Energy bottleneck

Global Investor 

Expert know-how for Credit Suisse investment clients August to October 2004 

Global strategy Difficult times 

Alternative investments Hedge funds coming of age 

Equities Where’s the impetus? 

Fixed income Fundamental data lend support 

Services Practical asset-management mandate 

Topics Japan/technology/Landesbanks 

GROWTH 

L 

Investment structures 

Alternative 

energy sources 

Slowdown 

H 

Purchasing power 

Oil price shock 

Squeeze 

China 

Adaptation process 

Global economy 

FINANCIAL MARKETS 

Production factors 

ENERGY BOTTLENECK

GLOBAL INVESTOR 3.04 

Editorial—3 

Energy squeeze: A brake on the global economy 

In the globalized economy of the twenty-first century, cheap labor 

is in effectively unlimited supply. But other factors of production, 

including raw materials, transport capacity, and above all energy, 

are creating a bottleneck that cannot be relieved in the short 

term. It is this bottleneck, rather than US consumer debt levels, 

or Fed action, which will bring to an end the economic expansion 

that has underpinned the equity-market recovery seen over 

the last eighteen months. 

Clear, widespread slowdown in growth 

Measures by the Chinese authorities to choke back activity and 

relieve domestic shortages were only the first installment of this 

process. The next installment is just about to happen, as high 

oil prices start to erode consumer purchasing power in the USA 

and elsewhere. The result will be a clear and widespread slowing 

of the global economic expansion, gradual at first, but becoming 

very clear as we move into next year. This is a difficult 

moment for financial markets, with equity investors having to face 

the adverse implications of far slower or even negative earnings 

growth, while bond yields have to factor in a cyclical rise in inflation 

that is likely to turn out higher than expected. Over significant 

parts of the next several months, wise investors will be in 

cash, or investment structures whose returns are not linked to 

overall market levels. Because the current oil price shock largely 

reflects market forces rather than OPEC supply disruptions, 

a self-correcting process will eventually occur. The cyclical slowdown 

in the world economy will provide some short-term relief, 

but by itself will reverse only a part of the rise in oil prices seen 

over the last twelve months. A full reversal will take many years. 

The energy profligacy of US consumers, fostered by years of 

relatively low prices, will unwind, but only gradually. Over an even 

longer period, China and other emerging nations will de-emphasize 

the role of automobiles in their development process, and 

alternative energy sources, such as bio-fuels, will proliferate and 

their costs will fall in the meantime. 

Bull markets similar to 1990s not in sight 

Structural changes of this disruptive type make it most unlikely 

that we will see a return to the bull markets seen in both equities 

and bonds over much of the 1990s. But they will create many 

exciting opportunities for investors prepared to seek them out. 

Giles Keating, Head of Global Research


Contents—4 

Global strategy 

Growing risk in the equity markets . . . . . . . . . . . . . . . . . . . . . 07 

Growth momentum is starting to weaken . . . . . . . . . . . . . . . . 10 

US dollar in state of suspense amid rate hikes . . . . . . . . . . . . 12 

Forecasts at a glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 

Technical analysis of world markets . . . . . . . . . . . . . . . . . . . . 16 

Special topic The Japanese odyssey . . . . . . . . . . . . . . . . . . . . 18 

Alternative investments 

The hedge fund industry is coming of age . . . . . . . . . . . . . . . 25 

Life Portfolio: Ideal instrument for estate planning . . . . . . . . . 28 

Equities 

Equity markets: 

No clear trend due to high level of uncertainty . . . . . . . . . . . . 31 

USA: Mixed bag of results and higher energy prices . . . . . . . . 33 

Europe: Brief pro-cyclical phase following 

the turnaround in US interest rates . . . . . . . . . . . . . . . . . . . . 36 

Switzerland: A straggler in the second half of the year? . . . . . . 38 

SMI stocks at glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 

Topic Technology stocks still make an interesting alternative . . . . 42 

Asia excluding Japan: Looking for signs of a soft landing . . . . 46 

Fixed income 

Sound fundamental data support corporate bonds . . . . . . . . . .49 

Active management is more important than ever . . . . . . . . . . . 52 

Bond selection list . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 

Emerging-market bonds: Limited upside potential . . . . . . . . . . 56 

Topic German Landesbanks: 

No guaranteed ratings after 19 July 2005 . . . . . . . . . . . . . . . . . . 58 

Services 

Interview with Andreas Russenberger . . . . . . . . . . . . . . . . . . 62 

Author index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 

Imprint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 

Normalization of lofty growth 

rates 

Good times for alternative 

investments? 

No sustained upmove 

on the horizon 

Improved overall returns 

on corporate bonds 

Professional investing with 

an asset-management mandate 

Product offers from Credit Suisse 

Pictet Funds – Japanese Equities P . . . . . . . . . . . . . . . . . . . . 35 

JP Morgan Fleming Europe Equity . . . . . . . . . . . . . . . . . . . . . 35 

ACM International Health Care Fund . . . . . . . . . . . . . . . . . . . 41 

Credit Suisse Commodity Fund Plus . . . . . . . . . . . . . . . . . . . 41 

Dexia Bonds International C Cap . . . . . . . . . . . . . . . . . . . . . 51 

RMF Convertibles Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Global agenda 

30 August to 2 September 2004 

Republican National Convention in New York: 

Big show for President Bush 

14 September 2004 

59th session of the UN General Assembly: 

New York welcomes world leaders

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Global strategy 

If equity markets follow the same pattern this time, we could see a period 

of 4 to 5 years of volatility, with no clear direction either way 

Most global leading indicators suggest that growth rates will return 

to normal, rather than decline massively 

How quickly US key rates return to a reasonable level depends, to a large 

extent, on inflation and employment trends


Global strategy—7 

Growing risk in the equity markets 

Bond yields will probably rise slightly by the end of the year, and we would not 

be surprised to see the stock markets suffer some marked losses in autumn. 

Despite the difficult environment, we think there will still be some good buying 

opportunities. Giles Keating 

Looking ahead to the end of this year, our forecasts are that bond 

yields will rise, taking the US ten-year Treasury to around 5% 

(compared to some 4.25% at the time of writing). For equities, we 

see a significant risk of a marked fall of around 10% (compared 

to the levels at the time of writing; i.e., around 1,070 on the S&P 

500, 2,600 on the DJ Stoxx 50). In this environment, our initial recommendation 

is for investors to hold short-dated or floating-rate 

bonds and to reduce outright exposure to equities, holding instead 

products offering exposure to equity volatility and based on strategies 

that balance a long position in one part of the equity market 

against a short position elsewhere. On currencies, we are mildly 

bearish on the dollar at its levels at the time of writing (CHF 1.25, 

EUR 1.22). 

Figure 1 

Global growth has peaked 

Source: Datastream, CSFB 

10 

8 

6 

4 

2 

0 

–2 

–4 

YoY % 

Don’t miss the buying opportunities 

Higher bond yields and weaker equity markets should offer attractive 

entry opportunities as we move toward the end of this 

year. Specifically, we would look to buy bonds at around 5% for 

the US 10-year Treasury, or 4.75% for German Bunds, and to buy 

equities with the S&P 500 at around 1,000 or the DJ Stoxx 50 at 

2,300. At these levels, we believe that equities would offer reasonable 

medium-term value. We also consider the bond yield levels 

mentioned to be well above the figures likely to prevail 

throughout most of 2005 as growth slows and a new deflationary 

scare emerges. However, looking longer-term to 2006 and beyond, 

we think bond yields could rise substantially above the 5% 

level, but that is an issue that can be addressed nearer the time. 

Central to these investment recommendations is a paradox 

that we perceive in current asset prices. We estimate that the 

economic growth required to underpin current equity valuations 

would probably generate more inflation than is implied by current 

bond yields. If this is correct, then there will be disappointment, 

either for bond or equity investors, or both. 

We think the most likely scenario is that, over the next two or 

three months, growth will at least be strong enough to support 

current equity prices. If this were right, however, it would imply 

more inflation pressure than is currently discounted by bond 

yields, and so those yields would have to rise. Interest-rate 

increases by the Fed and other central banks would also be more 

rapid than currently expected. After a time, bond investors would 

become reassured by this tough action, allowing yields to start 

declining, but equities would suffer. The result could be a sharp, 

14 

12 

10 

8 

6 

4 

2 

0 

01/94 

Global IP 

Logrithimic scale 

Trend = 6.4% 

01/96 

Figure 2 

Real equity returns at lower end of range 

on a long-term comparison 


01/98 

1853 

1863 

1873 

1883 

1893 

1903 

1913 

1923 

1933 

1943 

1953 

1963 

1973 

1983 

1993 

2003 

Real equity return 

01/00 

01/02 

01/04



decisive move downward in equity prices some time in autumn, 

and a spike in volatility. 

Inflation pressure likely to increase 

We have just entered a new stage of the global economic cycle – 

one that creates the conditions for this kind of instability. From 

early 2003 until the middle of this year, economic growth was accelerating, 

underpinning equity prices with the prospect of faster 

corporate earnings. As growth increased, it began to run well 

above the pace at which capacity was growing, so the amount of 

slack in the world economy was progressively reduced. This started 

to impact inflation from spring 2004 onward, and the rally in 

equities stalled out. However, the downside impact was blunted 

by the fact that output growth was still accelerating. 

Over the summer, however, we have reached a new stage in 

the cycle, potentially less benign. Global growth reached a peak 

(about 7% for world industrial production, Figure 1) and has now 

started to slow. Compared to the first half of the year, this slowdown 

carries a greater risk that company earnings will disappoint. 

Yet, because the slowdown is happening very gradually, the margin 

of spare capacity is still falling and intensifying inflationary 

pressure – even though the monthly data on this are, as usual, erratic. 

With less and less slack in the world economy, we think inflation 

pressure will be worse in the third quarter than it was in the 

second, and worse again in the fourth. An adverse reaction in 

bond markets and in Fed policy, and from there into equities, 

seems the likely outcome. 

Start of a long-term phase of volatility? 

These cyclical influences can also be placed in a longer-term context. 

The stock market bubble that reached its zenith at the start 

of 2000 took equities to a position of extreme overvaluation. It 

also pushed the real total return on equities far above the 6.4% 

trend line it has followed for 150 years (Figure 2). The collapse 

that followed up to March 2003 and the subsequent partial recovery 

mean that, at the time of writing, equities are close to fair 

value (based on consensus earnings expectations and current 

bond yield levels), and also puts equity total returns back close to 

the trend line. 

These observations do not give a sense of comfort. In the 

current environment of rising central bank rates, potentially higher 

bond yields and gradually slowing growth, one would expect 

equity prices to stand below fair value. And following a period of 

excess, such as that at the end of the 1990s, we would expect 

prices to fall back to well below trend, not merely close to it. 

Following the previous four great bear markets in equity history, 

(Figure 3), each lasting about three years (as this time), 

there was a partial recovery for about one year. After that, there 

was a period of four or five years, when equities showed no medium-term 

direction either up or down, but did have substantial 

volatility at times, and only after that did they finally stage a convincing 

recovery. If the same pattern is followed this time, we are 

just entering that four-to-five year middle phase, during which equities 

should offer value, only if bought after significant downmoves. 

| 

Figure 3 

Major historical bear markets 


110 

100 

90 

80 

70 

60 

50 

40 

30 

20 

Indexed to 100 at start of each equity bear market 

Years from 

start 0 1 2 3 4 5 6 7 8 

March 2000– Dec 1972–80 

Aug 1929–37 Dec 1915–23 

Dec 1952–60

Global agenda 

4 to 5 October 2004 

IMF and World Bank 2004 annual meeting 

in Washington: 

Is the world economy picking up? 

9 October 2004 

Presidential elections scheduled 

in Afghanistan: 

A real chance for democracy?



Growth momentum is starting to weaken 

There are signs that world economic growth momentum 

has reached its peak. Climbing inflation rates have increasingly stepped 

back into the spotlight again. Beat Schumacher 

The worldwide economic picture continues to be marked by solid 

growth rates in the USA as well as in Asia and a moderate expansion 

in the euro zone. Nevertheless, the leading indicator for 

the OECD countries, for example, is signaling that growth momentum 

has likely reached its pinnacle (Figure 1). But the lion’s 

share of leading economic indicators points more toward normalization 

of the very high growth rates, rather than a sharp decline. 

This assessment has also been underpinned by the price trend of 

economically sensitive industrial metals. Metals prices have declined 

slightly from their peak in February, though they continue 

to hover at a high level. The flip side of the coin with respect to 

robust economic growth and rising energy prices is climbing inflation 

rates. While rising inflation in many countries is attributable 

primarily to increasing energy prices, the core rate (headline 

inflation, excluding energy and food prices), particularly in the 

USA, shows a trend geared to the upside. Amid this environment, 

most central banks will probably continue – or commence in time 

– tightening the interest-rate screw. 

Inflation climbing in the USA 

The spurt in the core rate of consumer prices since the beginning 

of this year, from 1.1% to 1.9% in June, shows that the increase 

in inflation in the USA is not merely the result of energy prices. Although 

this surprisingly strong and precipitous jump in inflation is 

partially attributable to temporary factors, the future trend in the 

core inflation rate should continue to pursue an upward path. Various 

company surveys indicate that firms have recouped a little 

more capacity for passing on price increases. Unit labor costs 

should tend to have an inflationary impact as well, which can be 

traced to the resurgence in wage growth and especially the expected 

substantial drop in productivity growth. Productivity generally 

sees the strongest growth at the outset of a economic upswing 

since companies attempt to meet the higher demand with 

improving efficiency, holding back on creating new jobs. Thanks 

to the robust economic trend, however, average weekly hours 

rose in the second quarter, by an annualized 2%, compared with 

the previous quarter. Figure 2 shows that productivity growth usually 

decreases just as soon as input (i. e., average weekly hours) 

starts to expand noticeably again. 

US GDP growth is underpinned across a broad front and 

should reach roughly 3.5% in 2005, which implies a certain slow- 

Figure 1 

OECD: Growth momentum should have reached 

its pinnacle 

Source: Datastream 

8 

6 

4 

2 

0 

– 2 

– 4 

– 6 

Annual change in % 

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 

OECD leading 

indicator 

OECD Industrial production 

(6 months lagging)



down in growth. Fear looms in many circles over a slump in personal 

consumption, against the backdrop of advancing interest 

rates. Indeed, private household debt levels are high, though this 

factor is somewhat overblown, in our view. For instance, higher 

rates not only constitute a growing interest burden for households, 

but also result in greater interest income. Moreover, a 

good 70% share of outstanding debt (particularly mortgage loans) 

is transacted at fixed interest rates, so rising rates do not directly 

result in higher debt-servicing costs. Although increasing interest 

rates shrink disposable incomes and hamper consumer 

spending somewhat, such effects should be offset, to a large extent, 

by growing employment levels and rising wages. 

Euro zone: Spark in the export sector has not ignited 

the domestic economy 

In contrast, in the euro zone the PMI employment subindex has 

yet to paint a brighter picture of the labor market situation. This 

is manifest in the sluggish trend in personal consumption. The 

quite robust development in the export sector has thus far failed 

to spill over into the domestic economy. This applies especially to 

Germany, while in France consumer spending shows a somewhat 

more favorable trend. Weak personal consumption in Germany 

can be attributed to the uncertainties surrounding the labor market 

and the course of politics (i. e., the future of the social insurance 

system), as well as to the climbing inflation rates there. Still, 

inflationary pressure is hardly likely to mount, against the backdrop 

of moderate economic growth, and we expect inflation rates 

to retreat again starting in autumn due to a positive base effect. 

Figure 2 

USA: Productivity growth should weaken 


10 

8 

6 

4 

2 

0 

-2 

-4 

-6 


82 84 86 88 90 92 94 96 98 00 02 04 

Productivity 

GDP growth 

Average weekly hours 

Japan continues to provide positive surprises 

The prevailing trend in Asia paints a more upbeat portrait, where 

economic growth should remain robust as long as US investment 

activity continues to expand strongly. Of course, China constitutes 

one factor of uncertainty. Up to now, the measures that the government 

has implemented to cool down the country’s overheating 

economic locomotive seem to be showing the desired effect. 

Nevertheless, we would advise continuing to keep a close eye on 

the situation. Meanwhile, Japan continues to show high growth 

momentum. Still, we foresee a danger that momentum could 

diminish markedly in 2005, with no rapid trend reversal emerging 

with respect to the deflationary trend. | 

Figure 3 

Global trend in consumer prices 


4 

3 

2 

1 


0 

– 1 

– 2 

99 00 01 02 03 04 

USA Euroland Japan



US dollar in state of suspense amid rate hikes 

Interest-rate hikes draw liquidity from the financial markets. We therefore prefer 

currencies of countries with current-account surpluses, such as the Swiss franc, 

euro and yen, versus the US dollar. Marcus Hettinger 

The first half of 2004 was marked by revisions to expectations for 

interest-rate hikes by the US Federal Reserve. The accelerated 

build-up in employment levels in the USA in the spring had 

prompted market participants to conclude that the Fed would carry 

out an initial rate increase already in the summer. This adjustment 

in interest-rate expectations also subsequently led to a cyclically 

induced US-dollar rally, as we had anticipated. With the initial 

rate hike and additional moves on the interest-rate front by the 

American central bank priced into the markets, new issues should 

drive the foreign-exchange markets in the second half of the year. 

The consensus view is that the Fed will follow up on the first rate 

hike with additional interest increases. Nevertheless, the magnitude 

and pace with respect to returning the US federal funds rate 

to a level of normalcy are, to a large extent, contingent on the 

inflation and employment trends. Should inflation, in particular, 

continue to climb substantially – a scenario that we do not expect 

– the Fed would likely adopt a more aggressive stance on rate 

hiking than is currently priced into the markets, which could 

underpin the dollar. 

Further appreciation of Swiss franc versus the euro? 

The US current-account deficit is likely to garner more attention 

again since it continues to be nearly entirely financed by inflows 

of foreign capital into the bond market. Interest-rate differentials 

and the expected shifts in these differentials should thus continue 

to influence exchange-rate movements. The burgeoning US 

current-account deficit and the historically low real interest rates, 

even compared with other countries, still constitute the Achilles 

heel for the dollar because interest-rate hikes draw liquidity from 

the global financial markets. The European central banks should 

follow in the Fed’s footsteps, tightening their monetary policies in 

the course of this year (Figure 1). Currencies of countries with 

current-account deficits that are dependent on foreign capital inflows 

will probably underperform currencies of nations with current-account 

surpluses, amid an environment marked by climbing 

interest rates worldwide. This phenomenon was also seen in 

1994, when the Fed rang in the last significant rate-hiking cycle. 

At that time, the euro, Swiss franc and Japanese yen outperformed 

other currencies of countries with current-account deficits 

(Figure 2). In Europe, the Swiss National Bank (SNB) carried out 

its initial interest-rate increase already in June, and the Swedish 

Riksbank, as well as the European Central Bank (ECB) at the be- 

Figure 1 

Interest-rate hikes also expected in Europe 

Source: Bloomberg, Credit Suisse 

40 

35 

30 

25 

20 

15 

10 

5 

0 

Basis points 

USA 

UK 

Australia 

New Zealand 

Current-account deficits 

of countries 

Euro zone 

Interest rate hike expectations between December 2004 and March 2005 (futures) 

Japan 

Switzerland 

Canada 

Sweden 

Current-account surpluses 

of countries 

Norway



ginning of 2005, is likely to follow suit. The Bank of Canada (BOC) 

too should make an upmove on the interest-rate front in the autumn 

since the country is benefiting from the US economic upswing 

through its close trade links with its southern neighbor. 

Hence, the Swiss franc, euro, Swedish krona and Canadian dollar 

harbor further upside potential versus the greenback, in our view. 

Since the SNB kicked off its rate-tightening cycle ahead of the 

ECB, we expect the Swiss franc to also gain further ground against 

the euro. We believe that the Canadian dollar continues to look attractive 

thanks to the country’s twin current account and government 

budget surplus, the upcoming rate hike by the BOC, its commodities 

exports and the fair valuation (purchasing power parity). 

Japan, too, shows a current-account surplus, so the yen is likely 

to pick up territory amid an environment marked by a weaker US 

dollar. The signs are mounting that the export-induced upswing in 

Japan is increasingly spilling over into the domestic economy. Still, 

as long as deflation continues to persist, we are unlikely to see any 

effective tightening of monetary policy in Japan. The risks to our 

positive outlook on the yen are particularly a pullout by foreign investors 

from the Japanese stock market due to a slowdown in economic 

growth in Asia, persistently high oil prices and a noticeably 

more aggressive interest-hiking stance by the Fed. 

Figure 2 

1994: Euro, Swiss franc and yen outperform 


120 

115 

110 

105 

100 

95 

90 

Index 

02/94 

6 months after the first Fed rate hike 

04/94 

06/94 

08/94 

10/94 

12/94 

02/95 

Housing market constitutes risk for sterling 

The Bank of England (BOE) should continue to boost its key interest 

rates. Consequently, the absolute yield advantage is likely 

to underpin the pound, though the signs are growing stronger that 

the real estate market is on the verge of cooling down. Declining 

housing prices should lead to less pronounced rate hikes by the 

BOE, against the backdrop of rising household debt levels. In our 

view, the following factors especially speak in favor of a strengthening 

euro versus the pound: the impending end to the rate-hiking 

cycle in England, the sizable trade deficit, the slowdown in 

growth as a result of climbing key interest rates and the slight 

overvaluation of the British pound versus the euro, as well as the 

risks looming over the housing market (Figure 3). 

Exchange-rate fluctuations present opportunities 

The volatility in the foreign-exchange markets should remain high in 

the second half of the year as well. Uncertainty surrounding the extent 

of rate hikes by the Fed, against the background of a slowdown 

in economic growth and lofty crude-oil prices, presents investors 

with new challenges. In addition, the US presidential elections are 

approaching in November. We expect a close outcome in the race 

to the White House, so making assessments of the impact of a new 

administration on the dollar (dollar, fiscal and trade policies) is still difficult 

at present. Nevertheless, investors should perceive these 

exchange-rate swings not just as risks, but as opportunities too. 

Active foreign-exchange management can protect against currency 

losses (hedging), as well as even lead to greater returns. 

Figure 3 

Housing prices a risk factor for the pound 


0.90 

0.85 

0.80 

0.75 

0.70 

0.65 

0.60 

0.55 

0.50 

0.45 

0.40 

EUR/GBP 

EUR/USD 

NOK/USD 

NZD/USD 

83 85 87 89 91 93 95 97 99 01 03 

EUR/GBP exchange rate 

UK housing price inflation 

(r.h.s., inverted) 

CHF/USD 

GBP/USD 

CAD/USD 

JPY/USD 

AUD/USD 

SEK/USD 

YoY in % 

–10 

–5 

0 

5 

10 

15 

20 

25 

30 

35 

40

Forecasts at a glance 

3-month eurorates in % 

End-2003 02/08/2004 3 month 1 12 month 1 

USA 1.15 1.69 2.00–2.20 3.10–3.30 

Euroland 2.12 2.12 2.20–2.40 2.60–2.80 

UK 4.04 4.95 5.20–5.40 5.00–5.20 

Switzerland 0.26 0.53 0.65–0.85 1.40–1.60 

Japan 0.06 0.05 0.03–0.07 0.05–0.10 

Yield on 10-year government bonds 

USA 4.25 4.45 4.70–4.90 4.30–4.50 

Euroland 4.29 4.20 4.30–4.50 4.10–4.30 

UK 4.80 5.09 5.20–5.40 4.70–4.90 

Switzerland 2.72 2.78 2.70–2.90 2.50–2.70 

Japan 1.36 1.89 1.60–1.80 1.80–2.00 

Exchange rates 

USD 

EUR/USD 1.26 1.20 1.25–1.27 1.29–1.31 

USD/JPY 107 111 108–110 99–101 

GBP/USD 1.79 1.83 1.83–1.85 1.81–1.83 

CHF 

USD/CHF 1.24 1.28 1.21–1.23 1.13–1.15 

EUR/CHF 1.56 1.54 1.51–1.53 1.47–1.49 

GBP/CHF 2.21 2.34 2.23–2.25 2.05–2.07 

JPY/CHF 1.16 1.15 1.11–1.13 1.13–1.15 

Stock indices 

End-2003 02/08/2004 12 month 2 

USA S&P 500 1111.92 1106.62 0 

Canada TSE 300 8220.89 8458.07 0 

Japan TOPIX 1043.69 1135.64 + 

Hong Kong Hang Seng 12575.94 12201.39 0 

Singapore STI 1764.52 1887.41 0 

Germany DAX 3965.16 3862.71 + 

France CAC 40 3557.90 3623.79 0 

UK FTSE 100 4476.87 4415.73 0 

Italy MIB 30 26715.00 27571.00 0 

Spain IBEX 35 7737.20 7869.00 + 

Netherlands AEX 337.65 325.87 0 

Sweden Affersval. 188.36 200.59 0 

Switzerland SMI 5487.80 5537.80 0 

1 

Forecasts 

2 Relative to MSCI World: + = outperformer 0 = market performer – = underperformer Source: Bloomberg, Credit Suisse

Global agenda 

1 November 2004 

New EU president assumes office: 

Lots of work for José Manuel Barroso 

2 November 2004 

US elections: 

Photofinish for Bush and Kerry?

Technical analysis of world markets 

The stock markets paint an unstable picture in the medium term, but a rally into 

autumn is probable. US bond yields are likely to trend weaker until the beginning of 

September. Beat Grunder 

USA 

Upmove with limited potential in autumn 

still probable 

The S&P 500 Index has been consolidating in a comparatively narrow 

range since the beginning of the year, with the indicators displaying 

a mixed picture. The medium-term momentum oscillator, 

which reflected the initial attempts at a new upmove in mid-June, has 

flattened again and is pursuing a neutral path in line with the trend. 

The long-term constellation is conflicting. A declining oscillator stands 

against a still-intact price trend that is geared to the upside. Against 

this backdrop, we expect the index to still test the key threshold located 

at 1,070/1,075 before the middle of the third quarter 2004, 

ahead of a new (albeit limited) rally into autumn. Lines of resistance 

are situated at 1,180 1,210, and support levels are located at 1,070 

and 1,010/1,020. 

1750 

1500 

1250 

1000 

750 

S&P 500 Index 

2000 2001 2002 2003 2004 

Medium-term momentum 

Long-term momentum 

30 

15 

0 

–15 

–30 

Source: Metastock 

Switzerland 

Indicators are waning, but a new rally 

is probable in August 

The Swiss Market Index is showing a technically comparable picture 

to the S&P 500 Index. Nevertheless, the intermediate-term configuration 

is somewhat more clearly pointing downward since the failed 

attempt at a turnaround in mid-June. The sliding long-term indicator, 

also executing a top at the beginning of the second quarter 2004, 

confirms the unstable constellation. Merely the long-term price trend, 

which turned to the upside in the third quarter of 2003, is still intact. 

The conflicting technical structure points to further temporary weakness 

(with support levels situated at 5,380 and 5,260). In the course 

of the month of August, the market should then pursue a countermove 

into autumn. Technical lines of resistance are located at 5,800 

and 6,220. 

9000 

7500 

6000 

4500 

3000 

Swiss Market Index 

2000 2001 2002 2003 2004 



30 

15 

0 

–15 

–30 


Japan 

Long-term trend still heading upward 

The Nikkei 225 Index is moving sideways in a triangle pattern, on the 

heels of its second failed attempt to boldly break through the key 

technical support threshold situated at around 12,000 index points. 

The positive long-term technical picture weakened somewhat in the 

second quarter of 2004, but without endangering the price trend. The 

medium-term technical configuration is neutral and does not emit any 

clear indications. Accordingly, expectations into August are geared 

toward a further consolidation in the aforementioned triangle pattern 

and a renewed assault on the 12,000 threshold (technical lines of resistance 

are at 12,400 and 12,700). A premature retreat below the 

10,900 mark would threaten this positive intermediate-term scenario. 

22 

18 

14 

10 

6 

Nikkei 225 (in thousands) 

2000 2001 2002 2003 2004 



40 

20 

0 

–20 

–40 

Source: Metastock



Gold 

Consolidation at a high level, 

long-term trend still intact 

The gold price corrected and tested the support level at 370 in the 

wake of its second failed attempt to break through the key line of resistance 

located at 420/430. The picture with regard to the momentum 

indicator remains conflicting. Although the climbing mediumterm 

indicator shows sustained strength, the falling long-term 

momentum oscillator is likely to temporarily weaken the upward 

thrust. We therefore expect a continuation of the consolidation at a 

high level, with a renewed test of the aforementioned key line of resistance. 

Toward the end of the third quarter, the intermediate-term 

cycle could turn downward once again and, together with the longterm 

indicator, spark a decline in the gold price. 

450 

400 

350 

300 

250 

200 

Gold (USD/ounce) 

2000 2001 2002 2003 2004 



20 

10 

0 

–10 


US dollar 

New medium-term bottom expected in August 

Since the last interim high at 1.3225 in May, the US dollar has executed 

a steady downmove, testing the support level at 1.22. The 

medium- and long-term price trends continue to be aligned to the 

downside and have been confirmed by the corresponding momentum 

oscillators as well. Still, noteworthy is the fact that the downward 

thrust of the indicator is flattening, and the intermediate-term cycle, 

in particular, will execute a bottom probably at the beginning of August. 

In this regard, we would not rule out a preceding brief slide by 

the greenback into oversold territory below 1.20 (support levels located 

at 1.1920 and 1.1800), though a new upmove should subsequently 

take hold. Key lines of resistance are situated at 1.2850 and 

1.3250. 

2.0 

1.8 

1.6 

1.4 

1.2 

CHF/USD 

2000 2001 2002 2003 2004 



20 

10 

0 

–10 

–20 


US market interest rates 

Bond yields should continue to trend toward 

weakness until September 

The yield on the 10-year Treasury benchmark bond has clearly declined 

again on the back of the interim high at 4.85% reached in 

June, recently breaking through the technical support level located at 

4.45%. The medium-term indicator has commenced a new downmove, 

which should prevail probably until end-August or beginning of 

September. Accordingly, yields are likely to retreat further toward the 

next support level at 4.10%. Following temporary stabilization, yields 

should turn to the upside, thereby continuing to pursue the turnaround 

in place since 2003, in line with the further rising momentum 

oscillator in the long term. 

7 

6 

5 

4 

3 

Yield on 10-year US Treasury benchmark bond 

2000 2001 2002 2003 2004 



30 

15 

0 

–15 

–30 

Source: Metastock

Special topic 

“Risks to the recovery in Japan are rather 

underestimated than overestimated.” Christoph Fehr


Special topic—19 

The Japanese odyssey 

Global and local influencing factors should sustain the recovery 

of the Japanese economy in the second half of the year. Despite continued 

good prospects, however, we think the economic rally still faces 

considerable risks. Christoph Fehr, Ulrich Kaiser, CEFA 

In the wake of the 1985 Plaza Accord, the Japanese yen appreciated 

massively. The Bank of Japan (BoJ) responded to this by 

easing its monetary policy. Between January 1986 and February 

1987, the BoJ cut its discount rate from 5% to 2.5%, thus laying 

the foundation for a speculative bubble. Stock and real estate 

prices subsequently exploded. The BoJ took countermeasures 

and raised the discount rate to 6% over the course of 1989 and 

1990. This burst the equity and real estate bubble and ushered in 

a protracted period of economic stagnation that was sporadically 

interrupted by brief recovery phases. 

The Japanese government and the BoJ attempted to revive 

the economy by implementing a combination of monetarist and 

Keynesian approaches. This economic policy was flanked by 

measures to protect the banking system and by additional structure-preserving 

interventions. Table 1 on page 20 provides an 

overview of the key monetary and fiscal policy decisions made 

over the past decade or so. 

Theoretical basis for evaluating Japanese economic policy 

The business cycle theory of the Austrian school of macroeconomics 

derives substantially from the work of Ludwig von Mises. 

The interest-rate level is set in the free market by the degree to 

which consumers prefer a present good over a future good. This 

choice between saving or consuming today as opposed to saving 

and investing tomorrow determines the degree to which money 

gets saved and invested. When central banks artificially depress 

the rate of interest, this has grave consequences. Businessmen 

notice that interest rates are falling and react accordingly. They 

begin to invest more in producer goods and lengthy production 

processes because their financing costs are now lower. Businessmen 

react the way they would if savings had genuinely increased. 

They expand their investments in plant and equipment, 

building materials, construction, and so on. The newly created 

money gets invested. This investment activity results in rising 

costs, including wage expenses. When the new money gets paid 

out in the form of higher wages, problems arise. The bulk of the 

increased income that flows to consumers is put toward consumption 

because their propensity to save has not really increased. 

Hence, not enough money is saved to buy the newly produced 

capital goods. It thus becomes clear that businesses have 

misinvested the limited savings available. This reveals itself in a 

Figure 1 

The OECD leading indicator points to 

a weakening economy… 


10 

8 

6 

4 

2 

0 

–2 

–4 

–6 

–8 

Figure 2 

…possibly due to exports 


8 

6 

4 

2 

0 

–2 

–4 

–6 

–8 

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 

OECD leading indicator 

GDP growth (r.h.s.) 

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 

OECD leading indicator 

Export growth (r.h.s.) 

8 

6 

4 

2 

0 

–2 

–4 

20 

15 

10 

5 

0 

–5 

–10 

–15

Table 1 

Year Month Action 

1992 –1995 The government enacts a series of expansionary fiscal packages. 

1994 Income taxes are temporarily lowered. 

1995 The discount rate is cut to 0.5%. 

1997 April The consumption tax is raised from 2% to 5%. 

December Parliament enacts the Fiscal Structural Reform Law, which is aimed at reducing Japan’s budget deficit to 3% 

of GDP or less by fiscal 2003/2004. 

1999 February The BoJ cuts the overnight rate to nearly 0%. 

March 

The Financial Reconstruction Company injects JPY 7.5 trillion of public funds into Japan’s 15 largest banks. 

The government passes a fiscal package of approximately JPY 18 trillion. 

1998 January Parliament enacts temporary tax cuts amounting to JPY 2 trillion. 

November The government passes a fiscal package of approximately JPY 23.9 trillion. 

December The government nationalizes the Nippon Credit Bank and passes a tax reform bill aimed at cutting taxes by JPY 9.3 trillion 

in 1999/2000. 

2000 August The BoJ announces a hike in the overnight rate to 0.25%. 

October 


2001 February The BoJ lowers the discount rate to 0.35% and then to 0.25%. The overnight rate is pared back to 0.15%. 

March 

The BoJ reinstitutes its zero-interest-rate policy. It ceases to target the overnight call rate 

and instead sets a target for banks’ current account balances at the central bank (JPY 5 trillion). 

August 

The BoJ raises the target for current account balances at the central bank to JPY 6 trillion. The monthly volume of Japanese 

government bonds to be purchased outright by the BoJ is raised from JPY 400 billion to JPY 600 billion. 

October 


November The government passes a fiscal package of approximately JPY 4.5 trillion. 

2002 September The BoJ announces plans to purchase stocks held by the nation’s largest commercial banks. 

2003 April The BoJ raises the target for banks’ current account balances at the central bank to JPY 22–27 trillion. 

It announces that it is considering purchasing securitized loans and SME-related asset-backed securities from banks 

in order to facilitate the financing of small and midsize enterprises. 

2003 July Parliament allows life insurers to lower the guaranteed minimum return on life insurance policies. 

October 

The BoJ raises the target for current account balances at the central bank to JPY 27–32 trillion. 

2004 January The BoJ raises the target for current account balances at the central bank to JPY 30–35 trillion. 

Sources: Economist Intelligence Unit Ltd. EIU Country Profile; Credit Suisse 

sudden, sharp recession in the capital goods industry. The inflationary 

boom distorts the macroeconomy’s capital structure and 

pricing system. This business-cycle analysis reveals that the ensuing 

recession is not a scourge, but rather a necessary correction 

of the aforementioned misallocations of capital. 

How should governments and central banks respond to such 

a recession? Murray Rothbard composed the following list 2 : 

p The government must stop inflating the economy. The longer the 

government waits, the more painful the adjustment process will be. 

p After the inflationary boom collapses, the government must refrain 

from trying to reflate the economy. For even if this reflation 

succeeds, it will only lead to more severe consequences later on. 

p Struggling businesses must not be propped up. 

p The government must refrain from trying to hold up wages and 

prices. 

p The government should do nothing to stimulate consumption 

and should refrain from increasing its own expenditures. Boosting 

consumption would worsen the macroeconomy’s consumption/investment 

ratio. 

Prospects for the Japanese economy 

When we compare the measures that a government should appropriately 

take to sustainably lift an economy out of recession 

with the economic policies pursued by Japan over the past years, 

we see a chasm between theory and lived reality. This means that 

the Japanese economy is vulnerable to setbacks. We still believe 

that Japan’s economy will continue growing in 2005, but we think 

the risks to the recovery are being somewhat underestimated 

rather than overestimated. The early warning signs are in plain 

sight. The OECD leading indicator for Japan, for example, has 

been falling for quite some time now (Figure 1). 

The economic recovery additionally faces the following risks: 

p Exports: In China and the USA, Japan’s two biggest export markets, 

authorities have begun to implement measures that sooner 

or later are likely to weaken growth. The trend in the OECD leading 

indicator for Japan’s OECD export markets points to tougher 

times ahead for the Japanese export economy (Figure 2). 

p Monetary policy: Even if the BoJ maintains its free money policy 

for the time being, it is likely to lean more toward tightening

the monetary reins, albeit at a leisurely pace. One can only assume 

that a decline in money-supply growth rates will have a negative 

long-term impact on the economy. 

p Budget deficit: Japan’s national debt has ballooned to 160% of 

GDP. Although the government is striving to consolidate the federal 

budget, the recent upper house elections indicate that the 

political leeway for trenchant reforms is limited. However, if Japan 

does not credibly reduce its public debt, the country faces a looming 

rise in interest rates and a crowding out of private-sector investment, 

according to the Bank for International Settlements 3 . 



The stock market reflects Japan’s faulty crisis management 

Viewed in retrospect, the trajectory of the Nikkei 225 or the 

Topix could hardly better reflect Japan’s crisis management of the 

economic policy failure. The end-1989 Nikkei 225 stock average 

of 38,916, a record that still stands and which corresponded to a 

Topix reading of 2,881, cannot be explained by pure valuation 

analysis. The EPS estimate of roughly JPY 60 for the Topix at that 

time and the end-1989 bond yield of 5.5% would only have implied 

a fair value of 1,100 for the Topix, assuming that investors 

weren’t demanding a risk premium. Now the wheel has come full 

circle. After roughly a 15-year period that saw Japan suffer three 

recessions, numerous companies are now reaping the fruits of 

their restructuring measures, which were drastic in many cases. 

At the end of the 1980s, the banking subindex accounted for 

more than 25% of the Topix. Back then, 21 big banks traded on 

the stock exchange, and they were considered the mirror image 

of the Japanese economic miracle. The decline of the Japanese 

economy and the aftereffects of the bubble economy – such as 

collapsing real estate and stock prices – threw most Japanese 

banks into financial distress. The Long Term Credit Bank was 

temporarily nationalized, though it is now back on the stock exchange, 

under the name of Shinsei Bank, after its partial reprivatization 

at the start of this year. Other banks escaped this fate by 

merging. None of the seven major banks still standing today compare 

with the financial institutions of yore. Mitsubishi Tokyo Bank, 

a subsidiary of the Mitsubishi Tokyo Financial Group, comes closest. 

The mergers enabled Japanese banks to claw their way back 

to the international pinnacle, though only in terms of total assets. 

They are still miles away from the summit where profitability is 

concerned. 

Rosy earnings estimates for the current year 

Company forecasts for the current fiscal year are optimistic, but 

they are not stoking lofty expectations on the microeconomic 

side. One reason for the sharp 34% increase in the EPS estimate 

for 2004/05, to JPY 63, is the further reduction in exceptional expenses, 

since firms’ revaluation of real estate and equity holdings 

came in above plan in fiscal 2003. The aggregate revenue growth 

estimate of 2.7% is moderate considering the strong economy. If 

the consensus earnings estimate is met this year, it would mark 

the first time that absolute profits surpassed the stock-market 

boom level of 1989 (Figure 3), and this in the midst of earnings 

momentum that is still rising. The upward earnings trend looks set 

to continue into 2005/06. 

Top: Sony’s Aibo robot – 

Japan’s economy is still a hub 

of innovation 

Bottom: Outside a Tokyo bank – the 

banking sector should continue 

to benefit from the economic recovery 

Further upward earnings revisions likely 

At the end of July, major Japanese corporations began presenting 

their results for the first quarter (April–June) of fiscal 

2004/05. Given the economic conditions in Japan and in key

export markets like the USA and China, we think these interim results 

should come in at the upper end of expectations. In particular, 

the traditional export sectors – electronic goods, precision instruments 

and automobiles – are likely to post results that are well 

above target in some cases due to the advantageous currency exchange 

rates they enjoyed during the reporting period. Consequently, 

EPS estimates could once again be revised upward, 

which would make the Japanese stock market’s valuation look 

even more attractive. A similar process can also be expected in 

September in the runup to the release of half-year results. The 

half-year reporting season is all the more important because it affects 

the broad stock market, since the Topix companies that report 

on a quarterly basis are still in the minority. Hence, the halfyear 

results provide more representative insights than the 

quarterly figures, though the quarterly numbers serve as a better 

trend indicator. 

Foreign investors continue to set the tone 

The stock-market correction in May was solely attributable to a 

dearth of buyers, for with the exception a few days, foreign investors 

have remained faithful to the Japanese equity market and 

have turned into trendsetters for Japanese day traders. It was the 

day traders who were responsible for the record-high daily share 

turnover. This explains the sharp decline in trading activity in a 

phase in which no clear foreign-investor-driven stock-market 

trend is discernable. At the end of fiscal 2003, foreign investors 

owned a record-high 22% of the Topix’s market capitalization, 

surpassing Japanese private investors (21%) for the first time 

ever. Their future behavior will probably depend on two factors. 

First of all, Japanese stocks will become more attractive for them 

if the yen strengthens against the US dollar and/or the euro. 

There is a long-standing direct correlation between the Topix performance 

measured in US dollars and the JPY/USD exchange 

rate. Second, foreign investors’ level of surplus liquidity will be determined 

by their cost of capital (namely interest rates), which 

means their decisions will be substantially influenced by Federal 

Reserve monetary policy. Higher- or faster-than-expected rate 

hikes could spoil international investors’ appetite for Japanese 

stocks. For this reason alone, we do not expect share prices to 

jump as sharply as they did in fiscal 2003. 

While Japanese private investors were almost exclusively positioned 

on the seller side last fiscal year, their interest in buying 

appears to have returned very recently. Their renewed buying interest 

is more visible in the small-cap indices than in the trading 

volume statistics. 

Regardless of whether the stock market is valued using a dividend 

discount model or a risk premium approach, the theoretical 

fair value for the Topix lies above the current index level because 

the improved economic conditions, particularly in the domestic 

sector, have not only pushed up bond yields (to 1.78% for tenyear 

government bonds), but have also prompted earnings estimates 

to be raised for the new fiscal year. Both aforementioned 

valuation methods produce a fair value target range of 

1,300–1,350 for the Topix (Figure 4). On the valuation side, the 

biggest risk facing the stock market is an overheating of the 

Japanese economy or simply market expectations of such an occurrence. 

Either eventuality would make it impossible for the Bank 

of Japan to prolong its de facto zero-interest-rate policy and 

would thus fuel rate-hike expectations. A 50-basis-point rise in 

government bond yields to 2.50% could hardly be offset by cor- 

Figure 3 

EPS estimates are at a historical high 

Source: Datastream, IBES 

70 

60 

50 

40 

30 

20 

10 

0 

Figure 4 

Excessive risk premium creates upside potential 

for the Topix 

Source: Datastream, Credit Suisse 

6 

4 

2 

0 

–2 

–4 

–6 

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 

EPS in JPY (12-month forecast) 

Topix (r.h.s.) 

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 

Risk premium 

Topix (inverse, r.h.s.) 

3000 

2500 

2000 

1500 

1000 

500 

500 

1000 

1500 

2000 

2500 

3000

porate earnings growth, which means that stock-market valuations 

would inevitably worsen. Hence, excessively strong economic 

growth is the risk on the valuation side. The recently released 

Tankan report, which was much better than expected, and 

the subsequent reaction, particularly on the bond market, provided 

a foretaste of things to come. 

Banks and retailers are still the first choice 

Last year’s top sectors (banking, retailing, real estate and construction) 

have taken a breather, but we expect them to stage a 

comeback, even amid rising market interest rates, because the 

economic rally is likely to remain the major investment theme in 

Japan. However, we do not think that the weaker companies will 

post a renewed outperformance. Instead, we believe that investors 

will be focusing on quality, i. e. earnings stability, and will 

thus be eyeing valuations. Banks and retailers remain our first 

choice since they stand to profit the most from an economic rally. 

Moreover, if Japan completes the transition from deflation to 

inflation, the credit business, which has been very restrictive for 

years, could see resurging demand. We are not quite so optimistic 

about the real estate sector, which admittedly would also benefit 

from such an environment. Our somewhat more cautious view 

stems less from the price trend to date and is far more a reflection 

of the still relatively high vacancy rate for suburban commercial 

properties. The sharp increase in the stake that foreign investors 

hold in Japan’s three leading real estate firms, which has 

swiftly risen to well over 30%, indicates to us that much of the optimism 

is already priced in. We are taking a selective stance toward 

export-oriented companies. Since we expect the Japanese 

yen to rise, we would only invest in those exporters whose product 

assortments give them a competitive advantage and whose 

annual targets are already aligned to a stronger yen. | 

Top Picks 

x 100 

60 

55 

50 

45 

40 

35 

30 

25 

20 

x 1000 

12 

10 

8 

7 

6 

5 

4 

Kao 

Price rel. to Topix 



00 01 02 03 04 


Kao — Kao is Japan’s largest manufacturer of household goods 

and is number two worldwide behind Procter & Gamble (USA). — 

The group’s product range encompasses skin-care and hair-care 

items, soap, toothpaste, diapers and feminine hygiene products. 

— The group places value on enhancing efficiency (cost controls!) 

and on independent, simple (direct) distribution channels. — The 

stock has only a low correlation to the Topix. — Kao’s excellent 

management and high earnings quality justify our BUY rating despite 

the stock’s comparatively high P/E ratio. 

Price 02/08/04 H/L 52W EPS 04E/05E P/E 04E/05E Yield 04E 

JPY 2745 2765/2100 132.31/137.46 20.75/19.97 1.37% 

3 

2 

00 01 02 03 04 

Ito-Yokado 

Price rel. to Topix 


1 

The term “inflationary” used here does not denote a rise in a price index, but rather refers 

to an expansion of the money supply through the actions of the central bank and the 

affiliated banking system. This form of inflation differs from price inflation, which can but 

does not necessarily result from an expansion of the money supply. 

2 

Drawn from Murray N. Rothbard’s essay titled “Economic Depressions: Their Cause and 

Cure”, published on the Ludwig von Mises Institute website. 

3 

Bank for International Settlements, 74th Annual Report, p. 26. 

Ito-Yokado — Ito-Yokado operates supermarkets primarily in 

eastern Japan. — Its superstores sell apparel, groceries and 

household goods. — The group’s subsidiaries operate in a variety 

of business sectors such as convenience stores, restaurants, discount 

outlets, department stores, food manufacturing and processing, 

financial services, real estate and publishing. — The subsidiaries 

include Seven-Eleven Japan (50.75% stake), Denny’s 

Japan and Robinson’s Japan. — Ito-Yokado stock carries a P/E 

valuation that looks high at first glance. — However, the group’s 

EV/EBITDA multiple amounts to only 4.4. — We are assigning Ito- 

Yokado shares a BUY rating because the upward momentum in 

retailing stocks is likely to remain robust for the time being. 


JPY 4270 5220/2845 151.86/172.39 27.59/24.3 0.80%

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Alternative investments 

The prospect of positive returns – regardless of general market trends – 

makes hedge funds attractive 

Responding to the need for enhanced monitoring, Credit Suisse has 

built a proprietary platform called MAP (Manager Access Platform)


Alternative investments—25 

The hedge fund industry is coming of age 

A severe downturn in the equity markets has fuelled interest in hedge funds, 

resulting in a large influx of assets into the industry. Will this be a golden era of 

alternative investing? Clearly the industry is undergoing rapid change. Ramon Koss 

The last several years of rapid and accelerating asset growth in 

the hedge fund industry would seem to suggest that we are entering 

a golden era of alternative investing. Or could it be that the 

end is nigh, as suggested by the difficult second quarter of this 

year? 

While risk-adjusted returns on alternative investments have 

long outperformed those generated by traditional equity and fixed 

income investments, it took a severe downturn in the equity markets 

(2000–2002) to cause many investors – and the press – to 

shift their attention to hedge funds. 

This new high profile has resulted in significant flows of both 

money and talent into the alternative investment industry. Some 

experts believe that this large asset influx alone is sufficient to dilute 

returns, while others argue that assets under management in 

alternative strategies are still modest when compared to traditionally 

managed assets, such as long-only bond and equity portfolios 

(Figure 1). 

But discussions focusing on hedge fund alpha alone may be 

missing the point. Should we not focus on the quality of such alpha; 

i.e., the risks we must take to “buy” return potential? And 

should we not take a closer look at how alternative investments 

can serve to mitigate portfolio risk? The controversy continues, 

but there is agreement about one important thing: alternative investments 

provide substantial overall diversification benefits to 

investment portfolios. 

A brief historical perspective on absolute return investing 

One of the most advertised characteristics attributed to hedge 

funds, their focus on producing absolute returns (with efforts to 

protect capital), must ultimately be seen as a return to the roots 

of investing. Historically, absolute return investing dominated as 

the objective of virtually all client mandates. Portfolio managers 

were given financial assets with the clear objective of increasing 

their value through deliberate exposure to particular risks. It was 

only in the 1970s, that relative return products (such as mutual 

funds that measure their performance and risk against a benchmark) 

were emphasized as a means of managing investment 

risks. Index funds are the purest form of this style of investing. 

While alternative investment strategies are not the only available 

instruments that essentially provide “asymmetric” return profiles, 

they offer them primarily thanks to the flexibility of their 

Figure 1 

Compared to hedge funds, the mutual fund 

industry still accounts for the predominant share 

of total fund investments 

Source: Investment Company Institute; Hedge Fund Research, Inc. 

Hedge fund industry 

USD 817 billion 

Estimated assets under management 

as of December 2003 

Mutual fund industry 

USD13.960 trillion



mandates. Certain structural characteristics, such as hedge-fund 

managers co-investing alongside investors, managers being motivated 

by profit participation, and the presence of high water 

mark compensation structures, are all typical of skill-based investment 

strategies, and contribute to the existence of this asymmetry. 

Once upon a time, 

hedge funds were niche investment vehicles 

Some of the earliest hedge funds, founded during the 1950s, employed 

market neutral (“hedged”) pure arbitrage strategies. During 

periods of extended bull markets and high-risk appetite, such 

as the mid-1960s and the mid-1990s, hedge funds sprang up that 

pursued high risk, high expected return strategies. Despite these 

different risk profiles, there was one important similarity: hedge 

funds mostly took the form of partnerships, and invested the assets 

of a small number of very wealthy individuals. A lack of regulation 

and transparency, along with several highly publicized fund 

failures and sometimes wildly exaggerated return expectations 

combined to give hedge funds their reputation as black box investment 

vehicles characterized by extreme volatility. 

However, the industry is undergoing rapid change, and this 

description of hedge funds is no longer generally true. Today, two 

previously largely absent client categories are the main drivers of 

its growth: institutions, and affluent clients. Many institutional investors 

(such as pension funds, endowments and foundations) 

have come under pressure after the recent extended poor performance 

of the equity markets. As a result, their investment philosophy 

is evolving from one of tracking benchmarks, to one of 

matching liabilities. Although any perception of alternative investments 

as “portfolio kickers” is highly questionable, the prospect 

of positive returns regardless of general market trends has 

caused important flows of assets into the hedge fund industry. 

Individual investors have recently been provided access to 

hedge fund investments via structured products. This client segment 

has been – and will continue to be – strongly targeted by 

many financial services providers who are capable of structuring 

alternative investment products. 

Figure 2 

The causes of hedge fund failures imply the 

necessity for comprehensive due diligence 

Source: The Capital Markets Company Ltd. 

The rationale behind investing in funds of hedge funds 

As a result of these recent developments in the alternative investment 

industry, better regulation and visibility are inevitable. 

We believe that a certain assimilation into the “traditional” investment 

philosophy of the large providers who are currently discovering 

alternative investments is also to be expected. 

While, initially, hedge funds were mainly perceived as an alternative 

means of investing in the traditional markets, and investments 

into hedge funds were predominantly driven by bottomup 

analysis with the objective of finding highly skilled managers 

trading those markets, the prevalent view today is quite different. 

Other operational risks 14% Investment risk only 38% 

Operational risk where 

either misrepresentation of 

investments or misappropriation 

of funds were 

contributing factors 36% 

Business risk only 6% 

Multiple risk 6%



Alternative investments are viewed as a separate asset class, and 

the focus has shifted away from a pure appraisal of managers’ 

skill-sets, and towards diversification across heterogeneous alternative 

investment styles, risk allocation and risk management. 

Allocations are often made to certain alternative investment styles 

(not only single managers) and are a function of available opportunities, 

or the perception thereof. Within each style, allocations 

to skilled hedge fund managers then follow. In this sense, many 

funds of funds employ a mixed top-down/bottom-up allocation 

philosophy. Alternative multi-manager, multi-strategy portfolios 

are managed more actively and style drift (departure of hedge 

fund managers from their area of core competence) is less tolerated. 

At Credit Suisse, we recognize the advantages of such a 

mixed top-down/bottom-up approach. While in the areas of manager 

selection, asset allocation, portfolio management, and risk 

control we find value in strict adherence to standardized procedures, 

we also try not to be dogmatic in our “skill-seeking activity”. 

We recognize that, in each area, certain managers have better 

skills than others, but we believe that these skills are best 

applied where opportunities present themselves in the relevant 

area. Furthermore, the importance of understanding the individual 

risks inherent in each hedge fund strategy cannot be overstated 

– a sensible portfolio management and effective risk management 

cannot live without such considerations. In-depth 

understanding of the investment strategy and identifying the specific 

risks are therefore key elements in our due diligence process 

(Figure 2). 

platform called MAP (Manager Access Platform). Today, MAP 

monitors a significant and constantly increasing number of the 

funds and investment programs into which Credit Suisse is allocating 

client monies. 

The basic data (single position data wherever possible) is enriched 

by a tremendous amount of additional computed and fundamental 

risk-related data. We use the data to monitor both market-related 

as well as operational risks. As an encompassing 

platform, MAP provides cutting-edge tools and algorithms, such 

as risk reports, simulations, multi-factor models and value-at-risk 

calculations that allow our analysts to assess, manage, optimize 

and monitor the risks and characteristics of the Credit Suisse 

range of alternative investment products. 

We are a major force in the alternative investments industry. 

MAP is one example of how we strive to fulfill our fiduciary duties 

to our clients in an active (instead of reactive) and innovative (instead 

of defensive) manner. | 

Credit Suisse’s proprietary platform facilitates transparency 

Hedge fund critics claim that, due to their lack of transparency, 

hedge fund investments are inherently impossible to monitor effectively. 

Management of market risks, such as exposure to various 

market-risk factors, style drift, as well as operational risks 

such as pricing of positions and adherence to existing covenants, 

is inhibited for classical hedge fund investments, as such risks 

can only be properly managed if one has detailed and accurate 

portfolio information. 

Typically, investors into hedge funds see only highly aggregated 

data of their investment. Many hedge-fund managers are 

extremely reluctant to provide more detailed and timely information, 

citing reasons such as protection of trade secrets and proprietary 

investment strategies. Small investors, due to their weak 

negotiating power, have little possibility to combat this lack of 

transparency. Even if they could obtain better insight, most would 

have neither the time nor the expertise and resources to make effective 

use of it. 

While the issue of enhanced investment monitoring is a hot 

topic in the industry today, we had already addressed it several 

years ago, by starting to plan and build a sophisticated proprietary



Life Portfolio: Ideal instrument for estate planning 

With Life Portfolio, Credit Suisse Life & Pensions is offering a modern 

life insurance policy tailored to the needs of affluent investors, 

with attractive tax advantage. Luzi Saluz 

More and more investors are opting to invest some of their assets 

in a life insurance policy. This allows them to benefit from attractive 

tax advantages, and it is also an interesting estate planning vehicle. 

Credit Suisse Life & Pensions in Liechtenstein designed Life 

Portfolio to meet these client requirements. Life Portfolio is currently 

available to clients resident in Belgium, Italy and Germany. 

Step 1 

Investment funds 

Structured investments 

Portfolio management 

mandates 

Earn a higher return after taxes 

The income on the investments incorporated into Life Portfolio is 

reinvested on an ongoing basis. During the term of the Life Portfolio, 

the earnings are not subject to income tax in the abovementioned 

countries. If the requirements of the tax authorities 1 

have been fulfilled at the time when the client terminates the contract, 

the entire sum paid out will be free of income tax in Germany 

and Belgium. In Italy, the policy income is taxed at 12.5%. 

This tax benefit means that the return after tax can be significantly 

higher than for comparable direct investments. 

There are currently no indications of a worsening in the taxation 

practice of life insurance policies in Italy and Belgium, but 

German clients who wish to benefit from all income tax privileges 

should take out an insurance policy before the end of this year. 

Stricter regulations will apply from January 1, 2005, and the full 

tax exemption will be replaced by a 50% tax exemption. 2 

Investment funds, structured investments and portfolio 

management mandates are selected for a life insurance policy. 

The premise is that the investments are professionally 

managed. In insurance actuarial terms, this is how a so-called 

internal fund is created. 

Step 2 

Life insurance 

Free choice of beneficiaries in the event of death 

In addition to its potential to reduce your income tax burden, a life 

insurance policy provides you with flexible and simple estate planning 

options. 

The client’s right to designate beneficiaries means that you 

can decide who should receive the benefits in the event of your 

death. The policyholder is free to appoint any beneficiaries 3 . You 

can, for example, nominate just one of your grandchildren or your 

partner as beneficiary. It is also possible to appoint several beneficiaries 

with different shares. 

On the death of the insured, the insurance benefits are paid 

directly to the beneficiaries. The assets are therefore available to 

the beneficiaries without delay and they do not have to wait for 

probate of the will. 

The benefits can be paid directly to the beneficiaries, as they 

have a contractual claim to these benefits under the insurance 

policy. It is true that heirs entitled to a compulsory portion of your 

estate can file legal proceedings against the beneficiaries for the 

The selected investments are combined into a life insurance policy. 

Step 3 

Life insurance 

Investment funds 

Structured investments 

In this way, a life insurance policy is created that conforms 

to the tax law requirements in the client’s domicile as well 

as reaping attractive tax advantages. 

Portfolio management 

mandates

GLOBAL INVESTOR 3.04 Alternative investments —29 

infringement of forced heirship provisions, but the insurance company 

for its part is obliged to pay out the benefits without checking 

the rights of succession. 

The beneficiaries can be changed free of charge at any time. 

The change simply has to be notified in writing to the insurance 

company, which will issue a new policy. 

Amendments any time during the term of contract 

Figure 1 shows how Life Portfolio works. Life Portfolio offers the 

client a comprehensive range of investment funds, structured investments, 

and portfolio management mandates. The investments 

selected by the client are then combined with a life insurance 

policy – and the result is Life Portfolio. 

The investment strategy can be amended at any time during 

the term of the contract to suit the changed circumstances of the 

investor. 

Life Portfolio’s term ends on the insured’s 100th birthday or 

in the event of their death. The client decides when the contract 

should be terminated 4 . The client is also at liberty to make a partial 

withdrawal and let the policy run on. 

Life insurance policies for european clients 

A life insurance policy must comply with the tax regulations of the 

client’s country of residence if the client wants to take advantage 

of the tax privileges. It may, for example, be necessary to insure 

a minimum lump sum payable at death or to take out a policy with 

a specific term. 

As a rule, insurance policies are taken out from a local insurance 

company. However, investors in the European Economic 

Area may buy life insurance from an insurance company that is 

not domiciled in their home country. This has been made possible 

by the EU directive on life insurance, which allows inhabitants of 

the European Economic Area (EEA) to buy insurance cover from 

any insurance company in the EEA. 

As the Principality of Liechtenstein is a member of the European 

Economic Area, Credit Suisse Life & Pensions (Liechtenstein) 

may offer European clients interesting life insurance options 

that comply with the requirements of the tax authorities in the 

client’s country of residence. 

Liechtenstein law makes provision for multifaceted investment 

solutions that can be incorporated into a life insurance policy. 

Liechtenstein insurance companies are also allowed to deposit 

their assets with Swiss banks. The life insurance policies are 

sold by Credit Suisse advisors, who continue to serve their clients 

after the sale of a Life Portfolio policy. 

On the whole, Life Portfolio is a flexible investment vehicle 

offering various advantages, such as the reduction of your tax 

burden and the possibility to divide your estate without causing 

unnecessary resentment. These are all benefits that will be appreciated 

by affluent investors. | 

1 Italy: the insurance policy includes death cover; Belgium: the policy includes death cover, 

but does not provide any investment protection; Germany: the insurance policy was 

financed with five equal contributions, the lump sum payable at death amounts to at least 

60% of the total contributions, and the capital is paid out 12 years after the commencement 

of the contract at the earliest. 

2 

From January 1, 2005, 50% of the proceeds on insurance policies must be taxed as 

income, provided that the insurance policy was financed with five equal contributions, 

the contract term was at least 12 years, the lump sum payable at death equals at least 

60% of the total contributions, and the policy does not mature before the policyholder 

turns 60. 

3 

Statutory heirs can claim their compulsory portions. 

4 

Early surrender of the policy may entail negative tax consequences.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Equities 

The international equity markets lack the ongoing impetus 

to spark a robust and longer-term upmove 

There is definitely potential for a late-summer rally 

on the US stock markets, though this could be thwarted 

by a further rise in oil prices 

The Swiss market could suffer another drop in momentum 

in the second half of the year


Equities—31 

Equity markets: No clear trend due to high level of uncertainty 

We do not expect more than a temporary rally up to the end of 2004 due to 

flattening economic growth, inflation and interest-rate risks, as well as to corporate 

earnings growth traversing its zenith. Bernhard Tschanz 

The upmove on the stock markets, which were still heading higher 

at the outset of the year, turned into a sideways movement in 

the second quarter of 2004. Japanese and especially emergingmarket 

stock indices retreated. Accelerating core inflation in the 

USA, interest-rate hikes in various countries and rising bond yields 

were the main culprits behind the sagging equity markets. However, 

economic growth and corporate earnings remained impressive. 

At the sector level in a nutshell, defensive industries as well 

as energy and manufacturing stocks outperformed financial and 

technology stocks. 

Catalysts for a longer upmove are lacking 

The equity markets lack sustained sources of stimulus that could 

spark a robust and lengthier upmove on the stock exchanges. The 

drivers of last year’s upswing have either lost momentum or reversed 

course. For example, the global economy, led by the USA 

and China, now appears to be losing some growth momentum on 

the heels of the somewhat earlier upward turnaround in inflation 

and interest rates. Although inflation and interest-rate fears have 

ebbed a bit since mid-year, the medium-term uptrend appears to 

continue unabated. Geopolitical risks are also unlikely to lose any 

of their volatility for long, and the price of oil looks set to remain 

comparatively high. However, corporate profits should continue 

rising. But here, too, a slowdown is emerging, as analysts’ earnings 

revisions and corporate results for the second quarter indicate. 

Although the leeway for price hikes has increased considerably, 

the reappearance of rising unit labor costs will put a drag 

on the global process of improving corporate profit margins, which 

had recently gained considerable steam. 

Rising inflation and climbing interest rates amid flattening economic 

growth do not create an ideal environment for stocks. However, 

the equity markets have largely factored this scenario into 

current share prices, at least if our forecasts are correct. The moderate 

valuation should subsequently support stock prices. This assessment 

is corroborated by, among other things, the 2005E priceearnings 

ratios of less than 16 for the USA (S&P 500) and below 

13 for the euro zone (Euro Stoxx 50). Hence, from a fundamental 

perspective, the stock markets look poised to finish the year slightly 

above their current level despite their recent weakness. Moreover, 

the exceedingly buoyant investor optimism that still prevailed 

at the start of the year has now been sharply scaled back, which 

makes a temporary relief rally look increasingly probable. 

Figure 1 

MSCI indices 

(31 December 2002 to mid July 2004) 

Source: Bloomberg 

160 

150 

140 

130 

120 

110 

100 

90 

80 

Indexed (31/12/2002=100) 

12/02 

MSCI World 

MSCI Japan 

06/03 

MSCI USA 

MSCI EM 

12/03 

MSCI Europe 

MSCI EM Asia 

Table 1 

Sector performance before and after the first 

Fed rate hike (1977 to present) 

Source: Datastream, Credit Suisse 

6 months before 12 months after 

Overall market Negative Positive 

Cyclicals Outperformer Underperformer 

Defensive stocks Underperformer Outperformer 

Financials Underperformer Underperformer 

Technology Underperformer Outperformer* 

* Distorted by technology boom in the 1990s 

06/04

GLOBAL INVESTOR 3.04 Equities —32 

Japan continues to offer the best risk/reward profile, 

in our view 

We are maintaining our geographical preference for the Japanese 

stock market. Japan’s economic growth has clearly surprised on 

the upside to date. Even the domestic economy is slowly showing 

signs of recovery, and the tentative turn for the better in the 

employment market justifies our increased confidence. This, coupled 

with the indisputable restructuring achievements on the part 

of Japanese corporations, points to sustained, favorable earnings 

momentum in worldwide comparison. At the same time, Japan’s 

export sector is profiting from very advantageous currency exchange 

rates. Nevertheless, our preference in Japan remains focused 

on domestic-oriented sectors (banks, retailers, real estate 

firms and construction companies) in view of the progressing economic 

recovery. On the whole, we expect stock indices to advance 

in Japan, but we do not foresee sharp gains. For a stronger 

rally, the yen would have to appreciate considerably to attract additional 

foreign investors. We do not expect this to happen. 

Nothing has changed in our preference for Europe over the 

USA. The number of upward earnings revisions for companies is 

now declining in both regions, but profit expectations and stock 

valuations are higher in the USA. We have a cautious stance on 

investments in the emerging markets, where growing instability 

and rising interest rates usually create a less-than-wonderful environment. 

We would wait for the current stock-market correction 

to run its course before making new investments. 

Maintain a defensive sector alignment for the longer term 

For the first half of 2004, we recommended giving the defensive, 

i.e. less cyclically exposed sectors a stronger weighting. The latter 

have significantly outperformed the cyclical sectors. Table 1 

demonstrates the appropriateness of this policy with a comparison 

of sector performance before and after the first Fed rate 

hike. In the 12 months following the first hike, defensive sectors 

performed relatively strongly, while cyclicals (excluding technology 

stocks) tended to underperform. Although technology stocks 

rate as outperformers, this carries little meaning because the tech 

bubble distorted the picture in the 1990s and therefore probably 

makes it look too positive now. 

It is also interesting to note that financials trended relatively 

poorly both before and after the first Fed rate hike. Since prices 

of financials have suffered clear setbacks, we are neutral on the 

sector. | 

Stock-market forecasts Historical Earnings 

index performance 1 in % growth in % P/E P/E 

Market Index 02/08/2004 1 MTH 3 MTH 12 MTH 2004E 2005E 2004E 2005E 

USA S&P 500 1106.62 –2 –1 13 18 11 17.0 15.4 

Germany DAX 30 3862.71 –3 –4 12 54 22 15.0 12.3 

UK FTSE 100 4415.73 0 –2 8 11 11 18.0 16.1 

France CAC 40 3623.79 –2 –2 14 19 14 14.7 12.9 

Netherlands AEX 325.87 –5 –5 4 18 10 12.7 11.5 

Italy BCI 1300.66 –1 –2 12 37 19 17.8 14.9 

Spain IBEX 35 7869.00 –2 –4 12 21 15 14.8 12.9 

Sweden OMX 678.80 –2 –2 19 49 11 15.4 13.9 

Finland HEX 5410.41 –7 –6 –1 14 18 16.0 13.5 

Switzerland SMI 5537.80 –1 –5 10 21 13 15.7 13.9 

Canada S&P/TSX 8458.07 0 2 17 32 13 15.1 13.3 

Australia ASX All Ord. 3554.50 1 5 14 19 15 16.8 14.7 

South Africa 2 JSE All Share 10305.89 3 –1 17 15 24 10.2 8.2 

Japan TOPIX 1135.64 –3 –4 21 47 9 18.2 16.7 

Hong Kong Hang Seng 12201.39 0 2 19 43 6 14.4 13.6 

China 2 Shanghai B 89.943 0 –16 –19 28 7 11.1 10.4 

Singapore 2 STI 1887.41 3 3 21 15 7 13.6 12.8 

Malaysia 2 KLCE 827.49 0 –1 14 16 12 14.5 13.0 

Thailand 2 SET 636.70 –2 –2 30 4 8 11.0 10.2 

Taiwan 2 TWSE (weighted) 5350.40 –7 –11 –1 79 7 10.3 9.6 

Korea 2 KOSPI 719.59 –5 –17 –1 73 6 6.4 6.1 

1 

Performance based on local currency / 2 earnings growth and P/E of MSCI Country Index Sources: IBES, Datastream, Credit Suisse

USA: Mixed bag of results 

and higher energy prices 

The outcome of the elections, conflicting 

economic data and higher gasoline 

prices: many elements of uncertainty are 

affecting the US equity market. Nevertheless, 

there is potential for a positive 

correction in late summer. Jeremy Baker 

Figure 1 

S&P 500 composite earnings 

as % of previous peak in the current cycle 

Source: Baseline & A.G. Edwards 

120 

100 

80 

60 

40 

20 

0 

04/00 

07/00 

10/00 

01/01 

04/01 

07/01 

10/01 

01/02 

04/02 

07/02 

10/02 

01/03 

04/03 

07/03 

10/03 

01/04 

04/04 

S&P operating earnings – 

% of previous peak in this cycle 

Consensus estimate 

Besides the upcoming elections, investors now have to interpret 

rising interest rates, as well as a mixed bag of economic data that 

appear to show moderately slower growth expectations in the 

USA. On top of this, consumers have to cope with higher energy 

costs, specifically gasoline prices. Given that Americans historically 

enjoy low gasoline prices relative to their European counterparts, 

the higher costs at the pump are likely to have some impact 

on consumer spending. A recent survey carried out by the National 

Retail Federation indicated that rising gasoline prices are 

shifting consumer habits, although 43% of those interviewed 

stated that their habits would not change significantly. Of the remainder, 

nearly one in three consumers said they would alter travel 

plans, while 27% replied they would reduce the frequency of 

dining out, and 21% stated they would spend less on clothing. 

Retailers are fully aware that when consumers are forced to spend 

more of their disposable income on gasoline, they will scale back 

spending in other areas. Ultimately, higher energy costs are, in 

effect, an indirect tax on consumers. 

Weaker year-on-year data? 

Nevertheless, the current economic expansion in the USA is now 

in full motion, but signals emanating from economic and corporate 

activities indicate that the country is moving toward a peak in 

this regard. This peak comes in the wake of a strong period of 

corporate earnings growth, driven by cost controls, rising sales 

and lower oil prices. Corporate earnings in the first quarter of this 

year remained robust, despite some obstacles, but this did little 

to buoy equity-market enthusiasm. We should see healthy corporate 

earnings for the second quarter as well since the pre-announcement 

season was favorable by historical standards. Still, 

the ratio of upward versus downward earnings revisions was more 

moderate than the year before. Furthermore, the second quarter 

results should constitute the third consecutive quarter where 

earnings growth surpassed the last cycle’s peak earnings level 

achieved in the second quarter of 2000 (Figure 1). Hence, the 

corporate earnings outlook remains favorable. Nevertheless, we 

believe that the second half of 2004 and early 2005 are likely to 

present a challenge since overall future corporate earnings growth 

trends should moderate, leading to softer year-on-year comparisons. 

The slow down will likely be induced by higher interest 

rates and economic growth tapering off at a sustainable rate. 

Investors changing their thinking 

Interest-rate fears and further spikes in oil prices due to geopolitical 

tensions have diminished equity-market performances. Furthermore, 

although interest-rate expectations may not trend as investors 

anticipate, longer-term rising interest rates should cause 

an earnings contraction in the price/earnings (P/E) multiple as the 

year 2005 unfolds. Looking back at a previous cycle – namely, 

1995 to 1997 – we note that the earnings growth rate had slowed, 

though this was also a period of attractive stock returns. 

The early phase of an economic recovery is generally characterized 

by investors focusing on very high growth rates in recovering 

cyclical sectors: namely, materials and technology. However, 

once the economy has been in a recovery phase for a couple 

of years – and as interest rates start to rise, which happened in 

June – investors start to alter their orientation toward the equity 

market. Earnings growth is important because it serves as a catalyst 

for stock performance. A slowdown in year-on-year earnings 

growth to normalized levels (i.e., percentages in the mid-to-low-

er teens) would likely lead to a shift by investors toward less cyclical 

sectors, such consumer staples and healthcare, which deliver 

more consistent growth. 

Still room for a rally 

In conclusion, we believe that the window of opportunity for a further 

late-summer rally on the US equity market is still open, but 

this could be hindered by a further spike in oil prices. The longterm 

trend for the US markets still paints a positive picture, 

though volumes continue to remain weak. If an uptrend fails to 

spark buying interest, we would not be at all surprised to see a 

more pronounced correction. 

Top Picks 

65 

60 

55 

50 

45 

40 

35 

30 

25 

20 

00 01 02 03 04 

General Electric 

Price rel. to S&P 500 


General Electric — In 2Q 2004, 9 of 11 operating units posted 

year-on-year profit gains. — CEO Jeffrey Immelt stated that “the 

best economy we’ve seen in years” led to order growth. — GE 

closed on almost USD 30 billion in acquisition/divestitures in the 

second quarter as part of the company’s plan to boost profit 

growth in excess of 10% in 2005. — We look for GE to realize 

EPS of USD 1.57 in 2004 and USD 1.78 (+13%) in 2005. — We 

are maintaining our BUY rating on this blue-chip bellwether. 

Price 02/08/04 H/L 52 W EPS 04E/05E P/E 04E/05E Yield 04E 

USD 33.26 34.57/27.18 1.58/1.77 21.09/18.74 2.32% 

45 

40 

35 

30 

25 

20 

15 

10 

00 01 02 03 04 

McDonald’s 

Price rel. to S&P 500 


McDonald’s — We are impressed with the turnaround that 

McDonald’s has achieved in the past 18 months, even as it has begun 

to face more difficult sales and earnings comparisons. — The 

company is clearly achieving financial results that are well above 

its long-term annual targets. — Our 2004 and 2005 full-year projections 

remain at USD 1.70 and USD 1.85, respectively. — The 

shares currently trade at a moderate P/E discount to that of the 

S&P 500 Index. — Historically, the stock has commanded a premium 

multiple averaging 20%. — We therefore think there is still 

meaningful capital appreciation left in the stock. — Our rating on 

McDonald’s is a BUY. 

Price 02/08/04 H/L 52 W EPS 04E/05E P/E 04E/05E Yield 04E 

USD 27.46 29.98/21.57 1.75/1.9 15.65/14.42 1.60%


Product offers—35 

Equity Fund Japan: 

Pictet Funds – Japanese Equities P 

• The fund consists of two broadly diversified portfolios comprising 

a total of 250 stocks. 

• This fund enables investors to tap into the earnings potential of Japanese 

companies across the entire spectrum of market capitalizations. 

Source: Lipper Reuters 

Average peer group 

120 

100 

80 

60 

40 

Indexed in USD 

06.01 

09.01 

12.01 

Japan TSE 

1st Section-TR 

03.02 

06.02 

09.02 

12.02 

03.03 

06.03 

09.03 

Pictet F-Japanese 

Equities-P 

12.03 

03.04 

Investment objective and performance 

Pictet employs a differentiated investment 

strategy for the Japanese equity fund. The 

portfolio of large- and mid-cap companies 

is managed at Pictet’s Geneva headquarters 

using a combination of top-down sector 

allocation and bottom-up stock selection. 

The fund managers adhere to a 

cyclical, long-term investment rationale and 

do not allow themselves to be distracted by 

short-term trends. The portfolio of small 

and midsize companies is managed in 

Tokyo using a pure bottom-up approach, 

with great attention paid to short-term momentum 

and “surprises”. Both investment 

approaches aim to avoid capital losses, and 

the investments are subjected to a dynamic 

risk-control process. 

The fund is overweight in small and midsize 

enterprises, and its return over the past 

three years exceeds the benchmark index 

and beats rival funds. 

Security number: 353304 

Fund currency: 

JPY 

Performance past 3 years: 14.8% (in USD) 

Annual volatility: 20.8% 

Fund volume (million): JPY 110,956 

Portfolio manager: 

Yukie Suzukie 

Equity Fund Europe: 

JP Morgan Fleming Europe Equity 

• The strategy is designed to profit from market inefficiencies due 

to behavioral factors. 

• The manager aims to construct a portfolio displaying, as a whole, higher 

growth expectations and cheaper valuations than the market. 


100 

Indexed 


The strategy is based on a quantitative proprietary 

model called “Trend Momentum 

Value.” The model suggests that portfolios 

are tilted in order to exploit behavioral inefficiencies 

(irrational behavior and mistakes 

due to the human psychology that people 

systematically make while investing). The 

final goal is to build a very well-diversified 

portfolio, with about 200 different holdings, 

which as a whole grows faster than the 

market average and trades at an attractive 

valuation. 

The fund aims to consistently outperform 

its benchmark (the MSCI Europe Index) by 

2% per year on average (after costs). The 

fund has ranked very consistently among 

the best European equity funds, in periods 

of rising as well as sinking equity markets. 

90 

80 

70 


60 


EUR 

50 

06.01 

08.01 

10.01 

12.01 

02.02 

04.02 

06.02 

08.02 

10.02 

12.02 

02.03 

04.03 

06.03 

08.03 

10.03 

12.03 

02.04 

04.04 

Performance past 3 years: –13.6% (in EUR) 

Annual volatility: 18% 


MSCI Europe-Gross 

JPMF Europe Equity A EUR 

Fund volume (million): EUR 1,530 


Chris Complin

Europe: Brief pro-cyclical phase 

following the turnaround in 

US interest rates 

The European stock markets are not 

confident that the global economy 

will really recover. Profit warnings from 

firms like Nokia have not helped much. 

We expect a sector rotation after the 

turnaround in US rates. Markus Mächler, CEFA 

Only exports can provide the stimulus that should help propel European 

businesses to higher revenue and profits. European companies 

generate roughly 21% of their aggregate sales revenue in 

the USA and 65% within Europe. The rest of the world accounts 

for the remaining 14%, with only a little more than 1% generated 

in the growth market of China. The export-driven growth component 

is more important than the currency component, which continues 

to weigh on European enterprises. 

The currency situation eased a bit during the course of the 

second quarter, making the forex environment somewhat more 

predictable for businesses. Many export-dependent companies, 

such as carmakers for example, managed to hedge their foreign 

currency exposure several years forward at advantageous exchange 

rates. If the US dollar and British pound slide into a protracted 

period of weakness, this would create additional strains in 

the coming years. Until then, what matters most is the economic 

upturn, which should sustain corporate earnings. We continue to 

foresee low-double-digit profit growth for European companies 

this year. The profit warnings issued with the release of secondquarter 

numbers – by Nokia, for example – do not alter this forecast. 

Technology companies are facing a difficult period. Prices for 

supplier parts such as semiconductors and electronic components 

are rising, primarily because demand is regaining some momentum 

while production capacity at chip manufacturers is stagnating. 

In the wake of Nokia declaring a price war in the third 

quarter in an attempt to recapture lost market share, we do not 

believe that rising component prices can be passed on to consumers. 

This is putting additional pressure on profit margins in 

the technology sector. Contrary to expectations, demand in the 

software sector has been outpaced by demand for IT hardware. 

Only SAP has been able to meet analysts’ expectations. 

Figure 1 

Changes in GDP correlate with 

market valuations (P/E) 


30 

25 

20 

15 

10 

5 

0 

01/90 

01/92 

01/94 

01/96 

01/98 

01/00 

P/E Euro Stoxx 600 (l.h.s.) 

GDP Euroland, % change YoY (r.h.s.) 

01/02 

01/04 

6 

5 

4 

3 

2 

1 

0 

–1 

–2 

–3 

We favor chemical and automotive stocks 

Now that a turnaround in interest-rate movements has commenced 

in the USA, as expected, we foresee corresponding sector 

rotations on the equity market, which should benefit cyclical 

companies in an initial phase. Our preference goes to chemical 

and automotive stocks. Vertically integrated chemical companies 

like BASF stand to profit the most because they are less exposed 

to rising raw-material prices than specialty chemical manufacturers. 

Production volume in the chemical sector appears to be improving 

considerably, and capacity utilization is increasing. Over 

the past few years, most of the chemical companies have restructured 

their operations, reduced their cost base and cut their 

investment spending. Their balance sheets now look solid. Cash 

flow is improving, and liquidity is being primarily used for dividend 

payouts and share buybacks. 

The automotive sector more than offset its first-quarter 

weakness in the second quarter on the back of the good results 

in the auto-parts segment. Carmakers are significantly trailing 

the overall market. The increasing price pressure emanating from 

the raw-material and auto-parts industry cannot be passed on to 

car buyers. Automobile company valuations are too low, in our 

opinion. Even the slightest market revival in 2005 would have a 

very positive impact on corporate profits in this sector, by our estimates. 

We have adopted a somewhat cautious stance on the interest-rate-sensitive 

housing and real estate sector. Inflation fears 

are also pushing up market interest rates in Europe, which is like-

ly to put additional strains on the sector. For the time being we do 

not foresee a significant reduction in office vacancies, which continue 

to burden the real estate industry. 

Top Picks 


Equities—37 

Potential in Germany and Spain 

We are also diversifying our country allocation and have a positive 

rating on Germany and Spain. Spain’s high exposure to Latin 

America and its attendant link to the upturn in the USA make the 

country an attractive investment destination. In Germany, the DAX 

stocks have lagged behind the broader European market as a result 

of the lack of confidence that profits will improve. Advance 

praise is not being offered at the moment, which is why the market 

is consistently reacting to each piece of corporate news. We 

think the low expectations have potential to be revised upward, 

which should bolster the market. 

The question now arises as to what impact the upcoming US 

elections will have on the European market. Regardless of the 

election outcome, a favorable market environment can be expected 

in the runup to the voting. This will probably have a positive 

influence on the European market in the short term, though 

cautionary voices are already warning about the urgent need for 

post-election austerity measures and are portraying a correspondingly 

gloomy scenario. | 

80 

75 

70 

65 

60 

55 

50 

45 

40 

35 

30 

BASF 

Price rel. to DJ Stoxx 600 

00 01 02 03 04 


BASF — Exposure to petrochemicals: Trading volumes in the 

chemical sector improved significantly in 1Q 2004, and the trend 

probably continued in 2Q 2004, according to comments from the 

industry. — We believe that the global chemical industry capacity 

utilization rate has increased from 75%–80% to 80%–85%. — 

Margins and volumes in petrochemicals are improving significantly. 

— Price inflation is back in the industry. — BASF announced 

several price increases in 2Q 2004. — Exposure to agrochemicals: 

At the 1Q stage, BASF highlighted that 2Q would likely be 

the strongest quarter for agrochemicals. — Consensus estimates 

are currently too low, in our view. 


EUR 44.07 46.16/37.01 2.88/3.37 15.34/13.12 3.47% 

80 

70 

60 

50 

40 

Figure 2 

MSCI Europe and MSCI World (adjusted) 


30 

20 

00 01 02 03 04 

160 

DaimlerChrysler 

Price rel. to DJ Stoxx 600 


140 

120 

100 

80 

60 

40 

01/00 

04/00 

07/00 

10/00 

01/01 

04/01 

07/01 

10/01 

01/02 

04/02 

07/02 

10/02 

01/03 

04/03 

07/03 

10/03 

01/04 

04/04 

07/04 

DaimlerChrysler — Given the overweight sector view, we are 

convinced that now is the right time to take a medium-term position. 

— Labor strikes at some production plants should have come 

to an end. — Chrysler’s US vehicle registration and incentive figures 

show a positive trend for this division despite a still poor overall 

market environment. — We expect some positive news flow 

from the truck division, which has successfully turned around. — 

Our CFROI valuation model indicates a fair value of EUR 47 per 

share based on a continuous turnaround of Chrysler in the USA 

and no further investments in Mitsubishi. 

MSCI Europe 

MSCI World (adjusted) 


EUR 36.95 39.57/29.36 2.79/3.61 13.25/10.22 4.63%

Switzerland: A straggler in the 

second half of the year? 

The Swiss Market Index (SMI) could 

suffer a further drop in momentum 

in the second half-year. 

The SMI’s valuation indicates slight 

upside potential. Christian Gattiker-Ericsson, CFA 

The SMI’s absolute total return (share-price appreciation plus dividend 

payouts) of around +4% for the first half of 2004 beat the 

total return on the DJ Stoxx 50 by nearly 3 percentage points 

when adjusted for currency fluctuations. Compared with the 

whole of 2003, the first six months of 2004 saw an investment 

rotation out of cyclical industries and into defensive sectors, as 

expected (Figure 1). Investments in riskier sectors held the upper 

hand in 2003. However, last year’s winners, such as technology 

and capital goods stocks, sputtered a bit in the first half of 2004 

while cycle-resistant food-and-beverage and pharmaceutical 

stocks outpaced the overall market. Alongside the defensive sectors, 

late-cycle stocks such as building materials firms and chemical 

companies likewise advanced. 

Figure 1 

SPI sector returns in % 


80 

70 

60 

50 

40 

30 

20 

10 

0 

Technology 

Industrial goods 

Financial services 

Banking 

Construction materials 

Total return 2003 

Total return 1H 2004 

Healthcare 

Overall market 

Cyclical consumer goods 

Non-cyclical consumer goods 

Food 

Telecommunications 

Insurance 

Chemicals 

Trending sideways 

The Swiss equity market could continue to trend sideways in the 

second half of the year. Interest-rate hikes in the USA and 

Switzerland are probably largely priced into the market, at least for 

the remainder of this year. Moreover, during the past three 

months, analysts have raised their earnings estimates to an extent 

seldom seen before and are now projecting lofty profit growth 

of just under 16.5% for the next twelve months. However, earnings 

momentum is hardly likely to stay at the current levels in the 

coming months (Figure 2). Hence, actual reported earnings and 

potential payouts to shareholders could become more and more 

of a theme. 

After the mid-year 2004 reporting season, investors are likely 

to turn their attention to the 2004 dividend yield and the longerterm 

dividend prospects. To conflate these two aspects for Swiss 

stocks, we have combined the expected dividend yield for 2004 

with the projected dividend growth through 2007 to create an indicator 

of dividend attractiveness. At the sector level, financials 

and selected chemical stocks offer the most attractive dividends 

in Switzerland. We recommend Swiss Re, Syngenta and Clariant 

for those investors who place value on longer-term dividend 

prospects. 

Leeway with dividend policies 

In terms of dividend cover, insurance companies appear to have 

the most leeway to pay out dividends for 2004. Their projected 

cash flow per share is several times higher than their expected 

dividends per share. At the sector level, financials and selected 

chemical stocks have the highest dividend cover ratios in Switzerland. 

Compared to the European average, Swiss companies have 

a higher average dividend cash cover (roughly 9x versus roughly 

5x for Europe), which is partially due to Switzerland’s lower overall 

dividend yield (2% versus 3% for Europe). Hence, with regard 

to expected dividends for 2004, Swiss companies on the whole 

have greater leeway in their dividend policies. 

Disregarding its historically lower dividend yield, the SMI currently 

exhibits no valuation premium to speak of relative to the 

global equity market. With a forward P/E of approximately 15x, 

the SMI is actually trading at a marginal discount to the MSCI 

World index. This discount is balanced by the SMI’s lower expected 

earnings growth (16.5% versus 18.8% worldwide). However, 

these aggregate earnings growth rates derived from individual 

company valuations lie well above the long-term average (e.g. 

the SMI companies posted average annual earnings growth of 

8.4% from 1980 to 2003). We therefore assume in our valuation 

model profit growth of approximately 9% for the next twelve

months. This would yield a fair value of around 6,300 for the SMI 

on a twelve-month horizon. We thus see little reason to revise our 

end-2004 SMI fair value range of 6,000–6,200 that we set at the 

start of the year. 

Short-term rally for cyclical industrials 

and technology stocks? 

At the sector level, we think an increasing rotation into less cyclical 

industries is appropriate for the long term, especially in the 

event of a cyclical rebound in the third quarter. Pharmaceutical 

stocks and telecom service providers offer an attractive return 

profile with little cyclical risk. Cyclical industrials and technology 

stocks, in contrast, could actually see an exit window open up in 

the coming months. Individual late-cyclical industries, such as the 

chemical sector for example, should continue to outperform the 

overall market in the short term. However, we expect upside potential 

to diminish across all cyclical sectors on a twelve-month 

horizon. | 

Top Picks 

200 

180 

160 

140 

120 

100 

80 

60 

Roche 

Price rel. to SPI 


Equities—39 

00 01 02 03 04 


Roche — For the next three years, we expect Roche to grow at 

above sector average in terms of both sales (11% vs. 8%) and 

earnings (19% vs. 12%) on the back of its innovative portfolio of 

specialty products for the treatment of cancer and Hepatitis C, and 

for use in transplantations. — Based on P/E 2005E, Roche’s valuation 

shows a premium of 35% to the sector over a short-term 

horizon. — Since Roche’s product portfolio is relatively young, we 

believe that a long-term valuation better reflects the company’s 

potential. — Hence, based on the group’s capital value, we calculate 

a fair value in the range of CHF 145–155. 


CHF 125.25 141.25/107 5.29/6.05 23.67/20.7 1.46% 

600 

550 

500 

450 

400 

Figure 2 

Earnings revision momentum and SMI rate 

of change 

Source: Datastream, IBES 

80 


% 

80 

350 

300 

250 

200 

Rieter 

Price rel. to SPI 

00 01 02 03 04 


60 

40 

20 

0 

-20 

-40 

95 97 99 01 03 

50 

20 

-10 

-40 

-70 

-100 

Rieter — We view Rieter as a blue chip within the Swiss mechanical 

engineering sector. — The machinery maker has continuously 

posted an EBITDA margin above 10% over the past five years 

despite operating in a business environment that has been very 

tough in some instances. — Over the next six to twelve months, 

the group is likely to profit from sustained robust demand in the 

textile systems segment and from a slight easing of pricing pressure 

in the automotive systems segment. — Shares of Rieter look 

attractively valued to us with a consensus P/E 2005E below 11x 

and an alluring 2004E dividend yield of 2.6%. 

Net positive revisions as a % of the total (r.h.s.) 

SMI 


CHF 332 338.5/260 26.63/29.79 12.46/11.15 2.68%

SMI stocks at a glance 

Reuters Rating Price Performance % Market Earnings per share P/E Dividend Yield Payout ratio 

02/08/04 52W 52W 1 mth 3 mth 12 mth. cap (M) % 03A 04E 05E 04E 05E 04E 04E % BV/S P/BV 

All values in CHF, unless otherwise noted High Low 

Banks 144001 21.3 3.9 6.4 7.1 11.5 10.4 2.4 3.1 36.3 2.06 

CS Group R CSGN.VX REST 40.95 49 40 –5.6 –9.3 –2.3 48960 7.3 0.6 4.2 4.5 9.6 9.0 1.19 2.9 28.0 32 1.30 

Julius Baer Holding BAER.VX HOLD 343.00 486 320 –2.0 –0.3 0.7 3085 0.5 7.9 23.1 26.5 14.9 13.0 8.02 2.3 34.8 142 2.41 

UBS R UBSN.VX BUY 85.75 99 74 –1.9 –6.9 10.8 91955 13.6 5.5 6.9 7.8 12.4 11.0 2.82 3.3 40.7 35 2.45 

Insurances 56861 8.4 9.8 15.3 16.8 8.9 8.0 2.4 2.0 17.7 1.26 

Bâloise Holding R BALN.VX HOLD 49.90 63 44 –8.4 –4.0 5.9 2760 0.4 1.7 5.1 5.8 9.7 8.6 1.34 2.7 26.2 135 0.37 

Swiss Life R SLHN.VX HOLD 147.75 231 129 –13.0 –6.6 2.6 4468 0.7 9.5 13.1 16.1 11.2 9.2 3.56 2.4 27.1 192 0.77 

Swiss Reinsurance R RUKN.VX REST 73.85 97 71 –7.2 –12.2 –14.1 23784 3.5 – – – – – – – – – – 

Zurich Financial Services R ZURN.VX BUY 179.50 220 161 –8.1 –11.3 5.8 25849 3.8 14.8 23.8 25.7 7.5 7.0 3.20 1.8 13.4 128 1.41 

Industrial Services & Consulting 12048 1.8 11.1 14.1 17.6 20.7 15.2 4.1 1.5 30.3 6.36 

Adecco R ADEN.VX BUY 60.65 84 43 –2.4 5.9 –5.6 7947 1.2 1.6 2.8 4.0 21.5 15.0 0.87 1.4 30.8 9 7.12 

SGS Geneva SGSN.VX BUY 687.00 803 622 2.5 1.0 9.2 4101 0.6 29.5 35.8 43.8 19.2 15.7 10.47 1.5 29.2 141 4.88 

Telecommunications 10314 1.5 23.7 27.3 31.3 15.3 13.3 14.0 3.4 51.2 3.38 

Swisscom R SCMN.VX REST 418.00 430 367 2.0 3.9 15.9 10314 1.5 – – – – – – – – – – 

Chemicals 28220 4.2 7.4 11.3 13.9 17.1 14.2 3.6 2.1 35.0 1.95 

CIBA Spec. Chemicals R CIBN.VX BUY 88.35 101 82 –1.3 1.7 –2.9 6043 0.9 5.0 5.7 6.8 15.5 13.0 2.78 3.1 48.6 63 1.41 

Clariant R CLN.VX BUY 17.25 20 13 –6.0 4.9 21.2 3970 0.6 1.0 1.2 1.2 14.9 14.6 0.23 1.3 19.9 8 2.25 

Givaudan R GIVN.VX HOLD 740.00 752 548 1.9 14.7 35.8 5282 0.8 26.9 39.8 48.6 18.6 15.2 10.73 1.5 27.0 325 2.28 

Lonza R LONN.VX SELL 56.25 75 54 –10.5 –10.1 –12.7 2110 0.3 1.8 3.3 4.5 16.9 12.4 1.22 2.2 36.8 26 2.16 

Syngenta R SYNN.VX BUY 106.50 108 69 3.5 4.3 41.0 10814 1.6 2.6 5.9 7.3 18.0 14.6 2.16 2.0 36.5 55 1.94 

Healthcare 238830 35.4 3.1 4.4 5.1 21.1 18.6 1.5 1.7 35.9 4.50 

Novartis R NOVN.VX HOLD 57.50 59 50 4.2 –0.5 12.3 145292 21.5 2.0 2.9 3.3 19.6 17.4 1.09 1.9 37.1 12 4.67 

Roche Holding DRC ROG.VX BUY 125.25 141 107 –1.4 –7.9 11.8 87996 13.0 3.6 5.3 6.1 23.7 20.7 1.83 1.5 34.6 30 4.22 

Serono 

SEO.VX HOLD 780.00 974 728 0.4 1.4 –9.9 5542 0.8 24.6 30.4 35.0 20.0 17.4 7.01 0.9 23.1 178 4.38 

Food & Beverage 131144 19.4 15.9 17.2 19.4 18.9 16.8 7.7 2.4 44.7 3.42 

Nestlé R NESN.VX BUY 325.00 346 272 –2.4 –0.9 21.4 131144 19.4 15.9 17.2 19.4 18.9 16.8 7.70 2.4 44.7 95 3.42 

Electric Components & Equipment 14430 2.1 –0.6 0.3 0.5 23.4 13.5 0.0 0.4 10.1 4.67 

ABB R ABBN.VX BUY 6.97 8 5 2.2 –4.5 33.1 14430 2.1 –0.6 0.3 0.5 23.4 13.5 0.03 0.4 10.1 1.5 4.67 

Technology 1227 0.2 0.6 1.3 1.7 28.8 20.8 0.0 0.0 0.0 9.78 

Kudelski R KUD.VX BUY 36.20 46 33 2.7 –7.8 13.7 1227 0.2 0.6 1.3 1.7 28.8 20.8 0.00 0.0 0.0 4 9.78 

Consumer Cyclical 24489 3.6 2.6 3.6 4.2 17.6 14.9 0.8 1.7 29.6 2.43 

Richemont AG CFR.VX HOLD 33.05 36 24 0.0 –0.9 35.7 17252 2.6 0.9 1.8 2.2 18.0 14.8 0.64 1.9 34.8 13 2.45 

Swatch Group UHR.VX BUY 162.25 181 117 –0.8 –5.0 28.3 5437 0.8 8.4 9.7 10.9 16.7 14.9 1.68 1.0 17.3 69 2.37 

Swatch Group R UHRN.VX BUY 33.25 37 24 –0.2 –3.9 30.2 1800 0.3 1.7 1.9 2.2 17.1 15.2 0.34 1.0 17.3 14 2.42 

Construction & Materials 11897 1.8 3.4 4.0 4.6 17.0 14.6 1.2 1.8 30.4 1.90 

Holcim HOLN.VX BUY 67.70 70 51 1.0 5.5 24.7 11897 1.8 3.4 4.0 4.6 17.0 14.6 1.21 1.8 30.4 36 1.90 

Technology hardware & Equipment 1342 0.2 2.5 6.4 10.7 20.2 12.1 2.1 1.6 32.3 1.13 

Unaxis R 20 UNAX.VX HOLD 129.75 200 116 –8.6 –10.5 6.1 1342 0.2 2.5 6.4 10.7 20.2 12.1 2.07 1.6 32.3 115 1.13 

Swiss Market Index 5537.80 5942 4962 –1.2 –4.0 11.5 674802 100.0 322.2 370.6 17.2 14.9 2.2 35.3 2.36 

1 

Market value of free float 

Legend: REST = restricted (consensus estimates, IBES) BV = book value P/E = price to earnings R/DRC = registered share/dividend rights certificate Source = Bloomberg, IBES estimates, Datastream, Credit Suisse (ratings)



Sector funds: 

ACM International Health Care Fund 

• Geared toward stock investors who are seeking a well-diversified 

healthcare equity fund that has relatively low volatility. 


Indexed in USD 

150 

140 

130 

120 

110 

100 

90 

80 

06.99 

12.99 

06.00 

MSCI World/Health 

Care-Gross USD 

12.00 

06.01 

12.01 

06.02 

12.02 

ACM International 

Health Care A 

06.03 

12.03 


Over the past five years, the fund has posted 

the lowest volatility in its category. Its 

annualized standard deviation totals 

12.34% compared with 13.60% for the 

benchmark index and 12.69% for the 

fund’s peer group. The fund is managed by 

an eminently experienced research team. 

The team is led by a portfolio manager who 

has run the fund since its inception (1983) 

and whose 35 years of experience in investing 

in the healthcare industry is nearly 

unparalleled. The fund is managed using a 

classic bottom-up approach to stock selection. 

The portfolio is thus assembled by 

means of pure stock picking, though the 

fund manager rigorously adheres to his 

cautious investment philosophy at all times 

(90% of the companies in the portfolio are 

profitable enterprises). 



USD 

Fund volume (million): USD 701 

Annual return since 30 June 1999: 1.1% 


Portfolio manager: Norman M. Fidel 

Commodity funds: 

Credit Suisse Commodity Fund Plus 

• Geared toward investors who are seeking to invest directly 

in commodities rather than in specific companies. 

•Offers investors an opportunity to diversify their portfolios since 

commodities have a low correlation to traditional equity and fixed-income 

instruments. 


The Credit Suisse Commodity Fund Plus is 

a passively managed fund that aims to 

replicate the performance of the Goldman 

Sachs Commodity Index (GSCI) as closely 

as possible by investing in futures on the 

GSCI. The GSCI comprises 25 commodities 

primarily in the energy sector (68%). In 

order to improve the fund’s total return, 

cash is invested in money-market instruments 

with the goal of generating a return 

of LIBOR plus 30 basis points. Since twothirds 

of the fund’s assets are invested in 

energy and related products, its year-todate 

performance has been driven mainly 

by the rise in energy prices. 


130 

125 

120 

115 

110 

105 

100 

95 

Indexed in EUR 

11.03 

12.03 

01.04 

02.04 

03.04 

04.04 

05.04 

Security number: 

1691241 (EUR) 

1691240 (CHF) 

1691244 (USD) 


EUR, CHF, USD 

Fund volume (million): EUR 32, 

CHF 60, USD 69 

Return (since 30/11/03): 17.1% (in EUR) 


Goldman Sachs 

Commodity-TR USD 

Credit Suisse Commodity 

Fund Plus Euro 


Portfolio manager: Markus Huebscher

“Clamshell handsets with bigger displays and 

built-in cameras are in demand” Uwe Neumann, CEFA


Equities topic—43 

Technology stocks still make an interesting alternative 

Recovering technology stocks could take a breather in the second half of the year. 

Looking ahead to 2005, though, we believe the sector should continue to provide 

some good opportunities. Selective stock picking is key. Ulrich Kaiser, CEFA, Uwe Neumann, CEFA 

The significant underperformance by semiconductor stocks since 

the start of the year has run counter to the sector’s positive operational 

trend. Revenue growth picked up 2.1% sequentially and 

37% year-on-year in May. The average selling price for semiconductor 

chips is up 9.6% from a year ago. NAND flash memory 

chips are encountering pricing pressure. DRAM memory chip 

prices appear to have bottomed out and are likely to experience 

a seasonal upturn in the third quarter. The second-quarter 

(April–June) business results reported so far and company outlooks 

for the remainder of the year and beyond paint a mixed picture. 

Sector giant Intel, in particular, has provided grist for the mill 

of industry pessimists with its motley quarterly report, and even 

more so with its rather cautious appraisal of its future business 

prospects. However, this is no reason to strike a sour note, in our 

opinion, because Intel’s troubles are of the company’s own 

making. We share the market’s viewpoint that the semiconductor 

cycle is close to peaking, but we believe the current slowdown 

or slackening of growth is merely temporary and by no means 

comparable with the situation that prevailed after the year 2000. 

In contrast to the situation back then, the current level of capacity 

utilization and especially the isolated expansions of production 

capacity are exerting a dampening and modulating effect on both 

the semiconductor cycle and manufacturers’ pricing power. 

Against this backdrop, the current market opinion looks excessively 

grim to us (Figure 1). We are maintaining our neutral 

weighting of the semiconductor sector. 

Figure 1 

The market is too negative on semiconductors 


% 

% 

Contradictory signals in the electronic hardware sector 

As usual, hopes on the demand side are riding on the second half 

of the year. Production bottlenecks in the TFT-LCD flat-screen 

segment did not arise in the second quarter. However, supplier 

shortages left manufacturers insufficient leeway to cut prices. As 

a result, demand has grown more slowly than desired and a volume 

effect has not yet materialized. This particularly applies for 

flat-screen televisions, which could get a sales boost from the 

Olympic Games. According to recent statements, manufacturers 

are now willing to make price concessions in the range of 

10%–20%, particularly for 17- and 19-inch flat screens. We think 

annual price cuts of 30%–35% on flat-screen televisions would be 

needed to trigger a volume effect. Asian demand for mobile telephones 

declined in May, particularly in the lower-price segment, 

but rebounded in June. Increasing competition in the low-end 

60 

40 

20 

0 

–20 

–40 

–60 

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 

Relative performance of the US semiconductor sector (r.h.s.) 

Worldwide growth in semiconductors 

140 

120 

100 

80 

60 

40 

20 

0 

–20 

–40 

–60

digital camera segment is leading to price reductions. Demand for 

higher-end digital cameras and cellphones remains robust, while 

demand for PCs and consumer electronic devices is unlikely to 

pick up until the third quarter, though there are conflicting opinions 

about the magnitude of the expected seasonal upturn. Recent 

orders for motherboards received by Taiwan-based manufacturers 

point to only moderate growth. However, the robust 

order intake at component makers, presumably due to multiple 

order placements motivated by fears of shortages, suggests the 

opposite. We are maintaining our neutral weighting of the electronic 

hardware sector in view of a potential inventory buildup for 

various products. 

Telecom service providers: Exaggerated concerns 

about margin pressure 

Now that the market penetration of mobile phone users in Europe 

has nearly surpassed fixed-line usage, customer growth is increasingly 

fading into the background as a growth driver for the 

sector. In the first half of 2004, combined fixed-line and mobile telephony 

revenues actually declined slightly from the previous year 

by an average of 2%, but the operating margins of European telecom 

service providers remain high. For the first six months of this 

year, operating margins ranged from 32% for pure fixed-line carriers 

like British Telecom to a whopping 47% for integrated incumbents 

like Telecom Italia, which face relatively little competitive 

pressure. Hence, despite stagnating revenue, telecom 

operators continue to generate rich cash flows, which, in the 

wake of the industry’s massive debt reduction over the past three 

years, are now increasingly accruing to shareholders both directly 

and indirectly in the form of dividends or share buybacks. However, 

new technologies and regulatory interventions are raising 

concerns about intensifying margin pressure. Internet telephony 

(VoIP), for example, is a suspected margin-destroying technology 

in the fixed-line business. Moreover, advancing regulatory efforts 

to unbundle the local loop and the admittance of mobile service 

resellers (mobile virtual network operators) into the market are 

depressing investor sentiment. Although these sector trends are 

unlikely to be casually tolerated, the negative dynamics of these 

influences are being overestimated. The risk premiums currently 

priced into shares of telecom service providers, particularly in Europe, 

are too high in our opinion. The sector P/E based on estimated 

2005 profits has fallen below 10, and the free cash flow 

yield and average dividend yield currently stand at 10.5% and 

3.7%, respectively (Figure 2). The second half of 2004 is likely to 

see an easing of margin pressure and a stabilization of the 

revenue trend, which should be reflected in rising share prices. 

We are therefore overweighting the sector, and we recommend 

buying stocks like Vodafone, France Telecom, Telecom Italia and 

Deutsche Telekom. 

Telecom equipment manufacturers: Price war 

in the cellphone business 

Although the mobile telephone market has been booming this 

year (Figure 3), industry leader Nokia has suffered an unexpectedly 

steep slump in net profit so far this fiscal year, evidently as 

a result of intensifying competition. Nokia must defend its formidable 

market share (31%) with all its might in order to maintain its 

economies of scale, which have long enabled the handset maker 

to achieve operating margins above 20%. However, the competition 

with Samsung, Sony-Ericsson, Motorola and Siemens has 

Figure 2 

Free cash flow and dividend yields 

of European telecom providers 

Source: Credit Suisse 

0.14 

0.12 

0.1 

0.08 

0.06 

0.04 

0.02 

0 

BT 

DT 

FT 

Dividend yields 

KPN 

PT 

SWCM 

Figure 3 

Global trend in cellular phones 

Source: Gartner Group 

250 

200 

150 

100 

50 

0 

01/02 

Total 

04/02 

07/02 

10/02 

01/03 

04/03 

07/03 

Growth (YoY) 

TDC 

10/03 

TI 

TEF 

TA 

TLSN 

Free cash flow returns 

01/04 

04/04 

07/04 

10/04 

Sector 

in % 

35 

30 

25 

20 

15 

10 

5 

0

grown tougher. The cellphone boom this year has been driven by 

the burgeoning replacement cycle in Europe and the USA and by 

rising demand in Asia. In the midst of this phase, Nokia has evidently 

neglected to adapt its product range to the needs of replacement 

buyers. Clamshell handsets with bigger displays and 

built-in, easy-to-use cameras have been particularly in demand. 

Samsung and Sony-Ericsson have been the best at satisfying 

this demand and have captured market share as a result. Their 

market-share gains are now sparking a price war in the cellphone 

segment. Nokia is slashing its handset prices in an effort to stabilize 

its market share, at the expense of its profit margin at 

present. The margin erosion has been surprisingly swift. The cellphone 

maker was still generating a profit margin of 27% during 

the Christmas quarter of 2003, but this figure stood at only 19% 

in the second quarter of 2004, and Nokia expects it to plunge 

even further to 12% in the third quarter. Keep in mind that Nokia 

has a war chest of more than EUR 11 billion (EUR 2.5 per share) 

at its disposal to defend its market share. This means that the 

company has the wherewithal to wage a lengthy price war. This 

bodes ill for the cellphone industry and sector share prices. Nokia 

stock has already lost more than 30% of its value since the start 

of this year and is unlikely to rebound much in the second half. 

Shares of Samsung, Motorola and Sony-Ericsson have yet to feel 

the effects of the price war, but they probably will later on. 


Equities topic—45 

Brisk order intake for network equipment manufacturers 

The network equipment sector is likely to be less affected by this 

trend. The mobile telephony network business, where Ericsson is 

the leader with a market share of nearly 40%, can count on robust 

order intake this year. Growing demand, particularly in developing 

countries (South America, South Africa, India, etc.), and 

infrastructure upgrade orders in Europe and the USA (migration 

from 2G to 3G networks) are having a positive impact on the revenue 

trend. A similar but somewhat more moderate trend is visible 

in the fixed-line infrastructure business, where Alcatel is well 

positioned. Here, the migration from pure voice networks to digital 

data networks is boosting order intake from telecom service 

providers. What’s more, the aforementioned companies have 

emerged from a tough period of restructuring, the fruits of which 

are likely to be reaped this year. Profit margins and net income are 

thus poised to turn around sharply in 2004. However, current 

stock valuations are already discounting much of the expected 

profit growth. Companies like Ericsson have already seen their 

valuations return to 2.5 times annual revenue like back in the 

boom days. Risk-aware investors will find the best pickings in 

North America, where Lucent, Nortel (Canada), Cisco and Juniper 

Networks are exhibiting strong earnings momentum. | 

Top: Hasselblad professional digital 

cameras – demand still big for highquality 

equipment. 

Bottom: The pavilion of the global 

mobile telephony company Vodafone 

at the Cebit 2003 IT show.

Asia excluding Japan: 

Looking for signs of a soft landing 

Asia’s stock markets have turned in a 

disappointing performance so far this 

year. This situation brings to mind an old 

Asian adage: “As bamboos weather even 

a typhoon because they seem to bow 

to such force, a wise man too bows to 

such storms, acknowledging the stronger 

force and preserving his strength to 

emerge in its wake.” Damian Sigrist 

In 2003, the share prices on many Asian stock markets were 

swept upward as if by a storm, while in 2004 these equity markets 

have been blown back by a strong headwind. For example, 

the HSI China Enterprise Index realized an advance of 152% last 

year, but retreated in double-digit negative territory in the first half 

of 2004. Other major Asian stock-market indices faced the same, 

if not less pronounced, fate. Amid such a situation, long-term-oriented 

investors merely have the possibility – like the aforementioned 

bamboo tree – to ride out the correction, but at the same 

time being on the lookout for buying opportunities. In this regard, 

Asia’s stock markets offer great potential in the long term. 

Just how long investors will have to be patient depends primarily 

on the developments in China, which has become a key 

trading partner for many Asian countries. Of course, China’s 

economy is growing at an above-average pace. But with this 

growth, the danger arises that the economy will overheat and the 

risk looms that China will slide into the same situation as it did in 

the mid-1990s. At that time, the government also attempted to 

put the brakes on the high-revving economic engine. The measures 

implemented by the state – curbing investments and hiking 

interest rates by 270 basis points to 12.06%, among other things 

– had showed their effects. However, the braking maneuver 

turned out to be too abrupt and presented China with a “hard 

landing” as well as a period of deflation. 

Figure 1 

Asia’s stock-market performance has been 

disappointing until now 


160 

140 

120 

100 

80 

60 

40 

20 

0 

-20 

% 

Kospi (Korea) 

KL Composite 

(Malaysia) 

STI (Singapore) 

TWSE 

(Taiwan) 

Performance in 2003 

Performance since start of year 

Hang Seng 

(Hong Kong) 

SET (Thailand) 

HSI Enterprises 

(China) 

MSCI AC 

(Asia/Pacific) 

No interest-rate hike in China until inflation 

surpasses the 5% mark 

We currently assume that history will not repeat itself in this regard. 

First, the set of economic data emanating from China today 

looks much healthier. And second, China has improved its underlying 

institutional and regulatory conditions, whereby market intervention 

shows a more effective impact. The “soft landing” that 

the government is striving for should thus materialize, underpinned 

by robust domestic consumption and export activity. In order 

to achieve such a feat, though, China will be compelled to intervene 

with further measures such as boosting lending rates and 

probably hiking interest rates too, in view of the climbing inflation 

rates. Still, the People’s Bank of China explained that it would not 

tighten the interest-rate screw until the inflation rate surpassed 

the 5% mark. 

For the time being, investors’ doubts that the government can 

succeed in carrying out a “soft landing” are likely to stand in the 

way of Chinese stocks breaking out of their correction phase. But 

as soon as progress reports increase, interest in the Chinese 

market will be rekindled, which could be the case in the second 

half of this year. Nevertheless, investors should be aware that, 

amid an environment of rising interest rates, the stimulus to invest 

in China as well as in other emerging markets should dissipate. 

We favor defensive sectors such as energy and utilities, which can 

grow successfully, even given an economic slowdown. In addition, 

we prefer sectors, such as the infrastructure segment (roads, 

harbors), in which there are bottlenecks and, as such, have drawn 

the government’s attention as areas of investment. 

Taiwan reaps rewards from boost in its index weightings 

Since the development in other Asian markets is tied to the trend 

in China, the lion’s share of these stock markets will probably be 

held in check for the time being too. Positive news flow stemming 

from China and the USA, which has a disproportionately strong influence 

on some of these countries, could nonetheless lead to a

more precipitous rebound in these markets. In our view, this especially 

applies to Taiwan as well as to South Korea. In these two 

countries, the technology sector carries a heavy weighting in the 

stock-market indices. The tech sector is likely to benefit from the 

prevailing boom in consumption in China, as well as from the robust 

– albeit with waning momentum – US economy. Moreover, 

Taiwan’s market will be underpinned subliminally in the coming 

12 months by the fact that MSCI will noticeably boost the island 

nation’s weighting in its country indices. Accordingly, investment 

funds should build up their country allocations in Taiwanese 

stocks. In South Korea, we expect favorable impetus from personal 

consumption, after the country traversed the low point in 

2003 with regard to its credit card debt problems. Based on P/E 

multiples, the South Korean stock market is among the most attractive 

in the region. 

Hong Kong, Singapore and Thailand in the starting blocks 

Hong Kong is the most directly exposed to China’s growing influence 

in the Asian region. The special Chinese administrative region 

has profited since the outset of this year from the easing of 

restrictions on tourists and currency from the mainland, from 

which the hotel and retail sectors have already reaped rewards. In 

light of the climbing inflation rates, which sooner or later could 

lead to rising interest rates, the boom on the real estate market 

should continue to prevail. The pegging of the Hong Kong dollar 

to the US dollar exerts additional pressure on interest rates. The 

recent attempt by Beijing to bolster its influence on political developments 

in Hong Kong could dampen sentiment there. Moreover, 

based on P/E multiples, the Hong Kong market is among 

the most expensive in Asia. We are accordingly sticking to our 

cautious stance on Hong Kong. Ditto for Thailand. Although the 

country’s economy continues to expand at an above-average 

pace by international comparison, growth momentum has diminished 

as a result of waning personal consumption. Amid the current 

environment, this is unlikely to spark any new investment by 

market participants. The stock market in the city-state of Singapore 

has revealed itself to be as solid as a rock thus far in the 

course of this year. The country’s economy shows a robust trend, 

which has been manifest in a comparatively stable share-price 

performance. We are maintaining our neutral weighting on Singapore 

in our country allocation since this market does not count 

among the cheapest. | 

Top Picks 

14 

12 

10 

8 

6 

4 

2 

0.8 

8.0 

7.5 

7.0 

6.5 

6.0 

5.5 

5.0 

4.5 

4.0 

3.5 

Yanzhou Coal 

Price rel. to Hang Seng 


Equities—47 

00 01 02 03 04 


Yanzhou Coal — Yanzhou Coal is one of China’s leading coal producers. 

— The company reaps rewards from the demand for energy 

emanating from China, which generates most (81%) of its 

electricity with coal-burning power plants. — Hence, the supply of 

coal may not be able to meet the demand, which is manifest in 

sharply rising coal prices in 2004. — The situation could intensify 

since additional coal-burning plants will be built in the coming 

years due to the bottlenecks in the electricity supply. — In addition, 

Yanzhou Coal is a key coal exporter (the company accounts for 

roughly 17% of total Chinese coal exports). 


HKD 9.4 9.85/3.775 1.02/1.08 9.8/9.23 2.98% 

3.0 

00 01 02 03 04 

Table 1 

Asia’s stock markets are attractively valued 

once again 

Source: IBES, Credit Suisse 

EPS Growth % P/ E Rating 

2004E 2005E 2004E 2005E 

China 20.0 6.8 12 11 Neutral 

Hong Kong 31.1 4.6 16 15 Neutral 

Korea 71.5 8.0 7 6 Overweight 

Singapore 25.7 8.2 14 13 Neutral 

Taiwan 66.9 9.3 11 10 Overweight 

Thailand 0.3 9.7 11 10 Neutral 

Singapore Press Holdings 

Price rel. to STI 


Singapore Press Holdings — The economy of the Asian nationstate 

Singapore is trending favorably, from which the late-cyclical 

media group Singapore Press Holdings (SPH) should benefit. — 

Why? Companies strive to steadily boost their advertising budgets 

in phases of economic recovery. — In this situation, Singapore 

Press Holdings publishes 14 newspapers and magazines, as well 

as operates an online news portal and is active in the television 

business. — The group should be in a position to not only increase 

advertising revenues, but also raise its fees for classified ads. 


SGD 4.34 4.484/3.5709 0.31/0.23 13.69/18.94 4.61%

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Fixed income 

The increase in consumer prices reflects the fact that companies 

are defending their margins and that there is little need for a widening 

of spreads 

Active management of bond portfolios is especially important in phases 

of rising yields


Fixed income—49 

Sound fundamental data support corporate bonds 

There is considerable movement in government bond yields at the moment, while 

corporate bond spreads remain quiet and have settled at a low level. Dr. Ursula Oser 

The yields on government bonds and the spreads demanded by 

investors for buying investment-grade corporate bonds instead 

of sovereign issues depend crucially on the macroeconomic 

environment (Figure 1). In the past, the growth of gross national 

product and industrial production was central for the interest-rate 

outlook, while recently more interest has been focused on inflation. 

Even though the pace of US economic growth is losing 

momentum, the global economic upturn still appears to have a 

relatively sound base. The employment market has staged a – admittedly 

faltering – revival, and will probably help the US economy 

achieve a soft landing. In Europe, although unresolved structural 

problems and high unemployment stand in the way of a 

higher pace of growth, we nevertheless expect the euro-zone 

economy to grow by 1.5% this year and 1.6% next year. 

Investors are upbeat 

Market players in the investment-grade bond markets appear to 

share our relatively upbeat picture of the world economy. The 

lack of reaction from the credit markets to the publication of 

patchy economic indicators and the Fed’s past rate hike is reflected 

in the narrow range within which spreads have settled 

down since the beginning of the year. Figure 2 shows that the 

spread of EUR-denominated corporate bonds over sovereign issues 

of a comparable maturity has moved within a range of just a 

few basis points (bp). At present, the average spreads for a broad 

EUR index of liquid bonds is around 45 bp. 

We see greater uncertainty in the assessment of the future 

inflation trend. The inflation premiums priced into yields have risen 

significantly since mid-2003. Inflation rates themselves charted 

their lowest levels at the beginning of this year in the USA as well 

as in Europe, and have risen briskly since then – especially in the 

USA. US prices increased a good 3% YoY in June. Adjusted for 

the volatile influence of energy and food prices, this was just 2%. 

For several months now, US producer prices have been indicating 

that a certain inflation potential has built up as a result of the 

increase in commodity prices. And prices have now also risen, 

with a time lag at the consumer level. Although the inflationary influence 

of commodities is now fading again, the current inflation 

trend is enough of a cause of concern for the US central bank to 

continue to raise interest rates moderately in the next few months 

from their all-time lows. The prospect of higher key rates and the 

stretched budgetary situation will exert a certain amount of upside 

Figure 1 

First-half 2004 characterized by pronounced 

fluctuations in government bond yields 

Source: Credit Suisse, Bloomberg 

5.0 

4.5 

4.0 

3.5 

3.0 

% % 

01/04 

02/04 

03/04 

04/04 

10-year Bunds 

10-year US Treasuries 

10-year Eidgenossen (r.h.s.) 

05/04 

06/04 

07/04 

4.0 

3.5 

3.0 

2.5 

2.0



pressure on yield levels. The fact that yields and bond prices are 

moving in opposite directions means that total returns (capital 

gains/losses + coupon income) will probably be only moderate for 

the time being – depending on the residual maturity. On the other 

hand, a higher interest-rate level will create attractive opportunities 

for new fixed-income investments. 

Interest-rate fluctuations influence all fixed-income securities. 

Other decisive effects on the performance of corporate 

bonds spreads over government bonds include (1) to what extent 

the issuers can pass on their higher procurement costs to consumers, 

and (2) whether consumer spending would suffer from 

higher interest rates. The increase in consumer prices reflects the 

fact that companies are defending their margins and that there is 

little need for spread-widening. We therefore also assume that 

corporate bonds on average will bring higher total returns than 

government bonds in the next few months, and that investors will 

be compensated for the higher credit risk. Only an inflation shock 

– which we do not expect – would spoil this picture. We see the 

possibility of certain spread-widening at most in the case of bonds 

from issuers in the automobile sector. The US automobile sector 

has lured customers with extremely attractive financing models, 

which have motivated consumers to buy cars sooner. 

Companies react with bond buybacks 

The sound economic environment and a certain amount of pricing 

power have allowed companies to build up their cash reserves. 

In light of the inflows of liquidity and restrained investment budgets, 

some issuers have reacted by buying back selected outstanding 

bonds. It comes as no surprise that the European telecoms 

sector, which has devoted itself to the de-leveraging of its 

balance sheets, has pointed the way here. In the last few months, 

issuers from other sectors have also embarked on this path. 

Examples include the bond buybacks tendered by Linde and 

Saint-Gobain. The motivation for such transactions may differ 

greatly. Issuers that use the proceeds for longer-term financing 

are positioning themselves with regard to the expectation that interest 

rates will rise. Other companies are pursuing the objective 

of reducing their gearing. Basically, in our opinion, the buybacks 

are a sign of improving credit quality in the corporate sector. | 

Figure 2 

Since the start of 2004, the spread on EUR 

corporate bonds has settled down to a low level, 

without showing signs of widening soon 

Source: Credit Suisse, CSFB Liquid Eurobond Index 

4.5 

4 

% 

3.5 

3 

2.5 

01/04 

02/04 

03/04 

04/04 

05/04 

06/04 

07/04 

Average yields on corporate bonds 

Yields on EUR government bonds of similar duration



Global Investment Grade Bonds EUR: 

Dexia Bonds International C Cap 

• Investors can profit from global bond markets’ appreciation while avoiding 

exchange rate risks. 


Indexed 

125 

120 

115 

110 

105 

100 

30.06.01 

30.09.01 

30.12.01 

30.03.02 

30.06.02 

JP Morgan Global GBI 

Hedged DEM/EUR-TR 

30.09.02 

30.12.02 

30.03.03 

30.06.03 

30.09.03 

30.12.03 

Dexia Bonds International 

C Cap 

30.03.04 


The fund invests globally in investment 

grade bonds issued by governments, their 

agencies and to a smaller extent by corporations. 

The issues can be denominated in 

any of the main markets’ currencies. Although 

the fund manager might decide on 

keeping some currency exposure uncovered 

when he foresees an appreciation in 

either currency, positions will in general be 

automatically hedged. 

Thanks to a very consistent and disciplined 

approach to investments, coupled with a 

large pool of research resources, Dexia is 

able to generate an attractive performance 

across its fixed income portfolios. The 

Bonds International fund has ranked in the 

top quartile over both the long-term and the 

short-term, while maintaining an average 

volatility. 



EUR 

Yield to maturity: 4.55% 

Modified duration: 4.61 

Fund volume (million): EUR 1,102 


Luc D’Hooge 

Convertible bond funds: 

RMF Convertibles Europe 

• Convertible bonds offer the benefits of a hybrid structure that combines 

the defensive attributes of bonds with the earnings potential of stocks. 

• RMF, founded in 1992, is a wholly owned subsidiary of the Man Group 

specializing in know-how-based strategies for hedge funds, leveraged 

finance and convertible bonds. 


The attractiveness of the underlying stock 

and the creditworthiness of the bond issuer 

are the most important criteria in the investment 

process. Roughly 32% of the 

bonds held in the fund do not carry an official 

credit rating. Since June 2001, it has 

been the number one fund in its category in 

terms of its Sharpe ratio, which the fund 

has achieved by generating very good returns 

while assuming below-average risk. 

The fund has continually reduced its delta 

over the past months to 0.26, which lies at 

the lower edge of its sensitivity range 

(0.25–0.70). As of end-June 2004, the 

fund was invested in 50 convertible bonds, 

28 of which are not included in the benchmark 

index. 


125 

120 

115 

110 

105 

100 

95 

90 

Indexed 

06.01 

12.01 

06.02 

12.02 

06.03 

12.03 



EUR 

Performance past 3 years (annual): 5.4% 


Fund volume (million): EUR 189 

Delta: 0.26 


Goldman Sachs Europe 

Convertible-TR 

RMF Umbrella – Convertibles 

Europe 

Macaulay duration: 


4.7 years 

Bruno Achermann

Active management is more 

important than ever 

Improved performance in times of rising 

yields requires active bond portfolio 

management. Dr. Anja Hochberg 

Promptly at mid-year, the US Federal Reserve signaled the turnaround 

on the interest-rate front, with an initial cautious rate hike. 

Since the move and the accompanying commentary came as no 

surprise, the dreaded yield shock on the capital markets failed to 

materialize. Indeed, the medium-term upward trend for long-term 

yields is unbroken as well. Still, we do not expect to see any globally 

concurrent and synchronized climb in yields. Hence, active 

management of bond positions, with a view toward regional selection 

as well as duration management for boosting performance, 

is gaining significance. 

The US bond market should be the pivotal and focal point for 

the fixed-income market in the third quarter of this year as well. 

Up to now, the cautious stance taken by the US central bankers, 

coupled with the recent renewed weaker labor-market data (e. g., 

non-farm payrolls), has kept the long end of the yield curve fairly 

in check, hindering the feared jump above the 5% mark (i. e., the 

yield on 10-year US Treasuries). Nevertheless, the US economy 

is wandering – notwithstanding slightly waning growth momentum 

– steadily toward higher capacity utilization. This premise is 

strongly underpinned by the closing output gap in summer of 

2005. Real yields are thus likely to show some upside potential as 

a recompense for the real capital (Figure 1). Moreover, a narrowing 

output gap comes in tandem with a tendency toward inflationary 

pressure, which is manifest particularly in a rising core 

rate. Although the temporarily overshooting inflation rates should 

retreat slightly again in the course of the year, the core rate has 

unlikely reached its peak. On the heels of the recently diminished 

expectations for inflation, we also perceive a renewed potential for 

climbing yields. 

Changing yield momentum 

The adjustment of inflation expectations, in particular, exerts a 

decisive influence on our global yield strategy. First, the spurt in 

yields at the long end of the curve diminishes the attractiveness 

of longer-dated US-dollar bonds considerably. Second, the renewed 

increase in inflation expectations will probably spark a 

noticeable trend toward flattening of the yield curve – led by the 

short end. The slope of US yield curve is, in any case, very steep 

at this end (Figure 2) and prone to flattening. Against this backdrop, 

we would take advantage of the current resurgence in USdollar 

bond prices in order to realize profits on premium bonds 

(i. e., bonds trading above par value) in the ultra-short and longerdated 

maturities segments. In light of the latent risk in the coming 

months to the yield curve wings (short and long end), we 

would advise investing in the US-dollar segment with the reinvestment 

floater or taking positions in bonds in the 3 to 5 year 

maturity segment. 

Within a year’s time, however, we are likely to be confronted 

not just with climbing yields. History shows that on the financial 

markets, capital-market yields typically reach their peaks already 

well in advance of the end of the Fed rate-hiking cycle. We see 

US money-market rates culminating at a historically rather low 

level already in 2006, against the background of our current economic 

forecasts. If this timing is foreseeable for the financial markets, 

we are likely to face an impending consolidation rally on the 

bond markets, in which investments in longer-dated bonds would 

pay off. Still, investors should keep a close eye on the active management 

of their bond portfolios. The emergence of the flattening 

of the yield curve at the peak point – led by the long end – 

should subsequently lead to an inverse yield curve (i. e., lower

yields at the long end than at the short end). In this regard, favoring 

once again rather shorter-dated maturities, with the corresponding 

yield advantage, could definitely pay off. 



No synchronized increase in yields expected 

Regional diversification of a bond portfolio also constitutes as 

promising a factor for investing as the selection of the appropriate 

maturity segments. In the USA, the yield risk is likely to be the 

most pronounced in the coming months. Nevertheless, in view of 

the still-intact export upswing and a European Central Bank that 

is striving to dampen inflation expectations with a more hawkish 

tone, we no longer expect to see such a robust outperformance 

by EUR bonds versus their American counterparts over the summer. 

Merely strong appreciation of the euro, which would provide 

the ECB with renewed maneuvering room in the eyes of the financial 

markets, could lead to a de-coupling of yields. Such potential 

should indeed be more pronounced in the autumn, when 

the speculation over interest-rate hikes will be dashed in the 

euro zone. While the expectations on the part of the financial 

markets for an initial ECB rate hike at end-2004 have now been 

pushed forward, we anticipate that the central bank will not make 

a move on the interest front until the beginning of 2005 – when 

the spark from export activities also ignites the domestic economy. 

In Germany’s case, this will also necessitate a boost in real 

disposable incomes. Although noticeably retreating inflation rates 

at end-2004 could provide welcome support for personal consumption, 

in light of the sluggish recovery of the German labor 

market, we foresee only modest potential for a robust spurt in 

growth momentum. The generally flatterer growth path in the 

euro zone prompts us to favor EUR bonds in the coming months, 

with a longer maturity spectrum of 3–7 years. If the bond markets 

are again overshadowed by the US-driven consolidation, EUR 

bonds could instead lose their attractiveness. 

Figure 1 

Real yields harbor potential to rise 


6 

5 

4 

3 

2 

1 

0 

Real yields in % 

Index 

80 

70 

60 

50 

40 

30 

20 

90 91 92 93 94 95 96 97 98 99 00 01 01 03 04 

10-year US Treasuries 

ISM/NAPM 

Figure 2 

US yield curve historically steep 


3 

Yield spread on 10Y–2Y US government bonds in % 

2 

1 

0 

–1 

–2 

Yield on 2-year US 

government bonds 

0 4 8 12 16 

Current value 

Regression based on historical 

values

Bond selection list 

Industrialized nations 

Price Yield to Cur- Spread 

Sec. no. Coupon in% Issuer Rating Maturity 02/08/2004 maturity Duration rency bp 3 

CHF foreign bonds 

1900340 1 3/4 Commonwealth Bank AA–/Aa3 04.09.2007 99.68 1.86 2.97 CHF 17 

1567665 1 1/2 Österreichische Kontrollbank AAA/Aaa 27.03.2008 98.74 1.86 3.49 CHF 2 

1499609 2 1/4 Bayrische Landesbank AAA/Aaa 13.11.2008 100.54 2.12 3.97 CHF 12 

1901291 2 1/2 Met Life Glob AA/Aa2 30.07.2009 100.28 2.44 4.63 CHF 29 

1652329 2 1/4 Toyota AAA/Aaa 28.08.2009 99.99 2.25 4.64 CHF 9 

1906789 2 1/8 Hypo Alpe-Adria AA/Aa2 15.10.2010 97.50 2.57 5.64 CHF 19 

USD 

355627 3M Libor +10 Bp Deutsche Bank (FRN) AA–/Aa3 02.03.2006 99.54 n.a. 1.56 1 USD 38 2 

1540667 2 1/2 Nederlandse Gemeenten AAA/Aaa 31.03.2006 99.65 2.72 1.58 USD 23 

1579131 2 1/4 KFW AAA/Aaa 28.07.2006 99.05 2.75 1.90 USD 6 

1678826 3M Libor +13 Bp General Electric (FRN) AAA/Aaa 18.09.2006 100.50 n.a. 2.08 1 USD –11 2 

1639156 2 1/4 Rabobank AAA/Aaa 18.12.2006 98.53 2.90 2.24 USD 4 

1721853 3 Landwirtschaftliche Rentenbank AAA/Aaa 29.12.2006 99.76 3.10 2.24 USD 23 

1344766 3M Libor +10 Bp Deutsche Bank (FRN) AA–/Aa3 21.03.2007 100.31 n.a. 2.55 1 USD –2 2 

1898346 2 3/4 Rabobank AAA/Aaa 08.05.2007 98.74 3.23 2.59 USD 21 

1603953 3 General Electric AAA/Aaa 20.09.2007 98.63 3.47 2.85 USD 33 

1641029 3 Förderbank AAA/Aaa 30.09.2008 96.70 3.87 3.72 USD 40 

1706657 3 5/8 DEPFA ACS Bank AAA/Aaa 29.10.2008 98.93 3.90 3.85 USD 44 

1875558 4 1/4 ASIF III AAA/Aaa 30.12.2008 100.52 4.12 3.92 USD 56 

1711700 3 1/2 Waterschapsbank AAA/Aaa 30.01.2009 97.97 4.00 3.99 USD 42 

1867368 5 5/8 General Motors BBB/A3 15.05.2009 100.56 5.49 4.10 USD 185 

1902371 4 1/4 National Australia Bank AA–/Aa3 22.07.2009 99.90 4.27 4.38 USD 54 

1504890 3 7/8 Königreich Schweden AAA/Aaa 29.12.2009 99.70 3.93 4.68 USD 14 

EUR 

1598037 2 7/8 ERAP AAA/Aaa 12.07.2006 100.39 2.66 1.85 EUR 4 

1798056 2 3/4 Schwedischer Export Credit AA+/Aa1 30.05.2007 99.37 2.98 2.66 EUR 5 

1543657 3 1/2 Total Capital AA/Aa2 28.01.2008 100.77 3.26 3.18 EUR 12 

1548023 3 1/4 Baden-Württemberg AAA/n.a. 29.01.2008 100.16 3.20 3.19 EUR 6 

1563144 3 1/4 Kommuninvest Schweden n.a./Aaa 04.03.2008 99.89 3.28 3.28 EUR 11 

1590247 3 1/2 Eksportfinans AA+/Aaa 16.04.2008 100.60 3.32 3.38 EUR 12 

1728505 3 7/8 JP Morgan A+/Aa3 03.12.2008 100.92 3.64 3.83 EUR 29 

1664128 3 3/4 Bos. Intl. Australien AA/Aa2 15.12.2008 100.59 3.60 3.87 EUR 25 

1768932 4 1/8 DaimlerChrysler BBB/A3 23.01.2009 101.00 3.87 3.93 EUR 50 

1804674 3 1/2 ASIF III AAA/Aaa 11.03.2009 99.17 3.70 4.11 EUR 29 

1821178 3 1/8 Network Rail Finance AAA/Aaa 30.03.2009 98.26 3.54 4.20 EUR 12 

1906948 3 1/2 Capital Euro AAA/Aaa 22.07.2009 99.94 3.76 4.44 EUR 28 

1607643 3 5/8 Landwirtschaftliche Rentenbank AAA/Aaa 15.06.2010 99.23 3.77 5.16 EUR 11 

1623792 3 3/8 HBOS Treasury AA/Aa2 23.06.2010 97.22 3.91 5.20 EUR 25 

1626851 3 1/4 Rabobank AAA/Aaa 25.06.2010 97.31 3.77 5.23 EUR 10 

1885375 4 1/8 Air Liquide A+/n.a. 25.06.2010 100.62 4.00 5.12 EUR 34 

1867308 4 5/8 Dow Chemical A–/A3 27.05.2011 100.56 4.53 5.69 EUR 69 

GBP 

1548317 4 1/8 KFW AAA/Aaa 07.06.2006 98.18 5.18 1.71 GBP 20 

1320547 5 1/8 Financement Foncier AAA/Aaa 06.11.2006 99.67 5.27 2.00 GBP 23 

1472995 4 5/8 Nederlandse Gemeenten AAA/Aaa 07.12.2006 98.47 5.33 2.09 GBP 27 

1686683 4 1/2 Rabobank AAA/Aaa 07.12.2006 98.38 5.24 2.10 GBP 18 

1483769 4 1/2 KFW AAA/Aaa 07.12.2006 98.31 5.28 2.10 GBP 22 

1879910 5 3/4 BMW n.a./A1 06.12.2007 100.35 5.64 2.94 GBP 51 

1319474 5 1/8 Landbank Hessen-Thueringen AA+/Aaa 07.12.2007 99.12 5.41 2.90 GBP 29 

1651046 4 3/8 ASIF III AAA/Aaa 30.12.2008 95.10 5.66 3.77 GBP 50 

n.a. = not available 

1 Spread duration 

2 

Spread over Libor 

3 Spread to government bonds Source: Bloomberg, Credit Suisse



Emerging markets/lower credit rating 

Price Yield to Cur- Spread 

Sec. no. Coupon in% Issuer Rating Maturity 02/08/2004 maturity Duration rency bp 3 

Latin America 

881291 9 3/8 Brazil B+/B2 07.04.2008 105.00 7.78 3.00 USD 449 

1591043 4 5/8 Mexico BBB–/Baa2 08.10.2008 100.20 4.57 3.70 USD 113 

1761914 3-M-Libor + 70 bp Mexico (FRN) BBB–/Baa2 13.01.2009 101.90 n.a. 4.08 1 USD 26 2 

1890183 3-M-Libor + 575 bp Brazil (FRN) B+/B2 29.06.2009 103.30 n.a. 3.93 1 USD 506 2 

1594673 7 1/4 Uruguay B/B3 15.02.2011 88.00 9.78 4.79 USD 584 

Eastern Europe 

1702527 3-M Libor + 175 bp Sberbank (FRN) n. v./Baa3 24.10.2006 99.00 n.a. 2.13 1 USD 234 2 

1898890 3-M Libor + 325 bp Aries (Russia) (FRN) BB+/Ba2 25.10.2007 102.05 n.a. 2.94 1 EUR 239 2 

1899005 7 3/4 Aries (Russia) BB+/Ba2 25.10.2009 103.20 7.01 4.18 EUR 347 

1560913 4 5/8 Croatia BBB–/Baa3 24.02.2010 102.05 4.20 4.74 EUR 60 

1630731 5 3/4 Romania BB/Ba3 02.07.2010 105.20 4.72 4.93 EUR 105 

1681839 7 4/5 OAO Gazprom BB–/n.a. 27.09.2010 101.90 7.40 4.48 EUR 368 

n.a. = not available 

1 Spread duration 

2 

Spread over Libor 

3 

Spread to government bonds Source: Bloomberg, Credit Suisse 

Emerging markets at a glance 

Rating Political Real GDP Money Current Budget- Spread vs. govt. 

Country S&P 1 risk growth Inflation market account 2 deficit 2 benchmarkt Maturity 

Europe 

Czech Republic A– o k h k –5.00% –6.20% n.a. n.a. 

Hungary A– o h k k –4.80% –8.40% 17 bp 2014 

Poland BBB+ o h h h –1.70% –5.80% 79 bp 2014 

Russia BB+ o x x k 7.00% 1.50% 320 bp 2018 

Turkey B+ o x x x –3.10% –8.50% 395 bp 2014 

Asia 

China BBB+ o x h k 1.20% –2.40% 79 bp 2013 

Indonesia B o x x x 5.20% –1.60% 265 bp 2006 

Malaysia A– o h h k 9.00% –3.60% 91 bp 2011 

Philippines BB – h h x 3.90% –4.10% 418 bp 2014 

South Korea A– – h k k 4.20% 0.20% 84 bp 2013 

Taiwan AA– – h h k 7.40% –4.00% n.a. n.a. 

Thailand BBB o x h k 3.20% –0.90% 68 bp 2007 

Latin America 

Argentina SD – x h k 4.50% 0.60% n.a. n.a. 

Brazil B+ o h x x 0.40% –2.70% 591 bp 2013 

Colombia BB + h x k –1.40% –4.70% 449 bp 2013 

Mexico BBB– o h x x –1.90% –2.70% 165 bp 2014 

Venezuela B– – – h h x 8.40% –4.90% 569 bp 2013 

Africa 

South Africa BBB o h h h –2.30% –3.90% 126 bp 2013 

Notes Political risk, influence on the market GDP Currency Inflation, interest rates 

– – very negative k stable k stable k stable 

– negative h accelerating h up h appreciation 

o neutral x slowing x down x depreciation 

+ positive 

++ very positive 

1 

S&P rating on long-term foreign debt 

2 

in % of GDP (2004) n.a. = not available table as of 2 August 2004 Source: Bloomberg, Credit Suisse

Emerging market bonds: 

Limited upside potential 

After two years of strong performance, 

we expect low overall returns on 

EM bonds in the next 6 to 12 months. 

We recommend that investors adopt an 

active trading strategy to enhance 

performance. Walter Mitchell 

So far in 2004, the return on emerging market (EM) bonds has 

failed to match last year’s impressive performance, when the 

EMBI+ index of USD-denominated sovereign bonds was up 28%. 

This year, the same index is up 0.30% year-to-date, having been 

down as much as 9% by late April. In our view, EM bond prices 

are likely to remain volatile for the rest of the year. We think EM 

bonds will provide low total returns over the next 6 to 12 months. 

Figure 1 shows the 12-month rolling return for the EMBI+ index 

since 1994. In the last decade there have been three periods of 

above-average returns for EM bonds: 1995–1997, 1999–2000, 

and 2002–2003. After each of these “golden” phases the asset 

class endured a period of low or negative returns. We believe the 

market is in the midst of such a period now. 

Spreads at a historically low level 

First of all, spreads on EM bonds are quite low by historical standards. 

Indeed, the current sovereign spread (i.e. yield differential 

between the EMBI+ index and the equivalent duration UST bond) 

is 460 basis points (bp), well below the average of 730 bp over 

the last five years. Even taking into account the improvement in 

sovereign risks, spreads on EM bonds appear on the tight side, in 

our opinion. 

The ultra-low interest rate environment in the US in recent 

years has amplified demand for risky assets such as emergingmarket 

bonds. As the US Fed hikes interest rates, demand for EM 

bonds is likely to wane. In particular, the amount of leveraged buying 

by hedge funds and other investors will no doubt decline as 

the cost of borrowing rises. In this environment, we expect incremental 

demand for EM bonds to shrink not grow, hence the poor 

outlook for returns. In sum, narrow spreads and rising interest 

rates represent stiff headwinds for EM bonds as an asset class. 

This challenging set of circumstances stands in stark contrast to 

market conditions during the past two years, when a favorable 

constellation of falling interest rates, rising commodity prices and 

a recovery in global growth produced a remarkable rally in both 

the EM and high-yield debt markets. 

Figure 1 

Rolling 12-month return on EMBI+ Index 

Source: JP Morgan, Credit Suisse 

50 

40 

30 

20 

10 

0 

–10 

–20 

–30 

–40 

in % 

12/94 

12/95 

12/96 

12/97 

12/98 

12/99 

EMBI+ Index rolling 12-month return 

12/00 

12/01 

12/92 

12/03 

Coping with rising interest rates 

Despite the meager outlook for returns on EM bonds, we believe 

there are several reasons for investors, who possess the required 

amount of risk tolerance, to remain involved in EM bonds. We 

think it will be possible to achieve attractive total returns, but it 

won’t be as easy as during the last two years. To begin with, the 

risk profile of many sovereign borrowers is improving. In our view, 

improved risk profiles will help the asset class weather a period of 

rising global interest rates. The swift rise in US interest rates in 

late 1993 and 1994 triggered a massive sell-off in EM bonds. We 

do not expect a similar scenario this time. EM sovereigns are 

better prepared for a rise in yields this time around. Most have 

adopted floating exchange-rate regimes, which help insulate central 

bank reserves from a decline in capital flows. Furthermore, 

external borrowing requirements are lower nowadays due to increased 

borrowing in domestic bond markets and to a reduction 

in current account deficits. 

While an improved risk profile helps limit downside risk, an 

active trading strategy can boost performance in the current 

market environment. Global interest rates will not rise in a linear 

fashion. Instead, as we saw during 1H 2004, there will be sell-offs 

where yields rise sharply followed by temporary rallies as bond investors 

try to ascertain the correct level for interest rates. We

suggest treating the sell-offs as buying opportunities and using 

the rallies to take profits. Admittedly, timing the market is difficult. 

Nonetheless, we believe active trading strategy is necessary to 

improve overall returns in the current market environment. 

Performance on Brazilian bonds during 1H 2004 illustrates 

this point. Year-to-date the Brazilian EMBI+ sub-index is down 

–2.76%, but it’s up nearly 10% since mid May. If an investor had 

reduced Brazilian exposure during the first quarter and then increased 

it in the last several months, the six-month return would 

most likely be in positive rather than negative territory. In our view, 

such trading opportunities are likely to repeat themselves in the 

coming six months. Investors should exploit them to enhance performance. 



Strategy: Reduce duration 

Along with adopting a more active approach, we recommend investors 

reduce exposure to long-dated bonds. The longer the duration, 

the more volatile a bond’s price. Focusing on the short-tomedium-term 

part of the yield curve reduces the downside potential 

when the timing of the trade is wrong. For sovereign borrowers 

with a well established yield curve, we prefer the 2007 to 

2011 maturity range. This part of the curve benefits from the 

steep slope at the short end, while avoiding the excessive duration 

risk at the long end. Furthermore, the long end of a number 

of sovereign spread curves is flat or even inverted (Figure 2). The 

lack of additional spread or compensation for taking on more 

price volatility is another reason for not holding long-dated bonds 

in this kind of market. 

In terms of asset selection, we continue to prefer selected 

Russian bonds. Among sovereign issues, we recommend both 

EUR-denominated tranches of the recent Aries transaction. Aries 

is an investment vehicle that issued credit-linked notes (CLNs) 

that are linked to Soviet-era loans provided by Germany to Russia. 

These loans to the Soviet government are now being serviced 

by the Russian Federation. Rating agency Moody’s views these 

CLNs as subordinated Russian sovereign debt, which is why it 

rates the Aries notes Ba2 and not Baa3 like Russian Federation 

Eurobonds. S&P assigned a BB+ rating to the Aries notes, which 

is equivalent to its Russia rating. Among Russian corporate 

and bank borrowers, we favor the leading wireless provider 

Mobile Telesystems (Ba3/BB-), the leading steel producer 

MMK (Ba3/BB-), as well as both public-sector banks Sberbank 

(Baa3/n.r.) and VTB (Baa3/BB+). 

Besides Russia, we recommend medium-term Turkish sovereign 

bonds. Although yields are low compared to other EM sovereigns, 

recent economic and political developments have improved 

Turkey’s risk profile, in our view. Spreads on Turkish 

sovereign bonds could narrow further if the EU gives Turkey a 

date to begin accession negotiations next year. A decision is expected 

at the EU summit in December. In Latin America, we currently 

favor 3-to-5-year Brazilian bonds in EUR as well as USD 

floating-rate notes issued by Brazil and Mexico, both maturing in 

2009. For a look at all our current bond picks, please see the 

bond selection list on page 55. We recommend that clients use 

the recent rally in UST bonds to sell positions in the ultra-long dated 

USD bonds. Such long-term bonds will be the worst performers 

in EM if US interest rates resume their rising trend, as expected 

by the CSPB macroeconomics team. 

Figure 2 

Brazilian USD spread curve 


700 

600 

500 

400 

300 

200 

100 

Spread on US Treasuries 

06 

05 

0.50 

09 10 

08N 10N 

C-Bond 

07 08 

07N 

1.50 

2.50 

Modified duration 

3.50 

11 12 

4.50 

13 

5.50 

6.50 

20 

30 

27 

24 

7.50 

8.50 

34 

9.50

“Unguaranteed ratings slightly better than 

expected.” Dr. Jeremy Field


Bond topic—59 

German Landesbanks: No guaranteed ratings after 19 July 2005 

New obligations of the German Landesbanks will no longer be guaranteed 

by the German states from next summer onward. S&P and Fitch have published 

unguaranteed ratings for the Landesbanks ranging between A+ and BBB+, 

indicating the fundamental creditworthiness of the Landesbanks. Dr. Jeremy Field 

The German Landesbanks are legally independent public sector 

credit institutions that are owned by the German states (Laender) 

and regional savings bank associations (Sparkassen). There are 

also various crossholdings between Landesbanks. The business 

model of the Landesbanks is primarily a wholesale orientated and 

narrowly diversified merchant bank model. The banks are heavily 

dependent on external funding and most lack the deposit base of 

a retail bank network. The Landesbanks have been significant issuers 

of debt in the last few years, taking advantage of the window 

of opportunity of a low cost of capital before they lose their 

guarantees on 19 July 2005. In particular, they have lengthened 

their debt distribution profile, which means that the impact of 

higher capital costs will be felt gradually over the next few years. 

From 19 July 2005 onward, new bonds issued by the German 

Landesbanks will no longer be explicitly guaranteed by the German 

states, to be in compliance with EU competition laws. 

Adjusting business models to the new environment 

Fitch and S&P issued individual ratings on the senior unsecured 

unguaranteed obligations of the German Landesbanks to provide 

the market with insight into the fundamental creditworthiness of 

the Landesbanks (Table 1). Moody’s has yet to release its unguaranteed 

ratings for the Landesbanks. The ratings also provide 

the market with guidance on future counterparty credit ratings of 

the Landesbanks, which will also change on 19 July 2005. Since 

publication of the range of unguaranteed ratings in its last report 

on Landesbanks on 24 November 2003, S&P has had ongoing 

discussions with the Landesbanks on their strategies to adapt 

current business models in preparation for a new competitive environment, 

with a higher cost of capital. S&P notes that, overall, 

the banks have made progress in restructuring their balance 

sheets and business lines, improving their risk profiles and lengthening 

their funding profiles; the weighted-average maturity of 

Landesbank bond issues in EUR and USD has increased, from 

2.9 years in 2002 to 6.65 years in 2004. 

Future ratings slightly better than expected 

The unguaranteed ratings from S&P are marginally better than expected, 

with only Landesbank Sachsen rated below single A. S&P 

notes, however, that some of the individual ratings already reflect, 

and are dependent upon, the successful implementation of future 

changes. Failure to deliver these changes could have negative 

Table 1 

Future unguaranteed and current guaranteed 

ratings of the Landesbanks 

Source: S&P and Fitch 

S&P unguaranteed S&P current guaranteed 

rating 

rating/outlook 

S&P Fitch S&P Fitch 

Landesbank B-W A+ A+ AAA, neg AAA, stable 

Landesbank Berlin NR BBB+ NR AAA, stable 

Bremer LB NR A NR AAA, stable 

Deka Bank A A AA, neg AAA, stable 

LB Hessen-Thüringen GZ A A AA+, neg AAA, stable 

HSH Nordbank AG A A AA–, neg AAA, stable 

Bayerische Landesbank A– A+ AAA, neg AAA, stable 

LB Rheinland-Pfalz GZ A– BBB+ AA, neg AAA, stable 

Landesbank Sachsen GZ BBB+ A– AA, neg AAA, stable 

WestLB AG A– A– AA, neg AAA, stable 

Nord/LB NR A NR AAA, stable 

LB Saar NR A NR AAA, stable 

NR = not rated 

Table 2 

Timetable for the phasing out of guarantees 

Source: S&P 

Date of issuance Maturity Maintenance Statutory 

obligation guarantee 

until 18/07/01 until 18/07/05 yes yes 

19/07/01–18/07/05 until 18/07/05 yes yes 

until 18/07/01 any time after 18/07/05 no yes 

19/07/01–18/07/05 18/07/05–31/12/15 no yes 

19/07/01–18/07/05 after 31/12/15 no no 

after 18/07/05 anytime no no

ating implications. S&P will update the unguaranteed ratings on 

an individual basis as appropriate. Individual unguaranteed debt 

ratings could be amended before 19 July 2005, should circumstances 

change. Fitch rates some Landesbanks that are not rated 

by S&P: Bremer LB, LB Berlin, LB Saar and Nord LB (Table 

1). Fitch rates Bayerische LB at A+, two notches higher than S&P 

and one notch higher by LB Sachsen and West LB. Conversely, 

Fitch is one notch lower in its rating of LB Rheinland-Pfalz, at 

BBB+, than S&P. The Landesbanks will continue to benefit from 

guarantees with respect to both on- and off-balance-sheet obligations, 

as the statutory guarantee (Gewährträgerhaftung) provided 

by their publicsector guarantors (the German states) will be 

maintained until 18 July 2005, although bonds issued up to that 

date must mature no later than 31 December 2015. See Table 2 

for the detailed timetable for the removal of guarantees. Existing 

(grandfathered) debt and counterparty credit ratings are not 

affected by these unguaranteed ratings. Furthermore, public 

Pfandbriefe issued by the Landesbanks will continue to reflect 

S&P’s structured rating approach for Pfandbriefe and can be 

rated AAA, irrespective of the counterparty credit ratings of the 

issuers. 

German Laender are the main Landesbank guarantors 

There are 16 German states, three of which are city-states. However, 

the economic importance of the Laender varies markedly. 

Nordrhein-Westfalen (21.9%), Bayern (17.4%) and Baden- 

Württemberg (14.8%) alone made up 54.1% of German GDP 

in 2003. The three economically weakest states Mecklenburg- 

Vorpommern (1.4%), Saarland (1.2%) and Bremen (1.1%) contributed 

less than 5% of German GDP (see Table 3 for details). 

Table 4 gives the ratings from the three main ratings agencies and 

illustrates the differences in approach between the rating agencies. 

In particular, Fitch bases its ratings on the solidarity principle 

enshrined in the German constitution, and hence gives all 

Laender the same ratings as the German Federal State, namely 

AAA. Under the solidarity principle, the Laender are committed to 

support each other, as is the Federal Government. The rating 

ranges Aaa to Aa3 from Moody’s and AAA to AA– from S&P are 

also primarily based on the current mutual support obligation between 

the Laender and the Federal Government, with the rating 

floors currently at Aa3 and AA–, respectively. All members of the 

German federation are deemed to be jointly responsible for supporting 

a state that is in financial distress. However, the states’ 

budgets are not subject to individual approval by the central government, 

as is the case in most other European countries. The 

fiscal flexibility of the states is limited in the short term because 

tax rates and the apportionment of revenues are largely set by 

both houses of parliament. Expenditure obligations are largely 

determined by nationally dictated standards of service provision 

and wage agreements. German real GDP growth declined from 

2.9% in 2000 to –0.1% in 2003; we expect 1.20% growth in 

2004. Between 2000 and 2003, state revenues declined by 

8.3%, whereas total expenditure grew by 3.8%. As a consequence 

the states’ deficit has grown from 0.5% of GDP in 2000 

to an estimated 1.5% in both 2002 and 2003. Total German state 

budget deficits were EUR 31.7 billion in 2003. The states’ nominal 

outstanding debt has been increasing more rapidly than expected. 

S&P recently stated that the German states continue to 

be the highest indebted sub-sovereign issuers rated by them 

worldwide. 

Table 3 

German Laender – key data 

Source: German Laender and federal government, Credit Suisse estimates 

Population Share GDP per Real GDP 

(m) of total capita growth 

GDP (%) 2003 (E) 2003 (%) 

Nordrhein-Westfalen 18.1 21.9 25.8 –0.4 

Bayern 12.4 17.4 29.9 0.2 

Baden-Württemberg 10.7 14.8 29.4 –0.2 

Hessen 6.1 9.1 31.8 0 

Niedersachsen 8 8.6 22.9 0.4 

Rheinland-Pfalz 4.1 4.4 22.9 0.1 

Berlin 3.4 3.6 22.8 –1.3 

Hamburg 1.7 3.6 44.5 –0.4 

Sachsen 4.3 3.6 17.8 1.2 

Schleswig-Holstein 2.8 3.1 23.4 –0.2 

Brandenburg 2.6 2.1 17.5 –0.9 

Sachsen-Anhalt 2.5 2.1 17.4 0.3 

Thüringen 2.4 2 17.6 0.5 

Mecklenburg-Vorpommern 1.7 1.4 17.1 –1.6 

Saarland 1.1 1.2 24.3 –1.1 

Bremen 0.7 1.1 35.3 –0.9 

Deutschland 82.6 100 25.8 –0.1 

Table 4 

Credit ratings of the German states 


Moody’s S&P’s Fitch 

Bayern Aaa / stable AAA / stable AAA / stable 

Baden-Württemberg Aaa / stable AAA / neg AAA / stable 

Hessen n.a. AA+ / stable AAA / stable 

Nordrhein-Westfalen Aa2 / stable AA / stable AAA / stable 

Brandenburg Aa2 / stable AA– / stable AAA / stable 

Berlin Aa3 / stable n.a. AAA / stable 

Sachsen-Anhalt Aa3 / stable AA– / stable AAA / stable 

Hamburg n.a. AA– / stable AAA / stable 

Bremen n.a. n.a. AAA / stable 

Niedersachsen n.a. n.a. AAA / stable 

Rheinland-Pfalz n.a. n.a. AAA / stable 

Saarland n.a. n.a. AAA / stable 

Schleswig-Holstein n.a. n.a. AAA / stable 

Mecklenburg-Vorpommern n.a. n.a. AAA / stable 

Sachsen n.a. n.a. AAA / stable 

Thüringen n.a. n.a. AAA / stable 

n.a. = not available

Sharp increase in the proportion of bond financing 

The deterioration in public finances in recent years has been a 

major factor in the growth of bond financing. From the end of 

1999 to 2003, the proportion of state funding provided by bond 

financing increased from 17.6% to 36.4%. The proportion of bond 

funding ranges from 9% in the Saarland to 83% in Sachsen-Anhalt. 

The Laender issued EUR 35 billion of bonds in 2002 and EUR 

42 billion in 2003. It is to be hoped that the new debt issuance will 

stabilize around the 2003 levels in view of the pickup in GDP 

growth. The support system of the solidarity principle will be tested 

by Berlin’s appeal to the Federal Constitutional Court in 2003 

to obtain specific budget-balancing grants from the Federal government 

on the basis of a structural imbalance in Berlin’s budget. 

Berlin has the highest per capita debt of all the German states 

at EUR 14,365, compared to EUR 1,639 per capita in Bayern. 

Berlin is following the same route as Bremen and Saarland in the 

early 1990s, when the Federal Constitutional Court decided that 

special transfers would be paid to these two states. The ruling of 

the Constitutional Court is not expected before the end of 2005. 

We expect the court to rule in Berlin’s favor. A negative decision 

would likely have a considerable impact on credit spreads and 

Laender ratings. We expect Laender bond spreads to remain in 

a trading range over the next 12 months. The ratings of the Laender 

are not only important in their own right, because they are 

significant bond issuers, but also because they are the main guarantors 

of the grandfathered guaranteed debt on the Landesbanks. 

| 


Bond topic—61 

Top: Landesbank Sachsen is the 

only bank rated lower than a single A 

by S&P. 

Bottom: Nord/LB comprises the 

three states of Niedersachsen, 

Sachsen-Anhalt and Mecklenburg- 

Vorpommern.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . trending on the weak side. . . . . 

. . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Services 

“A discretionary mandate 

is particularly worthwhile in 

difficult times” 

Andreas Russenberger, Head of 

Sales &Consulting Switzerland, 

Investment Management, on the logic 

of discretionary mandates and the 

need for a professional investment 

strategy. 

Peter Christoph Discretionary mandates are in heavy demand at 

the moment. Is this a consequence of the volatile situation 

on the financial markets that private investors are up against? 

Andreas Russenberger The current situation certainly has an 

influence. This year alone, more than 4,000 new discretionary 

mandates have been entrusted to us. Many investors 

have burned their fingers in the past and lost money. 

It’s agonizingly hard to make the right choice in a tough economic 

environment and amid a growing number of investment 

vehicles. Many long-standing Credit Suisse 

clients are also now opting for a discretionary mandate. 

Lack of time and missing expertise are frequently cited 

reasons for delegating the management of one’s assets to 

a specialist. Is such a step also worthwhile for avid, wellinformed 

investors? 

Definitely. The investor who opts for a discretionary mandate 

no longer needs to keep track of the financial markets, 

though it is still recommendable to do so and is an even 

more enjoyable pursuit with a mandate. Each quarter – 

or on demand at any time – the investor receives a comprehensive 

report showing an overview of all transactions. 

We emphasize transparency. Every private banking customer 

should put at least a portion of his or her money in a discretionary 

mandate. 

How much money must a client be able to invest? 

A fund mandate requires a minimum investment of 250,000 

Swiss francs. A classical direct-investment mandate 

is obtainable for a sum starting at 500,000 Swiss francs. 

Solutions for clients truly become cost-efficient at such a 

level. 

How good are the results that Credit Suisse asset managers 

have achieved? 

The focus right now is on preserving capital. That may 

sound meek, but bear in mind that the bond index is down 

on the year and most of the stock markets are trending 

on the weak side. Our investments have performed 

well above average over the long term. We place great 

importance here on strict risk controls. Where currencies 

and stock indices are concerned, we ensure against 

risks through the partial use of targeted hedges. 

An asset-management mandate particularly pays off in 

difficult times. 

When a client signs a discretionary mandate, he puts 

enormous trust in the bank. How can he be sure that this faith 

is warranted? 

First let me mention the legal safeguards. Asset-management 

products have a long tradition in Switzerland. A clear 

legal framework for such products has evolved as a result. 

Moreover, our range of discretionary latitude is contractually 

Andreas Russenberger: “Our specialists make rational decisions”

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

CIO Notes – analyses and strategies 

An exclusive service for Credit Suisse clients and employees: 

CIO Notes deliver a monthly analysis of developments 

on the financial markets. CIO Notes do more than just 

provide a review and outlook for the various asset classes. 

They distill the analysis into a concrete strategy for assetmanagement 

mandates in simple, concise terms. 

Portfolio reporting – complete transparency at all times 

Credit Suisse’s unique portfolio reports provide an overview 

of all transactions and intricately track your portfolio’s 

development. Portfolio reports are automatically sent to 

clients on a quarterly basis, but are also obtainable 

at any time on demand. 

stipulated. Another question is how the bank specifically 

operates. We employ a well-structured investment process 

and are very close to the pulse of the market. Our assetmanagement 

specialists make decisions rationally, as opposed 

to the many private investors who let themselves be 

guided by their emotions. An important role is also played by 

the Investment Committee, which meets at least once a 

week. The committee members include our CEO Oswald J. 

Grübel and our chief investment officer. The top executives 

at Credit Suisse stand behind the asset-management mandates 

and set the strategy. 

Quite a few clients value close personal contact with a bank 

advisor. Don’t they get short-changed when so many specialists 

are involved? 

Not at all. We are very close to our clients. The relationship 

manager is the client’s sole contact person. It’s important at 

the outset to carefully assess the client’s financial needs and 

to select a suitable mix of investment products. Once the 

risk profile has been established, the relationship manager 

does not invest on the basis of his market opinions or 

instincts. At Credit Suisse, our experts go to work behind 

the scenes once the risk profile has been set. They swing 

into action where their talents lie and make decisions 

with cool professionalism. Hence, a mandate is not managed 

by a single person, but rather by teams that are each 

responsible for a specific market. The person analyzing the 

trend in Asian stocks at three o’clock in the morning 

cannot also be evaluating US equities at ten o’clock at night. 

That would be far from ideal. 

Asset management is geared to the long term. How long does 

a mandate run? 

The client is free to cancel the contract at any time, but 

a long-term commitment is definitely desirable. It makes no 

sense for a client to place 100 percent of his assets in 

a mandate if he already knows in advance that he will need 

75 percent of the funds in three months’ time to purchase 

a house. 

Can the risk profile be altered during the course of the year? 

Yes, but it doesn’t make sense to alter the profile unless 

the client’s personal circumstances have changed. It would 

be a mistake to alter a profile in reaction to changes in 

the markets. Our investment managers promptly adjust the 

strategy within the predetermined discretionary guidelines. 


Services—63


Authors—64 

Giles Keating, Head of Global Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 

Luzi Saluz, Insurance Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28–29 

Beat Schumacher, Fixed Income and Forex Research . . . . . . . . . . . . . . . 10–11 

Bernhard Tschanz, Head of Research Switzerland . . . . . . . . . . . . . . . . . 31–32 

Marcus Hettinger, Fixed Income and Forex Research . . . . . . . . . . . . . . . 12–13 

Jeremy Baker, Equity Sector Research . . . . . . . . . . . . . . . . . . . . . . . . . . 33–34 

Beat Grunder, Technical Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16–17 

Andrea Schulzke, Head of Fund Selection . . . . . . . . . . . . . . . . . . . . . 35, 41, 51 

Ulrich Kaiser, Equity Sector Research . . . . . . . . . . . . . . . . . . . . . . . . . . . 19–23 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43–45 

Markus Mächler, Equity Sector Research . . . . . . . . . . . . . . . . . . . . . . . . 36–37 

Christoph Fehr, Fixed Income and Forex Research. . . . . . . . . . . . . . . . . 19–23 

Christian Gattiker-Ericsson, Head of Equity Strategy. . . . . . . . . . . . . . . . 38–39 

Ramon Koss, Alternative Investments & Mutual Funds . . . . . . . . . . . . . . 25–27 

Uwe Neumann, Equity Sector Research . . . . . . . . . . . . . . . . . . . . . . . . . 43–45


Research team—65 

Research and Publications 

Giles Keating, Managing Director, Head of Global Research . . . . . . . (1) 332 22 33 

Research Switzerland 

Bernhard Tschanz, Managing Director, Head of Research Switzerland . (1) 334 56 27 

Damian Sigrist, Equity Sector Research . . . . . . . . . . . . . . . . . . . . . . . . . 46–47 

Dr. Ursula Oser, Global Credit Strategist . . . . . . . . . . . . . . . . . . . . . . . . 49–50 

Dr. Anja Hochberg, Head of Global Macro Economics 

and Forex Research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52–53 

Dr. Jeremy Field, Credit Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59–61 

Walter Mitchell, Emerging Market Research . . . . . . . . . . . . . . . . . . . . . . 56–57 

Credit Research 

Dr. Ursula Oser, Vice President, Global Credit Strategist . . . . . . . . . . (1) 334 56 92 

Yvonne Baumeler, Assistant Vice President, Corporate Bonds . . . . . . (1) 333 13 70 

John Feigl, Corporate Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 333 13 70 

Dr. Jeremy Field, Vice President, Corporate Bonds . . . . . . . . . . . . . (1) 334 56 29 

Walter Mitchell, Vice President, Emerging Markets . . . . . . . . . . . . . . (1) 334 56 67 

Felix Schafroth, Assistant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 333 13 62 

Equity Sector Research 

Robin Seydoux, Director, Head of Equity Sector Research . . . . . . . . (1) 333 37 39 

Jeremy Baker, Assistant Vice President, 

Energy, Basic Resources, United States . . . . . . . . . . . . . . . . . . . . . (1) 334 56 24 

Dr. Luis Correia, Vice President, 

Pharmaceuticals & Biotechnology, Italy, Portugal . . . . . . . . . . . . . . . (1) 334 56 37 

Dr. Maria Custer, Vice President, 

Chemicals & Medical Technology, Spain . . . . . . . . . . . . . . . . . . . . . (1) 332 11 27 

Ulrich Kaiser, Vice President, 

IT Components, Japan, Head of Equity Research Overseas . . . . . . . . (1) 334 56 49 

Markus Mächler, Vice President, 

IT Services & Automotive, Head of Equity Research Europe . . . . . . . (1) 334 56 41 

Uwe Neumann, Vice President, 

Telecommunications, UK, Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 334 56 45 

Christine Schmid, Vice President, Banking, Germany . . . . . . . . . . . . (1) 334 56 43 

Damian Sigrist, Assistant Vice President, Asia (excl. Japan) . . . . . . . (1) 334 56 49 

Harald Zahnd, Vice President, 

Consumer and Luxury Goods, Retail, Eastern Europe . . . . . . . . . . . . (1) 334 88 53 

Christian Bauer, Assistant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 334 56 47 

Claude Vautier, Assistant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 334 88 38 

Global Equity Strategy 

Christian Gattiker-Ericsson, Director, 

Engineering, Steel, Pulp & Paper, Head of Equity Strategy . . . . . . . . (1) 334 56 33 

Cédric Spahr, Assistant Vice President, 

Equity Strategy, Construction, Utilities . . . . . . . . . . . . . . . . . . . . . . (1) 333 96 48 

Global Economics 

Dr. Anja Hochberg, Vice President, 

Head of Global Macro Economics and Forex Research . . . . . . . . . . . (1) 333 52 06 

Christoph Fehr, Vice President, Fixed Income Japan . . . . . . . . . . . . . (1) 333 52 06 

Marcus Hettinger, Assistant Vice President, 

Forex Analysis and Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 333 13 63 

Roland Kläger, Fixed Income Europe . . . . . . . . . . . . . . . . . . . . . . . . (1) 332 09 69 

Beat Schumacher, Vice President, Fixed Income USA . . . . . . . . . . . (1) 333 52 06 

Technical Research 

Rolf Bertschi, Director, US Equities, Bonds, Currencies . . . . . . . . . . (1) 333 24 05 

Beat Grunder, Assistant Vice President, 

Equities Switzerland and Asian Pacific . . . . . . . . . . . . . . . . . . . . . . (1) 333 53 58 

Sigisbert Koch, Europe Equities excl. Switzerland . . . . . . . . . . . . . . . (1) 333 94 64 

Mensur Pocinci, Assistant Vice President, 

US Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 333 20 69 

Fund Selection 

Andrea Schulzke, Vice President, Head of Fund Selection . . . . . . . . (1) 332 43 67 

Nicola Nolè, Vice President, 

Global Equity Funds, US Equity Funds . . . . . . . . . . . . . . . . . . . . . . (1) 333 74 97 

Andrea Guzzi, Assistant Vice President, 

European Equity Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 334 79 64 

Jiannan Wang, Assistant Vice President, Asian Equity Funds, 

Emerging Market Equity Funds, Real Estate Funds . . . . . . . . . . . . . . (1) 332 33 20 

Karim Jabri, Fixed Income Funds . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 333 10 88 

Walter H. Fodor, Assistant Vice President, 

Sector Funds, Portfolio Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 334 41 97 

Uetlibergstrasse 231, CH-8070, Zurich Dialing Code (Country/Area): +41


Imprint—66 

This document was produced by and the opinions expressed are those of Credit Suisse 

as of the date of writing and are subject to change. It has been prepared solely for information 

purposes and for the use of the recipient. It does not constitute an offer or an 

invitation by or on behalf of Credit Suisse to any person to buy or sell any security. 

Any reference to past performance is not necessarily a guide to the future. The 

information and analysis contained in this publication have been compiled or arrived at 

from sources believed to be reliable but Credit Suisse does not make any representation 

as to their accuracy or completeness and does not accept liability for any loss 

arising from the use hereof. The issuer of the securities referred herein or a Credit 

Suisse Group company may have acted upon the information and analysis contained in 

this publication before being made available to clients of Credit Suisse. A Credit Suisse 

Group company may, to the extent permitted by law, participate or invest in other 

financing transactions with the issuer of the securities referred herein, perform services 

or solicit business from such issuers, and/or have a position or effect transactions in the 

securities or options thereof. 

An investment in the funds described in this document should be made only after careful 

study of the most recent sales prospectus and other fund regulations and basic legal 

information contained therein. The sales prospectuses and other fund regulations may 

be obtained free of charge from the fund management companies and/or from their 

agents. 

Alternative investments, derivative or structured products are complex instruments, typically 

involve a high degree of risk and are intended for sale only to investors who are 

capable of understanding and assuming the risks involved. Investments in Emerging Markets 

are speculative and considerably more volatile than investments in established markets. 

Some of the main risks are Political Risks, Economic Risks, Credit Risks, Currency 

Risks and Market Risks. Furthermore, investments in foreign currencies are subject 

to exchange rate fluctuations. Before entering into any transaction, you should consider 

the suitability of the transaction to your particular circumstances and independently 

review (with your professional advisers as necessary) the specific financial risks as well 

as legal, regulatory, credit, tax and accounting consequences. 

Neither this document nor any copy thereof may be sent to or taken into the United 

States or distributed in the United States or to a US person, in certain other jurisdictions 

the distribution may be restricted by local law or regulation. 

This document may not be reproduced either in whole, or in part, without the written 

permission of Credit Suisse. © 2004, Credit Suisse 

Publisher 

Credit Suisse 

Research & Publications 

P.O. Box 300, CH-8070 Zurich 

Director: Bernhard Tschanz 

Editors 

Christian Gattiker-Ericsson 

Peter Christoph, Infel AG, Zurich 

Editorial deadline 

2 August 2004 

Organization 

Bernhard Felder 

Technical coordinators 

Monika Tiemann, Ross Hewitt 

Design and concept 

Arnold Design AG 

Urs Arnold, Maja Davé, Renata Hanselmann, 

Andrea Studer 

Layout 

gdz AG, Zurich 

Printer 

Feldegg AG, Zollikerberg 

Stämpfli AG, Bern 

Translations 

Robert Anderson (E) 

Beatrice Eigenmann (G) 

Agentur der Dolmetscher- & Übersetzervereinigung (G) 

Stefan Bersal (G) 

Übersetzer Gruppe Zurich (F/Sp) 

Alleva Übersetzungen (I) 

Thanks to Mark Rabinowitz (E) 

Language editors 

Robert Anderson (E) 

Beatrice Eigenmann (G) 

gdz AG, Zurich (G) 

Übersetzer Gruppe Zurich (F/Sp) 

Alleva Übersetzungen (I) 

Photographs 

Roger Ressmeyer/Corbis (Cover, 04), Martin Stollenwerk 

(03, 62, 64, 65), Cornell Capa/Magnum Photos (04), 

David Boe/Corbis (09),Thomas Dworzak/Magnum 

Photos (09), Magnopress/Keystone (15), Brooks Kraft/ 

Corbis (15), Flueeler/mediacolors (18), Chris Steele- 

Perkins/Magnum Photos (21/42), Stuart Franklin/ 

Magnum Photos (21), Peter Marlow/Magnum Photos 

(45), Michael Kneffel (45), Roettgers/GRAFFITI (58), 

Thomas Langreder/VISUM (61), Kaiser/Caro (61) 

Copies of this publication may be ordered via your 

customer advisor; employees contact Netshop directly 

This publication is available on the Internet at: 

www.credit-suisse.com/research/ 

Intranet access for employees of the Credit Suisse 

Group: http://research.csintra.net 

International Research support is provided by 

Credit Suisse Private Banking’s global network 

of representative offices

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

In this issue: 

Funds 

ACM International Health Care Fund . . . . . . . . . . . . . . . . . . . 41 

Credit Suisse Commodity Fund Plus . . . . . . . . . . . . . . . . . . . 41 

Dexia Bonds International C Cap . . . . . . . . . . . . . . . . . . . . . . 51 

JP Morgan Fleming Europe Equity . . . . . . . . . . . . . . . . . . . . . 35 

Pictet Funds – Japanese Equities P . . . . . . . . . . . . . . . . . . . . 35 

RMF Convertibles Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 

Equities 

BASF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 

DaimlerChrysler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 

General Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 

Ito-Yokado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 

Kao . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 

McDonald’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 

Rieter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 

Roche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 

Singapore Press Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 

Yanzhou Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 

www.credit-suisse.com/research 

2511664

Energy bottleneck

Create successful ePaper yourself

Delete template?

Save as template?