This document has been produced purely for the purpose of information and does not therefore constitute an offer or a recommendation to invest or to purchase or sell shares, nor is it a contractual document. The opinions expressed reflect our judgement on the date on which it was written and are therefore liable to be altered at any time without notice. We refuse to accept any liability in the event of any direct or indirect losses, caused by using the information supplied in this document.

Every month SYZ Asset Management publishes “1 month in 10 snapshots” a review of global economic activity. Since an image can be more telling than words, every month we select 10 charts illustrating the key data that has marked economic and financial activity over the month, decoding their meaning with a brief explanation.

A publication of the Research & Analysis team – SYZ Asset Management - Tel. +41 (0)58 799 10 00 - info@syzgroup.com Author: Adrien Pichoud

This document is based on graphics the data of which were collected during January 2013.

Index

1. United States – Domestic demand takes over

2. United States – Mortgage rates at a low

3. United States – A deceptive decrease in GDP

4. Euro zone – Household sentiment has also hit a low

5. Germany – 2013, recovery in sight

6. Japan – The Bank of Japan “cautiously aggressive”

7. Japan – Repercussions of the slide in the yen

8. China – After the “soft landing”, the “soft recovery”

9. Foreign-exchange – Pressure eases on the Swiss franc

10. Bonds – The euro zone’s 10-year rate at an all-time low

1. United States – Domestic demand takes over • The US economy has finally avoided the

famous “fiscal cliff”. Thanks to a last-minute agreement on the “tax” issues and the “spending cuts” issues, the much-feared sudden tightening of budgetary policy has given way to a more moderate tightening, which puts the public deficit on the reduction track but without breaking a still-fragile growth dynamic.

• Thus the favourable trend that appeared in summer 2012 seems set to last: the trend towards firmer domestic demand and in particular private consumption, which is gradually taking over from investment and exports as the engine of growth.

• The drop in the unemployment rate since the summer, real-estate prices that are at last rising, historically advantageous financing terms and the clear-cut fall in gasoline prices have supported consumption and the services sector. Conversely, activity in industry, which is more dependent on exports and investment, has marked time. This transition is important to ensure sustainable growth of the economy, which in 2012 may have emerged from a long phase of “recovery” begun at the end of 2009.

ACTIVITY INDICES IN SERVICES AND INDUSTRY

00 01 02 03 04 05 06 07 08 09 10 11 12

35

40

45

50

55

60

65

US ISM NON MANUFACTURINGUS ISM MANUFACTURING

Source: Thomson Reuters Datastream

February 2013

This document has been produced purely for the purpose of information and does not therefore constitute an offer or a recommendation to invest or to purchase or sell shares, nor is it a contractual document. The opinions expressed reflect our judgement on the date on which it was written and are therefore liable to be altered at any time without notice. We refuse to accept any liability in the event of any direct or indirect losses, caused by using the information supplied in this document.

February 2013

2. United States – Mortgage rates at a low

• The major operation to reflate the US economy undertaken by the Fed after the bursting of the real-estate bubble at last appears to be bearing fruit. Three successive quantitative easing operations (part of the last of which directly concerns securities that finance mortgages) have pushed mortgage rates down to all-time lows (around 3.5% for a 30-year loan).

• The first consequence of this interest-rate slide is that refinancings of mortgages have increased, allowing households to reduce their financial burdens. This trend accelerated in 2012 with the return of rising house prices.

• The mix of “a fall in unemployment/low interest rates/rising prices” is even causing an embryonic recovery of applications for loans to buy a house. Five years after the bubble burst, the real-estate market at last appears to be gradually returning to life.

MORTGAGE APPLICATIONS (REFINANCINGS AND PURCHASES) AND AVERAGE 30 YEAR RATE (INVERTED)

00 01 02 03 04 05 06 07 08 09 10 11 12

0

100

200

300

400

500

600

700

800

900 3

4

5

6

7

8

9

US WEEKLY MORTGAGE APPLICATIONS - REFINANCING (52 WEEKS AVERAGE)US WEEKLY MORTGAGE APPLICATIONS - PURCHASES (52 WEEKS AVERAGE)US FREDDIE MAC 30 YEAR FIXED RATE(R.H.SCALE) Source: Thomson Reuters Datastream

3. United States – A deceptive decrease in GDP

• The first estimation of US GDP growth for the 4th quarter of 2012 looks like a very unpleasant surprise: for the first time since spring 2009, the US economy posted a negative growth rate (-0.1%).

• Yet the growth dynamic was much better than the figure may lead us to believe: household consumption firmed up (+2.2% in 4Q12), residential construction again accelerated (+15.3%) and corporate investment re-bounded (+8.4%) following the summer soft patch. Thus in actual fact private domestic demand clearly accelerated in the 4th quarter!

• It is in fact a substantial inventory reduction trend among companies (which will be favourable for production in early 2013) and the drop in public spending in the defence sector that are to blame for this decrease in GDP, with a combined impact of -2.6%.

QUARTERLY CHANGE IN GDP AND PRIVATE DEMAND

2009 2010 2011 2012

-8

-6

-4

-2

0

2

4

6

US - REAL GDP QoQ %US - FINAL PRIVATE CONSUMPTION & INVESTMENT QoQ %

Source: Thomson Reuters Datastream

4. Euro zone – Household sentiment has also hit a low • Since last summer, market sentiment and

more generally corporate sentiment have improved in the euro zone.

• But households, which are not very sensitive to the measures taken in response to the financial aspect of the crisis, have seen their situation continue to deteriorate. The consumer confidence index has thus fallen again, to reach in November its lowest level since May 2009.

• However, the same index has since rebounded, suggesting that even on the households’ front, sentiment may have bottomed out. However, we are still far from being able to expect an imminent recovery of consumption! The widespread tightening of fiscal policies and record unemployment rates will continue to weigh on spending.

• But after the appearance of a similar trend among companies, it appears that the situation has also stopped deteriorating on the households’ front.

CONSUMER CONFIDENCE, RETAIL SALES AND GDP

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

-35

-30

-25

-20

-15

-10

-5

0

5

-6

-4

-2

0

2

4

6

RETAIL SALES - 3MMA YoY %(R.H.SCALE)EURO AREA - GDP YoY %(R.H.SCALE)EURO AREA - CONSUMER CONFIDENCE Source: Thomson Reuters Datastream

This document has been produced purely for the purpose of information and does not therefore constitute an offer or a recommendation to invest or to purchase or sell shares, nor is it a contractual document. The opinions expressed reflect our judgement on the date on which it was written and are therefore liable to be altered at any time without notice. We refuse to accept any liability in the event of any direct or indirect losses, caused by using the information supplied in this document.

February 2013

5. Germany – 2013, recovery in sight

• According to the IMF, German GDP growth in 2013 is unlikely to exceed that of 2012: +0.9% in both cases. However, the dynamic appears to be more encouraging for this new year than it was last year.

• In 2012, the exacerbation of the euro-zone crisis and the slowdown of growth in the emerging world had weighed heavily on German industry, which is highly dependent on its exports. This weakness had ended up spreading to the sectors more geared to domestic demand, even causing a (slight) rise in unemployment. Thus the quarterly growth rate had constantly declined in 2012.

• However, the clear-cut recovery of the activity indices, particularly in services, and the rise in business expectations again observed in January appear to signal that the trend has been reversed for 2013.

ACTIVITY INDICES IN INDUSTRY AND SERVICES AND COMPANY HEADS’ BUSINESS EXPECTATIONS

30

35

40

45

50

55

60

65

2005 2006 2007 2008 2009 2010 2011 2012 201360

70

80

90

100

110

120

PMI manufacturing PMI servicesIFO business expectations So urce: SYZ A M , B lo o mberg

6. Japan – The Bank of Japan “cautiously aggressive” • For its first meeting of 2013 the Bank of Japan

has announced some substantial measures, even though some of them are less aggressive than what may have been expected.

• The aim is now clearly to move out of the deflation in which the economy has been bogged down for almost 20 years. To do so, the BoJ has set an inflation target of 2% and intends to ease its monetary policy until this target is achieved.

• In addition to holding interest rates at close to 0% (which has been the case since 1995), the BoJ will proceed to make massive liquidity injections (Quantitative Easing): JPY 13 trillion per month (≈USD 140 bn), which, over one year, is equivalent to 30% of Japan’s GDP! But all this will not begin before January 2014… Until then it is the current programme of JPY 3 trillion per month that will be maintained. An already-substantial easing (comparable to what the Fed is currently doing) but until now insufficient to take the Archipelago out of deflation.

BOJ BALANCE SHEET (% OF GDP) AND ANNUAL INFLATION RATE

18%

20%

22%

24%

26%

28%

30%

32%

34%

36%

2005 2007 2009 2011 2013-0.6%

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

BoJ balance sheet (% of GDP)Inflation rate (YoY %) So urce: SYZ A M , B lo o mberg, Datastream

7. Japan – Repercussions of the slide in the yen

• Since the March 2011 earthquake, Japan’s trade balance has swung into deficit. The blame can be placed on the increase in energy imports when exports were decreasing owing to the decline in global growth, the Archipelago’s loss of competitiveness and the tensions with China.

• However, the recent slide in the yen will not necessarily be beneficial for the trend in the foreign trade balance: while it should favour a recovery of exports, it will also lead to an increase in the value of imports. The famous J-shaped curve…

• We should therefore probably not expect an imminent return to a trade surplus in Japan. On the other hand, increasing activity in industry and more expensive imports head in the direction of the Bank of Japan’s objective – an exit from deflation…

TRADE BALANCE, EXPORTS AND IMPORTS

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

000'S

-10

-5

0

5

10

15

-50

-40

-20

0

20

40

60

75

JAP Trade Balance (sum 12 m, bn yen)JAP Exports (3m MAV YoY %)(R.H.SCALE)JAP Imports (3m MAV YoY %)(R.H.SCALE) Source: Thomson Reuters Datastream

This document has been produced purely for the purpose of information and does not therefore constitute an offer or a recommendation to invest or to purchase or sell shares, nor is it a contractual document. The opinions expressed reflect our judgement on the date on which it was written and are therefore liable to be altered at any time without notice. We refuse to accept any liability in the event of any direct or indirect losses, caused by using the information supplied in this document.

February 2013

8. China – After the “soft landing”, the “soft recovery”

• The fear of a marked slowdown in the Chinese economy had haunted investors in 2012. However, most of the activity indices stabilized during the autumn, giving substance to the soft landing for growth at a less brisk, but supposedly sustainable, pace.

• The rebound of annual GDP growth to 7.8% in the 4th quarter (following 7.4% the previous quarter) merely confirms the apparent end of the virtually uninterrupted slowdown observed since 2010.

• But that does not mean we should expect a marked rebound of activity. A stabilization of GDP growth at around 8% appears to be the best that can be expected in China, provided that exports continue to increase. And although the trend today is less worrying, the risks connected with the necessary rebalancing towards domestic consumption have still not disappeared…

ANNUAL CHANGE IN GDP AND EXPORTS

00 01 02 03 04 05 06 07 08 09 10 11 12

6

7

8

9

10

11

12

13

14

15

-30

-20

0

20

40

60

80

100

CHINA - GDP (YoY %)CHINA - EXPORTS (YoY % 3M MAV)(R.H.SCALE)

Source: Thomson Reuters Datastream

9. Foreign-exchange – Pressure eases on the Swiss franc • And what if the Swiss National Bank were a

few moves ahead in the “currencies war” that the central banks of the developed economies appear to be waging on each other?

• By accumulating substantial foreign-exchange reserves in defending the 1.20 threshold for the Swiss franc against the euro, the Swiss National Bank has inflated its balance sheet so much that it exceeds 80% of Switzerland's national GDP. Which is a much faster rate of liquidity creation than any other central bank in the world!

• Today, the upward pressure on the franc has diminished with the decline in tensions in the euro zone, which has enabled the SNB to stop intervening in the foreign-exchange market. The scale of the liquidity created since summer 2011 now gives rise to the threat of a downward correction of the Swiss currency, against both the euro and the dollar.

DOLLAR AGAINST SWISS FRANC: RELATIVE CHANGE IN THE BALANCE SHEETS OF THE SNB AND THE FED

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2000 2002 2004 2006 2008 2010 20122

2.5

3

3.5

4

4.5

5

USD/CHF SNB/FED So urce: SYZ A M , B lo o mberg, Datastream

10. Bonds – The euro zone’s 10-year rate at an all-time low • In spring 2012 the interest-rate on the 10-

year German government bond had reached an all-time low. But it was a reaction to rising interest rates in the peripheral European countries, against a backdrop of fears that the monetary union might break up.

• Since then, German interest rates, despite some signs of tension since the beginning of the year, have remained extremely low while a spectacular easing movement was taking place on Spanish and Italian interest rates.

• As a consequence, the average government bond interest-rate in the euro zone - in other words the governments’ average financing rate (weighted by the size of the economies) – fell at the turn of 2012 and 2013 to its lowest level since the monetary union was created, below 3%. An illustration of the mix between “recession/lack of inflation/the ECB’s very accommodative monetary policy” even if this rate still remains higher than inflation, unlike in the United States.

AVERAGE 10-YEAR GOVERNMENT BOND RATE (WEIGHTED BY GDP) OF THE EURO ZONE AND THE GERMAN BUND

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

2000 2002 2004 2006 2008 2010 2012

EMU 10y rate GER 10y rate So urce: SYZ A M , B lo o mberg, IM F