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roubini.com | [email protected] Tel: 212.645.0010 | [email protected] Tel: +44 (0) 20 7092 8850

The combination of systematic modelling with RGE’s experts’ analysis, provides our clients with unparalleled insight into countries’ strengths and vulnerabilities

roubini.com | [email protected] Tel: 212.645.0010 | [email protected] / [email protected] Tel: +44 (0) 207 092 8850 2

National Balance Sheet Approach• Flows vs. Stocks• Comprehensive view• Global

interconnectedness

Expert Analysis

Systematic Risk Scoring

• Expert judgement • Forecasting• Policy insight• Scenario analysis• Market views

• 100+ scores and ranks on 174 countries• Consistent and unbiased• Fully transparent• Track changes over time• Develop custom risk indicators

• The Country Insights™ Model, which benchmarks the strength and weaknesses of 174 countries around the world, is a key component of RGE’s systematic research, both as a tool for clients to use directly and as an input to RGE’s country and global thematic research.

• RGE’s Country Insights follows the methodology of the National Balance Sheet for each country and explores over 200 key variables that help clients determine opportunities and risks.

• The standard Country Insights Model has four pillars: – Pillar I: External Adjustment Capacity– Pillar II: Institutional Robustness– Pillar III: Growth Potential– Pillar IV: Social Inclusion

• In addition to the standard model, users can develop custom indicators by selecting a relevant set of scores from the Model.

4

Roubini Global Economics: Country Insights™

roubini.com | [email protected] Tel: 212.645.0010 | [email protected] / [email protected] Tel: +44 (0) 207 092 8850

Investment Attractiveness (IAS)

We implement our national balance sheet systematically, with four pillars that cover: macroeconomics, policy and political risk, growth and social stability

External adjustment capacity pillar

Macro-financial adjustment capacity

External indebtedness

Current account

Reserve buffer

Trade vulnerability

Robustness of institutions pillar

Strength of monetary policy

Strength of fiscal policy

Total indebtedness

Banking sector

Domestic political risk

International political risk

Political institutions

Growth and adaptability pillar

Demography

Human resource potential

Innovation and technology

Infrastructure

Business environment

Social inclusion pillar

Living standards

Health

Basic education

Safety

Satisfaction

Inequality

Perceived deprivation


We observe the past

We score the data using proprietary complex algorithms

Combining different scores to create indicators and country rankings

Combining systematic views with market prices and macro views identifies country risks and opportunities

Sovereign Risk

Country Strength

Total indebtedness

Social, institutional and regulatory risk

Banking risk and opportunity

A country’s economic growth potential

Cross-country dashboard

Thematic Exposure

Under-appreciated investment

opportunities

Over 200 data series (per country)

Over 2500 data points (per country)

Cross-country-comparable sources such as IMF, World Bank

Scores reviewed quarterly

Turns data into critical factors

Captures interaction of factors

Standardises scoring


Turning country risk from art into science: The process behind our systematic risk scoring


Panoramic view: Major changes in DM countries’ investment attractiveness

Source: Country Insights DM Update: UK Stays in High-Return Territory, but Brexit Risks Abound

DM Border Crossings—Into Higher Ground; Watching Brief

https://www.roubini.com/analysis/country-insights-dm-update-uk-stays-in-high-return-territory-but-brexit-risks-abound


Panoramic view: Major changes in EM countries’ investment attractiveness

Source: Country Insights EM Update: CE3 and India on the Rise

EM Border Crossings—Into Higher Ground; Danger Zone; Watching Brief

https://www.roubini.com/analysis/country-insights-em-update-ce3-and-india-on-the-rise

Equity Outperformance of High vs Low Investment Attractiveness Scores (IAS) – Quintile Analysis (1/2)


The quintile analysis shows that equity markets in “strong” countries (those with high IAS)

outperform those identified as “vulnerable.”

Source: Roubini Global Economics. Dates October 2005 – October 2015. For more details, please see research “Country Insights: Delivering Alpha”

-2%

0%

2%

4%

6%

8%

10%

12%

1 2 3 4 5

An

nu

alis

ed R

etu

rns

Quintiles

DM

3m 6m 1y

0%

2%

4%

6%

8%

10%

12%

14%

16%

1 2 3 4 5

An

nu

alis

ed R

etu

rns

Quintiles

EM

3m 6m 1y

-2%

0%

2%

4%

6%

8%

10%

12%

1 2 3 4 5

An

nu

alis

ed R

etu

rns

Quintiles

DM ex North America

3m 6m 1y

Quintile Method: Reviewing the data for each quarterly update, we

divide countries into quintiles based on their IAS ranking (low to high),

then calculate simple average equity-market returns for the countries

in each quintile over subsequent periods (3, 6 and 12 months).

https://www.roubini.com/analysis/country-insights-delivering-alpha

Equity Outperformance of High vs Low Investment Attractiveness Scores (IAS) – Quintile Analysis (2/2)


The quintile analysis shows that equity markets in “strong” countries (those with high IAS)

outperform those identified as “vulnerable.”

Source: Roubini Global Economics. Dates October 2005 – October 2015. For more details, please see research “Country Insights: Delivering Alpha”



then calculate simple average equity-market returns for the countries

in each quintile over subsequent periods (3, 6 and 12 months).

0%

2%

4%

6%

8%

10%

12%

14%

1 2 3 4 5

An

nu

alis

ed R

etu

rns

Quintiles

All World (incl. both DMs and EMs)

3m 6m 1y

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

1 2 3 4 5

An

nu

alis

ed R

etu

rns

Quintiles

DM Europe

3m 6m 1y

https://www.roubini.com/analysis/country-insights-delivering-alpha

Government Bond Outperformance of High vs Low Investment Attractiveness Scores (IAS) – Quintile Analysis


The quintile analysis shows that government bond markets in “strong” countries (those

with high IAS) outperform those identified as “vulnerable.”

Source: Roubini Global Economics. Dates October 2005 – March 2016. For more details, please see research “Country Insights: Seeking Bond-Market Alpha”



then calculate simple average government bond returns in USD for the

countries in each quintile over subsequent periods (3, 6 and 12 months).

0%

1%

2%

3%

4%

5%

6%

1 2 3 4 5

An

nu

alis

ed R

etu

rns

Quintiles

DM ex-US

3m 6m 1y

0%

1%

2%

3%

4%

5%

6%

1 2 3 4 5

An

nu

alis

ed R

etu

rns

Quintiles

DM

3m 6m 1y

0%

2%

4%

6%

8%

10%

1 2 3 4 5

An

nu

alis

ed R

etu

rns

Quintiles

EM

3m 6m 1y

https://www.roubini.com/analysis/country-insights-seeking-bond-market-alpha


Thematic Perspective: Brexit Risk: Which Economies Are Exposed?

Source: Brexit Risk: Which Economies Are Exposed?

Measuring European Trade and Financial Linkages With the UK (0 = high exposure, 10 = low exposure)

https://www.roubini.com/analysis/brexit-risk-which-economies-are-exposed

14

Thematic Perspective: Map Country Exposure to Roubini Macro Themes_1


Source: 2016 Macro Themes: EM Sweet Spots and Danger Zones.

Long-term challenges—aging and inequality Adverse impacts on growth and social stability in affected EMs

U.S. is narrowing growth pillar U.S. consumption cannot drive global demand alone, and the Fed has started raising interest rates. EMs with low risk of external debt financing and low reliance on U.S. demand are most resilient in this environment.

Persistent lowflation EMs with a track record of delivering moderate and stable inflation may be able to use monetary policy to support domestic demand or will at least be less likely to adopt defensive policies.

Savings glut/Investment slump Excess savings will flow toward investment opportunities in EMs that are able to deploy capital effectively and safely weather external shocks.

Divergent, imbalanced policy stances EMs with sufficient fiscal space and monetary policy credibility can stimulate their domestic economies, providing a cushion from global shocks.

China's bumpy landing EMs will be more resilient to slowing Chinese investment demand if they have limited direct trade and are not overly reliant on investment-related goods.

Commodities—Lower investment for longer, weak prices

EMs will have greater resilience to weak commodity prices if they are not reliant on commodity exports and/or have strong fiscal or FX reserve positions.

Persistent EM growth challenges Countries with fiscal strength, strong medium-term potential and stable political institutions have better outlooks for domestic demand and investment.

Global trade, capital flows—A squeeze on small open economies

Small open economies and mineral exporters are most exposed to sluggish global trade.

Metastasizing EM debt Countries with low sovereign risk, low or stable external and total debt, and flexible exchange rate regimes are best placed to cope.

Major Themes and Their Implications…

https://www.roubini.com/analysis/2016-macro-themes-em-sweet-spots-and-danger-zones

15


roubini.com | [email protected] Tel: 212.645.0010 | [email protected] / [email protected] Tel: +44 (0) 207 092 8850 Source: 2016 Macro Themes: EM Sweet Spots and Danger Zones.

…EMs’ Resiliency and Vulnerability to Roubini’s Top 2016 Themes

https://www.roubini.com/analysis/2016-macro-themes-em-sweet-spots-and-danger-zones

16


roubini.com | [email protected] Tel: 212.645.0010 | [email protected] / [email protected] Tel: +44 (0) 207 092 8850 Source: DM Themes: Nordic Strength, French Fragility.

…DMs’ Resiliency and Vulnerability to Roubini’s Top 2016 Themes

https://www.roubini.com/analysis/dm-themes-nordic-strength-french-fragility


EM Sovereign Credit and Roubini Shadow Ratings

Source: EM Ratings Watch: Argentina Up, but Oil Producers Continue to Falter

Country Strength Index (CSI) Shows Potential Rating Actions in EMs (average credit rating vs. CSI score)

https://www.roubini.com/analysis/em-ratings-watch-argentina-up-but-oil-producers-continue-to-falter


DM Sovereign Credit and Roubini Shadow Ratings

Source: DM Ratings Watch: Greece Up, France Down

Country Strength Index (CSI) Shows Potential Rating Actions in DMs (average credit rating vs. CSI score)

https://www.roubini.com/analysis/dm-ratings-watch-greece-up-france-down

20

Output via Roubini Excel Add-In


A convenient way to use in your workflow RGE’s quantitative output: Country Insights scores, raw data and RGE forecasts.

Output through Roubini.com: Single-Country Breakdown

Identify and track the evolution of risks and opportunities and alert you to changes in scores over time. 0 - 10 Scoring:0 = Weak10 = Strong

21roubini.com | [email protected] Tel: 212.645.0010 | [email protected] / [email protected] Tel: +44 (0) 207 092 8850

Output through Roubini.com: Cross-Country Dashboard

Create custom dashboards to monitor your universe and the indicators that you deem most useful to you. Use our predefined indicators or create custom country analysis indicators.


Research Output: Impact of Oil Dynamics on Key EM Currencies

Source: Bloomberg, Roubini Global Economics, December 2015

roubini.com | [email protected] Tel: 212.645.0010 | [email protected] Tel: +44 (0) 20 7092 8850 | [email protected] Tel: +65 6434 8890

RUB

SAR

COP

MXNMYR

UAE

QAR

KWD

NGN

KZT

AOA

DZD

IRQ IRRVEF

AZN

NOKCAD

-60%

-50%

-40%

-30%

-20%

-10%

0%

2 3 4 5 6 7 8 9

Ch

ange

in B

ren

t p

rice

in

do

me

stic

cu

rre

ncy

Oil Dependence Indicator EM/Frontier DM

Some oil FX may have further to adjust. In EMs, lower oil prices will hurt oil-producing countries in the Middle East, East Africa and Latin America, exacerbatingthe fiscal drag on growth and suppressing investment for longer.

Note: Oil dependence indicator is calculated on a scale of 0-10, where 0 is weak and 10 is strong. Itincorporates measures of fiscal and monetary policy space and reliance on oil exports. It does not includeFX reserves and sovereign wealth funds, which may understate the resilience of some GCC countries.

ResilientVulnerable

https://www.roubini.com/analysis/the-new-abnormal-roubinis-top-10-themes-for-2016#7

Thematic Perspective: China Slowdown, Fed Policy Bring Uncertainty to Asia

Australia

India

IndonesiaSouth Korea

Malaysia

Philippines

Singapore

Thailand

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

2.0 3.0 4.0 5.0 6.0 7.0 8.0

Exp

osu

re t

o F

ed

No

rmal

izat

ion

(Q

2

20

15

)

Exposure to China Investment Slowdown, Q2 2015

External volatility driven by China, the Fed’s normalization and commodity prices have heightened financial-stability concerns throughout Asia.

Source: Roubini Global Economics

roubini.com | [email protected] Tel: 212.645.0010 | [email protected] Tel: +44 (0) 20 7092 8850 | [email protected] Tel: +65 6434 8890

ResilientVulnerable

Vulnerable

Resilient

Estonia (6.6)

Finland (6.7) Estonia (6.6) Slovakia (6.5)

Austria (5.9) Estonia (6.7) Germany (6.3) Germany (6.2)

Germany (5.8) Finland (6.9) Finland (6.4) Slovenia (6.1) Slovenia (6.0)

Belgium (5.8) Austria (6.2) Finland (6.5) Slovenia (6.3) Austria (5.9) Austria (5.8)

Netherlands (5.7) Germany (6.0) Finland (7.1) Slovenia (5.5) Germany (6.3) Finland (5.8) Italy (5.6)

Ireland (5.6) Netherlands (5.5) Finland (6.9) Germany (6.3) Finland (6.7) Slovakia (6.1) Austria (6.2) Slovakia (5.4) Finland (5.5)

Italy (5.5) Belgium (5.5) Germany (6.1) Austria (6.1) Slovakia (6.3) Austria (5.5) Slovakia (5.9) Belgium (5.4) Belgium (5.4)

France (5.3) France (5.2) Netherlands (5.8) Belgium (5.7) Germany (6.3) Germany (5.5) Belgium (5.9) Netherlands (5.4) Netherlands (5.3)

Portugal (5.3) Portugal (5.1) Austria (5.7) Netherlands (5.7) Austria (6.0) Netherlands (5.3) Netherlands(5.4) Italy (5.2) France (5.3)

Greece (5.2) Italy (5.1) Belgium (5.6) Ireland (5.1) Netherlands (5.4) Estonia (5.3) Italy (5.2) Ireland (5.0) Spain (5.1)

Spain (5.0) Ireland (5.0) Ireland (5.0) France (4.8) Belgium (4.9) Italy (4.9) France (4.9) Spain (5.0) Portugal (5.0)

Greece (5.0) France (4.9) Italy (4.7) France (4.8) Belgium (4.8) Ireland (4.7) France (4.9) Ireland (4.9)

Spain (4.7) Portugal (4.8) Portugal (4.4) Italy (4.7) Greece (4.3) Spain (4.6) Portugal (4.7) Greece (4.0)

Greece (4.6) Spain (4.3) Ireland (4.5) Ireland (4.2) Portugal (4.2) Greece (4.1)

Italy (4.6) Greece (4.3) Portugal (4.3) France (4.1) Greece (3.9)

Spain (4.3) Spain (4.1) Spain (3.6)

Greece (4.0) Portugal (3.4)

Research Output: An example of our systematic scoring in action:A top-level view of Sovereign Risk in the Eurozone…

Sep 2005 Sep 2006 Sep 2007 Sep 2008 Sep 2009 Sep 20105.0*

Jun 2011 Jun 2012 Dec 2012

Highest risk

Lowest risk


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summarizations or synopses, is expressly prohibited without prior agreement from RGE. All rights reserved, Roubini Global Economics, LLC. For questions about reprints or permission to excerpt or redistribute RGE content, clients should contact their RGE account representative. http://www.roubini.com/tos

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• Information contained in this report or relied upon in its construction may previously have been disclosed under a consultingagreement with one or more clients. The prices of securities referred to in the report may rise or fall and past performance and forecasts should not be treated as a reliable indicator of future performance or results. This report is not directed to youif RGE is barred from doing so in your jurisdiction. Nor is it an offer or solicitation to buy or sell securities or to enter into any investment transaction or use any investment service.

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