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This week…

• Opportunities around the UK100 Index

• Impact on employment and inflation figures

• How do the energy heavy weights match up?

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General Advice & Risk Warning

Please note that any advice given by Invast staff is deemed to be GENERAL advice, as the information or advice given

does not take into account your particular objectives, financial situation or needs.

Therefore at all times you should consider the appropriateness of the advice before you act further.

CFDs and Forex are leveraged products and carry a high level of risk and are not suitable for everyone. You can lose

more than your initial deposit so you should ensure CFD and Forex trading meets your investment objectives. We

recommend you seek independent advice. Strategies and charts used in this presentation are for example only. You are

reminded that past performance is not indicative of future performance.

Invast Financial Services is regulated by ASIC. It's important for you to read and consider the relevant Product

Disclosure Statement and Financial Services Guide which contains details of our fees and charges before you decide

whether or not to acquire any financial products. These documents are available at www.invast.com.au

Invast Financial Services Pty Ltd ABN: 48 162 400 035. Australian Financial Services Licence No.438 283

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This week we look at the following topics:

• Opportunities around the UK100 Index

• Impact on employment and inflation figures

• How do the energy heavy weights match up?

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Dear Readers,

Our analysis this year has so far touched on the 2015broader Outlook Guide and in February we focused onAustralian listed companies. The new push this year is onindividual stocks, powered by Invast’s new DMA platform.The benefit of this platform is that it provides direct marketaccess into several global exchanges.

Our focus in March will be to analyse these major exchanges,as represented by key indices. Indices are important tounderstand even if you trade underlying stocks. All of theindices that we touch on in March are traded throughInvast’s MT4 platform, which remains a powerful trading tooland part of the overall Invast toolbox for traders.

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In April we plan to focus on individual stocks across these indices and we will groupthese stocks into various trading baskets across four individual weeks. But before thatcan occur, we need to study and analyse to see where each index is currently trending.

Our analysis will be broken up as follows:

Week commencing 2 March 2015: Outlook for the German DAX30 Week commencing 19 March 2015: Outlook for the UK FTSE100 Week commencing 16 March 2015: Outlook for the US S&P500 Week commencing 23 March 2015: Outlook for the Australian ASX200 Week commencing 30 March 2015: Outlook for the Hong Kong HSI50

Week commencing 9 March 2015: Outlook for the UK FTSE100

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We spoke about the DAX last week and reaffirmed our positive conviction, despite thehuge rally. This view was reaffirmed by the ECB’s commitment to stimulus over thepast few days and the constant devaluation of the Euro against the US dollar. AS wewrite, the DAX is sitting at around 11,500 and we have said that we think more gains,even above this level are likely. The situation for the UK is very different. We explainedthis difference in our 2015 Outlook Guide report when we published it in mid-January.At the time we said the following.

“…We think a gradual and sustained decrease in the GBPUSD pair will be a boost forthe FTSE100 index but not as much as the DAX will benefit from the decline in theEURUSD. The reason for this is exposure to resources but also the fact that many UKstocks have exposure to the underlying economy and the economic picture there isn’tpretty. The frustration for those trading the FTSE is fairly telling…”

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Image: UK100 daily price chart as quoted by Invast MT4 platform

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We also elaborated further, saying…

“..We think the FTSE will get worse before it gets better. There is scope for further pricedeclines because of the abovementioned factors, although the falling GBPUSD will be alimiting factor. We think there is solid support in the low 6000 price range with perhaps100 points or so on the downside possible. Conversely, there is strong resistance nearthe 6900 level and so the trading range is fairly tight.

UK brands are different to German brands in that they don’t necessarily make things,instead they just own things. This works well over the long term, delivering higher ratesof return, but in the short term as the currency falls, the German brands who makethings are better placed to benefit from a cheaper currency and lower energy prices asopposed to the UK ownership businesses.

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This major fundamental business between the two stock markets will be highlightedextremely well this year. In a nutshell, we aren’t tempted to enter the FTSE100 at thisstage, even if the GBPUSD is falling…”

In fairness, the FTSE100 has added a couple of hundred points since our report waspublished by this is not significant in the overall scheme of things. For the UK marketto move higher, we really need to see a firm commitment from the Bank of Englandeither way about their rate policy. As we wrote in the 2015 Outlook Guide, the UKeconomy is at somewhat of a tipping point for the time being. There are doubts aboutthe rate of growth, the impact on corporate earnings from sluggish European growthand not being a member of the ECB, it doesn’t enjoy the huge money printing andeasing that Germany or France would enjoy.

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The UK economy added 103,000 jobs in the December quarter with theunemployment rate falling to 5.7% from 7.2% in the prior corresponding period.Quarterly GDP growth is still sluggish at around 0.5% during the last measured quarterand inflation is barely an issue with CPI at 0.3%. There is a strong argument that theBank of England should do more to boost the economy, even though rates are still flatat 0.5%. In its March statement, the Bank of England voted to maintain Bank Rate at0.5%. The Committee also voted to maintain the stock of purchased assets financed bythe issuance of central bank reserves at £375 billion.

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The real test will come when the meeting minutes are released on 18 March 2015. Ifthe Bank of England is seen as changing its stance and potentially increasing its assetpurchasing program – as some have suggested – there could be a large move on theGBP against the US Dollar and in turn an upward break on the FTSE100. The case isthat inflation of 0.5% on a quarterly basis is at risk of falling further and the UKeconomy is moving out of sync with what is happening across the rest of Europe.

We think if the Bank of England’s minutes do not show anything new and continue topush the same line, the GBP could strengthen further and the FTSE100 looksvulnerable at current levels.

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Image: GBPUSD four hourly price chart

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Key index constituents

Ticker Name Weight (%) Sector Market Value (GBP)

HSBA HSBC HOLDINGS PLC 6.32 Financials 239,928,334

BP BP PLC 4.65 Energy 176,581,754

RDSA ROYAL DUTCH SHELL PLC CLASS A 4.55 Energy 172,657,767

GSK GLAXOSMITHKLINE 4.31 Health Care 163,434,807

BATS BRITISH AMERICAN TOBACCO PLC 4.02 Consumer Staples 152,569,98

VOD VODAFONE GROUP 3.42 Telecommunications 129,654,024

AZN ASTRAZENECA PLC 3.16 Health Care 119,829,474

RDSB ROYAL DUTCH SHELL PLC CLASS B 2.98 Energy 112,960,167

DGE DIAGEO PLC 2.74 Consumer Staples 103,841,281

LLOY LLOYDS BANKING GROUP PLC 2.44 Financials 92,673,363

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The most striking difference between the FTSE100 and the DAX, which we wrote aboutlast week, is the exposure to energy. Stocks like BP and Royal Dutch Shell are underhuge pressure from falling energy prices, not just on their earnings but the value oftheir global assets and their recent investment into new projects. As energy pricesremain depressed the share price of these large index constituents will weigh on theFTSE100 index. Similarly, the largest holding HSBC is the only bank among the top 10stocks, again very different to the exposure of financial services stocks on the DAX.

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FTSE industry sector composition chart

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As rates fall, usually the financial exposed stocks like HSBC become major beneficiaries.We have seen this become the case in Australia, Commonwealth Bank is now thelargest stock on the market and the big four banks in Australia are among the top 5stocks on the market. The problem for the FTSE100 is that the top 5 stocks only include1 major bank and HSBC itself has exposure to emerging markets which weighs onconfidence during periods of low inflation. Luckily though, there are many smallerfinancial services names that collectively contribute meaningfully to the overallFTSE100 composite. The sum of the smaller names is key here and these smallernames are again, confidence and interest rate driven. Financials and consumer staplestocks represent almost 40% of the FTSE, making the Bank of England’s meetingminutes, asset purchases and future interest rate intentions are critical part of theindex performance.

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We’ll update the Invast blog section of the website when the Bank of England meetingminutes are released on March 18th. Next week we will look at the S&P500 which wetouched on in November and again in our 2015 Outlook Guide report in mid-January.We will review the recent reporting period and the valuation implications of Yellen’sactions this year.

Also, make sure you register early for the upcoming monthly webinar. Details below.

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Outlook on major global indices – a correction coming?

Invast Insights chief editor and contributing author Peter Esho will summarise hisoutlook on the major global indices in March. Esho will document his findings basedon the performance of key stocks across these indices and where he believes the bigopportunities lie throughout this year. His presentation will focus on the following 5themes:

Outlook on the German DAX30Outlook on the UK FTSE100Outlook on the US S&P500Outlook on the Australian ASX200Outlook on the Hong Kong HSI50

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Esho is a regular contributor on CNBC, Bloomberg and host of ‘Your Money YourCall’. His webinar will cover both the fundamental and technical outlook on thesekey themes and a basic introduction to Invast’s new DMA CFD product offeringwhich complements MT4 and other services. This webinar is expected to fill fast.Q&A will be open straight after the presentation. Register now by clicking here.

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Go to www.invast.com.au/insights to get a complimentary 4 week trial and receive the latest insights as they are published to our live clients.

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DisclaimerPlease note that you are receiving this report complimentary from Invast Financial Services Pty Ltd(AFSL 438 283). Invast staff members may from time to time purchase securities which areincluded in this or future reports. The authors of this report may or may not be holding a positionin the securities mentioned. Please note that the information contained in this report and Invast'swebsite is of a general nature only, and does not take into account your personal circumstances,financial situation or needs. You are strongly recommended to seek professional advice beforeopening an account with us.

General Disclaimer: This newsletter contains confidential information and is intended only for theperson who downloaded it. You should not disseminate, distribute or copy this newsletter. Invastdoes not accept liability for any errors or omissions in the contents of this newsletter which ariseas a result of downloading this newsletter. This newsletter is provided for informational purposesand should not be construed as a solicitation or offer to buy or sell any financial product. InvastFinancial Services Pty Ltd is regulated by ASIC (AFSL 438 283 | ABN 48 162 400 035).

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Risk Warning: It's important for you to read and consider the relevant Product DisclosureStatement, and any other relevant Invast Financial Services Pty Ltd documents before you decidewhether or not to acquire any financial products listed in this email. Our Financial Services Guidecontains details of our fees and charges. All these documents are available here on our website, oryou can call us on +612 8036 7555. CFDs and Foreign Exchange are leveraged products and carry ahigh level of risk and you can lose more than your initial deposit so you should ensure CFD andForeign Exchange trading meets your personal circumstances.

General Advice Warning: Being general advice, this newsletter does not take account of yourobjectives, financial situation or needs. Before acting on this general advice you should thereforeconsider the appropriateness of the advice having regard to your situation. We recommend youobtain financial, legal and taxation advice before making any financial investment decision.

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