SHOWS: HONG KONG, CHINA (APRIL 11, 2013) (REUTERS - ACCESS ALL)

ADRIAN MOWAT, CHIEF ASIAN AND EMERGING MARKETS STRATEGIST, J.P.MORGAN

1. REPORTER OFF CAMERA SAYING:

'With the possible impact of Japan's bold policy moves, how do you rank developed markets versus emerging markets?'

2. ADRIAN MOWAT SAYING:

'The way I'd rank the globe is I'd have the U.S. equity market at number one, Japan at number two, Europe at number 3, and emerging markets at number 4. The U.S. equity market is fasinating - do you know that the best performing sectors in the first quarter were healthcare, consumer staples and then utilities? We've got a bull market led by defensives, which sounds very counter-intuitive. But what you need to look at there is M&A activities in the United States is up 64% year-to-date. Share buybacks are up 32%. What is going on there is that we are getting leveraged buyouts in consumer staples. Why in consumer staples? Because that's where you'll find steady cashflow. There is a positive earnings yield differential between the earnings yield of the consumer staples and the 3% borrowing cost that investment grade companies have today. So M&A, share buybacks lead the bull market in the United States. It's about buying relatively inexpensive stable earning streams. Rather than buying cyclicals. I talked already about the macro situation improving in Japan. In Europe, we did see an important improvement in funding conditions in Europe. And despite some of these issues in Cyprus, we do still believe that Europe will grow this year. Unfortunately, large cap EM looks troubled. Korea and Taiwan are at the wrong side of the weakening side in terms of competitiveness. Investors are confused about China's economic outlook. The central bank governor there has been talking about being pre-emptive in dealing with inflation. We've had a reimposition of property price control measures. We already had a stimulus in China in the second half of last year. And unfortunately, it doesn't seem to have generated the economic momentum that people were hoping for. In Russia, there's general disappointment about another period of leadership by President Putin and the type of economic policy. In Brazil, the economy continues to suffer from relatively high inflation and low growth. So this is why we've ranked emerging markets at the bottom. But remember that emerging markets are alpha rich and beta poor. What I mean by that is - within the right parts of EM, such as the ASEAN region, within small caps, there are big returns to be got. So active managers are actually having a very good time in emerging markets today.'

3. REPORTER OFF CAMERA SAYING:

'What will be the significance of a hundred yen versus the U.S. dollar?'

4. ADRIAN MOWAT SAYING:

'I suspect it will just be an easy number to remember, rather than being particularly economically significant. The significant event is the weak yen policy, plus this aggressive view to try and drive out deflation, target 2% inflation rate in Japan. We just had monetary data published in China. Foreign exchange reserves if I remember correctly, rose by about 128 billion U.S. dollars. That suggests the People's Bank of China had been intervening in the currency market, to try and moderate the exchange traded appreciation of the renminbi. I think we are seeing similar stories with the Korean won and the Taiwan dollar. So I do think that we are going to see strains generating as countries in Asia become concerned about their relative competitiveness.'