Chinese Yuan Revaluation_02-26-10_Strategy.pdf

Please refer to important disclosures at the end of this report.

www.exanebnpparibas.com/strategy

Strategy calls 25 February 2010

Equity Strategy

Report

Planning ahead for Chinese revaluation

Timing is impossible, so prepare now Speculation has been rife about a Chinese currency revaluation. The fundamental arguments for a stronger renminbi are sound and revaluation seems a question of when rather than if. Timing such a move is nigh on impossible, making it all the more important to plan ahead. We look at the market impact of revaluation, put together stock baskets of winners and losers and suggest stock and sector pair trades.

We discuss seven effects of revaluation 1) Timing is impossible. But dont expect it when international pressure is high. 2) EU exporters would benefit from increased Chinese purchasing power; a

positive for volumes and prices. Some would gain competitiveness.

3) EU importers and companies that have off-shored would suffer higher costs. 4) Equities would fall as it becomes clear that China is serious about slowing

down growth, but losses should be temporary as long as growth is not choked off.

5) Treasury yields would rise, as Chinas demand for them falls. But cheap equity valuations relative to bonds should provide a buffer against de-rating.

6) Revaluation would be a healthy sign of progress in rebalancing the Chinese economy towards consumer and domestic demand.

7) Less risk of trade sanctions, which would be good for risk premiums.

Winners & Losers We have compiled two baskets (winners & losers) of stocks with fundamental exposure and historical correlation to the renminbi. We also recommend a sector pair trade of long Luxury Goods vs short General Retail and a stock pair trade of long Inditex vs short Hennes & Mauritz to benefit from yuan appreciation.

Lars Kreckel Hlne JousseLondon: +44 207 039 9514 Paris: +33 1 44 95 69 [email protected] [email protected] Bert Jansen Paris: +33 1 44 95 98 55

Bearish Market drivers Bullish

[email protected]

Earnings momentum

PositiveNegative

Valuation

Expensive Cheap

Monetary conditions

LooseTight

Market sentiment (contrarian indicator)

FearGreed

= 1 January 2010= Current= 1 January 2010= Current

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Contents

Planning Ahead for Chinese Revaluation ______________________ 3

Key Indicators __________________________________________ 12

Market _____________________________________________________________ 14

Sectors ____________________________________________________________ 20

Stocks _____________________________________________________________ 32

Corporate financial calendar - The week ahead ________________ 34

Strategy: recent reports ___________________________________ 36

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Planning Ahead for Chinese Revaluation

Speculation is rife about when and by how much China will revalue its currency.

The fundamental argument for renminbi appreciation is strong. Chinese efforts to stimulate the economy throughout 2009 have clearly worked and have resulted in Q4 GDP growth rebounding to 10.7%. But the strength of the economic recovery has reached a level where fears of overheating now dominate the debate, rather than the fear of collapse of less than one year ago. New loans issued by Chinese banks have been running at incredible yoy growth rates of in excess of 30%. And much of this money has clearly found its way into asset prices. House prices rose by 7.8% in December, the fastest growth in 18 months, and the value of China-wide property transactions increased by an impressive 76% last year.

Efforts to cool down the growth dynamic are already underway, with the highest profile measures to date being increases in the reserve requirement ratio and lending restrictions for banks. Should further efforts to cool down economic growth become necessary one potential next step could be the revaluation of the currency.

Speculation about renminbi appreciation has been steadily increasing in financial markets. The chart below (provided by our China specialist) shows market expectations of revaluation as represented by the difference between 12M forward and spot rates, as well as the monthly trade balance and 'hot money' inflow (forex reserve accumulation unexplained by trade, FDI or translation gain or loss on non-USD denominated reserve). Market expectations of revaluation have increased, but are still far from record levels and also below the level reached prior to the July 2005 revaluation.

Figure 1: Market expectations of renminbi appreciation

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Trade surplus/deficit 'Hot money' Expected RMB revaluation based on RMB forward (rhs)

Last major RMB revaluation

Source: Thomson Datastream, Exane BNP Paribas

Timing such a move precisely is nigh on impossible, which makes it all the more important to be aware of the possible market impact in advance, i.e. today. In this report, we look at how equity markets as a whole are likely to react in the event of renminbi revaluation, and present baskets of stocks which should prove most sensitive on the upside and on the downside.

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Macro backdrop To set the scene, we show Exane BNP Paribas economics teams view on Chinese currency appreciation.

Until now, China has managed the natural appreciation of the renminbi by accumulating vast forex reserves in dollars. This means that the US can finance its public deficit at relatively low interest rates. In view of the poor substitutability of Chinese products, the US also limits increases in Chinese import prices and hence the drop in real income that would stem from the appreciation of the renminbi. China, meanwhile, limits the decline in US domestic demand and the erosion of exporting companies competitiveness in the face of rival countries whose currencies are pegged to the dollar.

Against this backdrop, the renminbi can only appreciate gradually against the dollar. The current strict pegging policy could be called into question if China decides that it is in danger of accumulating unlimited quantities of dollars that it fears are worthless. Meanwhile, the US could implement measures to protect US manufacturing jobs, which would limit the interest for China to continue to peg the renminbi to the dollar.

Our economic scenario forecasts a possible slight appreciation of the renminbi from the middle of the year, encouraged by the global recovery. If pegging were called into question, the Chinese economy would shift to being consumer-led instead of driven by business investment (see chart). Nevertheless, the impact on consumer spending could be limited by the tightening of credit conditions in the medium term to prevent private debt in China from ballooning.

Figure 2: Investment and private consumption as % of Chinese GDP

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Market impact seven effects Forming an opinion on how equity markets will react to the news of renminbi revaluation is certainly easier than having a high conviction view on the timing of the event. But clear-cut it is not. Much depends on the initial size and subsequent speed of revaluation and there are positive as well as negative effects for European companies to take into account; some effects are immediate, others will only be felt with a significant delay. And we have to differentiate between first and second-round effects.

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Below we list the main effects to expect in relation with a renminbi revaluation, based on fundamental arguments and on the analysis of what happened the last time that China revalued its currency five years ago.

Effect 1: Timing is impossible On 21 July 2005, around lunch time in Europe, headlines flashed across Bloomberg screens that China would revalue the renminbi by 2.1% and allow subsequent gradual appreciation. The news came as a surprise, without previous market guidance. And this is perhaps the first important lesson for the next round of appreciation: whenever it happens, it will not be pre-announced and it will be timed to surprise investors.

If we had to guess, we would not expect a revaluation at a time when political pressure from abroad is high or when speculation about revaluation is on the front pages of financial newspapers.

The realistic conclusion is that the only way to avoid being taken completely by surprise by revaluation is to prepare and be aware of the implications in advance.

Effect 2: Exporters outperform / greater Chinese purchasing power One of the most straightforward effects is the increased purchasing power of Chinese corporates and consumers. Very simply, if the renminbi appreciates by 5% against the dollar/euro, any goods and services from Europe becomes 5% cheaper to someone earning renminbi.

This effect would be immediate and should be a positive for anyone selling to China, i.e. exporters across the sectors. A look at the 2005 revaluation confirms this. Exporters to China such as Industrials, Basic Resources and Luxury Goods were amongst the strongest performers in the days after the revaluation.

More specifically, the effect depends on what currency contracts are priced in. If the contract price is US dollars the benefit should lie in increased demand rather than higher dollar-based prices. If the contract price is renminbi, the benefit would lie in higher dollar-based prices but unchanged demand.

Some European companies should also benefit from improved competitiveness compared with Chinese peers, which will face the question of whether to increase their selling prices by the amount of appreciation or whether to absorb the currency effect in their margins. This only applies to companies that compete directly with Chinese companies, such as ArcelorMittal (fewer steel exports from China) and Ericsson (would gain competitiveness relative to main competitor Huawei).

Longer-term, it should widen the potential market for European goods, which tend to be at the higher priced end of the market. Increased purchasing power should put them within reach of more Chinese corporates and consumers.

Effect 3: Importers underperform / more expensive imports from China The negative flipside of Effect 2 is that imports from China become more expensive.

This effect would be immediate and should be a negative for anyone with costs based in China, such as importers of goods from China to sell in Europe or companies that have outsourced their own production to China. A look at the 2005 revaluation confirms this. Importers from China were amongst the worst performers in the days after the revaluation (e.g. Inditex, Carrefour, Kesa).

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Much of the immediate impact again depends on the contract currency for existing contracts. If they are in renminbi the negative translation impact will be immediate. If the contract currency is US dollars (the majority, we suspect) the negative effect may be delayed until the next round of contract negotiations, when Chinese manufacturers may demand price increases. However, Chinese companies may also choose to absorb some of the effect in their own margins in order to maintain competitiveness. The precise impact will come down to the balance of bargaining power between Chinese sellers and European buyers.

Effect 4: damper on Chinese GDP growth A stronger renminbi would initially act as a break on Chinese GDP growth. For the export sector, which contributes approximately 35% of Chinese GDP, a stronger currency would constitute a direct hit to international competitiveness. Some companies may choose to take the hit on prices rather than on volumes, but it remains a clear negative. Exane BNPP economists estimate that a 5% renminbi appreciation would only be a small negative for Chinese GDP growth, as many Asian competitors are likely to let their currencies appreciate as well. The same happened after the 2005 revaluation. In the long run, the rebalancing of the economy should boost potential growth rates, but these effects will take years to develop.

This is perhaps the greatest negative effect of revaluation for equity markets. Depending on the size and form of revaluation, markets will see it as a signal that Chinese policymakers are worried about overheating in the economy and are serious about slowing down economic growth.

The experience of the 2005 revaluation confirms that revaluation is a risk for equities: the S&P 500 fell 0.7% on the day of revaluation. But the longer-term impact was negligible and on a longer-term chart the revaluation effect is almost invisible.

Figure 3: Renminbi revaluation and equities in 2005

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Source: Bloomberg, Exane BNP Paribas

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We would expect the shock to equity markets to be greater this time round. Firstly, the weight of the Chinese economy is significantly greater today than in 2005. China contributed 4.9% of global GDP in 2005, but this contribution is on track to grow to 8.8% this year. Secondly, European equity valuations are significantly more dependent on Chinese growth today than in 2005. In 2005, European earnings growth was driven to a large degree by domestic market strength. This time round, however, growth in developed markets is projected to remain anaemic for some time, so that future earnings growth is much more dependent on emerging market growth in general, and Chinese growth in particular. The market reaction to the announcement of China increasing reserve requirement ratios was a first indication of this increased sensitivity to newsflow on Chinese growth.

Figure 4: Chinas contribution to global GDP growth

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1981 1985 1989 1993 1997 2001 2005 2009 2013

China's contribution to global GDP growth

Source: IMF, Exane BNP Paribas

Effect 5: higher US Treasury yields Allowing the renminbi to appreciate should put upward pressure on US Treasury yields. There would be less need for currency intervention, so Chinese policymakers would have less demand for US Treasuries and US dollars. At the same time, higher prices of US imports from China should boost US inflation. On the day of the last Chinese revaluation in 2005, US Treasury yields rose 12bp.

Higher yields, naturally, are a negative factor for equity valuations, but the impact should be limited, in our opinion. From an asset allocation point of view, it would take a significant rise in government bond yields to make equities look inferior, pushing investors to shift from equities into government bonds. European equities offer an earnings yield of 8.8% and a dividend yield of 4.0%, which compares favourably with US Treasuries yielding 3.7% and Bunds at 3.2%. In other words, equities are not valued on the assumption that bond yields will remain at todays historically low levels for many years, but already reflect higher yields.

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Figure 5: Renminbi revaluation and US Treasuries in 2005

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UST 10yr yield (lhs) CNY (rhs)

Source: Bloomberg, Exane BNP Paribas

Effect 6: rebalancing the economy toward consumer & domestic demand Longer-term, renminbi appreciation will be an important step in rebalancing China from an industrial export-driven economy towards one also driven by domestic and consumer demand. This is a clearly stated policy objective, and making exports less competitive and putting more purchasing power into the hands of consumers encourages this shift within the Chinese economy.

This will be a very gradual process, however, and is unlikely to be priced in at the time of the initial revaluation. But it has the potential to greatly change who the beneficiaries of Chinas growth will be. While both corporate and consumer spending should initially pick up as the currency appreciates, consumer exposure would benefit from longer-lasting benefits. The focus should move from exporters of products and services in the early stages of the value chain (raw materials, industrials) to exporters of consumer goods and services.

Effect 7: less risk of trade sanctions A positive effect of the appreciation of the renminbi could be that it relieves political pressures. The United States in particular but also Europe and Japan have increasingly pushed for a more flexible Chinese currency, based on the assumption that an artificially cheap renminbi reduces the competitiveness of their own corporate sector. With unemployment expected to increase further in all three regions, this pressure is unlikely to disappear. No significant sanctions have been implemented, but the recent spat related to Google and censorship highlighted rising stress levels. Revaluation would go a long way towards reducing the risk of trade sanctions being implemented at some point in the future.

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Theme Stock Lists Below we present a list of stocks that should be particularly exposed to Chinese currency revaluation. We show the exposure to the positive effect on exports through the proportion of total sales in China and to the negative effect of increasing costs expressed through an estimate of costs generated in China. The table also shows how individual stocks reacted on 21 July 2005, the day China repegged the renminbi.

Figure 6: Potential winners from renminbi appreciation Name Rating % of sales

in Asia ex Japan

% of salesin Asia

incl Japan

% of salesin China

% of costs from Asia

Relativeperformance on day of renminbi

revaluation*

LVMH + 23 33 10 est. NA +Hermes Int. - 22 43 6 est. NA +Richemont = 33 45 NA -Swatch + 35 41 27 NA +Pernod Ricard - 30 NS +Carlsberg + 6 NS +Std. Chartered + 89 90 +ArcelorMittal + 13 NS +Rio Tinto = 30 45 19 NS +BHP Billiton + 38 42 20 NS +Ericsson + 32 9 10-15 +ASML + 71 73 4 NS +Vestas = 12 12

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Figure 8: Winners outperformed Losers on renminbi strength

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CNY yoy, inverted (lhs) Winners / Losers yoy (rhs)

Source: Bloomberg, Factset, Exane BNP Paribas

Stock pair trade: Long Inditex, short H&M We recommend a pair trade of long Inditex vs short Hennes & Mauritz to benefit from an appreciating Chinese currency.

Inditex is better positioned to benefit from both angles of renminbi appreciation. The company sources most of its products in Europe, and with less than 40% of procurement costs in Asia, it is less exposed to a rise in the cost of goods in the region. Hennes & Mauritz on the other hand sources over 60% of its products in Asia.

Inditex should also benefit slightly more from increased volumes and positive translation effects. Our sector team expects the company to generate 2.9% of group sales in China, compared with just 1.9% for Hennes & Mauritz. Both companies expect to grow their Chinese business, but we expect Inditexs exposure to China to remain greater than that of Hennes & Mauritz through at least 2019. Expanding the perspective to the rest of Asia, Inditexs advantage increases further. Inditex currently generates approximately 9% of group sales in the region; compared with Hennes & Mauritzs 3%.

Sector pair trade: Long Luxury Goods, short General Retail At the sector level we recommend playing this theme with a Retail pair trade: Long Luxury Goods versus short General Retail.

Both sectors are exposed to the theme of an appreciating renminbi, but should experience translational effects running in opposite directions. While Luxury Goods would benefit from increased purchasing power in the region stoking demand and pricing power, General Retail, after shifting a large part of procurement to Asia is at risk of not being able to pass on higher import costs to European consumers struggling to cope with high unemployment and increasing austerity measures by European governments.

The chart below shows that the Luxury Goods sector has tended to outperform General Retail in periods of renminbi strength relative to the euro.

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Figure 9: Luxury Goods tends to outperform General Retail on renminbi strengthening

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Source: Bloomberg, Factset, Exane BNP Paribas

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Key Indicators

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Key indicators Contents

Market (pages 14-19) Valuation Consensus estimates by indices and by group p. 14 Valuation and Earnings momentum p. 15 Performance and headline index targets p. 16 Monetary and Credit conditions p. 17 Market sentiment p. 18 Fund flows p. 19

Europe: P/E and EPS Growth 2009e 2010e P/E

(x) EPS growth

(%)Exane BNPP top-down

EPS growth forecast (%)P/E(x)

EPS growth (%)

Exane BNPP top-downEPS growth forecast (%)

Market Europe 15.4 (15) 12.0 28 Market ex financials Europe 15.4 (25) (30) 12.4 25 15

Source: FactSet, Exane BNP Paribas

Sectors (pages 20-31) Valuation Consensus estimates (P/E, Dividend Yield, EPS and DPS growth) p. 20 Earnings Revisions p. 21 Indicators based on Exane BNP Paribas estimates: - Valuation (P/E, CAPE, DY, EV/EBITDA, EV/Sales, EV/Op. FCF) p. 22-23 - Profitability (EBITDA, EBIT & Net margins, ROE) p. 24 - Growth (Sales, EBIT, EPS and DPS) p. 25 - Solvency (Net debt/EBITDA, Net debt/Sh. Equity, Interest cover, CDS spreads) p. 26 Performances (Europe and USA) p. 27 Relative sector performances p. 28-29 Sector allocation, comments and favourite stocks p. 30-31

Summary of our sector recommendations Outperform Neutral Underperform

Beverages Aerospace & Defence Automotive Building Materials & Infrastructure Chemicals Banks Healthcare Providers & Services Food & HPC Capital Goods

Insurance Food Retail IT Hardware Media General Retail IT Services

Oil & Gas Mining Leisure & Hotels Pharmaceuticals Real Estate Luxury Goods

Software Support Services Paper Steel Utilities

Telecom Operators

Source: Exane BNP Paribas

Stocks (pages 32-33) Top 10 Movers (Best & Worst earnings revisions, Best & Worst perf., Lowest P/Book, Highest FCF yield) p. 32 Top 10 Picks (Stocks by investment styles, Key Ideas and M&A target list) p. 33

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Market

Valuation Consensus estimates

Figure 1: By index P/E (x) EPS growth (%) 2009e 2010e 2011e 12m fwd 2009e 2010e 2011e

MSCI Europe 15.4 12.0 10.0 11.6 (15) 28 20MSCI Europe Large Cap 14.7 11.6 9.7 11.3 (15) 27 19MSCI Europe Mid Cap 20.1 14.7 11.6 14.1 (19) 37 27MSCI Europe Small Cap 23.9 15.7 11.3 14.8 (10) 52 39MSCI Euro 14.4 11.2 9.4 10.9 (23) 28 19CAC 40 15.6 11.7 9.6 11.3 (32) 33 21SBF 250 16.7 12.3 10.0 11.9 (31) 36 23DAX 30 16.7 12.1 10.1 11.8 6 38 20IBEX 35 10.8 10.2 8.9 10.0 (12) 6 15FTSE 100 15.4 12.0 9.6 11.6 (26) 28 25SMI 16.2 12.7 11.2 12.4 186 28 13MSCI USA 18.2 14.0 11.7 13.6 3 30 19

Dividend yield (%) Dividend growth (%) 2009e 2010e 2011e 2009e 2010e 2011e

MSCI Europe 3.5 3.9 4.3 (5) 10 12MSCI Europe Large Cap 3.7 4.0 4.5 (4) 10 12MSCI Europe Mid Cap 2.8 3.1 3.5 (6) 12 14MSCI Europe Small Cap 2.4 2.6 3.1 (9) 11 17MSCI Euro 3.9 4.3 4.9 (8) 9 14CAC 40 3.8 4.1 4.6 (5) 7 13SBF 250 3.6 3.9 4.4 (5) 8 13DAX 30 3.3 3.7 4.2 (10) 10 14IBEX 35 5.5 5.8 6.4 (8) 6 11FTSE 100 3.4 3.7 4.1 (11) 9 9SMI 3.0 3.3 3.7 22 12 12MSCI USA 1.9 2.0 2.2 (21) 5 10

Figure 2: By group1 Weighting P/E (x) EPS growth (%) (%) 2009e 2010e 2011e 2009e 2010e 2011e

Energy 11.8 13.8 10.1 8.4 (48) 37 20Cyclicals1 35.6 23.0 14.4 11.2 (47) 60 28Defensives1 20.8 12.7 11.9 11.1 6 7 7Financials 21.3 14.9 10.9 8.2 75 37 32Technology1 2.4 25.2 15.0 12.6 (46) 67 20Market excl. Basic Res and Financials 64.0 15.0 12.4 10.8 (21) 21 15Market excl. Energy 80.1 15.6 12.3 10.2 (7) 27 21Market excl. Financials 70.6 15.4 12.4 10.6 (25) 25 16Market excl. Oil ex Fin 58.8 15.8 12.9 11.2 (19) 23 16Market 15.4 12.0 10.0 (15) 28 20

Weighting Dividend yield (%) Dividend growth (%) (%) 2009e 2010e 2011e 2009e 2010e 2011e

Energy 11.8 4.8 5.1 5.4 (6) 7 5Cyclicals1 35.6 2.5 2.7 3.2 (14) 10 17Defensives1 20.8 4.1 4.5 4.8 5 8 7Financials 21.3 3.2 3.7 4.7 (13) 16 24Technology1 2.4 2.4 2.4 2.8 (3) 2 13Market excl. Basic Res and Financials 64.0 3.8 4.1 4.4 (0) 8 8Market excl. Energy 80.1 3.4 3.7 4.2 (5) 11 14Market excl. Financials 70.6 3.6 3.9 4.3 (3) 8 9Market excl. Oil ex Fin 58.8 3.4 3.7 4.1 (2) 9 10Market 3.5 3.9 4.3 (5) 10 121 Cyclicals = Automobiles & Components, Capital Goods, Chemicals, Commercial Services & Supplies, Construction Materials, Consumer Durables & Apparel, Consumer Services, Media, Metals & Mining, Retailing, Transportation.

Defensives = Food & Staples Retailing, Food Beverage & Tobacco, Health Care Equipment & Services, Household & Personal Products, Pharmaceuticals & Biotechnology, Telecommunication Services, Utilities.

Technology = Semiconductors & Semiconductor Equipment, Software & Services, Technology Hardware & Equipment.


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Valuation and Earnings momentum

Figure 3: MSCI Europe: EPS growth (%) Figure 4: MSCI Europe: EPS (EUR)

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Figure 5: European CAPE (x)1 Figure 6: MSCI Europe: 12m forward P/E and EPS

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Figure 7: Europe: corporate BY/Cash Flow yield2 Figure 8: Europe: Nominal Equity risk premium (%)

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1 Cyclically adjusted market P/E, based on current price and 10-year moving average EPS. 2 Relative to long-term average, log scale, based on BAA-rated corporate bond yields.

Source: FactSet, Thomson Datastream, Exane BNP Paribas estimates

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Performance and headline index targets

Figure 9: Headline index targets Index 1 Jan 10 Latest % gain YTD June 10e

targetJune 10e

upside Dec 10 target

Dec 10e upside

DJ Stoxx 600 254 247 (3) 255 3 275 11DJ Euro Stoxx 50 2,965 2,735 (8) 3,000 10 3,200 17CAC 40 3,936 3,716 (6) 3,900 5 4,200 13DAX 30* 5,957 5,616 (6) 6,000 7 6,600 18FTSE 100 5,413 5,343 (1) 5,500 3 5,900 10S&P 500 1,115 1,105 (1) 1,150 4 1,200 91 As of 25 November 2009. Total return index.

Source: Thomson Datastream, Exane BNP Paribas estimates

Figure 10: Headline index performance Country Index Level Performance over 1 month 3 months 6 months 1 year YTD

Germany DAX 302 5,616 (1) (3) 2 44 (6) France CAC 40 3,716 (3) (2) 2 37 (6) Switzerland SMI 6,688 3 5 8 42 2 Netherlands AEX 321 (3) 2 8 44 (4) Italy S&P MIB 21,346 (5) (6) (5) 38 (8) Sweden OMX 944 (1) (2) 2 53 (1) Spain IBEX 10,254 (10) (14) (9) 37 (14) Portugal PSI Gnral2 2,618 (6) (9) (3) 33 (10) UK FTSE100 5,343 1 0 9 40 (1) Belgium BEL 20 2,515 2 0 5 48 0 Euro DJ Euro Stoxx 257 (3) (4) (0) 40 (6) Europe DJ Stoxx 600 247 (1) 0 4 43 (3) Euro DJ Euro Stoxx 50 2,735 (4) (5) (2) 38 (8) Europe DJ Stoxx 50 2,486 (1) (1) 3 40 (4) USA S&P 500 1,105 1 (0) 8 43 (1) USA Dow Jones 10,374 2 (1) 9 41 (1) USA Nasdaq 100 1,813 1 1 11 55 (3) Japan Nikkei 225 10,199 (4) 8 (4) 40 (3)

Source: Thomson Datastream

Figure 11: European sector performances3 Sector Rating Latest Performance over

1 month 3 months 6 months 1 year YTD

DJ Stoxx 600 247 (1) 0 4 43 (3) Beverages + 266 2 5 18 56 0 Building Materials & Infrastructure + 253 (6) (5) (2) 54 (8) Insurance + 149 0 (1) 0 63 (2) Media + 155 (2) 4 8 24 (3) Oil & Gas + 319 (3) (1) 5 23 (4) Pharmaceuticals + 373 (0) 7 13 23 2 Software + 600 (0) 5 6 39 2 Steel + 542 (3) 9 13 85 (5) Telecom Operators + 247 (2) (3) 2 16 (5) Aerospace & Defence = 301 3 9 10 28 2 Chemicals = 438 0 (0) 13 49 (5) Food & HPC = 356 3 10 22 42 4 Food Retail = 3,726 (1) 2 9 28 (0) General Retail = 2,047 2 1 7 50 1 Mining = 774 (1) 3 22 118 (3) Real Estate = 145 0 (3) 3 62 (2) Support Services = 121 (2) 12 10 58 0 Automobile - 204 (11) (12) (12) 33 (14) Banks - 206 (3) (10) (11) 92 (7) Capital Goods - 304 3 5 12 63 2IT Hardware - 151 3 9 12 49 6 IT Services - 971 (3) 4 3 50 2 Leisure & Hotels - 130 1 9 13 47 3 Luxury Goods - 6,513 0 6 15 78 1 Transport - 194 (3) 7 8 36 5 Utilities - 323 (3) (1) (3) 11 (6) 2 Dividend reinvested. 3 Exane BNP Paribas sector classifications.


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Monetary and Credit conditions

Figure 12: Ted spread1 (in bp) Figure 13: 3-month LIBOR (%)

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EUR GBP USD

13-month USD Libor minus 3-month T-bill.

Figure 14: Europe - Corporate bond yields (%) Figure 15: Europe- Corporate bond spreads (in bp)

3

4

5

6

7

8

9

10


BAA A AA

0

500

1,000

1,500

2,000

2,500

3,000


100

200

300

400

500

High Yield (lhs) Investment grade (rhs)

Figure 16: Europe- CDS spreads (bp) Figure 17: Yield curves (10yr/2yr, x)

0

50

100

150

200

250


0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

Jul. 07 Jan. 08 Jul. 08 Jan. 09 Jul. 09 Jan. 10

USA UK Euro zone

Median, 5-year senior CDS, based on a sample of 100 European large caps.


18 Strategy calls

Market sentiment

Figure 18: Implied volatility Germany VDAX (%) Figure 19: Implied volatility USA VIX (%)

0

10

20

30

40

50

60

70

80

90

2002 2003 2004 2005 2006 2007 2008 2009 2010

0

10

20

30

40

50

60

70

80

2002 2003 2004 2005 2006 2007 2008 2009 2010

Figure 20: Bull/Bear ratio*: US retail investors Figure 21: Bull/Bear ratio*: US newsletters

(40)(30)

(20)(10)

0102030405060

2003 2004 2005 2006 2007 2008 2009 2010

Greed

Fear

(40)

(30)

(20)

(10)

0

10

20

30

40

50

2003 2004 2005 2006 2007 2008 2009 2010

Greed

Fear

* Bulls minus Bears (%, smoothed). * Bulls minus Bears (%, smoothed). Figure 22: Put/Call ratio*: ISE Figure 23: Put/Call ratio*: CBOE

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

2003 2004 2005 2006 2007 2008 2009 2010

Mean

Greed

Fear

0.4

0.6

0.8

1.0

1.2

1.4

2003 2004 2005 2006 2007 2008 2009 2010

Mean

Greed

Fear

* Smoothed; customers opening long transactions only (i.e., excl. market makers).

* Total Put/Call ratio, incl. equity index options (smoothed).

Source: Thomson Datastream, AAII, Investors Intelligence, ISEE, CBOE, Exane BNP Paribas

19 Strategy calls

Fund flows

Figure 24: USA: net equity fund inflows (USDbn) Figure 25: Europe: net equity fund inflows (EURbn)

(80)

(60)

(40)

(20)

0

20

Feb 07 Oct 07 Jun 08 Feb 09 Oct 09

(32)

(24)

(16)

(8)

0

8


Figure 26: Germany: net equity fund inflows (EURbn) Figure 27: France: net equity fund inflows (EURbn)

(6)

(4)

(2)

0

2

4

6


(5)(4)(3)(2)(1)

0123


Figure 28: Italy: net equity fund inflows (EURbn) Figure 29: UK: net equity fund inflows (GBPbn)

(10)

(8)

(6)

(4)

(2)

0

2


(2.5)(2.0)(1.5)(1.0)(0.5)

0.00.51.01.52.0

Feb07

Jun07

Oct07

Feb08

Jun08

Oct08

Feb09

Jun09

Oct09

Figure 30: Net purchases of Eurozone equities by non-residents (12-month sum, EURbn)

Figure 31: Net purchases of European equities by US investors (USDbn)

(300)

(200)

(100)

0

100

200

300

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

(40)

(20)

0

20

40

60

80

1997 1999 2001 2003 2005 2007 Jan-Sep09

Euro zone United Kingdom

Source: ECB, US Treasury, various European sources, Exane BNP Paribas

20 Strategy calls

Sectors

Valuation Consensus estimates

Figure 32: P/E and EPS growth1 P/E (x) EPS growth (%) 2009e 2010e 2011e 12m fwd 2009e 2010e 2011e

Market (MSCI Europe) 15.4 12.0 10.0 11.6 (15) 28 20Automobiles & Components NS 19.1 8.9 16.3 NS NS 113Banks 26.7 13.0 8.3 12.0 NS 105 57Capital Goods 18.8 14.7 12.1 14.2 (29) 28 22Chemicals 19.4 15.3 12.9 14.9 (32) 27 19Commercial Services & Supplies 17.8 15.7 13.7 15.4 (9) 13 15Construction Materials 16.1 13.3 10.4 12.8 (49) 21 28Consumer Durables & Apparel 21.0 17.3 15.0 16.9 (12) 21 16Consumer Services 14.3 14.7 13.0 14.4 (9) (3) 13Diversified Financials 15.5 9.5 7.6 9.2 NS 63 25Energy 13.8 10.1 8.4 9.8 (48) 37 20Food & Staples Retailing 14.9 13.2 11.9 13.0 4 12 12Food Beverage & Tobacco 16.8 15.1 13.6 14.8 11 11 11Health Care Equipment & Services 19.7 17.2 15.2 16.8 9 15 13Household & Personal Products 19.5 17.9 16.4 17.7 7 9 9Insurance 10.2 8.6 7.7 8.4 20 20 11Media 12.4 11.7 10.9 11.6 (8) 6 8Metals & Mining 26.8 12.2 8.7 11.5 (69) 120 40Pharmaceuticals & Biotechnology 11.6 10.8 10.2 10.7 14 7 6Real Estate 16.8 17.0 16.0 16.8 280 (1) 6Retailing 16.5 14.6 12.9 14.3 6 13 13Semiconductors & Semiconductor Equipt . NS 17.0 12.4 16.1 NS NS 37Software & Services 17.7 15.7 14.0 15.4 (11) 13 13Technology Hardware & Equipment 19.9 14.1 11.7 13.7 (48) 41 20Telecommunication Services 10.1 9.9 9.4 9.8 3 2 5Transportation 41.3 17.9 11.8 16.6 (66) 131 51Utilities 11.2 11.0 10.4 10.9 (6) 2 51 MSCI classification.

Source: FactSet

Figure 33: Dividend yield and DPS growth1 Dividend yield (%) DPS growth (%) 2009e 2010e 2011e 2009e 2010e 2011e

Market (MSCI Europe) 3.5 3.9 4.3 (5) 10 12Automobiles & Components 0.9 1.7 3.1 (46) 90 76Banks 2.5 3.2 4.2 (30) 26 33Capital Goods 2.7 2.9 3.3 (8) 6 14Chemicals 2.8 3.1 3.5 (16) 14 12Commercial Services & Supplies 2.4 2.4 2.8 12 0 19Construction Materials 3.1 2.9 3.4 (8) (4) 17Consumer Durables & Apparel 1.6 1.9 2.1 8 18 11Consumer Services 3.6 3.6 3.9 (10) (3) 9Diversified Financials 2.5 3.0 4.3 (3) 22 42Energy 4.8 5.1 5.4 (6) 7 5Food & Staples Retailing 3.0 3.2 3.6 11 9 10Food Beverage & Tobacco 3.0 3.2 3.5 12 8 9Health Care Equipment & Services 1.4 1.5 1.7 8 12 12Household & Personal Products 2.2 2.4 2.6 15 6 8Insurance 4.3 4.8 5.4 7 14 12Media 4.6 4.9 5.1 1 6 5Metals & Mining 1.2 1.7 2.3 (49) 39 33Pharmaceuticals & Biotechnology 3.7 4.0 4.3 9 8 7Real Estate 5.2 5.0 5.2 3 (4) 4Retailing 3.5 3.9 4.4 2 11 11Semiconductors & Semiconductor Equipt. 0.9 0.8 1.1 (30) (11) 39Software & Services 1.7 1.8 2.1 (7) 9 14Technology Hardware & Equipment 3.3 3.3 3.7 3 2 12Telecommunication Services 6.3 6.8 7.2 9 8 6Transportation 2.9 2.9 3.3 (10) 1 14Utilities 5.4 5.7 5.9 (11) 5 51 MSCI classification.

Source: FactSet

21 Strategy calls

Earnings revisions

Figure 34: 2010e EPS revisions over 1 month1 (%)

(6%) (4%) (2%) 0% 2% 4% 6% 8% 10% 12% 14% 16%

Constr MaterInsurance

Diversified FinancialsUtilitiesEnergy

TransportationMedia

Telecommunication ServicesConsumer Services

Software & ServicesFood & Staples Retailing

MSCI EuropeFood Beverage & Tobacco

Pharmaceuticals &Real Estate

Health Care Equip. & ServicesChemicals

Technology Hardware &Automobiles & Components

Capital GoodsRetailing

Household & Personal ProductsCommercial Services & Supplies

BanksConsumer Durables & Apparel

Metals & Mining

1 MSCI classification.

Source: FactSet

Figure 35: Europe: 2010e EPS growth by group2 (%) Figure 36: Europe: 2010e EPS by group (rebased)

0

10

20

30

40

50

60

Jan 08 Jun 08 Nov 08 Apr 09 Sep 09 Feb 10

Defensive CyclicalsFinancials Market ex financials

20

30

40

50

60

70

80

90

100

110

Jan 08 Jun 08 Nov 08 Apr 09 Sep 09 Feb 10

Defensive CyclicalsFinancials Market ex Financials

2 Based on MSCI Europe.

Cyclicals = Automobiles & Components, Capital Goods, Chemicals, Commercial Services & Supplies, Construction Materials, Consumer Durables & Apparel, Consumer Services, Media, Metals & Mining, Retailing, Telecommunication Services, Transportation

Defensives = Food & Staples Retailing, Food Beverage & Tobacco, Health Care Equipment & Services, Household & Personal Products, Pharmaceuticals & Biotechnology, Utilities


22 Strategy calls

Valuation1

Figure 37: P/E (x) 2009e 2010e Hist. avg3 2010e vs hist. avg Min

Market2 13.5 13.7 15.8 87% 13.1 Aero & Defence 11.3 12.1 14.3 85% 10.8 Automotive 44.2 18.0 11.8 153% 10.1 Banks 13.2 11.4 12.3 92% 9.7 Beverages 7.0 13.7 18.1 76% 7.0 Building Materials & Infrastructure 13.2 13.0 11.9 110% 9.6 Capital Goods 15.0 15.3 15.7 97% 13.1 Chemicals 14.5 15.1 13.3 113% 10.0 Food & HPC 15.1 17.8 20.0 89% 15.1 Food Retail 14.1 13.4 17.1 79% 13.1 General Retail 11.9 12.2 17.4 70% 11.9 Healthcare Providers & Services 15.8 16.1 23.0 70% 15.8 Insurance 9.1 8.5 13.3 64% 8.4 IT Hardware 19.2 14.6 24.0 61% 15.2 IT Services 12.7 12.2 21.0 58% 10.7 Leisure & Hotels 11.3 15.5 17.7 88% 11.3 Luxury Goods 14.6 17.5 18.6 94% 14.3 Media 10.5 11.4 16.7 68% 10.5 Mining 13.6 12.2 12.5 98% 8.7 Oil & Gas 11.5 10.3 10.3 100% 7.7 Paper NS 66.3 35.3 188% 12.6 Pharmaceuticals 12.8 13.1 20.3 65% 12.4 Real Estate 15.9 16.0 18.9 85% 15.0 Software 17.2 16.8 26.6 63% 17.2 Steel NS 17.6 9.3 190% 5.5 Support Services 15.2 16.7 19.5 86% 15.0 Telecom Operators 10.2 11.2 16.2 69% 10.2 Utilities 12.2 12.5 14.8 84% 10.8 1 Sector median. 2 Based on Exane BNP Paribas universe. 3 Historical average 1996-2008 (or over the longest available period), excl. bubble years 1999-2001. Some differences compared to previous weeks could be linked to additions or deletions in our covered universe. 4 2009 valuation ratios are calculated based on historical average prices for the year.

Source: Exane BNP Paribas estimates

Figure 38: CAPE4 (x) 31/12/2009 Last Hist. avg Min 01/07/07

Market 13.6 13.4 22.6 9.2 26.0 Automotive 9.5 8.6 13.5 7.6 19.8 Banks 8.2 7.9 17.8 3.9 21.7 Basic Resources 16.6 16.4 18.2 8.3 35.4 Beverages 24.7 24.7 25.2 15.1 32.0 Chemicals 20.1 19.3 17.6 10.1 26.2 Building Materials & Infrastructure 13.3 12.1 18.4 8.5 32.1 Financial Services 14.3 14.2 24.7 9.2 31.8 Food 19.6 20.3 22.6 14.6 26.2 Food Retail 16.6 16.8 26.1 12.6 24.9 General Retail 16.9 16.9 24.2 10.0 27.5 Healthcare 18.9 19.2 27.6 14.7 25.7 Industrial Goods & Services 16.0 16.1 22.2 10.7 30.5 Insurance 9.0 8.9 30.1 5.1 18.7 Media 13.7 13.7 30.5 9.9 26.7 Oil & Gas 13.2 12.7 22.7 10.1 26.4 Pers & Household Goods 19.0 19.6 23.0 12.8 29.3 Technology 15.2 15.9 38.4 10.7 28.3 Telecoms 15.7 15.0 27.4 13.1 24.4 Travel & Leisure 15.0 15.1 17.1 8.3 19.4 Utilities 17.3 16.3 22.7 14.0 35.1 4 Cyclically adjusted P/E, based on current price and 10-year moving average EPS. Datastream indices.


23 Strategy calls

Valuation1

Figure 39: Dividend yield (%) Figure 40: EV/EBITDA4 (x) Sector 2009e 2010e Hist.

avg3 2010e vs hist. avg

Min Sector 2009e 2010e Hist. avg3

2010e vs hist. avg

Min

Market2 3.2 3.0 2.5 122 1.7 Market2 7.7 7.8 8.4 93% 7.5Aero & Defence 3.8 3.1 2.1 150 0.4 Aero. & Defence 7.0 7.3 8.8 83% 7.0Automotive 0.8 2.0 2.5 81 0.8 Automotive 5.8 4.7 4.9 96% 4.2Banks 1.6 2.7 3.4 80 1.4 Beverages 9.5 8.7 9.2 95% 6.3Beverages 2.3 2.5 1.7 148 0.9 Capital Goods 8.5 8.6 8.2 105% 6.9Capital Goods 2.8 3.0 2.3 133 1.7 Chemicals 7.2 7.7 6.7 114% 5.6Chemicals 3.2 2.8 2.5 114 1.7 B. Mats & Infrastruct. 7.8 7.8 7.3 106% 5.9B. Mats & Infrastruct. 4.1 3.9 2.6 146 2.3 Food & HPC 9.2 9.9 10.0 99% 6.8Food & HPC 2.8 2.3 1.8 125 1.2 Food Retail 6.7 6.5 8.1 81% 6.7Food Retail 2.9 3.0 2.0 152 1.0 General Retail 7.3 7.1 10.6 67% 7.3General Retail 3.3 3.2 3.2 100 2.5 Health Prov & Serv 8.5 8.5 13.0 65% 8.5Health Prov. & Serv. 1.5 1.7 0.9 190 0.6 IT Hardware 8.4 5.9 10.6 55% 7.1Insurance 4.8 4.6 2.4 193 0.3 IT Services 5.6 6.8 11.3 61% 5.6IT Services 3.4 3.0 2.1 144 0.9 Luxury Goods 7.9 9.7 11.0 88% 7.9Luxury Goods 2.4 1.9 1.6 117 1.1 Media 7.4 7.8 10.3 75% 6.9Media 4.2 3.9 2.5 154 1.7 Mining 7.9 7.1 6.3 112% 4.6Mining 1.4 1.3 4.4 31 1.4 Oil & Gas 4.6 4.9 4.5 111% 3.7Oil & Gas 5.5 5.3 3.7 144 3.1 Paper 7.1 7.9 9.0 88% 7.1Paper 5.3 5.1 4.1 125 3.1 Pharmaceuticals 8.6 9.0 11.8 76% 8.6Pharmaceuticals 3.6 2.8 1.9 146 1.4 Software 9.7 10.0 15.5 65% 9.7Real Estate 5.1 4.6 3.7 123 3.0 Steel 8.6 8.8 5.1 173% 3.7Software 1.5 1.6 1.0 162 0.4 Support Services 8.8 9.6 11.0 87% 8.7Steel 2.4 2.1 2.9 72 1.3 Telecom Operators 5.0 5.2 5.7 91% 3.4Support Services 2.3 1.9 1.9 102 0.8 Utilities 7.7 7.7 8.3 92% 6.1Telecom Operators 5.7 6.1 3.5 178 1.4 Utilities 5.5 5.5 3.3 167 0.7

Figure 41: EV/Sales4 (%) Figure 42: EV/Op FCF4 (x) Sector 2009e 2010e Hist.

avg3 2010e vs hist. avg

Min Sector 2009e 2010e Hist. avg3

2010e vs hist. avg

Min

Market2 145 153 143 107 100 Market2 11.0 12.4 14.9 83% 11.0Aero & Defence 61 68 79 86 57 Aero & Defence 10.9 12.7 17.0 75% 9.9Automotive 44 46 47 97 35 Automotive 6.3 10.4 11.9 88% 5.9Beverages 282 245 194 127 139 Beverages 10.7 10.7 16.8 63% 10.4Capital Goods 113 111 115 96 85 Capital Goods 9.5 11.3 14.5 78% 9.5Chemicals 101 93 100 93 79 Chemicals 9.9 15.8 16.9 93% 9.9B. Mats & Infrastruct. 123 123 124 100 93 B. Mats & Infrastruct. 11.1 12.5 13.1 95% 8.6Food & HPC 162 174 155 112 92 Food & HPC 11.1 12.7 14.9 86% 10.9Food Retail 48 46 56 83 44 Food Retail 13.5 11.6 18.1 64% 10.3General Retail 91 90 138 65 80 General Retail 11.2 9.6 20.7 47% 11.2Health Prov & Serv 287 288 352 82 276 Health Prov & Serv 11.8 15.1 20.4 74% 11.8IT Hardware 103 95 176 54 103 IT Hardware 9.7 10.7 20.4 52% 9.7IT Services 50 60 106 57 50 IT Services 19.2 12.6 17.4 73% 7.0Leisure & Hotels 127 121 135 90 65 Luxury Goods 10.8 12.5 18.0 69% 10.8Luxury Goods 185 237 224 106 185 Media 10.2 10.2 14.2 72% 9.7Media 180 178 224 79 135 Mining 10.3 11.5 12.4 93% 8.7Mining 225 235 218 108 109 Oil & Gas 17.2 11.5 9.7 118% 7.4Paper 83 85 126 67 83 Paper 7.6 19.5 29.4 66% 7.6Pharmaceuticals 301 294 342 86 215 Pharmaceuticals 10.2 10.8 19.2 56% 10.2Software 283 309 451 68 283 Software 9.3 11.3 17.4 65% 9.3Steel 117 101 76 134 56 Steel 10.9 29.4 15.2 192% 8.1Support Services 138 154 150 103 99 Support Services 11.2 12.6 18.9 67% 11.2Telecom Operators 179 165 221 75 173 Telecom Operators 9.6 9.9 11.6 86% 8.4 Utilities 20.2 21.0 15.5 136% 7.21 Sector median. 2 Based on Exane BNP Paribas universe. 3 Historical average 1996-2008 (or over the longest available period), excl. bubble years 1999-2001. 4 Excluding Financials and/or Utilities and Oil & Gas. Some differences compared to previous weeks could be linked to additions or deletions in our covered universe. 2009 valuation ratios are calculated based on historical average prices for the year.


24 Strategy calls

Profitability1

Figure 43: EBITDA margin4 (%) Figure 44: EBIT margin4 (%) Sector 2009e 2010e Hist.

avg3 Min Max Sector 2009e 2010e Hist.

avg3 Min Max

Market2 18.0 18.8 16.7 13.8 19.7 Market2 12.9 13.8 11.9 9.4 15.1Aero & Defence 10.2 10.9 10.0 7.1 13.9 Aero & Defence 7.7 8.1 6.3 3.3 8.7Automotive 7.7 8.9 9.9 7.7 12.3 Automotive 1.8 3.0 5.1 1.8 7.8Beverages 28.3 28.6 21.0 14.0 28.3 Beverages 23.4 24.6 15.5 10.0 24.6Capital Goods 12.4 13.9 13.5 12.0 15.8 Capital Goods 9.2 10.0 9.6 7.9 12.7Chemicals 14.1 15.3 16.3 14.1 18.2 Chemicals 9.1 11.1 10.0 8.2 13.0B. Mats & Infrastruct. 17.7 18.6 16.8 14.8 19.3 B. Mats & Infrastruct. 10.9 11.4 11.1 9.1 14.2Food & HPC 17.4 17.5 15.5 13.8 17.4 Food & HPC 14.6 13.8 12.0 9.4 14.6Food Retail 7.2 7.3 7.0 6.3 8.0 Food Retail 4.8 4.8 4.7 4.0 5.5General Retail 15.8 15.9 15.4 14.1 17.5 General Retail 11.6 11.8 12.7 11.6 14.1Health Prov & Serv 30.1 30.1 24.0 19.6 30.1 Health Prov & Serv 23.5 24.5 18.7 13.6 24.5IT Hardware 12.0 19.6 14.9 5.1 23.9 IT Hardware 5.1 9.2 9.1 (2.4) 19.8IT Services 9.1 8.8 10.4 8.0 13.2 IT Services 7.7 7.6 8.4 6.3 11.3Luxury Goods 21.5 23.8 21.7 16.6 24.4 Luxury Goods 17.3 19.9 17.6 12.6 20.9Media 24.3 25.2 19.9 15.3 24.8 Media 19.7 20.7 16.5 11.7 20.7Mining 31.3 35.8 30.1 16.6 43.6 Mining 21.3 27.9 22.8 8.0 38.7Paper 12.0 10.8 16.1 11.0 22.6 Paper 4.1 3.3 7.4 3.0 14.7Pharmaceuticals 34.2 34.7 27.4 19.7 34.2 Pharmaceuticals 27.7 29.6 21.3 14.6 29.6Software 29.1 30.9 28.3 23.3 34.1 Software 27.3 29.2 26.0 21.0 30.3Steel 7.6 12.7 13.9 7.6 19.7 Steel (0.4) 7.3 8.7 (0.4) 15.2Support Services 18.0 18.3 13.1 7.9 18.3 Support Services 12.6 13.0 9.6 5.2 14.2Telecom Operators 34.4 34.1 39.0 31.7 48.0 Telecom Operators 19.4 20.7 19.8 14.7 23.3

Figure 45: Net margin4 (%) Figure 46: ROE (%) Sector 2009e 2010e Hist.


avg3 Min Max

Market2 6.6 8.0 6.9 4.2 10.5 Market2 11.9 13.2 15.2 11.9 17.5Aero & Defence 4.0 5.3 4.4 0.6 10.1 Aero & Defence 10.5 12.0 13.7 8.4 17.1Automotive (1.9) 1.8 3.5 (1.9) 6.1 Automotive (0.4) 5.0 12.9 (0.4) 16.3Beverages 13.7 15.8 9.8 6.1 13.7 Banks 5.3 7.7 13.4 5.3 18.2Capital Goods 6.6 6.4 5.6 2.2 9.3 Beverages 15.4 15.8 15.8 11.4 21.5Chemicals 5.9 7.3 6.2 4.7 9.3 Capital Goods 14.1 14.7 17.2 12.1 23.1B. Mats & Infrastruct. 6.0 6.5 6.5 4.6 11.0 Chemicals 10.2 13.2 13.7 10.2 18.2Food & HPC 10.2 9.8 7.9 5.4 11.9 B. Mats & Infrastruct. 8.3 8.5 15.3 8.3 17.2Food Retail 2.5 2.9 2.5 1.9 3.2 Food & HPC 14.7 15.1 18.5 14.0 22.7General Retail 7.9 8.0 8.9 7.4 9.9 Food Retail 12.0 14.6 15.6 10.4 19.3Health Prov & Serv 12.2 15.2 10.8 7.2 18.2 General Retail 21.4 20.6 25.1 20.4 34.0IT Hardware 0.6 7.1 5.5 (11.4) 14.5 Health Prov & Serv 14.0 13.5 15.7 13.1 18.0IT Services 2.1 2.7 3.2 (7.4) 7.6 Insurance 9.0 10.0 8.1 2.3 13.2Luxury Goods 12.0 13.7 10.8 5.9 15.6 IT Hardware 8.2 12.7 9.4 (10.5) 21.5Media 7.1 8.2 6.8 (2.3) 11.0 IT Services 10.7 10.1 15.1 7.6 28.3Mining 15.2 19.9 15.1 1.3 25.5 Luxury Goods 12.9 14.5 14.0 8.2 18.6Paper (3.8) 0.8 4.2 (4.0) 11.9 Media 11.8 14.6 16.6 8.7 26.7Pharmaceuticals 19.1 22.0 14.9 8.0 19.4 Mining 9.7 14.7 15.0 (1.1) 32.5Software 15.2 18.0 15.3 5.0 19.6 Oil & Gas 14.6 14.2 17.4 (5.6) 24.9Steel (1.0) 4.1 6.3 (1.0) 14.0 Paper (0.5) 1.2 7.2 (0.5) 15.9Support Services 6.3 7.4 6.1 (1.6) 9.9 Pharmaceuticals 18.6 20.0 18.9 16.1 21.5Telecom Operators 11.4 11.3 9.3 0.5 15.8 Software 15.7 15.9 13.0 (28.3) 30.8 Steel 3.0 8.4 13.1 3.0 23.1 Support Services 19.1 20.3 26.5 11.2 47.7 Telecom Ops 18.8 19.1 13.3 2.4 20.6 Utilities 12.6 12.6 13.0 10.0 17.01 Sector median. 2 Based on Exane BNP Paribas universe. 3 Historical average 1996-2008 (or over the longest available period). 4 Excluding Financials, Utilities and Oil & Gas. Some differences compared to previous weeks could be linked to additions or deletions in our covered universe. Source: Exane BNP Paribas estimates

25 Strategy calls

Growth1

Figure 47: Sales growth4 (%) Figure 48: EBIT growth (%) Sector 2009e 2010e 2011e Hist.

avg3 03-08

Sales CAGR Sector 2009e 2010e 2011e Hist.

avg3 03-08

EBIT CAGR

Market2 (2) 4 5 8 10 Market2 (2) 9 11 12 13Aero & Defence 9 1 3 9 12 Aero & Defence 10 2 11 20 21Automotive (14) 6 6 6 5 Automotive (67) 39 80 13 17Beverages 3 4 5 10 10 Beverages 5 11 9 12 13Capital Goods (8) 1 5 7 9 Capital Goods (9) 5 15 12 19Chemicals (15) 7 6 7 9 Chemicals (32) 32 17 11 20B. Mats & Infrastruct. (12) 3 7 10 13 B. Mats & Infrastruct. (16) 9 19 13 13Food & HPC (2) 4 6 5 5 Food & HPC 0 7 8 8 7Food Retail 5 7 6 8 5 Food Retail 8 11 9 10 7General Retail 4 6 6 12 6 General Retail 5 10 8 15 4Health Prov & Serv 8 8 8 14 16 Health Prov & Serv 9 12 12 16 0IT Hardware (11) 15 9 11 12 IT Hardware (11) 27 27 23 7IT Services 4 (1) 2 18 16 IT Services 3 (2) 2 30 20Leisure & Hotels (3) 0 5 8 3 Leisure & Hotels 5 2 12 10 9Luxury Goods (3) 4 6 8 8 Luxury Goods (16) 10 10 11 11Media 2 1 3 8 4 Media 1 2 9 11 8Mining (24) 24 6 16 26 Mining (41) 58 16 12 38Paper (19) 6 6 1 (1) Oil & Gas (45) 15 8 25 19Pharmaceuticals 7 5 3 9 11 Paper (14) (12) 44 1 (3)Software 2 9 10 20 15 Pharmaceuticals 11 10 8 11 21Steel (36) 12 8 11 21 Software 5 17 13 18 13Support Services 1 3 6 9 14 Steel (56) 34 35 27 43Telecom Operators (0) 0 1 8 4 Support Services 6 9 14 12 17 Telecom Operators 0 2 4 7 0 Utilities 2 7 6 8 13

Figure 49: EPS growth (%) Figure 50: Dividend growth (%) Sector 2009e 2010e 2011e Hist.

avg3 03-08e

EPS CAGRSector 2009e 2010e 2011e Hist.

avg3 03-08

DPS CAGR

Market2 (5) 10 13 12 14 Market2 0 4 7 9 13Aero & Defence (8) 4 13 11 20 Aero & Defence 7 8 9 7 11Automotive (80) 141 59 13 16 Automotive 0 27 50 7 11Banks (11) 24 47 12 (0) Banks (15) 45 38 4 (11)Beverages 6 18 11 9 15 Beverages 5 19 11 4 5Capital Goods (18) 7 18 11 15 Capital Goods 0 0 15 7 8Chemicals (34) 28 23 11 21 Chemicals (0) 9 17 8 10B. Mats & Infrastruct. (26) 4 28 9 14 B. Mats & Infrastruct. 0 0 10 10 17Food & HPC (2) 12 11 10 9 Food & HPC 4 6 9 12 14Food Retail 5 14 11 10 6 Food Retail 9 10 10 11 10General Retail 8 8 9 17 2 General Retail 0 6 10 13 9Health Prov & Serv 12 10 14 20 22 Health Prov & Serv 2 17 14 11 13Insurance (10) 7 8 14 12 Insurance 5 3 3 14 13IT Hardware (29) 35 29 20 20 IT Hardware 0 0 0 1 6IT Services (4) (4) 3 23 15 IT Services 0 0 4 18 9Leisure & Hotels 0 1 14 14 11 Leisure & Hotels 0 0 9 9 11Luxury Goods (11) 14 10 9 11 Luxury Goods 2 4 3 12 13Media (2) 1 9 8 10 Media 0 3 8 9 8Mining (51) 74 26 30 55 Mining (9) 0 0 8 24Oil & Gas (45) 14 11 18 16 Oil & Gas 1 2 5 11 14Paper 63 (45) 187 75 (1) Paper 6 (0) 10 (7) (13)Pharmaceuticals 13 14 7 13 21 Pharmaceuticals 10 5 5 10 16Real Estate (6) 1 8 7 NA Real Estate 0 2 4 8 14Software 10 18 14 18 14 Software 0 9 8 24 20Steel (68) 7 48 18 49 Steel (24) 0 0 14 24Support Services 9 13 17 13 16 Support Services 20 0 9 14 17Telecom Operators 8 3 6 11 7 Telecom Operators 5 5 4 13 21Utilities (0) 4 6 10 10 1 Sector median. 2 Based on Exane BNP Paribas universe. 3 Historical average 1996-2008 (or over the longest available period). 4 Excluding Financials, Utilities and Oil & Gas. Some differences compared to previous weeks could be linked to additions or deletions in our covered universe.


26 Strategy calls

Solvency1

Figure 51: Net debt / EBITDA (x) Figure 52: Net debt/Shareholders equity (%) Sector 2009e 2010e Hist.


avg3 Min Max

Market2 1.9 1.6 1.5 1.0 2.0 Market2 54 47 48 37 60Aero & Defence NC NC 0.1 NC 0.6 Aero & Defence NC NC NC NC 11Automotive 9.6 7.0 3.8 1.8 9.6 Automotive 167 163 133 77 167Beverages 3.1 2.4 1.5 0.5 4.3 Beverages 115 83 65 17 154Capital Goods 0.8 0.7 0.8 0.2 2.3 Capital Goods 22 19 22 8 45Chemicals 1.7 1.2 0.9 0.3 1.7 Chemicals 49 37 34 10 60B. Mats & Infrastruct. 3.9 3.5 2.3 1.7 3.9 B. Mats & Infrastruct. 108 100 84 44 130Food & HPC 0.7 0.3 1.0 0.2 1.7 Food & HPC 23 8 42 8 83Food Retail 1.4 1.3 1.7 0.6 2.5 Food Retail 52 44 67 22 101General Retail 0.3 0.1 0.6 NC 1.0 General Retail 13 2 21 NC 36Health Prov & Serv 1.8 1.4 1.6 1.3 2.2 Health Prov & Serv 56 42 58 40 77IT Hardware NC NC NC NC 0.2 IT Hardware NC NC NC NC 8IT Services NC NC NC NC 1.7 IT Services NC NC NC NC 31Leisure & Hotels 1.7 1.7 2.0 1.2 3.7 Leisure & Hotels 50 47 62 43 121Luxury Goods 0.8 0.5 2.0 0.5 3.2 Luxury Goods 18 13 44 13 68Media 1.7 1.4 1.8 1.1 2.8 Media 54 43 60 31 110Mining 0.9 0.7 1.5 0.4 6.0 Mining 24 21 40 21 96Oil & Gas 0.8 0.7 0.9 0.3 3.6 Oil & Gas 29 29 29 18 59Paper 3.5 3.5 2.6 1.8 3.9 Paper 58 60 64 52 72Pharmaceuticals 0.5 0.4 0.1 NC 0.5 Pharmaceuticals 17 14 3 NC 17Software NC NC NC NC 0.1 Software NC NC NC NC 5Steel 2.1 1.5 1.0 NC 2.1 Steel 26 30 34 NC 57Support Services 1.1 1.0 0.9 0.0 1.8 Support Services 47 40 128 1 517Telecom Operators 2.0 1.9 2.0 1.2 3.2 Telecom Operators 88 80 71 30 99Utilities 3.0 3.0 2.3 1.8 3.0 Utilities 75 72 24 0 80

Figure 53: Interest Cover (x) Figure 54: CDS spreads (5-year senior, bp) Sector 2009e 2010e Hist.

avg3 Min Max Sector Last 1 month

ago3 months

ago 01/01/09 01/09/08

Market2 9.8 10.9 14.4 8.7 20.9 Market 86 82 82 183 91Aero & Defence NM 10.9 13.5 1.4 73.8 Aero. & Defence 92 92 75 303 63Automotive 4.8 7.5 18.7 4.8 39.2 Automotive 226 196 230 386 151Beverages 4.7 6.1 9.7 4.6 15.0 Banks 104 92 84 109 91Capital Goods 13.1 19.4 18.1 5.0 37.2 Basic Resources 131 105 162 1112 150Chemicals 8.6 11.4 19.8 8.6 42.8 Capital Goods 58 61 65 209 78B. Mats & Infrastruct. 4.6 5.3 7.9 4.6 10.3 Chemicals 48 50 49 130 46Food & HPC 16.9 35.6 15.2 8.9 35.6 B. Mats & Infrastruct. 135 119 117 744 212Food Retail 7.8 9.1 12.9 6.6 42.0 Food & Beverage 61 67 73 93 57General Retail 26.1 31.5 75.0 20.5 NM Insurance 124 129 128 130 62Health Prov & Serv 8.5 9.0 8.0 5.8 11.7 Luxury Goods 58 65 58 163 61IT Hardware 29.2 29.6 49.2 16.8 84.7 Media 75 80 69 230 100IT Services 12.3 16.8 30.6 8.3 NM Oil & Gas 53 49 48 137 41Leisure & Hotels 6.0 7.9 9.1 6.0 11.3 Pharmaceuticals 43 44 43 121 51Luxury Goods 11.5 16.9 15.0 4.4 31.0 Real Estate 144 126 156 521 158Media 8.0 9.5 9.3 3.1 21.7 Retail 102 97 114 283 135Mining NM 25.1 82.0 2.8 NM Tech 103 104 100 287 144Oil & Gas 88.8 73.2 63.8 2.6 NM Telecom Operators 73 76 73 133 100Paper 4.4 5.7 10.2 4.4 17.0 Travel & Leisure 210 200 188 369 162Pharmaceuticals 15.6 20.2 81.0 15.6 NM Utilities 65 70 54 135 67Software 25.0 NM NM 25.0 NM Steel 3.5 7.4 15.9 3.5 29.5 Support Services 12.3 15.3 19.4 7.1 54.0 Telecom Operators 7.8 8.1 8.4 4.9 12.3 1 Bottom-up aggregates, except for CDS (median). 2 Based on Exane BNP Paribas universe; basket of 100 large caps for CDS spreads. 3 Historical average 1996-2008 (or over the longest available period). NC: Net Cash; NM = not meaningful.

Source: Exane BNP Paribas estimates, Thomson Datastream

27 Strategy calls

European and US sector performances

Figure 55: European sector performances1 (%) 1 week 1 month 3 months 1 year Since 31 Dec. 2009

Automobiles & Components (3.1) (9.3) (11.7) 31.6 (13.3)Banks 0.0 (2.7) (10.5) 92.3 (6.3)Capital Goods 1.1 1.0 2.5 52.6 (0.2)Chemicals (2.0) 1.4 1.5 53.8 (3.8)Commercial Services & Supplies 0.9 0.7 9.4 40.1 1.3Construction Materials (3.1) (8.9) (6.9) 52.3 (13.1)Consumer Durables & Apparel (0.1) 0.9 7.0 87.4 2.2Consumer Services 1.2 3.8 11.8 32.1 4.5Diversified Financials 0.2 (0.9) (7.6) 77.3 (6.3)Energy (0.6) (2.8) 0.1 22.4 (3.5)Food & Staples Retailing (1.9) (1.1) 2.6 24.9 0.5Food Beverage & Tobacco 2.4 3.7 10.6 42.5 4.3Health Care Equipment & Services 2.5 1.6 11.8 34.7 4.5Household & Personal Products 1.4 2.3 6.5 46.4 0.2Insurance (0.1) 0.6 (1.5) 59.6 (2.4)Media (0.4) (2.5) 3.9 21.7 (3.5)Metals & Mining (1.6) (1.9) 3.7 107.6 (4.6)Pharmaceuticals & Biotechnology (0.7) (1.1) 5.4 21.7 (0.1)Real Estate (0.1) (0.9) (5.4) 52.2 (4.5)Retailing (1.9) 1.4 (0.5) 54.4 0.3Semiconductors & Semiconductor Equipt (0.8) 1.5 14.2 85.5 (2.1)Software & Services 1.4 (0.8) 3.9 31.8 1.5Technology Hardware & Equipment 0.1 3.5 7.9 28.4 8.8Telecommunication Services (0.6) (1.4) (2.6) 16.8 (5.1)Transportation (0.5) (4.6) 0.1 46.0 (3.5)Utilities (0.5) (3.3) (0.8) 13.6 (5.8)1 MSCI classification

Source: FactSet

Figure 56: US sector performances1 (%) 1 week 1 month 3 months 1 year Since 31 Dec. 2009

Automobiles & Components 2.7 7.5 18.4 208.5 12.5Banks 2.6 1.0 3.9 93.8 7.1Capital Goods 0.8 2.6 3.6 61.0 3.7Commercial Services & Supplies 0.8 (0.4) (1.5) 27.2 (2.8)Consumer Durables & Apparel 0.2 4.5 6.1 73.5 2.3Consumer Services 0.1 0.8 3.9 38.8 3.1Diversified Financials 1.9 3.3 (3.9) 85.2 (0.7)Energy (1.5) (1.4) (4.5) 24.9 (2.6)Food & Staples Retailing 0.8 2.7 0.1 19.6 2.8Food Beverage & Tobacco 0.4 2.9 (0.1) 29.7 1.1Health Care Equipment & Services 0.1 (0.9) 3.9 30.1 1.3Household & Personal Products 1.6 4.4 0.2 32.7 3.5Insurance 2.2 5.4 4.5 54.8 5.7Materials (0.7) (0.2) (3.3) 58.3 (4.5)Media 1.8 4.5 4.8 69.8 (0.6)Pharmaceuticals & Biotechnology (0.2) (1.1) 0.8 18.8 0.2Real Estate 2.0 4.1 4.9 62.4 (1.5)Retailing 2.5 6.0 3.9 66.0 1.8Semiconductors & Semiconductor Equipment (0.4) 3.7 5.9 66.0 (3.7)Software & Services 0.5 (1.0) (1.6) 52.6 (5.7)Technology Hardware & Equipment (0.3) 0.4 (0.6) 68.8 (3.8)Telecommunication Services (1.1) (1.8) (5.8) 11.7 (9.5)Transportation 3.0 3.3 3.4 56.7 2.0Utilities 0.6 (2.3) (0.8) 11.5 (5.6)1 MSCI classification.

Source: FactSet

28 Strategy calls

Europe: relative sector performances1

Figure 57: Consumer staples Figure 58: Retail

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Food Mfg. Beverages HPC

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Food Retail General Retail

Figure 59: Healthcare Figure 60: Utilities, Telecoms and Concessions

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Pharma & Biotech Healthcare Equip & Serv

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98 99 00 01 02 03 04 05 06 07 08 09 10Utilities Telecommunication Serv.Transp. infrastructures

Figure 61: Financials Figure 62: Basic Resources

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98 99 00 01 02 03 04 05 06 07 08 09 10Banks InsuranceReal Estate Diversified Financials

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1 Versus MSCI Europe. Rebased.


29 Strategy calls

Europe: relative sector performances (contd)1

Figure 63: Industrials Figure 64: Consumer Cyclicals

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Capital Goods Chemicals Constr. mat

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Figure 65: Technology Figure 66: Media

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98 99 00 01 02 03 04 05 06 07 08 09 10Broadcast. & Entert. Media agenciesPublishing

Figure 67: Transport Figure 68: Leisure & Services

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1 Versus MSCI Europe. Rebased.


30 Strategy calls

Sectors Outperform and Neutral Figure 69: Sector weightings and favourite stocks Sector Benchmark

weight Exane

BNPP reco. Date of reco.

change Relative performance Favourite stocks

(%) (%) 1M 3M YTD

Beverages (+) 2.3 4.0 22/07/09 3 6 3 Carlsberg, Heineken, SABMiller

Building Materials & Infrastructure (+) 2.8 5.0 17/09/09 (5) (4) (6)

Ciments Franais, CRH, Eiffage, Saint-Gobain, Vinci

Healthcare Providers & Services (+) 1.0 3.5 01/02/08 2 (1) 2

Fresenius Medical Care, Fresenius SE, Qiagen, Rhoen-Klinikum, Smith & Nephew

Insurance (+) 5.8 8.0 09/10/09 (1) 5 1 Axa, CNP Assurances, Fortis, ING, SCOR

Media (+) 1.7 4.0 27/10/09 3 12 8 Pearson, Publicis, Reed Elsevier, Vivendi, Wolters Kluwer, WPP, Yell

Oil & Gas (+) 9.8 13.5 25/05/07 (1) 0 0 BG Group, BP, Royal Dutch Shell, Technip, Tullow Oil

Pharmaceuticals (+) 10.6 12.0 11/01/06 1 8 6 Merck KGaA, Novartis, Roche, Sanofi-Aventis, Shire, Teva Pharmaceuticals, UCB

Software (+) 0.9 3.0 09/07/09 1 6 6 Autonomy Corp, Dassault Systmes, SAP AG

Steel (+) 1.3 3.0 30/05/08 (1) 10 (1) ArcelorMittal, Thyssenkrupp, Vallourec

Telecom Operators (+) 6.7 10.0 12/02/08 (1) (2) (2) Bouygues, BT Group, Eutelsat, KPN, Portugal Telecom, SES, Tele2, Telefnica, Telenor

Aerospace & Defence (=) 1.0 1.0 01/03/05 4 10 5 BAE Systems, Finmeccanica, Thales

Chemicals (=) 3.0 3.0 07/07/09 1 (0) (2) Akzo Nobel, Lanxess, Rhodia

Food & HPC (=) 6.4 6.0 06/11/03 5 11 8 Beiersdorf, Henkel Pref, Tate & Lyle, Unilever

Food Retail (=) 2.2 2.5 01/09/08 0 3 4 Ahold, Tesco

General Retail (=) 1.3 1.0 22/01/09 3 2 5 Kingfisher

Mining (=) 4.0 3.0 30/05/08 0 4 0 Antofagasta, BHP Billiton, Xstrata

Real Estate (=) 0.9 0.0 18/11/09 1 (2) 1 British Land, Gecina, Icade, PSP, Unibail-Rodamco

Support Services (=) 1.7 1.5 09/01/08 1 12 4 Adecco, Bureau Veritas, SGS


31 Strategy calls

Sector Underperform Figure 70: Sector weightings and favourite stocks Sector Benchmark

weight Exane

BNPP reco. Date of reco.

change Relative performance Favourite stocks

(%) (%) 1M 3M YTD

Automotive (-) 2.0 0.0 03/07/01 (10) (12) (10) Continental, Michelin, Peugeot, Renault, Volvo, VW Pref

Banks (-) 16.7 9.0 25/05/07 (2) (10) (4) Banco Popolare, Barclays, Bca Pop Emilia Romagna, Crdit Agricole, Credit Suisse, Deutsche Bank, Intesa Sanpaolo, Lloyds, Soc Gen, Standard Chartered

Capital Goods (-) 4.2 1.0 08/09/08 4 6 6 Alstom, Legrand, Philips, Rexel, Schneider, Schindler, Smiths Group

IT Hardware (-) 2.0 0.0 04/03/08 4 10 10 ASML, Ericsson, Gemalto, Infineon, Logitech, STM, Wacker Chemie

IT Services (-) 0.2 0.0 21/07/06 (2) 5 6 Atos Origin, Indra

Leisure & Hotels (-) 0.5 0.0 02/06/03 6 14 10 Compass, IHG, Lottomatica, TUI Travel

Luxury Goods (-) 1.2 0.0 22/01/09 2 7 6 Christian Dior, Hugo Boss, Luxottica, LVMH, Swatch

Paper (-) 0.0 0.0 01/10/09 2 (5) 2

Utilities (-) 6.5 3.0 10/02/09 (2) 0 (2) Acciona, CEZ, EDP, EDF, Enel, Iberdrola Renovables, National Grid, RWE, Snam Rete Gas, SSE, Suez Env, Terna, United Utilities, Veolia Env.

Other* 3.3 3.0

* Tobacco, Financial Services, Consumer Goods, Transport.


32 Strategy calls

Stocks

Top 10 movers Figure 71: 10 best earnings revisions over 1 week1 (Exane BNP Paribas estimates)

Figure 72: 10 worst earnings revisions over 1 week1 (Exane BNP Paribas estimates)

Company 2010e EPS revisions over 1 week (%)

Company 2010e EPS revisions over 1 week (%)

Vedanta Resources 29 TF1 (26) Eramet 28 Lafarge (13) Wolseley 20 Merck KGaA (10) TPSA 12 Deutsche Telekom (9) Dassault Systmes 10 Iberdrola Renovables (9) Daimler 7 Akzo Nobel (8) Colruyt 7 UBI Banca (7) Shire Plc 6 Mediobanca (5) Axa 5 Solvay (3) Antofagasta Plc 5 Telekom Austria (3)

Figure 73: 10 best earnings revisions over 1 month2 (consensus estimates)

Figure 74: 10 worst earnings revisions over 1 month2 (consensus estimates)

Company 2010e EPS revisions over 1 month (%)

Company 2010e EPS revisions over 1 month (%)

Renault 83.3 Renewable Energy Corporation (89.9) Stmicroelectronics 57.4 Lufthansa (40.7) Infineon Technologies 38.5 Fiat (38.6) 3i Group 36.7 Tullow Oil (34.8) S E Banken 34.0 Alcatel-Lucent (31.7) ThyssenKrupp 26.1 Thales (Ex Thomson Csf) (31.5) Scania 24.1 EFG Eurobank Ergasias (30.4) Danske Bank 21.4 Rautaruukki (26.4) DnB NOR 20.5 UPM Kymmene (24.4) TF1 20.1 Outokumpu (24.2)

Figure 75: 10 best performances3 (%)

Figure 76: 10 worst performances3 (%) Company 1 month Company Since

July 07 Company 1 month Company Since

July 07

Amplifon 21 Aixtron 458 Ren. Energy Corp (36) Seat Pagine Gialle (93) CSR 19 Tullow Oil 292 SAS (32) RBS (89) Novo Nordisk 16 Autonomy Corp. 240 Metrovacesa (27) Thomson (89) Barclays plc 15 Gemalto 181 Q-Cells (24) Safilo (85) SES SA 15 K+S 164 Sacyr-Vallehermoso (24) Yell (85) ProSiebenSat.1 14 Jeronimo Martins 154 Peugeot (21) SAS (84) Rolls-Royce 13 Vedanta Res. 150 Safilo (21) Ren. Energy Corp (83) Yell 13 Ansaldo STS 130 Fiat (19) Q-Cells (81) ABB Ltd 13 BHP Billiton 130 Altran Technologies (19) Petroplus (76) Zodiac 13 Antofagasta 128 BT Group (18) Metrovacesa (73)

Figure 77: Top 10 lowest P/Book4 (x) Figure 78: Top 10 highest FCF yield4 (%) Company 2009e P/Book Company 2009e FCF Yield

Peugeot 0.37 TUI 42.9 Renault 0.47 Wolseley 35.2 Italcementi 0.48 Continental 34.8 Porsche Group 0.56 Wendel 32.5 Air France-KLM 0.57 Renault 30.3 Heidelberg Cement 0.63 Michelin 22.4 STMicroelectronics 0.66 ThyssenKrupp 21.7 Lufthansa 0.66 ProSiebenSat.1 19.7 Edison 0.68 Peugeot 18.7 TUI 0.70 Randstad Holding 18.5 1 Exane BNP Paribas universe. 2 MSCI Europe universe. 3 Exane BNP Paribas universe. Relative to the DJ Stoxx 600. 4 Exane BNP Paribas universe and estimates. Excluding Financials.

Source: FactSet, Thomson Datastream, Exane BNP Paribas estimates

33 Strategy calls

Key ideas, M&A target list and stocks by investment style

Figure 79: Key ideas Figure 80: M&A target list Company Target price Upside (%) Rel. perf.

since entry Company Target

priceUpside

(%)Company Target

price Upside

(%)

Carlsberg 530DKK +29 +65 Aegis 130p +12 NH Hoteles 5EUR +59Eutelsat .30EUR +21 +14 Aquarius Platinum 4GBP +7 Puma 285EUR +38LVMH 93EUR +18 +31 Autonomy Corp. 18GBP +17 Qiagen 18EUR +14Portugal Telecom 10EUR +23 +2 Bulgari 8EUR +34 Stallergnes 82EUR +40SAP AG 42EUR +28 (6) Dana Petroleum 14GBP +25 Tele2 140SEK +32Smith & Nephew 800p +19 +11 Intercell 34EUR +53 Tesco 495p +17 +15 Ipsos 25EUR +9 Thales 46EUR +59 (17) KPN 15EUR +25 Veolia Environnement 32EUR +32 (3) Lonmin 16GBP (12) WPP 750p +26 +8 LSE 820p +24

Figure 81: Top 10 Value1 (Perf YTD2: -0%) Figure 82: Top 10 Div. Dazzlers1 (Perf YTD2: +1%) Company Rating CAPE 10Y

(x) Earnings

Yield 2010e (%)

CAPE*P/Book (x)

Company Rating DY 2010e (%)

Payout 2010e (%)

Net debt / EBITDA

(x) 2010e

Boliden = 10.5 11.2 12 BP + 6.8 69.7 0.7CEZ + 13.2 10.5 28 Crdit Agricole SA + 5.7 46.3 NSCiments Franais + 7.5 10.9 6 Sainsbury - 4.8 67.4 1.5Eni - 8.3 10.0 10 SES SA + 4.6 63.6 2.9Kazakhmys = 12.1 10.1 18 Statoil - 4.7 48.5 0.4Royal Dutch Shell + 10.8 11.1 13 Tele2 + 6.1 68.9 0.3Sanofi-Aventis + 13.9 12.1 19 TeliaSonera = 5.0 53.6 1.3TOTAL = 10.4 10.1 18 TOTAL = 5.6 55.6 0.6Vodafone Group - 14.1 10.9 11 Vivendi + 7.6 67.5 0.6Xstrata + 14.1 12.1 19 Vodafone Group - 5.9 54.3 2.2

Figure 83: Top 10 Value Creators1 (Perf YTD2: +0%) Figure 84: Top 10 Growth1 (Perf YTD2: +9%) Company Rating (EV/CE)/

(ROCE/ WACC)

ROCE/ WACC

2010

ROCE/WACC LT

average

Company Rating 2010e sales

growth (%)

2010e EBIT

growth (%)

2011e EBIT

growth (%)

AstraZeneca - 0.4 5.4 4.5 Aixtron + 60.7 99.2 29.4BAE Systems + 0.5 3.1 1.3 Autonomy Corporation + 14.7 39.5 13.6Bayer = 0.7 2.2 1.8 Beiersdorf + 4.7 17.7 11.7Belgacom = 0.5 4.2 3.5 Dassault Systmes + 3.3 19.3 15.5Celesio = 0.6 2.0 2.0 EDP Renovaveis SA = 34.1 77.3 31.9Centrica - 0.7 3.6 2.5 Essilor International + 4.6 14.1 14.6Next = 0.8 6.1 5.5 L'Oral - 4.5 11.9 10.1Novartis + 0.7 3.0 2.6 Luxottica + 5.0 20.5 16.6Roche + 0.6 2.8 2.7 Qiagen + 12.0 22.1 18.1Sanofi-Aventis + 0.5 2.6 2.5 Sonova = 9.8 15.5 14.21 Selection based on Exane BNP Paribas investment criteria (for further details, see The Investors Quest for Style, available on our website). 2 Relative to DJStoxx600.


34 Strategy calls

Corporate financial calendar* - The week ahead

1 March 2010

When Bloomberg Company What NL Monday 1 March 2010 ANA SM Acciona Analyst Meeting ES AGS LN Aegis 2009 Preliminary Results GB STS IM Ansaldo STS FY 2010 Results IT AQP LN Aquarius Platinum Ex & Div. Payment (0.02USD) GB AQP LN Aquarius Platinum Ex date (0.02USD) GB CPG LN Compass Group Dividend payment (0.088GBP) GB HSBA LN HSBC Holdings Analyst Meeting GB IPN FP Ipsen FY 2009 Results FR KNEBV FH Kone B AGM FI Post Mkt LUX IM Luxottica FY 2009 Results IT NHH SM NH Hoteles FY 2009 Results ES PSON LN Pearson FY 2009 Results GB PSON LN Pearson FY 2009 Preliminary Results GB =>05/03/2010 STMN SW Straumann Full year investor roadshow CH VIV FP Vivendi FY 2009 Sales and Results FR 08:00 KSP ID Kingspan FY 2009 Preliminary Results IE 09:15 HSBA LN HSBC Holdings FY 2009 Results GB Tuesday 2 March 2010 BP/ LN BP 2010 Strategy presentation GB CRH ID CRH Plc FY 2009 Results IE INF LN Informa FY 2009 Results GB Pre Mkt ICLL AV Intercell FY 2009 Results AT KNEBV FH Kone B Ex date (0.468EUR) FI MGGT LN Meggitt FY 2009 Preliminary Results GB Post Mkt NEO FP Neopost Q4 2010 Sales FR NOVN VX Novartis Ex date (1.365CHF) CH ROG VX Roche AGM CH SGE LN Sage Group AGM GB SPR FP Sperian Protection FY 2009 Results FR Post Mkt RCF FP Teleperformance FY 2009 Results FR UCB BB UCB FY 2009 Sales and Results BE 17:45 EN FP Bouygues FY 2009 Results FR Wednesday 3 March 2010 ADEN VX Adecco R FY 2009 Results CH Pre Mkt ATE FP Alten FY 2009 Results FR ATE FP Alten Analyst Meeting FR DGE LN Diageo plc Ex date (0.146GBP) GB Pre Mkt ERF FP Eurofins Scientific FY 2009 Results FR GFC FP Gecina FY 2009 Results FR LUN DC H Lundbeck FY 2009 Sales and Results DK HMSO LN Hammerson Ex date (0.085GBP) GB HOLN VX Holcim R FY 2009 Results CH Pre Mkt JMT PL Jeronimo Martins FY 2009 Results PT LTO IM Lottomatica FY 2009 Results IT QSC GY QSC FY 2009 Preliminary Results DE SCR FP SCOR FY 2009 Results FR SCR FP SCOR Conference Call FR STAN LN Standard Chartered FY 2009 Results GB DG FP Vinci Q4 2009 Results FR ADS GY adidas FY 2009 Results DE 10:30 ERF FP Eurofins Scientific Analyst Meeting FR 10:30 JMT PL Jeronimo Martins Conference Call PT 11:00 ADEN VX Adecco R Conference Call CH 11:00 EN FP Bouygues Analyst Meeting FR Thursday 4 March 2010 Pre Mkt AH NA Ahold FY 2009 Results NL ABI BB Anheuser-Busch InBev FY 2009 Results BE AKE FP Arkema FY 2009 Results FR BEI GY Beiersdorf AG FY 2009 Results DE BVI FP Bureau Veritas FY 2009 Results FR Pre Mkt CO FP Casino FY 2009 Results FR COB LN Cobham FY 2009 Results GB ERG IM ERG Q4 2009 Results IT ERG IM ERG Conference Call IT Post Mkt EDP PL Energias de Portugal (EDP) FY 2009 Results PT EI FP Essilor International FY 2009 Results FR EI FP Essilor International Analyst Meeting FR FNC IM Finmeccanica FY 2009 Results IT Pre Mkt GSZ FP GDF Suez FY 2009 Results FR GTO FP Gemalto FY 2009 Results & Q4 Sales FR KAZ LN Kazakhmys Trading Update 2009 GB

35 Strategy calls

Thursday 4 March 2010 (contd)

LIN GY Linde FY 2009 Results DE PTC PL Portugal Telecom FY 2009 Results PT WTB LN Whitbread Trading Update GB 08:30 GSZ FP GDF Suez Analyst Meeting FR 10:00 CO FP Casino Analyst Meeting FR 13:00 AGL IM Autogrill FY 2009 Sales and Results IT 17:45 CEI FP Areva CI FY 2009 Results FR Friday 5 March 2010 ATL IM Atlantia FY 2009 Results IT FUR NA Fugro FY 2009 Results NL IT IM Italcementi FY 2009 Results IT MPI LN Michael Page FY 2009 Results GB NOVN VX Novartis Dividend payment (1.365CHF) CH SGE LN Sage Group Dividend payment (0.0493GBP) GB SZG GY Salzgitter AG FY 2009 Results DE Pre Mkt UBM LN United Business Media FY 2009 Results GB Pre Mkt VNOI NA VastNed O I FY 2009 Results NL Pre Mkt VASTN NA VastNed Retail FY 2009 Results NL VIE FP Veolia Environnement Q4 2009 Results FR WPP LN WPP FY 2009 Results GB 08:30 UBM LN United Business Media Conference Call GB

36 Strategy calls

Strategy: recent reports*

2010

23 February 2010 The Investor's Quest for Style Low P/CFs as a Value play

18 February 2010 Strategy Calls Yield appeal

12 February 2010 Flash January: Price momentum vs sector earnings revisions

11 February 2010 Strategy Calls The UK might me next

9 February 2010 Flash December: European equity funds continued to benefit from net inflows

5 February 2010 Focus Europe: economic and market impact of the sovereign debt crisis

4 February 2010 Strategy Calls Sovereign debt, growth and inflation

28 January 2010 Strategy Calls Recovery potential

21 January 2010 Strategy Calls Sovereign debt issues and Q4 earnings

14 January 2010 Strategy Calls Q4 earnings outlook

13 January 2010 Flash December: Price momentum vs sector earnings revisions

8 January 2010 Flash November: Third consecutive month of net outflows from US equity funds

7 January 2010 Strategy Calls Consensus expectations for 2010

2009

17 December 2009 Strategy Calls Low growth world...here we come, and key market drivers

8 December 2009 Flash November: Price momentum vs sector earnings revisions

3 December 2009 Strategy Calls Key market drivers

3 December 2009 Flash October: Outflows from US equity funds continued

26 November 2009 Strategy Calls Key market drivers

25 November 2009 Report: Market Outlook 2010 More ups than downs

18 November 2009 Flash: Real Estate upgraded to Neutral

12 November 2009 Strategy Calls Key market drivers

10 November 2009 Flash October: Price momentum vs sector earnings revisions

06 November 2009 Flash September: resumption of net outflows from US equity funds

05 November 2009 Strategy Calls Making sense of the sell-off and key market drivers

29 October 2009 Strategy Calls Key market drivers

27 October 2009 Report Media sector upgraded to Outperform

22 October 2009 Strategy Calls Q3 and beyond and key market drivers


9 October 2009 Flash September: Price momentum vs sector earnings revisions

8 October 2009 Strategy Calls Q3 earnings outlook and key market drivers

5 October 2009 Flash August: New record high for US bond fund inflows


24 September 2009 Strategy Calls Keep on flowing and key market drivers

23 September 2009 The Investor's Quest for Style - In search of yield

17 September 2009 Strategy Calls Strategy Calls: Dollar weakness and key market drivers

17 September 2009 Report Cyclicals - phase II; Construction upgraded to Outperform

11 September 2009 Flash August: Price momentum vs sector earnings revisions

10 September 2009 Strategy Calls Don't buy Utilities and key market drivers

10 September 2009 Flash July: Return of net inflows to bonds reach new highs

* Reports are available on our website www.exane.com/strategy

37 Strategy calls

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Planning Ahead for Chinese RevaluationKey IndicatorsMarketSectorsStocksCorporate financial calendar* - The week aheadStrategy: recent reports*

Documents

Chinese Yuan Revaluation_02-26-10_Strategy.pdf