DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. 14 October 2016 Global Equity Research Investment Strategy Global EM Equity Strategy STRATEGY GEM Friday Factsheet - Week # 41 ■ Last week was the first since March this year to record net inflows into all four EM funds categories that we track (pan-GEM + 3 regional fund groups). The US$2.5bn inflows into EM funds were driven primarily by inflows into pan-GEM (US$1.4bn) and Asian ETFs (US$610mn). Inflows into Non-Japan Asia dedicated funds were the strongest since January this year (Figure 1). ■ While the EM rally continues to hold ground (+29% in absolute and +15% relative to developed equities in US$ terms since the January 21 trough), sentiment among sell-side analysts (as measured by the number of buy less sell and hold recommendations) has deteriorated across most emerging markets over the last six months. The biggest negative changes in stance in analyst recommendations have been witnessed in China, India, Turkey, Philippines, Chile and Poland. The only countries with even a marginal improvement in sentiment among sell-side analysts over this period are Russia, Brazil and Hungary (Figure 9). ■ Emerging market economic surprises have over the last two months slumped back to levels similar to the start of the year. Regionally, this has been driven by a sharp rollover in surprises from Non-Japan Asia after a short-lived recovery in August (Figures 16 and 18). .Research Analysts Alexander Redman 44 20 7883 6896 alex.redman@credit-suisse.com Arun Sai 44 20 7883 0002 arun.sai@credit-suisse.com 14 October 2016 Global EM Equity Strategy 2 Equity fund flows and assets Latest flows into long-only emerging market regional retail funds (week to Wednesday) Figure 1: Regional and total EM equity flows (last 25 weeks) split by active funds (dark) and ETFs (light) Figure 2: Rolling four-week net flows into EM regional equity funds as a % of assets under management 27/418/58/629/620/710/831/821/912/10-2.0-1.00.01.02.03.04.05.06.0GEM (US$bn)-2.0-1.5-1.0-0.50.00.51.0Asia (US$bn)-0.3-0.2-0.10.00.10.20.3LatAm (US$bn)-0.5-0.4-0.3-0.2-0.10.00.10.2EMEA (US$bn)27/418/58/629/620/710/831/821/912/10-4.0-2.00.02.04.06.0Total EM (US$bn) -6%-5%-4%-3%-2%-1%0%1%2%3%4%Jan 05Jan 07Jan 09Jan 11Jan 13Jan 15Total EM (%) Figure 3: Regional and total EM equity fund flows (US$bn) -100-80-60-40-20020406020122013201420152016 ytdGEMEMEAAsiaLatAmTotal EM Figure 4: Regional and total EM equity fund flows as % of year average AUM -30%-25%-20%-15%-10%-5%0%5%10%15%20122013201420152016 ytdGEMEMEAAsiaLatamTotal EM Source for all data above: EPFR, Credit Suisse research 14 October 2016 Global EM Equity Strategy 3 Country positioning (buy/sell side) Asset-weighted GEM long-only equity retail fund and sell-side broker country positioning Figure 5: GEM equity fund positions in the Asia markets versus MSCI Figure 6: GEM equity fund positions in the Latin America markets versus MSCI 0.40.60.81.01.21.41.61.82.02.22.4Jan 02Jan 05Jan 08Jan 11Jan 14IndiaThailandIndonesiaChinaTaiwanS Korea 0.20.40.60.81.01.21.41.61.8Jan 02Jan 05Jan 08Jan 11Jan 14BrazilMexicoChile Source: EPFR, MSCI, Credit Suisse research Figure 7: GEM equity fund EMEA market positions versus MSCI Figure 8: GEM equity fund cash level and regional positions versus MSCI 0.00.51.01.52.02.53.03.5Jan 02Jan 05Jan 08Jan 11Jan 14HungaryTurkeyRussiaS AfricaPolandCzech Rep 0%1%2%3%4%5%6%7%0.70.80.91.01.11.21.31.4Jan 02Jan 05Jan 08Jan 11Jan 14Cash-RHSLatAmEMEAAsia Source: EPFR, MSCI, Credit Suisse research Figure 9: Broker buys less holds and sells as % of total number of I/B/E/S recommendations -60-40-20020406080% Buys less Holds & Sells, current% Buys less Holds & Sells, -6m Source: Thomson Reuters, I/B/E/S, MSCI, Credit Suisse research As of 1 September: Within Asia, GEM funds are overweight India (76%), Thailand (41%) and Indonesia (13%), and underweight China (18%), S Korea (28%) and Taiwan (30%). GEM funds are overweight Brazil (30%) and Mexico (6%), and benchmark Chile. GEM funds are overweight Hungary (140%), Turkey (81%), Russia (34%) and S Africa (4%), and underweight Poland (27%) and Czech Rep (34%). In aggregate GEM funds are overweight Latin America (19%) and EMEA (2%), and underweight Asia (9%). Cash weightings are 3.2% versus the 16-year average of 3.0% As of 14 October: Most ‘overrated’ and ‘underrated’ countries expressed a