1. Crystal Ball: The Year Ahead in Capital Markets Paul Gambles 14 th January 2015

2. Disclaimer This commentary has been prepared using information based on the research capabilities of MBMG Group and represents the current opinion of MBMG Group. The opinions expressed are subject to change without notice. Where information has been sourced from parties outside MBMG Group, these are generally believed to be reliable but reliability and accuracy is not guaranteed. This commentary is for informational purposes only and does not in any way constitute investment advice and should not be construed as an offer to sell, a solicitation to buy, or an endorsement or recommendation of any company or security in any jurisdiction. Nothing in this document constitutes a formal legal opinion or constitutes investment advice. Each reader should consider whether this research is entirely or partially suitable for their particular circumstances and, if appropriate, seek additional, specific, professional advice. Neither MBMG Group nor its officers can accept any liability for the consequences of any action taken or not taken as a result of reading this commentary. MBMG Group is an independent researcher of information and does not provide investment advice or asset or financial management in Thailand. MBMG Group is affiliated with MBMG Asset Management Limited, a Mauritian institution that is authorized and licensed to provide investment management services in Mauritius. All investments contain risk and may lose value and past performance is not a guarantee or reliable indicator of future results.

3. What will the capital markets do in 2015? 2015 Outlook They will… … FLUCTUATE! J Pierpont Morgan

4. 2015 Outlook Capital market trends depend on countless factors, including: Economic performance (local, regional & global) Public, market & media perception of local & global issues Policy & politics (central banks’ policies & governments’ policies) Investors’ capacity and propensity (often overlooked) GDP

5. Debt deflation: The last global debt deflation was The Great Depression 2015 Outlook: Global High levels of PRIVATE debt constrain spending This is being masked by artificially stimulated unsustainable asset bubbles One country has already experienced 25 years of this…

6. Japan: 2015 Outlook: Global

7. The United States is turning Japanese

8. 2015 Outlook To avoid the Japanese disease, Central Banks needed to be more creative in their stimulus solutions… … but most seem reluctant to let go of QE and austerity = which only delays the inevitable re-set = but until then Central Banks call the shots

9. For Thai capital markets… 2015 Outlook Still 3 main challenges Political stability International trade Private debt levels

10. Trade… Weakening global demand Thailand Figures: Bank of Thailand

11. But trade with LVMC countries still growing Thailand - ASEAN Opportunities in physical and digital infrastructure Source: Bank of Thailand LVMC Imports (% Total)

12. High level of private debt… Thailand Sources: BOT Paper “Rising Household Debt: Implications for Economic Stability” (October 2014) & CEIC

13. …especially in lower income bracket Thailand Sources: BOT Paper “Rising Household Debt: Implications for Economic Stability” (October 2014) & SES

14. But plenty of opportunities……in infrastructure Thailand Government approved THB 3.3 trn (CAD 120 m) for infrastructure projects Rail (urban & inter-city) Road & auction for 4G LTE internet licences

15. Infrastructure projects (win/win) Thailand Direct investment flow: Related private sector opportunities – materials, construction, finance Indirect investment flow: Infrastructure expenditure flows through to consumers – retail, finance Needs to happen pretty quickly!

16. But..

17. The difference that the AEC will make this year…

18. 2015: Year of the AEC! Thailand - ASEAN Not really!! Officially due to start 2015 but reality is a long process e.g. European Union single market ASEAN countries today have far less in common now than EU countries did in 1992 EU has important structures in place: a legislative body (Parliament) a watchdog to ensure laws adhered to (European Commission), court process (ECJ) to resolve disputes (individuals or states vs EU or states) AEC does not have these

19. Capital Outflows… Thailand Any perceived setbacks in Thai recovery or delays in infrastructure spend… … may lead to BoT cutting rates (weaker Baht) Could exacerbate capital outflows in Thailand Ahead of inheritance & property tax reforms or

20. Thailand - Summary Baht will…. …strengthen when it becomes apparent G7 interest rates won’t rise, …strengthen more on ongoing political stability/successful infrastructure, …strengthen even more when G7 resorts to more stimulus …weaken if BoT cut rates, …weaken further in any political or legitimacy crisis …weaken even further when tax outflows take place Could see swings of +/- 5-10% through the year

21. Thailand - Summary Ultimately hostage to the rest of the world - leaving SET/risk assets especially vulnerable to exogenous shocks this year Although RoW is in bad shape, global CBs are unlikely to give up without a fight, so assuming those shocks self-correct then it all becomes about the domestic story Even with declining global trade as long as the political situation remains stable and as long as infrastructure is implemented the outlook is: Volatile but moderately bullish for the SET Very bullish for parts of it Supportive of property and fixed interest Overall: cautious with very selective risk focus

22. Disclaimer This commentary has been prepared using information based on the research capabilities of MBMG Group and represents the current opinion of MBMG Group. The opinions expressed are subject to change without notice. Where information has been sourced from parties outside MBMG Group, these are generally believed to be reliable but reliability and accuracy is not guaranteed. This commentary is for informational purposes only and does not in any way constitute investment advice and should not be construed as an offer to sell, a solicitation to buy, or an endorsement or recommendation of any company or security in any jurisdiction. Nothing in this document constitutes a formal legal opinion or constitutes investment advice. Each reader should consider whether this research is entirely or partially suitable for their particular circumstances and, if appropriate, seek additional, specific, professional advice. Neither MBMG Group nor its officers can accept any liability for the consequences of any action taken or not taken as a result of reading this commentary. MBMG Group is an independent researcher of information and does not provide investment advice or asset or financial management in Thailand. MBMG Group is affiliated with MBMG Asset Management Limited, a Mauritian institution that is authorized and licensed to provide investment management services in Mauritius. All investments contain risk and may lose value and past performance is not a guarantee or reliable indicator of future results. Thank you!