The "Henley Market Outlook" gives our current assessment of the six Henley asset classes.

1. Henley Market Outlook
MAY 2013
Hong Kong | Singapore | Shanghai
THE WEALTH MANAGEMENT PROFESSIONALS
The emperor has no clothes

2. The Henley Outlook May 2013
Hong Kong, Singapore & Shanghai
Equities
Global Overview .............................................................................................................................................. 3
Cash & Currencies .............................................................................................................................................. 5
Fixed Income ...............................................................................................................................................6
Property .............................................................................................................................................. 7
Equities US ...................................................................................................................................... 8
Japan ................................................................................................................................. 8
UK ........................................................................................................................................9
Europe Ex UK .................................................................................................................. 9
Australia ........................................................................................................................ 10
ASEAN ........................................................................................................................... 10
Greater China................................................................................................................ 11
India .............................................................................................................................. 11
Other Emerging Markets ......................................................................................... 12
Commodities Energy...............................................................................................................................13
Precious Metals.............................................................................................................13
Industrial Metals.......................................................................................................... 13
Agriculture.............................................................................................................. 14
Alternative Investments .............................................................................................................................................15
2
Content
The Investment Committee
Peter Wynn Williams
Investment Director
& Partner
Andrew Kelly
Partner
David Reynolds
Partner
George Rippon
Partner
Simon Liu
Head of Investment
Research
Paul Brady
Partner
Chris Skinner
Partner
The Henley Investment Committee combines more than 110 years’ experience and
is unique in being backed by a full-time team of five investment professionals to
optimise asset allocation and manager selection.

3. Equities
3
The Emperor Has No Clothes!
There has been no end of conjecture
about the cause of April’s correction
for the precious metals. It was
China’s disappointing GDP figures,
or it was the Federal Reserve talking
about easing off the QE gas pedal,
or it was sales of European monetary
gold flooding the market, or it was
something else.
However,thefactisthatthecorrection
was started by someone dumping one
hundred tonnes of gold into the thinly-traded pre-market on that fateful Friday morning. Who
it was we will probably never know, but we can infer that they cared little about the price they
achieved, otherwise they would have sold when the market was at its most liquid, not least liquid.
A further nine hundred tonnes followed during the day, equivalent in total to about forty percent
of global annual mine production. Quite a day – and the following Monday was just as torrid, if
not more so.
It is thought by some that the blue touch paper which ignited the crisis was the proposed Cypriot
bailout and bank re-structurings. It is said that deposit confiscation in particular prompted
renewed concerns about counterparty risks across the system, which in turn prompted large
amounts of cash and paper gold to be converted into physical. Since the paper (or “unallocated”)
gold is said to be leveraged 100:1 or more, the stockpiles in the warehouses ran down significantly.
Reliable and well-placed sources claim that by the Friday, the London Bullion Market Association
was in imminent danger of default and that, to prevent us from seeing that the emperor has no
clothes, the price was deliberately smashed down to allow the banks to re-stock their warehouses
without pushing prices (and losses on shorts) upwards.
Perhaps we will never know what really happened, whodunnit and why. But a funny thing
happened. Instead of intimidating outsiders to stay out of gold and holders to sell it, the smash
sparked even higher demand for physical than the already elevated levels of demand before
it. Perhaps the most important result of the smash has been the growing awareness of what
a corrupt and manipulated farce the COMEX and its regulators have become. Part of that
growing awareness has come from a new documentary broadcast by the Canadian Broadcasting
Corporation, one of the first mainstream media outlets to discuss gold and silver manipulation,
and even to name names.
Global Overview
Peter Wynn Williams
Investment Director
pww@thehenleygroup.com.hk
Source: BullMarketThinking.com

4. Equities
The Henley Outlook May 2013
Hong Kong, Singapore & Shanghai
4
Global Overview
Peter Wynn Williams
Investment Director
“The budget should be
balanced, the Treasury should
be refilled, public debt should
be reduced, the arrogance
of officialdom should be
tempered and controlled,
and the assistance to foreign
lands should be curtailed, lest
Rome will become bankrupt.
People must again learn to
work instead of living on public
assistance.”
Marcus Tullius Cicero, 106 BC – 43 BC,
Roman politician, lawyer, orator and
philosopher.
The physical and paper markets have become bifurcated. If this continues, there is hope that the
physical market will assert itself and start setting prices (as the law requires), and that the paper
shorts will finally capitulate as a result of growing physical shortages.
Hope is one thing. What we can be sure of going forward is more volatility. Please be prepared.
Long-term precious metals’ investors are used to it. In 2011, we endured two corrections in silver
of more than thirty percent each in less than six months. It never feels good; but, if you sold, what
would you buy? Answers on a postcard, please!
Lastly, talk of the European sovereigns selling their gold strikes me as most unlikely. First of all,
they probably have very little gold available for sale. Germany proved that for us earlier this
year when they announced it would take them seven years to repatriate three hundred and fifty
tonnes from the vaults of the Federal Reserve in New York. No doubt it has all been lent, leased
or swapped long ago. Far more likely is an official upward re-valuation of gold to re-liquefy both
the bullion banks and the troubled sovereigns. As I have written in these pages before, it is what
the Americans did the last time they were in a similar position, in January 1934. Those who did
not own gold would be hurt, but it could get governments and banks off the debt hook. It must
be very tempting!

5. Equities
5
HENLEY ASSESSMENT
Strongly Negative
Mostly negative GBP, followed by
JPY. USD and EUR to still fare poorly
over medium-to-long term against a
trade-weighted basket of currencies
given that these currencies are
debasing and devaluing through
significant quantitative easing (QE).
We still favour SGD as a safe haven,
and commodity currencies for yield.
Summary
■■ The JPY is just below 100 to the USD. This is a significant psychological threshold and its
resistance to being breached has been severely tested in the last month. Widely expect this
level to break and the JPY to weaken further through Abenomics. Over the next couple of
years there is a great expectation of moves as high as 140.
■■ After a poor March for GBP, the limelight was taken off it by the events in Greece, again
showing the flaws in the EUR. Economic indicators all over Europe look weak and the prospect
of a rate cut grows with the ever more painful austerity measures taking hold.
■■ AUD remains rangebound with the USD.
■■ EUR has pulled back from its strength against the USD post the Cyprus debacle.
■■ SGD remains steadily strong ahead of the MAS meeting. Expectations are that the current
gradual appreciation policy will continue as it is.
Cash & Currencies
Source: www.fxstreet.com

6. Equities
The Henley Outlook May 2013
Hong Kong, Singapore & Shanghai
6
Points of General Interest
■■ PIMCO, the world’s biggest bond fund, is cutting its exposure to Spanish and Italian debt
highlighting that despite the protestations of the likes of Lagarde and the IMF that Europe is
recovering, there are still significant risks within the euro zone. PIMCO highlighted that they
believe the current easing in pressure for these nations to borrow from international markets is
as a result of liquidity from central banks that has overshadowed the economic fundamentals
of these countries. Fundamental risks still remain given that the ECB has not been tested as
the lender of last resort and that European politicians have made little progress in working
towards a fiscal and monetary union.
■■ A significant public statement from PIMCO – and one that is supported by the below graph
– is that the reduction in borrowing costs for Italy and Spain is not mirrored by improved
economic data and is simply a product of central bank liquidity. The most logical question
that then needs to be asked is: when the liquidity dries up, what will be left to support these
nations and what will then be the knock-on effect on their ability to borrow? In this writer’s
mind at least, it will be very negative.
Government Bonds
■■ Australia, in a significant move to tighten its ties to its biggest trading partner, China,
committed to buy almost USD2bn of government debt. The Australian government now has
5% of its reserves invested in Chinese debt.
Corporate Bonds
■■ Corporate debt had a good month in April with investors looking for apparent yield over the
potential appreciation and volatility of the stock market with corporate debt ETFs reporting
significant inflows.
Offshore Bank Accounts- Best Buys GBP
■■ No Notice Account- Britannia International – 1.50%pa
■■ 60 day Notice- Britannia International- 1.75%pa
We have seen a drop in rates offered by banks in the offshore market this month, which suggests
there is no threat to an increase in interest rates in the near future from the Bank of England.
Britannia continues to offer the best rates.
Fixed Income
Source: The Wall Street Journal
HENLEY ASSESSMENT
Negative
While there may be some short-
term relief in fixed income from the
volatility seen in equity markets
and also a comparative positive
return when compared to holding
straight cash in the short term,
we are of the opinion that such
short-term relief has the potential
to come at a costly price in the
medium-to-long term. With the
developed economies committed
to the path of continued monetary
easing, we believe that inflation
will become a serious concern in the
future. Such an environment would
see the relatively low yields enjoyed
by fixed interest overrun by the cost
of goods. As we are in the business
of managing our clients’ wealth, for
the medium-to-long term we are
still bearish on the opportunity cost
versus inflationary concerns of this
asset class.
However with a more short-term
view there may be an argument
to seek safety in specific emerging
market bonds, but we see serious
danger in accepting the debt of the
developed economies, both on a
sovereign default front (especially
within Europe) and on a return vs
inflation front.

7. Equities
7
Positives
■■ US residential property prices jumped 8.1% in January YOY, the biggest one month move
since June 2006, according to the S&P/Case-Shiller index of property values in 20 cities. In
2013 ground is expected to be broken on 613,000 single-family homes to meet rising demand,
the most in four years, compared to around 500,000 per annum having been built in the past
four years. The chart below demonstrates the “affordability” of US housing. Affordability is a
function of 1. home prices, 2. mortgage rates and 3. income (with 1. and 2. obviously having
fallen steeply over the past five or so years).
■■ Rightmove Plc has reported London home sellers raising their asking prices by 1.9% in March
MOM. One cause of this may be a result of sterling falling around 5% against a basket of
international currencies since the start of 2013, which is likely to attract further foreign buyers.
Gains in London during March were led by a 6.2% surge in Kensington and Chelsea, the city’s
most expensive district, to a GBP2.3m average. Part of this increase was thought to be due to
falling supply, with 12% fewer properties for sale as compared with March 2012.
■■ In response to tighter lending rules imposed by the Hong Kong Monetary Authority, lenders
are raising their home loan mortgages rates by 25 basis points. Hong Kong’s currency peg to
the USD has kept interest rates in the city at near record lows for many years, underpinning a
more than 110% gain in home prices since the start of 2009. With all the rising property price
cooling measures introduced recently, Midland Holding (the city’s biggest publicly traded
estate agency) has suggested that transactions may fall and property prices drop as much
as 10% in 2013.
■■ Property analysts in Kuala Lumpur are optimistic that Malaysia will be the new hot spot for
Asian foreign property investors, as they seek to avoid the high costs associated with property
purchases in Singapore and Hong Kong.
Negatives
■■ Property researcher Hometrack Ltd has reported that house prices in England and Wales rose
0.3% in March MOM, the most in three years. However, this was mainly led by a surge in
London property prices, as demand outstripped supply. The UK government announced two
programmes in the March budget to assist Britons in buying homes, as the recovery in the
broader property market struggles to gain traction. Firstly, the government pledged GBP3.5bn
to help Britons purchase newly built property. Secondly, there is also a plan to guarantee
GBP130bn of new mortgages to help reduce the deposit needed to purchase existing and
newly-built homes. The program begins in 2014 and will run for three years.
■■ Many European housing markets continue to be very depressed with price falls in 2012
accelerating in Greece, Spain, Netherlands, Portugal, Slovenia and Croatia. The steepest falls
occurred in Greece and Spain, which in 2012 were 14.22% and 12.73% lower respectively.
Property
HENLEY ASSESSMENT
Neutral
Property prices generally, after
significant falls in 2009, stabilised
in 2010 and 2011. Property prices
in many areas have weakened in
2012 and 2013 YTD, as economic
conditions remain difficult.
Property values have, however,
recovered in selected areas such
as Singapore, Hong Kong and
London. Additionally we are seeing
early signs of a recovery in the US
housing market. We still consider
some specialised property assets,
such as student accommodation,
to merit inclusion in our portfolios.
Other than these investments, we
would suggest that clients do not
invest further at this time.
Source: Bloomberg

8. Equities
The Henley Outlook May 2013
Hong Kong, Singapore & Shanghai
8
Positives
■■ The stock market has responded well to new measures which try to lift Asia’s second largest
economy out of deflation. Nikkei 225 Stock Average gained 20% in the first quarter of 2013
(left graph above).
■■ JPY extended its weakening trend to near JPY100 per USD after Kuroda announced bold
policies that include purchase of longer maturity Japanese government bonds (JGB) in early
April. JPY fell to its lowest level in three years vs USD (right graph above). Some investors
interpret the announcement as BoJ funding the government by printing more JPY.
Negatives
■■ JGB trading has shown unusual volatility as a result of uncertainty over monetary stimulus in
early April. Dealing in JGB futures was halted after the sell-off in JGB contracts, causing prices
to plunge and pushing yields higher by 8bps to 60bps.
■■ Japan remained in technical recession through Q4, with GDP falling 0.1% QOQ and 0.4%
annualised.
EQUITIES
UNITED STATES
JAPAN
HENLEY ASSESSMENT
Negative
Chances of Congress and the
White House addressing the
long-term solvency issues of the
US government in a meaningful
manner remain nil. The changes
required to balance the system are
too politically painful, so a currency
crisis within the next couple of years
seems the most likely outcome –
especially if there is a black-swan
event, such as an assassination,
a COMEX default or a bomb on
Iran, for example. Meanwhile the
economy continues to bottom
bounce, fundamentals continue to
deteriorate, and markets continue
not to care, buoyed by a rising tide
of confetti (and nothing else).
Positives
■■ QE to infinity will inflate asset prices for the time being.
■■ The US Federal Reserve has forecast rates will remain unchanged until at least 2015.
■■ In the long-term, demographics and returned energy self-sufficiency bode well.
Negatives
■■ National debt: USD16.8tn and rising; debt to GDP: 107% and rising. This is absurdly
unsustainable.
■■ QE to infinity promises currency debasement, rising prices and lower discretionary spending.
■■ Data continues to disappoint almost across the board.
■■ Debt ceiling “temporarily suspended” plus QE to infinity may result in a currency crisis in a
couple of years.
HENLEY ASSESSMENT
Neutral
With a new prime minister as well as
a new governor at the central bank,
the markets expect more stimulus
measures together with aggressive
monetary policy to further weaken
the JPY. The new president of BoJ,
Hiroki Kuroda, has long been critical
of the central bank for not buying
more assets to revive the economy.
Consumer confidence reached its
highest level since the end of 2007.
The economic outlook index has also
returned to its peak of early 2006.
While Japan may begin to recover on
the back of a weaker JPY, this would
hurt other exporting countries in Asia
and rest of the world.
Source: IHS Global Insight and Wells Fargo Securities, LLC

9. Equities
9
UNITED KINGDOM
EUROPE EX UNITED KINGDOM
EQUITIES
HENLEY ASSESSMENT
Negative
George Osborne’s month went from
bad to worse last week when a second
credit rating agency stripped the UK
of its prized AAA credit rating. The
action by the Fitch rating agency
following hot on the heels from the
downgrade by Moody’s in February,
leaving Chancellor George Osborne
again defending the government’s
austerity plan. Fitch said its
downgrade primarily reflected a
weaker economic and fiscal outlook.
And it ends a disastrous period for
George Osborne’s economic policy
after the IMF downgraded its UK
economic forecasts again and
warned Britain it needs a plan B for
jobs and growth. In its twice-yearly
World Economic Outlook published
on Wednesday, the IMF slashed its
forecast for growth to 0.7% in 2013
after saying in January that the
country’s economy could expect
1% growth.
Positives
■■ The Conservative government is currently sticking with its plans to help support the housing
market and help first-time buyers into this market. Capital spending is being made available
to support shared equity loans of 20% of the value of the new homes, with the buyer only
needing to raise a 5% deposit. A major issue people have had to date is the fact that many
banks are now demanding a 30% deposit which is out of reach for many people and as such,
has had a dragging effect on the sector.
Negatives
■■ The redistribution of the UK economy is happening much more slowly than envisaged,
especially to the faster-growing emerging markets. Not enough British companies are tapping
into this market; Brazil, Russia, India and China accounted for just 7% of total UK exports,
compared with 54% for the EU, according to the business lobby group, the Confederation of
British Industry. As an example, Belgium currently exports dramatically more to India than
the UK, despite the obvious cultural ties between the two nations.
HENLEY ASSESSMENT
Strongly negative
Germany dealt a blow to plans for a
banking union at an informal meeting
of European finance ministers last
week,sayingtheproject wouldrequire
changes to the European Union
treaty. ECB’s very accommodative
monetary policy was only partly
passed on to the financing conditions
faced by firms and households in
some euro area countries. Small- and
medium-sized enterprises (SMEs), the
backbone of the euro zone economy,
are particularly hard hit by this
development and the ECB is studying
options to address the issue.
Positives
■■ ECB President Mario Draghi said the bank stands ready to cut interest rates if the economy
deteriorates further. The ECB is looking at a range of measures including lower rates, more
long-term loans to banks and a program to encourage lending to small- and medium-sized
companies.
Negatives
■■ The IMF has stated that as much as 20% of non-bank corporate debt in the weakest euro-
area economies is unsustainable and may force companies to cut dividends and sell assets.
Businesses in Italy, Spain and Portugal have the largest debt overhang. Firms in the euro-area
periphery have built a sizable debt overhang during the credit boom, on the back of high profit
expectations and easy credit conditions.
■■ ECB/EU/IMF troika revised upwards the size of Cyprus’s “debt sustainability” package by 35%
from EUR17bn to EUR23bn (120% of Cypriot GDP) after a bigger-than-expected hole was
found in Cypriot banks. Cyprus will have to find this money itself without help from the troika,
including the sale of 10 of its 14 tonnes of gold reserves (cEUR400m).
■■ Germany’s economy slowed to “near stagnation” last month, while France’s economy
recorded its biggest contraction for four years. The Markit composite purchasing managers’
index (PMI), which measures both the manufacturing and services sectors, declined to 50.6 in
Germany last month (Feb13: 53.3).

10. Equities
The Henley Outlook May 2013
Hong Kong, Singapore & Shanghai
10
ASEAN
AUSTRALIA
EQUITIES
HENLEY ASSESSMENT
Neutral
Both the global backdrop and local
dataflow have been significantly less
positive since the April board meeting.
US and Chinese economic updates
have disappointed, commodity
prices and equity markets have sold
off. Locally, consumer sentiment has
faltered, business confidence has
remained subdued and labour market
data suggests the Feb jobs gain was
overdone with the unemployment rate
rise from 5.4% to 5.6% suggesting
underlying conditions are soft.
Positives
■■ Australian Prime Minister Julia Gillard said that her government’s “tight” fiscal stance leaves
room for the central bank to cut interest rates as manufacturers try to cope with sustained
currency strength.
■■ Fitch Ratings affirmed Australia’s AAA credit rating, saying it highlighted the economy’s
underlying strength. In its report Fitch said it made its decision because the country had built
up the capacity to absorb shocks thanks to low public debt, a free-floating exchange rate and
a liberal trade and labour market.
Negatives
■■ The improved consumer mood in 2013 encountered a significant setback in April. After a
strong rally in the first three months, the Westpac–Melbourne Institute Consumer Sentiment
Index stumbled, falling 5.1%.
■■ Australia’s unemployment rate climbed in March to the highest level in more than three years.
The jobless rate rose to 5.6% from 5.4%.
■■ Australian industry has been squeezed by the currency’s record stretch above parity with
the USD since it was freely floated in 1983, and that has made tourism more expensive and
exposed local manufacturers to cheaper imports.
HENLEY ASSESSMENT
Positive
We have seen corrections in March
across the region due to concern
that valuations are too expensive
after reaching record levels. It is
those markets that have a very
good run and where valuations
are above historical levels that are
very susceptible to profit taking.
They have rebounded quickly going
into April. ASEAN economies are in
general outpacing bigger nations
in the Asia-Pacific region as well as
their western counterparts.
Positives
■■ Steady economic growth continues across the region in general.
■■ Thailand, Vietnam and the Philippines will see the strongest increase in private-equity
transactions this year as buyouts in the region struggle to recover, according to Bain &
Company.
Negatives
■■ Factories in ASEAN are battling rising costs as governments in Asia increase minimum wages,
which could lead to worldwide inflationary pressure.

11. Equities
11
Positives
■■ The business climate index from the
National Bureau of Statistics of China
was 125.6 in Q1, up from the 124.4 for
Q4 of 2012.
■■ China’s inflation fell to 2.1% YOY in
March. This reduces the possibility
of the PBoC tightening monetary
and credit policies in the coming few
months.
Negatives
■■ China’s Q1 GDP slowed to 7.7% YOY
from 7.9% YOY in Q4 due to weak
March industrial production.
■■ Chinese stocks saw a sell-off again this month, mainly due to PBoC’s continuous liquidity
withdrawal and disappointing annual results and a conservative guidance from Chinese
corporates.
■■ Fitch cuts China’s long-term local currency rating one notch down to A+, citing a lack of
transparency in increased local government borrowing.
India
GREATER CHINA
EQUITIES
HENLEY ASSESSMENT
Positive
Rather than strengthen modestly
as had been expected, China’s GDP
growth slowed in Q1. Most of the
disappointment could be traced to a
much weaker than expected March
industrial production report, where
growth slowed significantly compared
to last quarter. After the congress
meeting in early March, investors
were in little doubt that the new
administration is focused on creating a
sustainablegrowthmodelforthefuture.
Also, the latest regulations from the
China Banking Regulatory Commission
(CBRC) attempt to define and tighten
the use of non-standard credit assets
which wealth management firms can
invest in. This indicates Beijing might
feel potential risks in the shadow
banking system and take actions to
regulate the area. Policy reforming is
the primary driver of the market this
year and we firmly believe China’s
economic recovery is still on track.
HENLEY ASSESSMENT
Neutral
Markets reacted to the withdrawal of
an ally (DMK) last month but showed
no signs of euphoria after the RBI
rate cut. It seems India is now in a
stagflation-like situation wherein
the growth stagnates but inflation
remains at an elevated level.
Positives
■■ The fall in gold prices is expected to bring down the current account deficit from 4.3% to 3.9%
of GDP; USD100/oz fall will compress the deficit by about USD3bn.
■■ The country’s central bank, the RBI, cut the repo rate by 25 basis points to 7.5%.
Negatives
■■ Owing to the power outage and fall in new business orders, the manufacturing sector
witnessed the slowest growth in 16 months with the PMI in March standing at 52, down from
54.2 in February.
■■ CPI inflation climbed to 10.9% in February with wholesale price inflation at 11.4%.
Source: Bloomberg Finance LP

12. Equities
The Henley Outlook May 2013
Hong Kong, Singapore & Shanghai
12
HENLEY ASSESSMENT
Negative
The assessment has been
downgraded to negative as the
nations of South Korea, Brazil and
Russia faced increasing global
headwinds. Particularly for South
Korea, the weakening JPY and
heightened tensions over the
peninsula have a detrimental
effect on business confidence and
its exporting economy. In Brazil,
inflation is becoming more of a
worry to the administration. In a
sign that inflation worries trump
growth concerns, Brazil’s central
bank raised its benchmark rate for
the first time since July 2011. This
is in stark contrast to other central
banks which have maintained or
lowered their interest rates.
Other Emerging Markets (South Korea, Russia, Brazil)
EQUITIES
Positives
■■ South Korea unveiled a KRW17.3tn supplementary budget to support the stalling economy
as domestic consumption remains sluggish while exports slow because of the weaker JPY and
cooling global demand. The bulk of the supplementary budget is aimed at compensating for
lower revenues this year. Around KRW5.3tn will be spent on creating 40,000 jobs, providing
financial support for low-income households, expanding childcare services and stabilising
prices of agricultural products. It predicted this would boost this year’s growth by 0.3%.
Negatives
■■ The rising tension on the Korean peninsula is finally having an impact on Seoul’s financial
markets, as investors worry that the current tension is likely to be prolonged, unlike in the past.
The KOSPI benchmark index fell 0.4% to 1,918.69, its lowest closing since November 2012.
■■ Brazil’s central bank’s monthly activity index contracted by 0.52% in February 2013, dashing
any hopes that its 1.4% expansion in January 2013 was the start of a sustained recovery. For
the first time since late 2011, consumer price inflation was above the government’s upper limit
of 6.5% a year, at 6.59%.
■■ Russia’s USD2tn economy is growing at the weakest pace since a 2009 contraction as Europe’s
debt crisis curbed exports and prompted companies to trim investment as the government
scaled back spending after elections. According to the Ministry of Economic Development,
GDP will rise 2.4% this year. This was downgraded against the earlier projection of 3.6%.
Source: IBGE

13. Equities
13
Positives
■■ The Federal Reserve continues to increase the money supply by USD85bn every month,
further debasing the dollar by transforming debt into currency.
■■ Gold’s fundamental and most important attribute remains unchanged. Because gold is a
tangible asset, it does not have counterparty risk.
Negatives
■■ Short-term volatility in markets will unsettle investors.
Energy
Precious Metals
COMMODITIES
HENLEY ASSESSMENT
Neutral
While gold has been getting all the
negative coverage, crude oil has also
come under pressure and Brent Crude
fell below the key USD100 mark and is
now down 11% since the start of the
year. Weak growth in China and large
supplies are having a subduing effect
on price, although many speculators
believe the worst has passed and
are becoming increasingly bullish.
Natural gas remains the sole stand-
out energy commodity having
returned over 30% YTD. We remain
neutral on the sector.
Positives
■■ A floor in oil prices appears to be close which may result in a bounce of crude prices.
Negatives
■■ Supplies are plentiful which is having a dampening effect on current prices.
HENLEY ASSESSMENT
Positive
It has been a torrid time for precious
metals this month as gold plunged
the most in 33 years. At times like
these, it is worth keeping things in
perspective. The drop in the price
of gold (note the use of price and
not value) was attributable to some
negative news out of China and
the continuing saga of the Cypriot
bailout but fundamentally, nothing
has changed and the rationale for
holding gold remains. Although the
short-term graph does not make for
pretty viewing, the recent volatility
represents a drop back to prices
in February 2011. The Henley
Group views this as a significant
buying opportunity as we continue
to believe that gold remains
undervalued at current levels
and indeed the price has rallied
significantly since the 16th April.
Source: Goldmoney.com

14. Equities
The Henley Outlook May 2013
Hong Kong, Singapore & Shanghai
14
Positives
■■ WarrenBuffett’sinvestmentpowerhouseBerkshireHathawayand3GCapitalhaveannounced
they will take over US tomato sauce and baked beans maker Heinz, in a deal worth USD23bn.
This could lead to broad cost-cutting measures across the industry and a possible rerating in
the valuation of similar companies.
■■ UN’s Food and Agriculture Organization estimates there will be over nine billion mouths to
feed on the planet by 2050.
■■ Middle-class consumers in BRICS economies are increasingly demanding more varied and
protein-rich foods. As affluence increases, protein from sheep, poultry, pigs, cows and fish may
in turn displace grains in diets.
■■ Urbanisation and life expectancy is expected to increase.
Negatives
■■ Prices are subject to
many uncontrollable
risks, e.g., weather
and natural disasters,
politics and other pests.
■■ Due to recent drought
conditions in the
American Mid-West
and Russian Black
Sea regions we have
seen corn, wheat and
soy prices increase
on average over 50%
within a few months.
Commodities
Agriculture
Industrial Metals
Source: DWS
HENLEY ASSESSMENT
Neutral
Industrial metals have not been
immune from recent declines in
commodities. Copper fell below
USD7,000 per tonne for the first time
in almost 18 months on concern
that demand from China to the US
and Europe may falter. Tin was also
poised to enter a bear market. China,
which is the world’s biggest consumer
of metals, missed growth targets
which put pressure on the sector.
Positives
■■ Modest growth in the US and expected growth of 8% in China will provide some support for
the sector.
Negatives
■■ Curbing policies in China may knock demand in the short term and keep prices low.
HENLEY ASSESSMENT
Positive and Negative
There are two very different markets
playing out in the agriculture sector –
physical and equity. Many physical soft
commodity prices have exploded due
to changing global weather patterns
over the past few months, however
these sharp price increases tend to be
followed with just as sharp falls; there
is a very seasonal and cyclical pattern
with these movements. Currently with
many soft commodity prices at or
near record highs we have a negative
view on investing at these levels and
encourage profit taking. On the equity
side, the largest weighting funds have
to this sector is via fertilizer and seed
companies. These industries are having
a significantly more important role to
play to help increase yield and in the
case of seed companies, invent seed
which is more tolerant to changing
global weather patterns. We remain
positive agriculture equity funds.

15. Equities
Positives
■■ Hedge fund performance had another positive month in March 2013: the HFRX Global Hedge
Fund index rose 0.7%, taking Q1 performance to 3.1%.
■■ Equity long/short managers were once again amongst the top performers for the month,
with Japanese and US focused managers faring particularly well. European managers were
also positive for the month and generally managed to avoid systemic risks from the Cypriot
bailout.
■■ In March, Preqin, a leading
alternative asset data provider,
interviewed120hedgefundinvestors
to ask whether they believed that
returns in 2013 would exceed those
achieved in 2012. As revealed in the
right-hand-side chart, the majority
of investors (79%) responded that
they did believe returns in 2013
would exceed 2012, demonstrating
overall optimism among hedge fund
investors for the year ahead.
Negatives
■■ Inaggregate,performancefromcommoditymanagerswasnegativeoverMarch.Commodities
prices moved in a dislocated manner during the month and some managers had to take the
damage from their long positions in precious metals.
■■ Investors continuously lost their interests in fund of hedge funds industry. Annual fund of
hedge fund launches fell from 142 in 2010 to 79 in 2011 and to 59 in 2012 – this represents
the lowest level since 2000.
Alternative Investment
General disclaimer and warning
The Henley Group Limited (“The Henley Group”) has produced this document for your private use only and you must not distribute it to any other person. Re-distribution or reproduction in whole or in part of this document by any means is strictly
prohibited and The Henley Group accepts no liability for the actions of third parties in this respect. Notwithstanding that the information contained herein has been obtained from sources which The Henley Group believes to be reliable, The Henley
Group makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy, completeness or correctness. The information in this document, including any expressions of opinions or estimates, should neither be
relied upon nor used in any way as indication of the future performance of any financial products, as prices of assets and currencies may go down as well as up and past performance should not be taken as indication of future performance. Neither
this document nor any information contained herein shall be construed as an offer, invitation, advertisement, inducement, representation of any kind or form or any advice or recommendation to buy or sell any financial products
Source: Preqin Investor Interviews–March 2013
HENLEY ASSESSMENT
Neutral
This year so far, there are now
significant discrepancies between the
relative strength of major economies.
These diverging economic conditions,
in combination with the reduction of
risk-on/risk-off market movements,
should increase the opportunity set
for hedge fund managers. In 2011
and 2012, both years witnessed a
correlated risk-on/risk-off behavior in
Q2 and Q3. However, it is suggested
by a number of factors that a repeat is
unlikely in 2013 (better money inflow
into equities, better fundamental
data in US, more positive and
resilient equity market sentiment,
etc), and if inter-stock and inter-
sector correlations can remain at low
levels, then we believe that equity
long/short managers will continue
to produce attractive risk-adjusted
returns for the rest of the year.

16. The Henley Outlook May 2013
Hong Kong, Singapore & Shanghai
Equities
16
The Henley Investment Advisory Service is all about providing you with a committed, professional partner for your personal
finances. Similar to the service level a private bank would offer, it brings proactive investment advice to our clients in a
cost-effective manner. Henley Investment Advisory will help ensure your savings are invested in the right asset class
at the right time, making your hard-earned cash work harder still and propelling you faster towards financial freedom.
For more information about the service, talk to your Henley advisor or send an email to hias@thehenleygroup.com.hk
Henley Market Outlook
MAY 2013