EURUSD opportunity for the - BNP Paribas GlobalMarkets

Looking Beyond The USD's September Challenges  FX Recommendations

2

FX Recommendations

 FX Weekly Key Themes

3

 Option structures

 G10 Themes

4

 FX Volatility Focus

10

 FX Positioning Analysis

12

 Economic Calendar

13

 Forecasts

15

G10 Themes

 Contacts

16

 EURUSD opportunity for the patient dollar bull

  

   BNPP Estimated FX Positioning 39

SEK 30

EUR CAD

18

NOK

17 14

AUD

 



-15

CHF

-17

GBP USD



-2

JPY

-36

17-Aug-2017 10-Aug-2017

-50 -40 -30 -20 -10 0 10 20 30 40 50

BNPP quantitative tools signal near-term downside risk for EURUSD. However, the USD faces a challenging September. The USD may recover more meaningfully in Q4, if key fiscal hurdles are cleared in September. The current inversion in the front-end of the EURUSD vol curve makes positioning for a delayed USD recovery attractive. We are adding a bearish 2m/4m EURUSD one-touch calendar spread to our model portfolio.

 AUD and NZD: Trading themes on our radar

0

NZD

1-touch EURUSD calendar spread: buy 1x 15-Dec-17, Sell 1x 13-Oct-17, EURUSD 1.13 1-touch offered at 15.00%. 6-month EURSEK put spread: buy 1x 9.45, sell 1x 9.20. (09-Feb-18 expiry). 1y USDJPY RKO: strike 121.50 with KO 132.50. (08-Dec-17 expiry).



The AUD and NZD have been underperforming the USD in recent weeks, bringing them back into line with their STEERs. In our view, this has been due to both a decline in risk appetite and the USD’s slight recovery. In the coming months, we think AUDUSD and NZDUSD will be driven by two potentially opposing forces: an improvement in risk appetite and movements in the broad USD index. Hence, the AUD and NZD are likely to outperform low yielders (EUR, JPY, CHF and the GBP) but may weaken against the USD. Local fundamentals indicate that the NZD should outperform the AUD.

FX Volatility Focus

 Calendars of EUR, CHF and AUD 1–Touches to position for post debtceiling USD rebound  This document has been produced by: BNP Paribas London Branch

Despite a recent rebound in US activity data and stretched positioning, a USD recovery could be hindered in the medium term by concerns over September debt ceiling/government funding extension negotiations.

Michael Sneyd, CFA, Global Head of FX Strategy & CrossAsset Strategist

Currency Views

Sam Lynton-Brown, FX Strategist Clara Leonard, FX Strategist Natalie Rickard, Graduate BNP Paribas Securities Corp (New York) Daniel Katzive, CFA, Head of FX Strategy North America Vasilis Koutsaftis, FX Options Strategist

EURUSD USDJPY EURCHF GBPUSD AUDUSD USDCAD

Current 1.173 109.73 1.13027 1.2885 0.7923 1.2647

1 Month 1.15 115 1.13 1.28 0.78 1.27

3 Month 1.13 118 1.12 1.26 0.76 1.29

Please refer to important information at the end of the report. FX Strategy team

www.GlobalMarkets.bnpparibas.com

Current FX Recommendations1 Portfolio Overview: Recent Spot Trade Recommendations Entry Date 03-Aug-17 12-Jul-17 10-Jul-17 15-Jun-17 22-Jun-17 24-May-17 04-Jun-17 03-May-17 25-Apr-17 19-Apr-17 23-Feb-17 01-Feb-17

Position Long USDJPY Short NZDUSD Short GBPUSD Short NZDCAD Short EURNOK Short EURJPY Short AUDUSD Long NZDJPY Short EURUSD Long USDJPY Short AUDUSD Short NZDJPY

Entry Rate Stop Loss Target Rate Close Rate 110.65 108.80 0.7260 0.7370 1.2890 1.3060 0.9580 0.9400 9.4900 9.6100 125.00 125.00 0.7470 0.7592 77.740 76.300 1.0935 1.1100 108.80 112.90 0.7695 0.7620 82.600 79.920

Close Date Return (%) 13-Aug-17 -1.70% 18-Jul-17 -1.49% 14-Jul-17 -1.30% 06-Jul-17 1.85% 28-Jun-17 -1.23% 26-Jun-17 0.00% 18-Jun-17 -1.63% 18-May-17 -1.79% 17-May-17 -1.47% 17-May-17 3.64% 15-Mar-17 0.91% 06-Mar-17 3.31% Total 2017

Portfolio Overview: Recent Option Trade Recommendations

-2.27%

2

Entry Date Position Entry Rate Close Rate Close Date MTM (%) Return (%) Buy 1x 15-Dec-17, Sell 1x 13-Oct-17, EURUSD 15.00% 15.00% 17-Aug-17 0.00% 1.13 1-touch (1.1720) (1.1720) 0.63% 6-month EURSEK put spread: buy 1x 9.45, sell 0.86% 09-Aug-17 0.55% 1x 9.20 (9.5025) (9.6220) 0.38% 1-year USDJPY RKO: strike 121.50 with KO 0.03% 08-Dec-16 -1.18% 132.50. (110.20) (113.40) 0.00% 9-month Dual Digital USDJPY up and EURUSD 19.50% 16-Feb-17 down – strikes 2% OTMS. USDJPY strike 115.82, (113.55, 03-Aug-17 -1.50% (110.44 EURUSD strike 1.0437. 1.0650) 1.1852) 23-Mar-17

0.36% (1.0710)

EURCHF 1x2 call spread (8-Sep-17 expiry, sold legs sold on 13-Jul-17, spot ref 1.1023)

1.48% (1.1185)

27-Jul-17

BNP Paribas STEER™ Model – Recent Quant Trading Signals Entry Date Position 17-Aug-17 SHORT EURSEK 16-Aug-17 LONG USDCOP 11-Aug-17 LONG USDTHB

-

2.31%

Total 2017

-6.00%

3

Entry Rate 9.5036 2966.0600 33.2500

Target 9.3810 2989.1565 33.4396

Stop Loss 9.5657 2954.5118 33.1552

Close Rate -

Close Date -

Return (%) 0.00% 0.00% 0.11%

11-Aug-17

SHORT EURSEK

9.5766

-

-

9.4945

15-Aug-17

0.86%

10-Aug-17

SHORT USDBRL

3.1607

-

-

3.2027

15-Aug-17

-0.40%

08-Aug-17

SHORT USDCAD

1.2666

-

-

1.2757

15-Aug-17

-0.72%

02-Aug-17

SHORT EURNOK

9.3636

-

-

9.3045

16-Aug-17

0.63%

31-Jul-17

SHORT GBPUSD

1.3129

-

-

1.2910

15-Aug-17

1.67%

09-Aug-17

SHORT USDRUB

59.8300

-

-

60.1292

09-Aug-17

-0.50%

Total 2017

-7.14%

Overall portfolio 2017

-15.41%

1 Positions highlighted in grey are currently open.

"Older recommendations are not included in the listed positions due to space constraints but results are reflected in the annual totals. "The above recommendations do not reflect a fully invested, live portfolio and only G10 currencies will be featured. 2 Weighting of option trade recommendations based on risking 1.5% of the notional on the premium. 3 Updates of BNP Paribas STEER™ trading signals published in FX Daily STEER™, available via email.

** The reported returns on options recommendations represent the gains/ losses since the publication of our final FX Plus of 2016 (on 15 December 2016). Prior gains/ losses on these recommendations have been credited to our 2016 portfolio. *Stop trailed to entry 17 August 2017 www.GlobalMarkets.bnpparibas.com

2

Weekly FX key themes: How to position for Q4 USD rebound Sam Lynton-Brown BNP Paribas London Branch FX Strategist

  

We recommend positioning for a post-September decline in EURUSD via 1-touch calendar spreads. Jackson Hole policy symposium will be in focus next week. We remain positioned for EURSEK depreciation.

Positioning for a postSeptember decline in EURUSD via 1-touch calendar spreads

We recommend positioning for a post-September decline in EURUSD via 1-touch calendar spreads. The US faces a daunting fiscal calendar in September and the market is unlikely to rebuild Fed pricing materially until the event risk is over, in our view. The USD may recover more in Q4, as the Fed’s balance sheet rundown is likely to get under way and if key US fiscal hurdles are cleared. The EURUSD implied volatility term structure is flat over two-month and four-month tenors, which further supports the use of calendar spread structures. Please see pages 4-6 for more details.

Jackson Hole symposium; Draghi unlikely to deliver new message

The Federal Reserve Bank of Kansas City hosts its annual Jackson Hole policy symposium on 24-26 August. The full speaker list is yet to be confirmed, but the event is likely to feature a number of key G10 central bankers. European Central Bank (ECB) President Mario Draghi is confirmed to appear, but our economists do not expect any significant policy messages given the close proximity to the 7 September ECB monetary policy meeting.

Staying positioned for medium-term EURSEK depreciation via put spreads

Swedish data continue to surprise to the upside. July core CPI inflation accelerated to 2.4% y/y, above target for the first time since 2010, and rising well above the Riksbank’s own forecast of a 1.8% y/y print. With the ECB gradually signalling a withdrawal of accommodation, it paves the way for the Riksbank to follow suit. SEK 2y swap yields increased by 5bp and we see scope for yields to continue to rise as the market prices in Riksbank tightening, supporting the SEK. STEER™ signals EURSEK should decline further to its short-term fair value of 9.3810 and we also remain positioned for EURSEK depreciation via a put spread 9.45/9.20 (9-Feb-18 expiry).

GBP continues to weaken in line with soft data

The GBP continues to weaken as expectations for Bank of England tightening continue to decline. Pricing for the probability of a 25bp BoE rate hike this year has fallen to 20%. We expect BoE tightening expectations to remain subdued as growth is likely to carry on weakening; we accordingly target GBPUSD declining to 1.26 in the coming months. Next week’s second release of Q2 GDP will probably confirm growth was about 1.0% annualised in H1. Swedish front-end yields have scope to adjust higher, supporting the SEK

Source: Macrobond, BNP Paribas

17 August 2017 www.GlobalMarkets.bnpparibas.com

3

EURUSD opportunity for the patient dollar bull Daniel Katzive  Head of FX Strategy North America  BNP Paribas Securities Corp. 

BNPP quantitative tools signal near-term downside risk for EURUSD. However, the USD faces a challenging September. The USD may recover more meaningfully in Q4, if key fiscal hurdles are cleared in September. The current inversion in the front-end of the EURUSD vol curve makes positioning for a delayed USD recovery attractive. We are adding a bearish 2m/4m EURUSD one-touch calendar spread to our model portfolio.

EURUSD is vulnerable in the near-term

EURUSD appears to have topped out in early August and has begun to correct lower. Our momentum model signals that EUR momentum has peaked, while our positioning analysis framework suggests EURUSD positioning is stretched long. With US front-end yields bouncing off their mid-August lows, following hawkish comments from New York Fed President Dudley, and US economic surprise indicators bouncing sharply off last week’s lows, a compelling case could be made for entering EURUSD shorts at this time, targeting a move down towards our 1.13 year-end target for the pair.

A more meaningful correction lower in EURUSD is more likely in Q4

While a tactical short EURUSD spot position may well play out favourably over the next two weeks, we think the risk-reward would be more attractive to position for a more meaningful move lower later this year. We see a number of significant challenges facing the USD in September, and also expect the EUR to be underpinned heading into an ECB tapering decision. The current flattness of the EURUSD vol curve allows for positioning for a post-September decline in the pair by selling shorter-dated vol to fund longer-dated exposure. (For a more detailed discussion spanning multiple currency pairs, please see the “Volatility Focus” section of this publiction). At this time we are adding a bearish EURUSD bearish one-touch calendar spread to our model portfolio. Buy 1x 15-Dec-17, Sell 1x 13Oct-17, EURUSD 1.13 1-touch offered at 15.00% (Spot Ref: 1.1720).

The US faces a daunting fiscal calendar in September

The US faces a challenging legislative calendar in September. An increase in the Federal debt ceiling must be passed by early October in order to avoid a technical default on US debt. While the Republicans control both the House and the Senate,

Chart 1: EUR momentum has failed; position capitulation to follow?



Chart 2: US economic surprise measures and frontend yields have bounced


4

a number of conservative Republican Congress members, and even some White House officials, have expressed reservations about passing a “clean” debt ceiling increase without accompanying spending cuts. However, meaningful cuts in discretionary spending would likely jeopardize support for a bill among more moderate members. A clean bill could probably pass with moderate Republican and Democratic support, but Congressional leadership may be reluctant to alienate conservative members, and there is the risk that the Democrats will try to leverage their support to garner concessions on key priorities. The mission is far from impossible (and eminently more solvable than the health care puzzle), but we would expect some market tension to be part of the process in reaching a resolution. The US faces a daunting fiscal calendar in September

Government spending will also be in focus as we move through September. The US government fiscal year ends on 30 September, and the spending authority under the continuing resolution passed in May will expire with it. If legislation authorizing spending is not passed by the end of September, all non-essential government services will shut down. While the systemic and economic risks associated with a temporary shutdown are minimal and short-term resolutions can be used to postpone the deadline indefinitely, failure to reach a deal early in the month would add to concerns about governance and presumably would weigh on the USD.

Market unlikely to rebuild Fed pricing quickly

Focus on fiscal policy in September is likely to mean less attention will be paid to the monetary policy outlook. The Fed has sent strong signals that it will announce its tapering plans at its 20 September meeting, but it seems likely to leave its policy target rates unchanged at that time. The Fed’s accompanying language is likely to be open-ended and data-dependent with respect to future tightening, limiting the extent to which markets are able to increase pricing for a December hike beyond the approximately 50% chance currently reflected in the rates markets.

USD outlook may be better in Q4

Beyond September, the prospects for the USD may look a bit better. By that point, key must-pass legislation should be in the rear-view mirror (even with extensions being only temporary). If Congress also manages to pass a budget resolution for the upcoming fiscal year (non-binding legislation that would provide a procedural framework for passing tax reform with just a simple majority in the Senate), markets would also likely need to increase pricing for a possible tax-reform

Chart 3: EURUSD vol curve is correcting from inverted levels

Chart 4: Scenario analysis for trade one month out 6.0%

1m Horizon P&L

4.0% 2.0% 0.0% -2.0%

1.1138 1.1254 1.1370 1.1486 1.1719 1.1836 1.1953 1.2071

-4.0%

EURUSD

-6.0%

-8.0% -10.0% -12.0% -14.0% Source: Macrobond, BNP Paribas



5

package passing Congress early next year. Meanwhile, the Fed’s balance sheet rundown would be underway, exerting steady, though gradual, upward pressure on long-end yields. Markets will also need to maintain some risk of renewed policy tightening by December, particularly if US data begins to strengthen again. EUR may benefit less from tapering expectations once they are fully priced in

A final piece of the puzzle is the European Central Bank (ECB). We expect the central bank to use its September meeting to set the stage for an October tapering announcement. While tapering expectations might support the EUR in the run-up to the October meeting, we would look for diminishing benefits as the announcement is increasingly priced in, with the EUR only garnerning more sustained support once the tapering procsess has begn early next year. The structure we are recommending is a modestly negative delta at inception and becomes increasingly negative delta as we move through September and the short leg approaches expiry. The buyer is exposed to loss of premium if 1.13 never trades or trades before 13 October. The the trade peforms best if EURUSD is stable-to-slightly lower in the first month, then more significantly lower in Q4. (Please see Chart 4 for a diagram of P&L on this trade one-month out at various levels of the exchange rate.)


6

AUD and NZD: Trading themes on our radar Michael Sneyd BNP Paribas London Branch Global Head of FX Strategy & Cross-Asset Strategist

  

Clara Leonard BNP Paribas London Branch G10 FX Strategist

 

The AUD and NZD have been underperforming the USD in recent weeks, bringing them back into line with their STEERs. In our view, this has been due to both a decline in risk appetite and the USD’s slight recovery. In the coming months, we think AUDUSD and NZDUSD will be driven by two potentially opposing forces: an improvement in risk appetite and movements in the broad USD index. Hence, the AUD and NZD are likely to outperform low yielders (EUR, JPY, CHF and the GBP) but may weaken against the USD. Local fundamentals indicate that the NZD should outperform the AUD.

AUD and NZD have underperformed the USD

We recently observed the AUD and NZD selling off at the same time against the USD. Both currencies appeared expensive against our fair value model, STEER™ (short-term equilibrium exchange rate) at the end of July (the AUD by a z-score of 1.55 and the NZD by 2.60) but have re-converged and are currently in line with their short-term fundamentals (Chart 1). In our view, this can mostly be explained by a large shift in risk sentiment and the USD’s slight recovery.

This underperformance can be partly explained by a deterioration of risk sentiment

August has been characterised by a deterioration in risk sentiment, causing a correction in equity markets, a rise in implied vols and a correction in the AUD and NZD. Our favoured gauge of risk appetite is our BNP Paribas Global Risk Premium Index (BNPSGRP Index) which has signalled a significant deterioration in risk appetite since the beginning of August, corresponding with the AUDUSD and NZDUSD sell off (Chart 2).

The broad recovery of the USD has also been weighing on these pairs

AUDUSD and NZDUSD also appear to have been suffering from the recent broad USD rebound (Chart 3). The improvement in US data flow, coupled with more hawkish rhetoric from FOMC member William Dudley, has caused the market expectations for the Fed’s pace of hiking to be revised slightly higher, causing the broad trade-weighted USD to have its largest cumulative recovery since April.

Unwind of long positions likely contributed to underperformance

Our BNP Paribas FX positioning analysis indicates that an unwinding of large long AUD and NZD positions are likely to have contributed to the corrections in these currency pairs. Our positioning analysis signals that between mid-May and the end

Chart 1: AUDUSD and NZDUSD declines have caused recoupling’s with their STEERs

Chart 2: AUD and NZD have been weakening with the deterioration of risk appetite…

0.76 0.75 0.74 0.73 0.72 0.71 0.70 0.69 0.68 22-May-2017

22-Jun-2017 STEER

Source: Macrobond, BNP Paribas 17 August 2017 www.GlobalMarkets.bnpparibas.com

22-Jul-2017 NZDUSD Source: Macrobond, BNP Paribas 7

of July, AUD positioning moved from -24 to +22 (on a -/+50 scale) and NZD positioning from -40 to +13, making those positions vulnerable to an unwind. Currently positioning stands at +14 and 0 for the AUD and NZD, respectively. In the coming months, we expect AUDUSD and NZDUSD to be driven by two potentially opposing forces: We expect risk appetite to recover

 A recovery of risk appetite – We view the deterioration in risk sentiment as likely to be temporary. Equity markets and ‘risky’ FX are already recovering. The Fed, having switched from being hawkish to dovish, is unlikely to change its tone back again too quickly, even if US data flow continues to pick up. This creates an attractive environment for risky assets, as a recovery in economic strength, coupled with reasonably anchored nominal interest rates, creates an opportunity for US real yields to remain under pressure. Our cross-asset correlation analysis identifies that US 10y real rates and US economic data are key determinants for risky asset performance, including the AUD and NZD. Based on a historical performance, a situation of improving US data and declining real yields provides an environment for the AUD and NZD to outperform both the USD and JPY. This analysis also suggests that in a situation where improving US data causes US real yield to rise (due to shifting expectations about the Fed) then the AUD and NZD can still outperform the JPY, but may underperform the USD.

A USD rise after September would be a headwind to AUDUSD and NZDUSD

We expect AUD and NZD to rise vs low yielders AUD outperformance vs NZD unlikely to persist



Broad moves in the USD – AUDUSD is highly correlated to the USD tradeweighted index (TWI), also true for NZDUSD (Chart 3). As we detailed on pages 4-6, we believe the USD might struggle in September, considering the challenging legislative calendar. But after September, the prospects for the USD may look a bit better, particularly if US data begin to strengthen again.

As a result, the AUD and NZD are likely to outperform low yielders (EUR, JPY, CHF and GBP), but weaken against the USD. Relative value: NZD to outperform AUD The relative performance of the AUD and NZD has varied in recent months, with AUDNZD rising 4.6% since mid-June. In evaluating the relative performance of these two currencies, we view the following to be important:

Chart 3: Broad recovery for the USD is also likely to have been a headwind for the AUD and NZD vs USD

Chart 4: US 10yr real yield and US economic data have moved into pro-risk quadrant in August 0.3 June ↑ Real yields ↓ Economic data

July ↑ Real yields ↑ Economic data

0.2

Stronger economic data

0.1 Evolution of real yields and US data over past 12 months

-0.6

-0.4

0 -0.2

0 -0.1

-0.2

m/m change in US real yields, bp -0.3 Source: Macrobond, BNP Paribas 17 August 2017 www.GlobalMarkets.bnpparibas.com

0.2

0.4

0.6

m/m change in US economic strength

August (so far) ↓ Real yields ↑ Economic data (Ideal scenario for risky asset performance)

Lower real yields

Source: Macrobond, BNP Paribas 8

1. Divergence in RBA and RBNZ policy RBNZ seems to be more worried about FX appreciation

The AUD’s outperformance versus the NZD since mid-June corresponds with a divergence in the tone between the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ). AUDNZD has been moving in line with the rise in the short-term rate differential (Chart 5). The RBNZ’s more dovish tone than the RBA’s has been due to increased focus on the impact of FX strength. Our analysis of FX pass-through shows that of G10 economies, the estimated impact on CPI inflation of a 10% rise in the TWI is the largest for NZD (-0.84pp), but only 0.24pp for the AUD. At the latest RBNZ monetary policy meeting, it was noted that a lower NZD is “needed” (previously the wording was “would be helpful”). Furthermore, RBNZ Assistant Governor John McDermott characterised this language as the first step towards intervention. Conversely the July RBA minutes have been perceived by markets as very hawkish. We view that the FX market’s reaction to these policy shifts has now moved too far, and in a process of normalisation the NZD can regain ground against the AUD.

This is in line with our analysis of FX pass-through

2. Recovery of risk appetite favours NZD over AUD STEER™ signals that the NZD has a higher sensitivity to risk appetite than the AUD. A 1% move lower in world equities corresponds to a 0.69% move lower in NZDUSD, and a 0.51% move for AUDUSD. An improving risk environment going forward is likely to favour the NZD more than the AUD, causing AUDNZD to decline. 3. NZD positioning has more scope to be rebuilt Our last FX Positioning Analysis suggests that previously held long NZD positions have now been closed, with an overall score of zero. This contrasts with AUD positioning which remains net long with a score of +14. Therefore there appears to be more room to add long NZD positions. To conclude, we view that the relative fundamentals now favour the NZD vs AUD. However, we are aware that AUDNZD currently exhibits strong momentum and we will therefore monitor price action for trading opportunities over the coming weeks.

Chart 5: AUDNZD has been moving in line with the rise in 2y rate differential

Chart 6: Long positioning in AUD and NZD has been unwound in recent weeks BNP Paribas FX Positioning Analysis 39

SEK

30

EUR 18

CAD

17

NOK

14

AUD 0

NZD -2

JPY -15

CHF

-50


10-Aug-2017

-36

USD


17-Aug-2017

-17

GBP

-30

-10

10

30

50

Source: BNP Paribas

9

Vol Focus: Calendars of EUR, CHF and AUD 1–Touches to position for post debt-ceiling USD rebound Vasilis Koutsaftis BNP Paribas Securities Corp FX Options Strategist



 

Despite a recent rebound in US activity data and stretched positioning, a USD recovery could be hindered in the medium term by concerns over September debt ceiling/government funding extension negotiations. We favour fading elevated Jackson Hole and September ECB risk premia. We explore USD bullish 1-Touch calendarsto position for a USD rebound once the September debt ceiling/government funding extension roadblocks pass, exploiting vol surface inversion.

As discussed in “Opportunities for the patient dollar bull” on pages 4-6 of this publication, we see scope for the USD to bounce in Q4, once key fiscal deadlines have been navigated and as the Fed’s balance sheet reduction program gets underway. However, in the near term, despite stretched short USD positioning, we see less scope for USD to move meaningfully higher. FX vol term structures appear flat or even inverted in certain cases, making it attractive to position for a more significant USD gains later this year. The USDCHF and EURUSD 4m-2m ATM calendar trades 1.4 and 0.5 standard deviations below its 1y average, a statistic that understates the flatness/inversion of the vol term-structure, as it incorporates the recent memory of the French and British elections that resulted in extreme gamma pricing (Chart 1). Similarly the 4m-2m AUDUSD calendar at 0.27 vols, trades 0.6 standard deviations below its 1y average. Buying December 15th/selling October 13th calendars of EURUSD 1-Touches takes advantage of an inverted vol surface, it captures positive static rolldown, it is short gamma for a range-bound spot, but flat gamma for large spot moves in either direction. Directionally, at trade inception, it is mildly short EURUSD, but turns increasingly short EURUSD with the passage of time. The long December 15th expiry covers the December FOMC and ECB. The short Chart 1: EURUSD and USDCHF 4m-2m ATM Vol 2.5

1.00

USDCHF 4m-2m ATM Vol EURUSD 4m-2m ATM Vol

2.0

Chart 2: USDCAD and AUDUSD 4m-2m ATM Vol spreads USDCAD 4m-2m ATM Vol AUDUSD 4m-2m ATM Vol

0.75

1.5 1.0 0.5

0.035

0.50

0.0

0.023

-0.5 -1.0

0

0.378 0.25

0.217

0.00

0

-0.25

-1.5 -2.0

-0.50 Sep

Nov 2016

Jan

Mar

May 2017

Jul

Source: Bloomberg, BNP Paribas Source: Macrobond, Bloomberg, BNP Paribas


Sep

Nov 2016

Jan

Mar

May 2017

Jul

Source: Bloomberg, BNP Paribas Source: Macrobond, Bloomberg, BNP Paribas

10

October 13th expiry fades risk-premia associated with the Jackson Hole Economic Symposium, occurring 24-26 August, and the debt ceiling/government funding extension, as well as the September FOMC and ECB meetings. Similar constructs in USDCHF and AUDUSD are equally attractive. The trade below was originally published in Calendars of EUR, CHF and AUD 1– Touches to position for post debt-ceiling USD rebound, 15 August 2017. Trades (EURUSD: 1.1719) Buy 1x Dec 15th/Sell 1x Oct 13, EURUSD 1.13 1Touch calendar offered @ 15%. If the 1.13 barrier never trades or it trades before October 13th, investor foregoes upfront premium. If 1.13 trades between October 13/December 15th, investor receives 100% of notional, for a gearing of 100%/15%=6.7:1 (The 1.13 December 15th EURUSD 1Touch put outright would be offered @ 34.8%, for a gearing of 2.86:1). The trade captures a static carry+roll of 5 points over the first 5 weeks. At inception, the trade offers a mild short EURUSD delta, which becomes increasingly short with the passage of time (assuming unchanged spot). At any time horizon, the trade is short gamma locally, but turns flat gamma for spot significantly below or above current levels, ie, at a 1-month horizon, the trade is flat gamma for spot above 1.18 or below 1.1250. In other words, the trade is short gamma in the state of the world where gamma is more likely to underperform and flatten for large moves in spot either way. .


11

BNP Paribas FX Positioning Analysis Clara Leonard BNP Paribas London Branch G10 FX Strategist

  

Long EUR positions have been scaled back to a score of +30 (on a +/-50 scale), whilst the market remains very short USD. The SEK is now the largest long position in the G10. SEK long positions have risen sharply over the week from +25 to +39. In the commodity bloc, AUD and NZD long positions have fallen further; NZD positioning is now neutral. Conversely, long CAD positions have risen further.

n

Chart 1: BNP Paribas FX positioning analysis – overall positioning* SHORT

LONG 39

SEK 30

EUR 18

CAD

17-Aug-2017

17

NOK

10-Aug-2017

14

AUD 0

NZD -2

JPY -15

CHF

-17

GBP -36

USD

-50

-40

-30

-20

-10

0

10

20

30

40

50

Source BNP Paribas

*The positioning scores in the chart above are the equally weighted average of the five percentiles from the table on the right. The values in the table are reported as a percentile based on the prior five years of data. These percentiles are rescaled to give a value between -50 and +50. Values above +40 and below -40 represent extreme positions. To interpret a score from the table, say -27 for example, add 50 to give 23. This tells us that 23% of observations over the past five years have been below the current observation.

Client exposure

IMM

-14 20 0 -41 -39 31 5 -15 -15 34

-49 50 -39 7 2 46 43 49 -

FX Fund BNPP Risk position trending reversals tracker indicator -46 -25 -48 26 14 41 21 4 3 -19 -11 -23 -3 10 -46 -7 11 10 -3 16 8 -34 35 -36 30 12 42 38 36 46



Client exposure – Internal sales desks’ estimate of FX investor exposure



IMM – The commitment of traders (COT) is a widely used proxy for US-based hedge-fund/CTA activity



Risk reversals – Risk reversals indicate the price of calls relative to puts, and thus incorporate an option “market sentiment”



FX Fund position tracker – Regression based decomposition of currency fund positioning



BNPP trending indicator – A technical measure of the strength of a currency’s momentum



The overall currency score is then calculated as the equally weighted average of the components


USD EUR JPY GBP CHF CAD AUD NZD NOK SEK

12

Economic calendar: 18 – 25 August HIGH-INCOME ECONOMIES GMT

Local

Fri 18/08

Sun 20/08

Wed 23/08

Thu 24/08

Fri 25/08

Sovereign debt to be rated by Fitch

Ireland

Sovereign debt to be rated by DBRS

Belgium

Sovereign debt to be rated by DBRS

08:00

10:00

Eurozone

14:00

10:00

US

14:15

10:15

15:00

17:00

13:00

15:00

Italy

14:00

16:00

Germany

16:30

18:30

Mon 21/08 Tue 22/08

Previous Greece

Current account (sa): Jun

Forecast

Consensus

EUR 30.1bn

-

-

93.4

93.0

94.0

Univ. of Michigan sentiment (prel) : Aug Dallas Fed’s Kaplan speaks in Dallas, TX

Germany

Merkel holds election campaign rally near Hannover Prime minister Gentiloni attends economic conference in Rimini Merkel answers questions at town hall by RTL television Bavarian CSU Party Head Seehofer Interviewed by ARD TV

Germany

German Finance Ministry publishes monthly report

Germany

09:00

11:00

ZEW expectations: Aug

17.5

-

-

09:00

11:00

ZEW current assessment: Aug

86.4

-

-

16:00

18:00

Merkel's Chief of Staff gives speech on integration

08:00

10:00

Manufacturing PMI: Aug

56.6

56.6

-

08:00

10:00

Services PMI: Aug

55.4

55.1

-

08:00

10:00

Composite PMI: Aug

55.7

55.7

-

10:30

12:30

Germany

13:05

09:05

US

13:00

09:45

Markit US Manufacturing PMI (sa, p): Aug

53.3

53.0

-

15:00

10:00

New home sales (saar): Jul

610k

600k

613k

14:00

10:00

New home sales (sa) m/m: Jul

0.8%

-1.6%

0.4%

06:45

08:45

France

Manufacturing confidence

109

110

-

07:00

09:00

Spain

GDP (final) q/q: Q2

0.9%

0.9%

-

07:00

09:00

GDP (final) y/y: Q2

3.1%

3.1%

-

08:30

09:30

GDP (prel) q/q: Q2

0.2%

0.3%

0.3%

08:30

09:30

GDP (prel) y/y: Q2

2.0%

1.7%

1.7%

12:30

08:30

Initial claims

232k

240k

-

14:00

10:00

Existing home sales (saar): Jul

5.52m

5.60k

5.56mn

14:00

10:00

Existing home sales (sa) m/m: Jul

-1.8%

1.4%

0.6%

15:00

17:00

Germany

06:45

08:45

France

Consumer confidence

104

101

-

23:30

08:30

Japan

Core CPI national y/y: Jul

0.4%

0.5%

0.5%

23:30 (24/08)

08:30

Core CPI Tokyo y/y: Aug

0.2%

0.2%

0.3%

06:00

08:00

GDP (final) q/q: Q2

0.6%

0.6%

-

06:00

08:00

GDP (final) y/y: Q2

2.1%

2.1%

-

08:00

10:00

Ifo business climate: Aug

116.0

116.2

-

08:00

10:00

Ifo current conditions: Aug

125.4

125.8

-

08:00

10:00

Ifo expectations: Aug

107.3

107.3

-

12:30

08:30

Durable goods orders (sa, prel) m/m: Jul

6.4%

-5.0%

-5.7%

12:30

08:30

Durable goods ex-transport (sa p) m/m: Jul

0.1%

0.8%

0.5%

12:30

08:30

Core cap goods shipments ex-air (p) Jul

0.1%

-0.8%

-

Sat 26/08


Eurozone

UK US

Germany

US

US

Merkel on Newspaper Panel on the West's future Dallas Fed’s Kaplan speaks to Oil Group in Midland, TX

Schaeuble campaigns for Merkel in Western Germany

24-26 Aug., Kansas City Fed hosts annual Jackson Hole Policy Symposium,

13

Economic calendar: 18 - 25 August CEEMEA Fri 18/08

Tue 22/08

Wed 23/08

Thu 24/08

GMT

Local

12:00

14:00

07:00

08:00

09:00

10:00

09:00

10:00

12:00

14:00

Previous Poland

Hungary

Consensus

4.5%

6.0%

8.4%

Construction output y/y : Jul

11.6%

9.5%

13.3%

Real retail sales y/y : Jul

5.8%

7.4%

7.4%

PPI y/y : Jul

1.8%

2.2%

2.0%

Gross wages y/y: Jun

12.9%

13.0%

13.8%

NBH meeting and rate decision

0.90%

0.90%

0.90%

South Africa CPI m/m: Jul

Poland

Forecast

Industrial production y/y : Jul

0.2%

0.2%

0.3%

CPI y/y: Jul

5.1%

4.5%

4.6%

Core CPI m/m: Jul

0.4%

0.5%

0.5%

Core CPI y/y: Jul

4.8%

4.7%

4.7%

Unemployment rate: Jul

7.1%

6.9%

7.0%

MPC minutes (July meeting)

LATAM Fri 18/08

GMT

Local

12:30

08:30

12:30 12:30

Previous Chile

1.5%

08:30

GDP q/q Q2

0.18%

0.8%

0.7%

08:30

Current account balance Q2

USD -1.0bn

USD -0.7bn

USD -1.3bn

Budget balance: Jul

ARS-57.0bn

ARS-38.9bn

-

26.25%

26.25%

-

GDP y/y: Q2 (f)

1.8%

1.8%

-

0.6%

0.5%

-

11.0%

-

-

3.1%

2.4%

-

-0.18%

0.39%

-

2.78%

2.72%

-

Argentina

7-Day Repo Reference rate

Thu 24/08

Fri 25/08

Consensus

0.13%

Tue 22/08

Wed 23/08

Forecast

GDP y/y Q2

Mexico

1.0%

13:00

08:00

13:00

08:00

GDP q/q: Q2 (f)

13:00

08:00

GDP nominal y/y: Q2

13:00

08:00

Economic activity IGAE y/y: Jun

12:00

09:00

12:00

09:00

IBGE inflation IPCA-15 y/y: Aug

13:30

10:30

Current account balance: Jul

USD1.3bn

USD-5.0bn

-

13:30

10:30

FDI: Jul

USD4.0bn

USD5.5bn

-

13:00

08:00

Mexico

4.1%

2.6%

-

19:00

16:00

Argentina

19:00

16:00

13:30

10:30

Brazil

Credit report: Jul

14:00

08:00

Mexico

14:00

08:00

14:00

Brazil

IBGE inflation IPCA-15 m/m: Aug

Retail sales y/y: Jun Trade balance: Jul Economic activity index y/y: Jun

USD-0.7bn

-

3.3%

4.2%

-

Bi-weekly CPI y/y

6.59%

6.49%

-

Bi-weekly CPI

0.25%

0.22%

-

08:00

Bi-weekly core CPI y/y

4.95%

5.06%

-

14:00

08:00

Bi-weekly core CPI

0.06%

0.24%

-

15:00

09:00

Central bank monetary policy minutes

13:00

08:00

Unemployment rate: Jul

3.3%

---

13:00

08:00

Unemployment rate s.a.: Jula

3.3%

-

14:00

09:00

Current account balance: Q2

USD-6.9bn

-

Mexico

Release dates and forecasts as of close of business prior to the date of publication; (p) = preliminary; (r) = revised Source: BNP Paribas, Reuters, Bloomberg, national statistics, central banks, ratings agencies

For our four-week calendar, please click here


14

FX Forecasts* USD Bloc EURUSD USDJPY USDCHF GBPUSD USDCAD AUDUSD NZDUSD USDSEK USDNOK

Spot 1.17 110 0.96 1.29 1.26 0.79 0.73 8.13 7.95

Q3 '17 1.15 115 0.97 1.31 1.27 0.80 0.73 8.26 7.96

Q4 '17 1.13 118 0.99 1.26 1.29 0.76 0.70 8.32 7.96

Q1 '18 1.15 120 0.97 1.29 1.29 0.73 0.70 8.09 7.96

Q2 '18 1.17 118 0.96 1.31 1.28 0.74 0.71 7.86 7.95

Q3 '18 1.19 116 0.94 1.37 1.26 0.75 0.72 7.65 7.94

Q4 '18 1.20 114 0.96 1.41 1.25 0.76 0.73 7.50 7.92

Q4 '19 1.30 95 0.98 1.53 1.23 0.80 0.77 7.31 7.46

EUR Bloc EURJPY EURGBP EURCHF EURSEK EURNOK EURDKK

Spot 129 0.91 1.13 9.54 9.32 7.44

Q3 '17 132 0.88 1.12 9.50 9.15 7.46

Q4 '17 133 0.90 1.12 9.40 9.00 7.46

Q1 '18 138 0.89 1.12 9.30 9.15 7.46

Q2 '18 138 0.89 1.12 9.20 9.30 7.46

Q3 '18 138 0.87 1.12 9.10 9.45 7.46

Q4 '18 137 0.85 1.15 9.00 9.50 7.46

Q4 '19 124 0.85 1.27 9.50 9.70 7.46

CEEMEA USDPLN EURCZK EURHUF USDZAR USDTRY EURRON USDRUB EURPLN USDILS

Spot 3.64 26.0 304 13.2 3.52 4.59 59.2 4.27 3.62

Q3 '17 3.63 26.4 311 13.00 3.58 4.40 57.14 4.17 3.60

Q4 '17 3.67 26.4 312 13.25 3.71 4.40 58.57 4.15 3.60

Q1 '18 3.65 26.3 312 13.35 3.72 ----58.08 4.20 3.60

Q2 '18 3.59 26.0 313 13.50 3.82 ----57.59 4.20 3.60

Q3 '18 3.53 25.9 316 13.75 3.93 ----58.04 4.20 3.60

Q4 '18 3.54 25.8 320 14.00 4.00 4.51 59.63 4.25 3.60

Q4 '19 3.35 ------------4.13 ----64.32 4.35 -----

Asia Bloc USDSGD USDMYR USDIDR USDTHB USDPHP USDHKD USDRMB USDTWD USDKRW USDINR USDVND

Spot 1.36 4.30 13358 33.25 51.29 7.82 6.68 30.3 1137 64.2 22729

Q3 '17 1.37 4.20 13300 34.00 51.00 7.80 7.00 30.00 1120 64.00 23000

Q4 '17 1.35 4.10 13200 33.50 52.00 7.80 7.04 29.50 1110 63.00 23300

Q1 '18 ---------------------------------------------

Q2 '18 ---------------------------------------------

Q3 '18 ---------------------------------------------

Q4 '18 1.33 4.00 13500 32.50 52.00 ----7.01 29.00 1050 64.00 24000

Q4 '19 1.30 3.80 13600 30.00 50.00 ----6.15 26.00 1020 64.00 24200

LATAM Bloc USDARS USDBRL USDCLP USDMXN USDCOP USDPEN

Spot 17.3 3.16 646 17.7 2971 3.24

Q3 '17 17.25 3.00 650 18.00 2850 3.26

Q4 '17 17.50 3.00 650 18.00 2875 3.28

Q1 '18 17.75 3.15 655 18.05 2900 3.30

Q2 '18 18.00 3.20 660 18.10 2925 3.35

Q3 '18 18.00 3.20 665 18.05 2950 3.40

Q4 '18 18.25 3.25 665 18.00 2950 3.35

Q4 '19 19.70 3.35 670 18.20 3010 3.40

Others USD Index

Spot 93.64

Q3 '17 95.33

Q4 '17 97.32

Q1 '18 -----

Q2 '18 -----

Q3 '18 92.59

Q4 '18 91.50

Q4 '19 84.27

*End Quarter


15

FX – Global Strategy Contacts Foreign Exchange Michael Sneyd, CFA

Global Head of FX Strategy & Macro Quantitative Strategist

London

44 20 7595 1307

[email protected]

Sam Lynton-Brown

FX Strategist

London

44 20 7595 8467

[email protected]

Clara Leonard

FX Strategist

London

44 20 7595 1424

[email protected]

Natalie Rickard

Graduate

London

44 20 7595 8270

[email protected]

Daniel Katzive, CFA

Head of FX Strategy North America

New York

1 212 841 2408

[email protected]

Vasilis Koutsaftis

FX Options Strategist

New York

1 212 471 7973

[email protected]

Emerging Markets FX & IR Strategy Wike Groenenberg

Head of Emerging Markets Research, London CEEMEA & APAC

44 20 7595 8746

[email protected]

Marcelo Carvalho

Head of Emerging Markets Research, Sao Paulo Latam

55 11 3841 3418

[email protected]

Piotr Chwiejczak

FX & IR CEEMEA Strategist

London

44 20 7595 8715

[email protected]

Sai Ulluri

CEEMEA Graduate

London

44 20 7595 1872

[email protected]

Erkin Isik, CFA

FX & IR CEEMEA Strategist

Istanbul

90 216 635 2987

[email protected]

Mirza Baig

Head of FX & IR Asia Strategy

Singapore

65 6210 3262

[email protected]

Dawn Kwa

Graduate

Singapore

65 6210 3263

[email protected]

Altaz Dagha

AU/NZ IR Strategist

Singapore

65 6210 4994

[email protected]

Kun Shan

China Strategist

Shanghai

86 21 2896 2773

[email protected]

Tianhe Ji

China Strategist

Beijing

86 10 6535 0836

[email protected]

Gabriel Gersztein

Head FX & IR Latam Strategy

Sao Paulo

55 11 3841 3421

[email protected]

Samuel Castro

FX & IR Latam Strategist

Sao Paulo

55 11 3841 3492

[email protected]

Gustavo Mendonca

FX & IR Latam Strategist

Sao Paulo

55 11 3841 3445

[email protected]

Production and Distribution Barbara Consuelo, Foreign Exchange, London. Tel: 44 20 7595 8486, Email: [email protected] Amanda Grantham-Hill, London. Tel: 44 20 7595 4107, Email: [email protected] Anna McLauchlin, London. Tel: 44 20 7595 3754, Email: [email protected] Louise Bylicki, New York. Tel: 1 212 471 6479, [email protected]

LEGAL NOTICE This document has been written by our strategy teams; it does not purport to be an exhaustive analysis, and may be subject to conflicts of interest resulting from their interaction with sales and trading which could affect the objectivity of this report. This document is non-independent research for the purpose of the UK Financial Conduct Authority rules. For the purposes of MiFID, non-independent research constitutes a marketing communication. This document is not investment research for the purposes of MiFID. It has not been prepared in accordance with legal requirements designed to provide the independence of investment research, and is not subject to any prohibition on dealing ahead of the dissemination of investment research. STEER™ is a trade mark of BNP Paribas. This document constitutes a marketing communication and has been prepared by BNP Paribas for, and is directed at, (a) Professional Clients and Eligible Counterparties as defined by the European Union Markets in Financial Instruments Directive (2004/39/EC) (“MiFID”), and (b) where relevant, persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, and at other persons to whom it may lawfully be communicated (together “Relevant Persons”) under the regulations of any relevant jurisdiction. Any investment or investment activity to which this document relates is available only to and will be engaged in only with Relevant Persons. Any person who is not a Relevant Person should not act or rely on this document or its content. Securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors.


16

The information and opinions contained in this document have been obtained from, or are based on, public sources believed to be reliable, but there is no guarantee of the accuracy, completeness or fitness for any particular purpose of such information and such information may not have been independently verified by BNP Paribas or by any person. None of BNP Paribas, any of its subsidiary undertakings or affiliates or its members, directors, officers, agents or employees accepts any responsibility or liability whatsoever or makes any representation or warranty, express or implied, as to the accuracy and completeness of the information or any opinions based thereon and contained in this document and it should not be relied upon as such. This document does not constitute or form any part of any offer to sell or issue and is not a solicitation of any offer to purchase any financial instrument, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on, in connection with any contract or investment decision. To the extent that any transaction is subsequently entered into between the recipient and BNP Paribas, such transaction will be entered into upon such terms as may be agreed by the parties in the relevant documentation. Information and opinions contained in this document are published for the information of recipients, but are not to be relied upon as authoritative or taken in substitution for the exercise of judgement by any recipient, are subject to change without notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. In providing this document, BNP Paribas does not offer investment, financial, legal, tax or any other type of advice to, nor has any fiduciary duties towards, recipients. Any reference to past performance should not be taken as an indication of future performance. To the fullest extent permitted by law, no BNP Paribas group company accepts any liability whatsoever (including in negligence) for any direct or consequential loss arising from any use of or reliance on material contained in this document even where advised of the possibility of such losses. All estimates and opinions included in this document are made as of the date of this document. Unless otherwise indicated in this document there is no intention to update this document. BNP Paribas and its affiliates (collectively “BNP Paribas”) may make a market in, or may, as principal or agent, buy or sell securities of any issuer or person mentioned in this document or derivatives thereon. Prices, yields and other similar information included in this document are included for information purposes however numerous factors will affect market pricing at any particular time, such information may be subject to rapid change and there is no certainty that transactions could be executed at any specified price. BNP Paribas may have a financial interest in any issuer or person mentioned in this document, including a long or short position in their securities and/or options, futures or other derivative instruments based thereon, or vice versa. BNP Paribas, including its officers and employees may serve or have served as an officer, director or in an advisory capacity for any person mentioned in this document. BNP Paribas may, from time to time, solicit, perform or have performed investment banking, underwriting or other services (including acting as adviser, manager, underwriter or lender) within the last 12 months for any person referred to in this document. BNP Paribas may be a party to an agreement with any person relating to the production of this document. BNP Paribas, may to the extent permitted by law, have acted upon or used the information contained herein, or the research or analysis on which it was based, before the document was published. BNP Paribas may receive or intend to seek compensation for investment banking services in the next three months from or in relation to any person mentioned in this document. Any person mentioned in this document may have been provided with relevant sections of this document prior to its publication in order to verify its factual accuracy. This document is for information purposes only and there is no assurance that a transaction(s) will be entered into on such indicative terms. Any indicative price(s) contained herein have been prepared in good faith in accordance with BNP Paribas' own internal models and calculation methods and/or are based on or use available price sources where considered relevant. Indicative price(s) based on different models or assumptions may yield different results. Numerous factors may affect the price(s), which may or may not be taken into account. Therefore, these indicative price(s) may vary significantly from indicative price(s) obtained from other sources or market participants. BNP Paribas expressly disclaims any responsibility for the accuracy or completeness of its own internal models or calculation methods, the accuracy or reliability of any price sources used, any errors or omissions in computing or disseminating these indicative price(s), and for any use you make of the price(s) provided. The indicative price(s) do not represent (i) the actual terms on which a new transaction could be entered into, (ii) the actual terms on which any existing transactions could be unwound, (iii) the calculation or estimate of an amount that would be payable following an early termination of the transactions or (iv) the price(s) given to the transactions by BNP Paribas in its own books of account for financial reporting, credit or risk management purposes. As an investment bank with a wide range of activities, BNPP may face conflicts of interest, which are resolved under applicable legal provisions and internal guidelines. You should be aware, however, that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in this document, either for its own account or for the account of its clients. This document may contain certain performance data based on back-testing, i.e. simulations of performance of a strategy, index or assets as if it had actually existed during a defined period of time. To the extent any such performance data is included, the scenarios, simulations, development expectations and forecasts contained in this document are for illustrative purposes only. All estimates and opinions included in this document constitute the judgment of BNP Paribas and its affiliates as of the date of the document and may be subject to change without notice. This type of information has inherent limitations which recipients must consider carefully. While the information has been prepared in good faith in accordance with BNP Paribas’s own internal models and other relevant sources, an analysis based on different models or assumptions may yield different results. Unlike actual performance records, simulated performance returns or scenarios may not necessarily reflect certain market factors such as liquidity constraints, fees and transactions costs. Actual historical or back tested past performance does not constitute an indication of future results or performance. This document is only intended to generate discussion regarding particular products and investments and is subject to change or may be discontinued. We are willing to discuss it with you on the understanding that you have sufficient knowledge, experience and professional advice to understand and make your own independent evaluation of the merits and risk of the information and any proposed structures. The information contained herein is not and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada, the U.S. or any other province or territory nor shall it be deemed to provide investment, tax, accounting or other advice. Transactions involving the product(s) described in this document may involve a high degree of risk and the value of such transactions may be highly volatile. Such risks include, without limitation, risk of adverse or unanticipated market developments, risk of counterparty or issuer default, risk of adverse events involving any underlying reference obligation or entity and risk of illiquidity. In certain transactions, counterparties may lose their entire investment or incur an unlimited loss. The information relating to performance contained in this document is illustrative and no assurance is given that any indicated returns, performance or results will be achieved. Moreover, past performance is not indicative of future results. Information herein is believed reliable but BNP Paribas and its affiliates do not warrant or guarantee its completeness or accuracy. All information, terms and pricing set forth herein reflect our judgment at the date and time hereof and are subject to change without notice. In the event that we were to enter into a transaction with you, we will do so as principal (and not as agent or in any other capacity, including, without limitation, as your fiduciary, advisor or otherwise). Only in the event of a potential transaction will an offering document be prepared, in which case, you should refer to the prospectus or offering document relating to the above potential transaction which includes important information, including risk factors that relate to an investment in the product(s) described herein. Prior to transacting, you should ensure that you fully understand (either on your own or through the use of independent expert advisors) the terms of the transaction and any legal, tax and accounting considerations applicable to them. You should also consult with independent advisors and consultants (including, without limitation, legal counsel) to determine whether entering into of any securities transactions contemplated herein would be contrary to local laws. The information contained herein is provided to you on a strictly confidential basis and you agree that it may not be copied, reproduced or otherwise distributed by you, whether in whole or in part (other than to your professional advisers), without our prior written consent.. Neither we, nor any of our affiliates, nor any of their respective directors, partners, officers, employees or representatives accepts any liability whatsoever for any direct or consequential loss arising from any use of this document or their content; and any of the foregoing may from time to time act as manager, co-manager or underwriter of a public


17

offering or otherwise, in the capacity of principal or agent, deal in, hold or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to the securities or related derivatives that are discussed herein. BNP Paribas and its affiliates may (or may in the future) hold a position or act as a market maker in the financial instruments discussed, or act as an advisor, manager, underwriter or lender to such issuer. In no circumstances shall BNP Paribas or its affiliates be obliged to disclose any information that it has received on a confidential basis or to disclose the existence thereof. The information presented herein does not comprise a prospectus of securities for the purposes of EU Directive 2003/71/EC (as amended from time to time). This document was produced by a BNP Paribas group company. This document is for the use of intended recipients and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without the prior written consent of BNP Paribas. By accepting this document you agree to this. United States Disclosures Important Option Disclosures: Options are complex instruments that are not suitable for every investor, may involve a high degree of risk, and may be appropriate investments only for sophisticated investors who are capable of understanding and assuming the risks involved. Supporting documentation for any claims, comparisons, recommendations, statistics or other technical data will be supplied upon request. Any trade information is preliminary and not intended as an official transaction confirmation. If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options, please contact your BNP Paribas sales representative or visit the OCC's website at http://www.theocc.com/about/publications/character-risks.jsp Important ETF Disclosures: For any ETFs discussed in this document, you should consider the investment objectives, risks, and charges and expenses of the investment company carefully before investing. The prospectus, and if available, the summary prospectus, contains this and other important information about the ETF. You may obtain a prospectus and, if available, a summary prospectus by calling +1 212 841-3099. The prospectus and, if available, summary prospectus should be read carefully before investing. As with any investment, ETFs have risks. These include the general risks associated with investing in the underlying assets, potential tracking error, and the possibility that particular indices may lag other market segments or active managers. In addition, ETFs investing in international markets may include currency and geopolitical risks, while fixed income ETF risks also include credit and interest rate risk. BNP Paribas and its affiliates may hold a position or act as a market maker in the financial instruments discussed, or act as an advisor, manager, underwriter, or lender to such issuer. As a result, BNP Paribas may have potential conflicts of interest relating to the ETFs that are discussed in this material. In particular, BNP Paribas may act as an Authorized Participant in the purchase or sale of shares from an ETF and participate in the creation and redemption of the securities covered in this material. In connection with these activities, BNP Paribas may receive a fee, may be deemed to be an underwriter of the ETF shares, and may receive information about pending creations or redemptions of large blocks of ETF shares. Under no circumstances shall BNP Paribas or its affiliates be obliged to disclose any information that it has received on a confidential basis or to disclose the existence of such information. BNP Paribas also may act as a market maker or block positioner in the ETF shares discussed in this material, or financial instruments that are held by the ETF and/or are part of the index whose performance the ETF seeks to track. As a result, BNP Paribas may be buying or selling ETF shares (or the instruments underlying the ETF shares) for other customers or for its own account while you are selling or buying ETF shares. BNP Paribas may have multiple advisory, transactional, financial and other interests in the companies whose securities or other instruments may be purchased or sold by an ETF discussed in this material. BNP Paribas may from time to time engage in business with these companies, including extending loans to, making equity investments in or providing advisory services to the companies, including merger and acquisition advisory services. In the course of those activities, certain BNP Paribas personnel may acquire nonpublic information about the companies. Such information could potentially affect the prices at which the ETF shares trade. BNP Paribas will maintain the confidentiality of such information and not disclose it to the ETF, ETF holders, or other unauthorized personnel. Important Disclosures for Convertibles Securities or other Securities not registered under US Securities Laws: Certain securities discussed herein may not be registered under the Securities Act of 1933 and therefore are considered “restricted securities” pursuant to Rule 144(a)(3). Only Qualified Institutional Buyers (“QIB”) as defined under rule 144A Only Qualified Institutional Buyers (“QIB”) as defined under rule 144A or non-US persons (as defined in Regulation S under the Securities Act) may be eligible to purchase such instruments. UK: In the UK, this document is being communicated by BNP Paribas London Branch. 10 Harewood Avenue, London NW1 6AA; tel: +44 20 7595 2000; fax: +44 20 7595 2555- www.bnpparibas.com. Incorporated in France with Limited Liability. Registered Office: 16 boulevard des Italiens, 75009 Paris, France. 662 042 449 RCS Paris. BNP Paribas London Branch is lead supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR). BNP Paribas London Branch is authorised by the ECB, the ACPR and the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request. BNP Paribas London Branch is registered in England and Wales under no. FC13447. France: This report is produced and/or is distributed in France by BNP Paribas SA and/or BNP Paribas Arbitrage. BNP Paribas SA is incorporated in France with Limited Liability (Registered Office: 16 boulevard des Italiens, 75009 Paris, France, 662 042 449 RCS Paris, www.bnpparibas.com) is authorized and supervised by European Central Bank (ECB) and by Autorité de Contrôle Prudentiel et de Résolution (ACPR) in respect of supervisions for which the competence remains at national level, in terms of Council Regulation n° 1024/2013 of 15 October 2013 conferring specific tasks on the ECB concerning policies relating to the prudential supervision of credit institutions. BNP Paribas Arbitrage is an unlimited liability company, whose registered office is 160/162 boulevard Mac Donald 75019 Paris, registered with the Paris Trade and Companies Registry under number 394 895 833. It is authorised and supervised by the Autorité de Contrôle Prudentiel et de Résolution and the Autorité des Marchés Financiers in France. Germany: This report is being distributed in Germany by BNP Paribas S.A. Niederlassung Deutschland, a branch of BNP Paribas S.A. whose head office is in Paris, France. 662 042 449 RCS Paris, www.bnpparibas.com). BNP Paribas Niederlassung Deutschland is authorized and lead supervised by the European Central Bank (ECB) and by Autorité de Contrôle Prudentiel et de Résolution (ACPR) and is subject to limited supervision and regulation by Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in respect of supervisions for which the competence remains at national level, in terms of Council Regulation n° 2013/1024 of 15 October 2013 conferring specific tasks on the ECB concerning policies relating to the prudential supervision of credit institutions as well as Council Directive n° 2013/36/EU of 26 June, 2013 and Section 53b German Banking Act (Kreditwesengesetz - KWG) providing for the principles of shared supervision between the national competent authorities in case of branches and applicable national rules and regulations. BNP Paribas Niederlassung Deutschland is registered with locations at Europa Allee 12, 60327 Frankfurt (commercial register HRB Frankfurt am Main 40950) and Bahnhofstrasse 55, 90429 Nuremberg (commercial register Nuremberg HRB Nürnberg 31129). Belgium: BNP Paribas Fortis SA/NV is authorized and supervised by European Central Bank (ECB) and by the National Bank of Belgium, boulevard de Berlaimont 14, 1000 Brussels, and is also under the supervision on investor and consumer protection of the Financial Services and Markets Authority (FSMA), rue du congrès 12-14, 1000 Brussels and is authorized as insurance agent under FSMA number 25789 A Ireland: This report is being distributed in Ireland by BNP Paribas S.A., Dublin Branch. BNP Paribas is incorporated in France as a Société Anonyme and regulated in France by the European Central Bank and by the Autorité de Contrôle Prudentiel et de Résolution. Italy: This report is being distributed by BNP Paribas Italian Branch (Succursale Italia) which is authorised and lead supervised by the European Central Bank


18

(ECB) and the Autorité de Contrôle Prudentiel et de Résolution and regulated by the Autorité des Marchés Financiers, and this authorisation has been notified to the Bank of Italy. BNP Paribas Succursale Italia is the Italian branch of a company incorporated under the laws of France having its registered office at 16, Boulevard des Italiens, 75009, Paris, whose offices are located in Piazza Lina Bo Bardi 3, Milan, tax code and registration number at the Companies Registry of Milan No. 04449690157, is enrolled in the register of the banks held by Bank of Italy under No. 5482, duly authorised to provide in Italy banking and investment services according the principle of the mutual recognition. The branch is subject to limited regulation by the Bank of Italy and the CONSOB respectively. Netherlands: This report is being distributed in the Netherlands by BNP Paribas Fortis SA/NV, Netherlands Branch, a branch of BNP Paribas SA/NV whose head office is in Brussels, Belgium. BNP Paribas Fortis SA/NV, Netherlands Branch, Herengracht 595, 1017 CE Amsterdam, is authorised and supervised by the European Central Bank (ECB) and the National Bank of Belgium and is also supervised by the Belgian Financial Services and Markets Authority (FSMA) and it is subject to limited regulation by the Netherlands Authority for the Financial Markets (AFM) and the Dutch Central Bank (De Nederlandsche Bank). Portugal: BNP Paribas – Sucursal em Portugal Avenida 5 de Outubro, 206, 1050-065 Lisboa, Portugal. www.bnpparibas.com. Incorporated in France with Limited Liability. Registered Office: 16 boulevard des Italiens, 75009 Paris, France. 662 042 449 RCS Paris. BNP Paribas – Sucursal em Portugal is lead supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR). BNP Paribas - Sucursal em Portugal is authorized by the ECB, the ACPR and Resolution and it is authorized and subject to limited regulation by Banco de Portugal and Comissão do Mercado de Valores Mobiliários. BNP Paribas - Sucursal em Portugal is registered in C.R.C. of Lisbon under no. NIPC 980000416. VAT Number PT 980 000 416.” Spain: This report is being distributed in Spain by BNP Paribas S.A., S.E., a branch of BNP Paribas S.A. whose head office is in Paris, France (Registered Office: 16 boulevard des Italiens, 75009 Paris, France). BNP Paribas S.A., S.E., C/Ribera de Loira 28, Madrid 28042 is authorised and supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and subject to limited regulation by the Bank of Spain. Switzerland: This report is intended solely for customers who are “Qualified Investors” as defined in article 10 paragraphs 3 and 4 of the Federal Act on Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Federal Ordinance on Collective Investment Schemes of 22 November 2006 (CISO). “Qualified Investors” includes, among others, regulated financial intermediaries such as banks, securities traders, fund management companies and asset managers of collective investment schemes, regulated insurance institutions as well as pension funds and companies with professional treasury operations. This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to Qualified Investors. For specification purposes, a “Swiss Corporate Customer” is a Client which is a corporate entity, incorporated and existing under the laws of Switzerland and which qualifies as “Qualified Investor” as defined above." BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss Financial Market Supervisory Authority FINMA. BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No. CHE-102.922.193. BNP Paribas (Suisse) SA is incorporated in Switzerland with limited liability. Registered Office: 2, place de Hollande, 1204 Geneva, Switzerland. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. United States: This report may be distributed (i) by BNP Paribas Securities Corp. to U.S. persons who qualify as an institutional investor under FINRA Rule 2210(a) (4), or (ii) by a subsidiary or affiliate of BNP Paribas that is not registered as a US broker-dealer only to U.S. persons who are considered “major U.S. institutional investors” (as such term is defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended). U.S. persons who wish to effect transactions in securities discussed herein must contact a BNP Paribas Securities Corp. representative unless otherwise authorized by law to contact a nonUS affiliate of BNP Paribas. BNP Paribas Securities Corp. is a broker dealer registered with the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) and member of FINRA, SIPC, NFA, NYSE and other principal exchanges. THIS DOCUMENT IS FOR THE GENERAL INFORMATION OF BNP PARIBAS’S CLIENTS AND IS A GENERAL SOLICITATION OF DERIVATIVES BUSINESS FOR THE PURPOSES OF, AND TO THE EXTENT IT IS SUBJECT TO, §§ 1.71 AND 23.605 OF THE U.S. COMMODITY EXCHANGE ACT. Brazil: This report was prepared by Banco BNP Paribas Brasil S.A. or by its subsidiaries, affiliates and controlled companies, together referred to as "BNP Paribas", for information purposes only and do not represent an offer or request for investment or divestment of assets. Banco BNP Paribas Brasil S.A. is a financial institution duly incorporated in Brazil and duly authorized by the Central Bank of Brazil and by the Brazilian Securities Commission to manage investment funds. Notwithstanding the caution to obtain and manage the information herein presented, BNP Paribas shall not be responsible for the accidental publication of incorrect information, nor for investment decisions taken based on the information contained herein, which can be modified without prior notice. Banco BNP Paribas Brasil S.A. shall not be responsible to update or revise any information contained herein. Banco BNP Paribas Brasil S.A. shall not be responsible for any loss caused by the use of any information contained herein. Turkey: This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER A.S., Teb Kampus D Blok Saray Mah. Kucuksu Cad. Sokullu Sok., No:7 34768 Umraniye, Istanbul, Turkey, Trade register number: 358354, www.tebyatirim.com.tr). Notice Published in accordance with ‘‘Communiqué Regarding the Principles on Investment Consultancy Activities and the Investment Consultancy Institutions’’ Series: V, No: 55 issued by the Capital Markets Board. The investment related information, commentary and recommendations contained herein do not constitute investment consultancy services. Investment consultancy services are provided in accordance with investment consultancy agreements executed between investors and brokerage companies or portfolio management companies or non-deposit accepting banks. The commentary and recommendations contained herein are based on the personal views of the persons who have made such commentary and recommendations. These views may not conform to your financial standing or to your risk and return preferences. Therefore, investment decisions based solely on the information provided herein may fail to produce results in accordance with your expectations. Israel: BNP Paribas does not hold a licence under the Investment Advice and Marketing Law of Israel, to offer investment advice of any type, including, but not limited to, investment advice relating to any financial products. Bahrain: This document is being distributed in Bahrain by BNP Paribas Wholesale Bank Bahrain, a branch of BNP Paribas S.A. whose head office is in Paris, France (Registered Office: 16 boulevard des Italiens, 75009 Paris, France). BNP Paribas Wholesale Bank Bahrain is licensed and regulated as a Registered Institution by the Central Bank of Bahrain – CBB. This document does not, nor is it intended to, constitute an offer to issue, sell or acquire, or solicit an offer to sell or acquire any securities or to enter into any transaction. South Africa: BNP Paribas Securities South Africa (Pty) Ltd (Registration number 1996/009716/07) is a licensed member of the Johannesburg Stock Exchange and an authorised Financial Services Provider (FSP 29451) in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Any view


19

or opinion expressed in this report does not constitute advice and the recipient should obtain their own advice prior to making any decision or taking any action whatsoever based hereon. China: This document is being distributed in the People’s Republic of China (“PRC”), excluding the Hong Kong or Macau Special Administrative Regions or Taiwan) by BNP Paribas (China) Limited (“BNPP China”), a subsidiary of BNP Paribas. BNPP China is a commercial bank licensed by the China Banking Regulatory Commission to carry on banking business in the PRC. India: In India, this document is being distributed by BNP Paribas Securities India Pvt. Ltd. ("BNPPSIPL"), having its registered office at 5th floor, BNP Paribas House, 1 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 (Tel. no. +91 22 3370 4000 / 6196 4000 / Fax no. +91 22 3370 4363). BNPPSIPL is registered with the Securities and Exchange Board of India (“SEBI”) as a stockbroker in the Equities and the Futures & Options segments of National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. (SEBI Regn. Nos.: INB/INF231474835, INB/INF011474831; CIN: U74920MH2008FTC182807; Website: www.bnpparibas.co.in). Indonesia: This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by licensed employee(s) to its clients. PT BNP Paribas Securities Indonesia, having its registered office at Menara BCA, 35th Floor, Grand Indonesia, Jl. M.H.Thamrin No.1, Jakarta, 10310, Indonesia, is a fully subsidiaries company of BNP Paribas SA and is licensed under Capital Market Law No. 8 of 1995 and the holder of broker-dealer and underwriter licenses issued by the Capital Market and Financial Institutions Supervisory Agency (BAPEPAM-LK). PT BNP Paribas Securities Indonesia is also a member of Indonesia Stock Exchange. Neither this research publication nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations. This research publication is not an offer of securities in Indonesia. Some of the securities referred to in this research publication have not been registered with the Capital Market and Financial Institutions Supervisory Agency (BAPEPAMLK) pursuant to relevant capital market laws and regulations, and may not be offered or sold within the territory of the Republic of Indonesia or to Indonesian citizens through a public offering or in circumstance which constitute an offer within the meaning of Indonesian capital market laws and regulations. Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas not registered as a financial instruments firm in Japan, to certain financial institutions defined by article 17-3, item 1 of the Financial Instruments and Exchange Law Enforcement Order. BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments and Exchange Law of Japan and a member of the Japan Securities Dealers Association, the Financial Futures Association of Japan and the Type II Financial Instruments Firms Association. BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japan affiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited. Some of the foreign securities stated on this report are not disclosed according to the Financial Instruments and Exchange Law of Japan. Malaysia: This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd. The views and opinions in this research report are our own as of the date hereof and are subject to change. BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd. This publication is being provided to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd. Philippines: This report is being distributed in the Philippines by BNP Paribas Manila Branch, an Offshore Banking Unit (OBU) of BNP Paribas whose head office is in Paris, France. BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No. 1034 (PD 1034), and regulated by the Bangko Sentral ng Pilipinas. This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034, and is qualified in its entirety to the products and services allowed under PD 1034. Hong Kong: This report is being distributed in Hong Kong by BNP Paribas Hong Kong Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas Hong Kong Branch is registered as a Licensed Bank under the Banking Ordinance and regulated by the Hong Kong Monetary Authority. BNP Paribas Hong Kong Branch is also a Registered Institution regulated by the Securities and Futures Commission for the conduct of Regulated Activity Types 1, 4 and 6 under the Securities and Futures Ordinance. Singapore: BNP Paribas Singapore Branch is regulated in Singapore by the Monetary Authority of Singapore under the Banking Act, the Securities and Futures Act and the Financial Advisers Act. This report may not be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor pursuant to Section 274 of the Securities and Futures Act, Chapter 289 of Singapore ("SFA"), (ii) to an accredited investor or other relevant person, or any person under Section 275(1A) of the SFA, pursuant to and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA. South Korea: Branch: BNP Paribas Seoul Branch is regulated by the Financial Services Commission and Financial Supervisory Service for the conduct of its financial investment business in the Republic of Korea. This report does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South Korea. Securities: BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission. This report does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South Korea. Taiwan: BNP Paribas Taipei Branch is registered as a licensed bank under the Banking Act and regulated by the Financial Supervisory Commission, R.O.C. This report is directed only at Taiwanese counterparties who are licensed or who have the capacities to purchase or transact in such products. This report does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in Taiwan. Thailand: Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (“BNPP”) and Finansia Syrus Securities Public Company Limited (“FSS”). FSS International Investment Advisory Securities Co Ltd (“FSSIA”) prepares and distributes research under the brand name “BNP PARIBAS/FSS”. BNPP is not an affiliate of FSSIA or FSS. FSS also publishes a different research product under the brand name “FINANSIA SYRUS,” which is prepared by research analysts who are not part of FSSIA and who may cover the same securities, issuers, or industries that are the subject of this report. The ratings, recommendations, and views expressed in this report may differ from the ratings, recommendations, and views expressed by other research analysts or research teams employed by FSS. This report is being distributed outside Thailand by members of BNP Paribas. Australia: This material, and any information in related marketing presentations (the Material), is being distributed in Australia by BNP Paribas ABN 23 000 000 117, a branch of BNP Paribas 662 042 449 R.C.S., a licensed bank whose head office is in Paris, France. BNP Paribas is licensed in Australia as a Foreign Approved Deposit-taking Institution by the Australian Prudential Regulation Authority (APRA) and delivers financial services to Wholesale clients under its Australian Financial Services Licence (AFSL) No. 238043 which is regulated by the Australian Securities & Investments Commission (ASIC).The Material is directed to Wholesale clients only and is not intended for Retail clients (as both terms are defined by the Corporations Act 2001, sections 761G and 761GA). The Material is subject to change without notice and BNP Paribas is under no obligation to update the information or correct any inaccuracy that may appear at a later date.


20

Some or all of the information contained in this document may already have been published on https://globalmarkets.bnpparibas.com © BNP Paribas (2017). All rights reserved. IMPORTANT DISCLOSURES by producers and disseminators of investment recommendations for the purposes of the Market Abuse Regulation: Although the disclosures provided herein have been prepared on the basis of information we believe to be accurate, we do not guarantee the accuracy, completeness or reasonableness of any such disclosures. The disclosures provided herein have been prepared in good faith and are based on internal calculations, which may include, without limitation, rounding and approximations. BNP Paribas and/or its affiliates may be a market maker or liquidity provider in financial instruments of the issuer mentioned in the recommendation. BNP Paribas and/or its affiliates may provide such services as described in Sections A and B of Annex I of MiFID II (Directive 2014/65/EU), to the Issuer to which this investment recommendation relates. However, BNP Paribas is unable to disclose specific relationships/agreements due to client confidentiality obligations. Section A and B services include A. Investment services and activities: (1) Reception and transmission of orders in relation to one or more financial instruments; (2) Execution of orders on behalf of clients; (3) Dealing on own account; (4) Portfolio management; (5) Investment advice; (6) Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis; (7) Placing of financial instruments without a firm commitment basis; (8) Operation of an MTF; and (9) Operation of an OTF. B. Ancillary services: (1) Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management and excluding maintaining securities accounts at the top tier level; (2) Granting credits or loans to an investor to allow him to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction; (3) Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings; (4) Foreign exchange services where these are connected to the provision of investment services; (5) Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments; (6) Services related to underwriting; and (7) Investment services and activities as well as ancillary services of the type included under Section A or B of Annex 1 related to the underlying of the derivatives included under points (5), (6), (7) and (10) of Section C (detailing the MiFID II Financial Instruments) where these are connected to the provision of investment or ancillary services. BNP Paribas and/or its affiliates do not, as a matter of policy, permit pre-arrangements with issuers to produce recommendations. BNP Paribas and/or its affiliates as a matter of policy do not permit issuers to review or see unpublished recommendations. BNP Paribas and/or its affiliates acknowledge the importance of conflicts of interest prevention and have established robust policies and procedures and maintain effective organisational structure to prevent and avoid conflicts of interest that could impair the objectivity of this recommendation including, but not limited to, information barriers, personal account dealing restrictions and management of inside information. BNP Paribas and/or its affiliates understand the importance of protecting confidential information and maintain a “need to know” approach when dealing with any confidential information. Information barriers are a key arrangement we have in place in this regard. Such arrangements, along with embedded policies and procedures, provide that information held in the course of carrying on one part of its business to be withheld from and not to be used in the course of carrying on another part of its business. It is a way of managing conflicts of interest whereby the business of the bank is separated by physical and nonphysical information barriers. The Control Room manages this information flow between different areas of the bank where confidential information including inside information and proprietary information is safeguarded. There is also a conflict clearance process before getting involved in a deal or transaction. In addition, there is a mitigation measure to manage conflicts of interest for each transaction with controls put in place to restrict the information flow, involvement of personnel and handling of client relations between each transaction in such a way that the different interests are appropriately protected. Gifts and Entertainment policy is to monitor physical gifts, benefits and invitation to events that is in line with the firm policy and Anti-Bribery regulations. BNP Paribas maintains several policies with respect to conflicts of interest including our Personal Account Dealing and Outside Business Interests policies which sit alongside our general Conflicts of Interest Policy, along with several policies that the firm has in place to prevent and avoid conflicts of interest. The remuneration of the individual producer of the investment recommendation may be linked to trading or any other fees in relation to their global business line received by BNP Paribas and/or affiliates. IMPORTANT DISCLOSURES by disseminators of investment recommendations for the purposes of the Market Abuse Regulation: The BNP Paribas disseminator of the investment recommendation is identified above including information regarding the relevant competent authorities which regulate the disseminator. The name of the individual producer within BNP Paribas or an affiliate and the legal entity the individual producer is associated with are identified above in this document. The date and time of the first dissemination of this investment recommendation by BNP Paribas or an affiliate is addressed above. Where this investment recommendation is communicated by Bloomberg chat or by email by an individual within BNP Paribas or an affiliate, the date and time of the dissemination by the relevant individual is contained in the communication by that individual disseminator. The disseminator and producer of the investment recommendations are part of the same group, i.e. the BNP Paribas group. The relevant Market Abuse Regulation disclosures required to be made by producers and disseminators of investment recommendations are provided by the producer for and on behalf of the BNP Paribas Group legal entities disseminating those recommendations and the same disclosures also apply to the disseminator. If an investment recommendation is disseminated by an individual within BNP Paribas or an affiliate via Bloomberg chat or email, the disseminator’s job title is available in their Bloomberg profile or bio. If an investment recommendation is disseminated by an individual within BNP Paribas or an affiliate via email, the individual disseminator’s job title is available in their email signature. For further details on the basis of recommendation specific disclosures available at this link (e.g. valuations or methodologies, and the underlying assumptions, used to evaluate financial instruments or issuers, interests or conflicts that could impair objectivity recommendations or to 12 month history of recommendations history) are available at https://globalmarkets.bnpparibas.com/gmportal/private/globalTradeIdea. If you are unable to access the website please contact your BNP Paribas representative for a copy of this document.


21