April 11, 2019 10:00 AM GMT

MORGAN STANLEY INDIA COMPANY PRIVATE LIMITED

India Economics | Asia Pacific Upasana Chachra
ECONOMIST
Upasana.Chachra@morganstanley.com +91 22 6118-2246
Analyzing Recent Saving- Avni Jain
ECONOMIST
Avni.Jain@morganstanley.com +91 22 6118-1850

Investment Trends Institutional Investor Global Fixed-Income

Research Polls are now open. We hope you
have enjoyed our research over the past year
Idiosyncratic factors have delayed a full-fledged recovery in and appreciate your support. Request your
ballot.
growth, weighing on the saving - investment trend in the past
few years. We believe this is a cyclical phenomenon and
improvement in growth outlook will positively impact the Exhibit 1: Savings Less Investment = Current Account
saving - investment dynamics. Deficit
45% Savings (% of GDP) 3%
Investment (% GDP)
Current Account Balance (% of GDP), (RS) 2%
40%
1%
In this note, we provide an analysis of recent saving – investment trends. In the 0%
35%
past few years saving – investment in India as a % of GDP has moderated, which -1%
30%
has led to an increase in investor interest to assess the underlying causes. -2%
-3%
25%
Further, the lack of improvement in the overall saving rate despite an -4%

improvement in macro stability has been a puzzling phenomenon. We address a 20% -5%

F1995
F1996
F1997
F1998
F1999
F2000
F2001
F2002
F2003
F2004
F2005
F2006
F2007
F2008
F2009
F2010
F2011
F2012
F2013
F2014
F2015
F2016
F2017
F2018
F2019e
few key questions related to the same in this note:
Source: CEIC, RBI, Morgan Stanley Research E = Morgan Stanley Research
What are the cyclical drivers of the saving trend? The key cyclical drivers are: (1) Estimates
trend in revenue deficit, which impacts public saving, (2) trend in export income,
which impacts corporate saving and (3) trend in terms of trade, which impacts
Exhibit 2: Pick-up in Capacity Utilization Bodes Well for
household and corporate savings through the impact on input costs. Capex
80 37
What are the cyclical drivers of investment trend? The key drivers are: (1) end Capacity Utilization, 4Q Moving average,
(pushed forward by 3-quarters), LS
35
demand and capacity utilization levels and (2) strength of private / public sector 78
GFCF (% of GDP), 4Q Moving Sum
33
balance sheets. 76
31
74
What has caused a fall in the saving rate? We note that the bulk of the decline 29

in the saving rate since F2012 is attributable to the fall in household saving and, 72 27

within that, physical saving. Further, household net financial saving too has 70 25
Mar-12

Jun-14

Mar-15

Jun-17

Mar-18
Sep-10

Jun-11

Dec-12

Sep-13

Sep-16

Dec-18

Sep-19
Dec-15

grown at a slower pace than nominal GDP growth, likely impacted by patchy
growth trends (impacting household income growth) and an increase in financial Source: CEIC, RBI, Haver, Morgan Stanley Research
leverage.
Why do we expect saving - investment trend to improve going forward? We
believe that the growth trend will improve over the next few years, as the Indian
economy reaps the benefits of some of the institutional reforms undertaken in
the last 2-3 years (such as GST, IBC, PSU bank recapitalization, financial
inclusion). With an improvement in end demand, we expect capacity utilization
levels to continue to improve, which will help to sustain the nascent signs of a
pick-up in investment rates. Indeed, a pick-up in capex will help to improve job
growth and sustain the virtuous cycle of jobs - income growth - higher saving –
higher investment. Further, if the government accelerates the next set of reforms
related to land and labour, investment growth and job creation should get
added support. The risks to this view will emerge from a slowdown in growth led
by domestic or external factors, which would delay the improvement in saving -
investment dynamics. For important disclosures, refer to the Disclosure Section,
located at the end of this report.

1
Key Highlights of Saving and Investment Trends
While demographics have been supportive for India, the trend in saving and investment
has been impacted by cyclical factors in the recent past, which has led to a decline in the
saving and investment rate. Indeed, since F2012 the investment rate has declined at a
faster pace than the saving rate, which has led to a narrowing of the current account
deficit.

What has been the recent trend in the saving rate?

Saving: India's saving rate rose sharply between F2003 and F2009, led by an
improvement in the saving rate of the public and private corporate sector. The
household sector, which has traditionally been the source of capital for all other
sectors, also saw an acceleration in the saving rate. However, post the credit crisis, the
saving rate has declined, initially led by a deterioration in the saving rate of all sectors
(public, private and household). However, since F2015, while public and private
corporate saving improved, the trend in household saving has continued to decline.

(a) Public Saving - Improvement since F2015: Public saving is impacted by the
government's fiscal consolidation stance reflected through the trend in revenue balance.
Indeed, public saving peaked at 5.1% of GDP in F2008, when the consolidated fiscal and
revenue deficit were at the lowest point. Post the credit crisis, the fiscal deficit widened
and public saving saw a decline. However, the trend improved from F2015, with
government efforts to reduce the fiscal deficit and with support from a lower oil
subsidy burden, which also improved saving at SOE companies.

(b) Private Corporate Saving - Steady trend: The trend in private corporate saving will
be impacted by the trend in corporate profitability (including depreciation). While
corporate profitability (for broad market) remains lackluster, the CSO data (as per new
base) for private corporate saving has remained largely steady (i.e. not deteriorating).
The difference in the trend in corporate profitability and private corporate saving could
be partly attributed to the fact that the coverage for the private corporate sector under
CSO also includes quasi corporates, as per the new series of national accounts.

(c) Household Saving - Declined the most, led by fall in physical saving: The household
sector is the key provider of capital in the economy as it saves more than it invests.
However, the trend in household saving has seen a decline, with the saving rate falling
from 23.6% of GDP in F2012 to 17.2% of GDP in F2018. The decline has been largely led
by a household physical saving, which have declined at a faster pace than the decline in
household financial saving.

2
What has caused a fall in household saving in the past few
years?
We identify three reasons for the fall in household saving:

(i) Decline in household physical saving - accounts for bulk of the decline: Since F2012
household physical saving has declined from 16.3% of GDP in F2012 to 10.6% of GDP in
F2018. This can be attributed to weakness in the real estate sector and, as such, we
expect this trend to have remained similar in F2019 as well. Indeed, the decline in
household physical saving accounts for 85% of the total fall in household saving since
F2012.

(ii) Household gross financial saving pool remained largely steady... Since F2012, the
household gross financial saving pool has grown at an average of 9.4%, lower than
nominal GDP growth of 12.2%. As a % of GDP, gross financial saving have been largely
flat between 10.6-11% of GDP between F2012-18. We believe that patchy trend in overall
growth, impacted by exogenous factors and weakness in private corporate capex, have
meant that job growth would have been weak, keeping household income growth
muted.

(iii) …And an increase in financial leverage has led to lower net financial saving: While
gross household financial assets have remained largely steady as a % of GDP, the
increase in financial leverage in the past two years has meant that net household
financial saving has declined. Indeed, as per RBI data, household leverage increased to
3.9% of GDP in F2018 from 3.3% of GDP in F2012. Continued strong growth in retail
loans (Jan-19 at 17%) indicates that household financial leverage would have remained
steady in F2019 as well.

3
Exhibit 3: Sector Wise Saving as % of GDP Exhibit 4: Household Saving as % of GDP Has Declined Largely Due to
a Fall in Physical Saving...
40% Public Private Corporate Household Total
Household - Physical savings
35% 30% Household - Financial savings
Total Household
30% 30.4% 25%
25%
20%
17.4%
20% 17.4%
15% 6.7%
15%
10% 10%
11.4%
5% 5% 10.7%
1.6%
0%

F2019e
F2003
F2004
F2005
F2006
F2007
F2008
F2009
F2010
F2011
F2012
F2013
F2014
F2015
F2016
F2017
F2018
0%

F2019e
F2003
F2004
F2005
F2006
F2007
F2008
F2009
F2010
F2011
F2012
F2013
F2014
F2015
F2016
F2017
F2018
-5%

Source: CEIC, Morgan Stanley Research E = Morgan Stanley Research Estimate

Source: CEIC, Morgan Stanley Research E = Morgan Stanley Research Estimate

Exhibit 5: … However, Net Financial Saving Too Have Remained Exhibit 6: … With a Pick-up in Financial Leverage Recently
Weak... Loans & Advances from Government
7%
Shares & Debentures Claims on Government
20% Provident and Pension Funds Life Insurance Funds Loans & Advances from other FI's
Non-Banking Deposits Bank Deposits 6%
Currency Total Financial Assets Bank Advances

15% 5% Total Financial Liabilities

Components of HH's Financial Liabilities (% of GDP)
4%
10%
3%

5%
2%

1%
0%
Components of HH's Financial Asstes % of GDP) 0%
F2003

F2004

F2005

F2006

F2007

F2008

F2009

F2010

F2011

F2012

F2013

F2014

F2015

F2016

F2017

F2018
-5%
F2003

F2004

F2005

F2006

F2007

F2008

F2009

F2010

F2011

F2012

F2013

F2014

F2015

F2016

F2017

F2018

Source: RBI, Morgan Stanley Research

Source: RBI, Morgan Stanley Research

4
 What has been the recent trend in investment rate?
Investment: India's investment rate saw a big jump between F2003 and F2008, led by
pick-up in public and private capex. However, since F2012, the investment rate has
steadily declined with a fall across segments.

Public capex - Steady trend: Public capex as a % of GDP has been largely steady in the
past three years, however compared to F2012, the trend has declined. The government
through both the budget and the off-budget (SOE) route has been reinvigorating public
infrastructure spending since F2015.

Private capex - Weak trend: Private capex grew at a faster pace, reaching 17.3% of GDP
in F2008 (from 5.7% of GDP in F2003), versus public capex, which rose to 8.9% of GDP
in F2008 (from 6.4% of GDP in F2003). Post the credit crisis, several factors, including a
slowdown in government investment approvals (until 2013), demand deficiency (global
and domestic), weak corporate balance sheets, and capacity excesses have led to a
declining trend in private corporate capex. Indeed, we estimate private corporate capex
to have dropped to 6.6% of GDP in F2017.

Household capex - Constitutes for bulk of the decline: The decline in household capex
has been the most stark, in line with the decline in household physical saving, with
household capex as a % of GDP declining from 16.3% of GDP in F2012 to 10.7% of GDP in
F2018. The trend of positive real rates, which makes returns on physical assets less
attractive, and the slowdown in real estate sector can be attributed to the same.

Exhibit 7: Sector Wise Investment as % of GDP Exhibit 8: Net Resource Gap (% of GDP)
45% Public Private Corporate Household 15% Public Private Corporate Household
Others incld Valuables Total
40%
10%
35% 32.5%
30% 2.6%
5% Household surplus has come down,
25% 10.5% while private corporate net saving gap is
reducing as investments are muted
20% 0%
15%
12.2% -5%
10%
5% 7.2% -10%
0%
F2019e
F2003
F2004
F2005
F2006
F2007
F2008
F2009
F2010
F2011
F2012
F2013
F2014
F2015
F2016
F2017
F2018

-15%
F2019e
F2003

F2005

F2007

F2009
F2010
F2011
F2012

F2014

F2016

F2018
F2004

F2006

F2008

F2013

F2015

F2017

Source: CEIC, Morgan Stanley Research E = Morgan Stanley Research Estimates Source: CEIC, Morgan Stanley Research E = Morgan Stanley Research Estimates

5
The following variables impact cyclical trends in saving and
investment
Saving trends
Revenue deficit: The trend in public savings is influenced by the government's
management of the revenue deficit (revenue receipts less revenue expenditure) as it
denotes a drain on (or saving of) current resources. Apart from a revenue deficit, which
impacts the saving from government administrative machinery, the performance of
central and state level public sector enterprises also determines the public savings
trend. A key variable in this context is the level of oil subsidies, as the oil subsidy borne
by PSU (public sector undertaking) oil marketing companies is a drain on public saving.
The deregulation of retail fuel prices has improved the revenue balance trend for the
central government. Further, states have shown better management of the fiscal deficit,
which is running below the central government's level.

Terms of trade: Given India is a net commodity importer, the commodity terms of trade
tend to have a significant bearing on the trade deficit. An improvement in the terms of
trade since mid-2014 has accrued meaningful gains to the economy in terms of a lower
import bill, with the net commodity trade deficit tracking at 4.1% of GDP in 2018 versus
the peak of 6.6% of GDP in 2012. The improvement in terms of trade in the broader
context implies an increase in saving for the overall economy. Until 3Q18, a sharp rise in
oil prices (by ~40%YoY) led to a deterioration in commodity terms of trade, reversing
some of these gains and that would also lead to a drag in overall saving.

Export income: Exports of both goods and services account for ~19.7% of GDP in F2019
and thus this is an important factor impacting the overall growth trend in the economy.
The trend in export growth has been patchy, impacted by the global growth slowdown
in 2014-16, after which, while global growth accelerated in 2017-18, domestic factors
(mainly implementation of GST and lingering impact of demonetization) kept export
growth muted. Further, a renewed global growth slowdown since 2H18 due to a
combination of factors- namely, increase in trade tensions, tightening in financial
conditions and slowdown in China, has kept export growth lacklustre. This has resulted
in a decline in export income, which has seen a drain on overall saving in the economy
(negatively impacting corporate earnings and thus their saving).

Exhibit 9: Cyclical Factors Impacting Saving Trend

Source: CEIC, RBI, Morgan Stanley Research. Data as of F2018

6
Investment trends
Capacity utilization, pricing power, strength of balance sheets impacting private capex:
The trend in private capex will be determined by: a) capacity utilization levels, which are
impacted by demand growth - domestic and external, b) corporate profitability impacted
by pricing power and c) the ability of balance sheets to sustain expansion in capex. In the
last few years, a patchy trend in growth due to domestic / external exogenous factors
have kept capacity utilization trends muted and only recently has this started to
improve, albeit at a slow pace. Further, until recently, weak balance sheets at industrial
companies and SOE banks was another constraint. However, corporate fundamentals
are now improving with deleveraging, and the government has also recapitalized the
SOE banks, which should pave the way for an improvement in private capex.

Government push for infrastructure and manufacturing capex impacting public capex:
The government can push public capex through both on- and off-budget resources
(mainly public sector enterprises). Public capex has seen an improvement as the
government has increased outlays on capex through both the budget and public sector
units.

Exhibit 10: Cyclical Factors Impacting Investment Trend

Source: CEIC,RBI, Morgan Stanley Research. Data as of F2018

7
Saving - Investment balance
Productivity-driven growth to ensure saving - investment balance remains in check:
Since F2014 India's current account deficit has narrowed mainly due to a sharper fall in
investments than an improvement in the saving rate in the economy. The current
account deficit or the saving - investment gap remained below the 2% mark until F2018,
and we expect it to be around 2.1% of GDP in F2019. We expect the current account
deficit to remain within policymakers' comfort range of 2-2.5% of GDP, as we expect that
a pick-up in investment rate will be matched by a pick-up in saving rate.

The risk to this outlook would be a deterioration in terms of trade (oil price increase)
that would adversely impact the saving rate and thus lead to a higher current account
deficit or a slower growth outcome, which implies that investment rate does not
increase at the same magnitude keeping the current account deficit low.

8
Evolution of Trend in Saving and Investment
Exhibit 11: Sector Wise Saving as % of GDP Exhibit 12: Sector Wise Investment as % of GDP
40% Public Private Corporate Total Household Total 45% Public Private Corporate Household
Others incld Valuables Total
35% 40%
35% 32.5%
30% 30.4%
30% 2.6%
25%
25% 10.5%
17.4%
20% 20%
15% 15%
12.2%
10% 10%
11.4% 5% 7.2%
5%
0%
1.6%

F2019e
F2003
F2004
F2005
F2006
F2007
F2008
F2009
F2010
F2011
F2012
F2013
F2014
F2015
F2016
F2017
F2018
0% F2019e
F2003
F2004
F2005
F2006
F2007
F2008
F2009
F2010
F2011
F2012
F2013
F2014
F2015
F2016
F2017
F2018

-5%

Source: CEIC, CSO, Morgan Stanley Research E = Morgan Stanley Research Estimates Source: CEIC, CSO, Morgan Stanley Research E = Morgan Stanley Research Estimates

Exhibit 13: Net Household Saving Has Declined Recently Exhibit 14: Household Capex as % of GDP Remains Weak
30% HH Saving HH Capex HH Net Saving 17% 30%

25% % of GDP 16% Household Capex % of GDP, LS 25%

15%
20% 20%
14%
15% 13% 15%

10% 12%
10%
Three City House
11% Price Index, YoY%, RS
5%
5%
10%
0%
F2019e
F2003
F2004
F2005
F2006
F2007
F2008
F2009
F2010
F2011
F2012
F2013
F2014
F2015
F2016
F2017
F2018

9% 0%
F2003

F2004

F2005

F2006

F2007

F2008

F2009

F2010
Source: CEIC, CSO, Morgan Stanley Research E = Morgan Stanley Research Estimates
Source: CEIC, CSO, Morgan Stanley Research

Exhibit 15: Net Saving Gap of Private Corporate Sector Has Reduced Exhibit 16: Improvement in Capacity Utilization Bodes Well for Capex
20% Private Corporate Saving
% of GDP Private Corporate Capex 80 37
Private Corporate Net Saving Capacity Utilization, 4Q Moving average,
15% (pushed forward by 3-quarters), LS
78 35

10% GFCF (% of GDP), 4Q Moving Sum

33
76
5% 31
74
0% 29

-5% 72 27

-10% 70 25
F2019e
F2006
F2007
F2008
F2009
F2010
F2011
F2012
F2013
F2014
F2003
F2004
F2005

F2015
F2016
F2017
F2018

Mar-12

Jun-14

Mar-15

Jun-17

Mar-18
Sep-10

Jun-11

Dec-12

Sep-13

Sep-16

Dec-18

Sep-19
Dec-15

Source: CEIC, CSO, Morgan Stanley Research E = Morgan Stanley Research Estimates
Source: CEIC, CSO, Morgan Stanley Research

9
Exhibit 17: Public Sector Net Saving Gap Has Remained Steady Exhibit 18: General Government Remains a Drag on Overall Public
15% Public Saving Public Capex
Saving
% of GDP
Public Net Saving 4% Non-financial corporations Financial corporations
10% General Government Total
3% (% of GDP)
5%
2%
0%
1%
-5%
0%
-10%
-1%
-15%

F2019e
F2005
F2006
F2007
F2008
F2009
F2010
F2011
F2012
F2013

F2018
F2003
F2004

F2014
F2015
F2016
F2017
Dissavings from govt indicates
-2% continuous revenue deficit
F2012 F2013 F2014 F2015 F2016 F2017 F2018
Source: CEIC, CSO, Morgan Stanley Research E = Morgan Stanley Research Estimates Source: CEIC, CSO, Morgan Stanley Research

10
Disclosure Section
Information and opinions in Morgan Stanley Research were prepared or are disseminated by one or more of the following, which accept responsibility for its
contents: Morgan Stanley Asia Limited, and/or Morgan Stanley Asia (Singapore) Pte. (Registration number 199206298Z) and/or Morgan Stanley Asia
(Singapore) Securities Pte Ltd (Registration number 200008434H), regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its
contents and should be contacted with respect to any matters arising from, or in connection with, Morgan Stanley Research), and/or Morgan Stanley Taiwan
Limited and/or Morgan Stanley & Co International plc, Seoul Branch, and/or Morgan Stanley Australia Limited (A.B.N. 67 003 734 576, holder of Australian
financial services license No. 233742), and/or Morgan Stanley Wealth Management Australia Pty Ltd (A.B.N. 19 009 145 555, holder of Australian financial
services license No. 240813, and/or Morgan Stanley India Company Private Limited, regulated by the Securities and Exchange Board of India (“SEBI”) and
holder of licenses as a Research Analyst (SEBI Registration No. INH000001105), Stock Broker (BSE Registration No. INB011054237 and NSE Registration
No. INB/INF231054231), Merchant Banker (SEBI Registration No. INM000011203), and depository participant with National Securities Depository Limited
(SEBI Registration No. IN-DP-NSDL-372-2014) which accepts the responsibility for its contents and should be contacted with respect to any matters arising
from, or in connection with, Morgan Stanley Research and their affiliates (collectively, "Morgan Stanley").
For important disclosures, stock price charts and equity rating histories regarding companies that are the subject of this report, please see the Morgan
Stanley Research Disclosure Website at www.morganstanley.com/researchdisclosures, or contact your investment representative or Morgan Stanley
Research at 1585 Broadway, (Attention: Research Management), New York, NY, 10036 USA.
For valuation methodology and risks associated with any recommendation, rating or price target referenced in this research report, please contact the Client
Support Team as follows: US/Canada +1 800 303-2495; Hong Kong +852 2848-5999; Latin America +1 718 754-5444 (U.S.); London +44 (0)20-7425-8169;
Singapore +65 6834-6860; Sydney +61 (0)2-9770-1505; Tokyo +81 (0)3-6836-9000. Alternatively you may contact your investment representative or Morgan
Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY 10036 USA.
Global Research Conflict Management Policy
Morgan Stanley Research has been published in accordance with our conflict management policy, which is available at
www.morganstanley.com/institutional/research/conflictpolicies. A Portuguese version of the policy can be found at www.morganstanley.com.br
Important Disclosures
Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice within the
meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Morgan Stanley Research does not provide individually tailored investment advice. Morgan Stanley Research has been prepared without regard to the
circumstances and objectives of those who receive it. Morgan Stanley recommends that investors independently evaluate particular investments and
strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of an investment or strategy will depend on an investor's
circumstances and objectives. The securities, instruments, or strategies discussed in Morgan Stanley Research may not be suitable for all investors, and
certain investors may not be eligible to purchase or participate in some or all of them. Morgan Stanley Research is not an offer to buy or sell or the solicitation
of an offer to buy or sell any security/instrument or to participate in any particular trading strategy. The value of and income from your investments may vary
because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instruments prices, market indexes, operational or
financial conditions of companies or other factors. There may be time limitations on the exercise of options or other rights in securities/instruments
transactions. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be
realized. If provided, and unless otherwise stated, the closing price on the cover page is that of the primary exchange for the subject company's
securities/instruments.
The fixed income research analysts, strategists or economists principally responsible for the preparation of Morgan Stanley Research have received
compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues (which include fixed income trading
and capital markets profitability or revenues), client feedback and competitive factors. Fixed Income Research analysts', strategists' or economists'
compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular
trading desks.
With the exception of information regarding Morgan Stanley, Morgan Stanley Research is based on public information. Morgan Stanley makes every effort to
use reliable, comprehensive information, but we make no representation that it is accurate or complete. We have no obligation to tell you when opinions or
information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company. Facts and views
presented in Morgan Stanley Research have not been reviewed by, and may not reflect information known to, professionals in other Morgan Stanley business
areas, including investment banking personnel.
Morgan Stanley may make investment decisions that are inconsistent with the recommendations or views in this report.
To our readers based in Taiwan or trading in Taiwan securities/instruments: Information on securities/instruments that trade in Taiwan is distributed by Morgan
Stanley Taiwan Limited ("MSTL"). Such information is for your reference only. The reader should independently evaluate the investment risks and is solely
responsible for their investment decisions. Morgan Stanley Research may not be distributed to the public media or quoted or used by the public media without
the express written consent of Morgan Stanley. Any non-customer reader within the scope of Article 7-1 of the Taiwan Stock Exchange Recommendation
Regulations accessing and/or receiving Morgan Stanley Research is not permitted to provide Morgan Stanley Research to any third party (including but not
limited to related parties, affiliated companies and any other third parties) or engage in any activities regarding Morgan Stanley Research which may create or
give the appearance of creating a conflict of interest. Information on securities/instruments that do not trade in Taiwan is for informational purposes only and is
not to be construed as a recommendation or a solicitation to trade in such securities/instruments. MSTL may not execute transactions for clients in these
securities/instruments.
Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC. Morgan Stanley Research does
not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC. PRC investors shall have the relevant qualifications to invest in
such securities and shall be responsible for obtaining all relevant approvals, licenses, verifications and/or registrations from the relevant governmental
authorities themselves. Neither this report nor any part of it is intended as, or shall constitute, provision of any consultancy or advisory service of securities
investment as defined under PRC law. Such information is provided for your reference only.
Morgan Stanley Research is disseminated in Brazil by Morgan Stanley C.T.V.M. S.A. located at Av. Brigadeiro Faria Lima, 3600, 6th floor, São Paulo - SP,
Brazil; and is regulated by the Comissão de Valores Mobiliários; in Mexico by Morgan Stanley México, Casa de Bolsa, S.A. de C.V which is regulated by
Comision Nacional Bancaria y de Valores. Paseo de los Tamarindos 90, Torre 1, Col. Bosques de las Lomas Floor 29, 05120 Mexico City; in Japan by
Morgan Stanley MUFG Securities Co., Ltd. and, for Commodities related research reports only, Morgan Stanley Capital Group Japan Co., Ltd; in Hong Kong
by Morgan Stanley Asia Limited (which accepts responsibility for its contents) and by Morgan Stanley Asia International Limited, Hong Kong Branch; in
Singapore by Morgan Stanley Asia (Singapore) Pte. (Registration number 199206298Z) and/or Morgan Stanley Asia (Singapore) Securities Pte Ltd
(Registration number 200008434H), regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be
contacted with respect to any matters arising from, or in connection with, Morgan Stanley Research) and by Morgan Stanley Asia International Limited,
Singapore Branch (Registration number T11FC0207F); in Australia to "wholesale clients" within the meaning of the Australian Corporations Act by Morgan
Stanley Australia Limited A.B.N. 67 003 734 576, holder of Australian financial services license No. 233742, which accepts responsibility for its contents; in

11
Australia to "wholesale clients" and "retail clients" within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia
Pty Ltd (A.B.N. 19 009 145 555, holder of Australian financial services license No. 240813, which accepts responsibility for its contents; in Korea by Morgan
Stanley & Co International plc, Seoul Branch; in India by Morgan Stanley India Company Private Limited; in Vietnam this report is issued by Morgan Stanley
Singapore Holdings; in Canada by Morgan Stanley Canada Limited, which has approved of and takes responsibility for its contents in Canada; in Germany and
the European Economic Area where required by Morgan Stanley Europe S.E., regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin); in Spain
by Morgan Stanley, S.V., S.A., a Morgan Stanley group company, which is supervised by the Spanish Securities Markets Commission (CNMV) and states
that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under
Spanish regulations; in the United States by Morgan Stanley & Co. LLC, which accepts responsibility for its contents. Morgan Stanley & Co. International plc,
authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority, disseminates in
the UK research that it has prepared, and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000, research which has
been prepared by any of its affiliates. RMB Morgan Stanley Proprietary Limited is a member of the JSE Limited and regulated by the Financial Services Board
in South Africa. RMB Morgan Stanley Proprietary Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc. and RMB Investment
Advisory (Proprietary) Limited, which is wholly owned by FirstRand Limited.
The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners. Third-party data providers make no
warranties or representations relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages relating
to such data. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and S&P.
Morgan Stanley Research, or any portion thereof may not be reprinted, sold or redistributed without the written consent of Morgan Stanley.
Indicators and trackers referenced in Morgan Stanley Research may not be used as, or treated as, a benchmark under Regulation EU 2016/1011, or any other
similar framework.
The information in Morgan Stanley Research is being communicated by Morgan Stanley & Co. International plc (DIFC Branch), regulated by the Dubai
Financial Services Authority (the DFSA), and is directed at Professional Clients only, as defined by the DFSA. The financial products or financial services to
which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client.
The information in Morgan Stanley Research is being communicated by Morgan Stanley & Co. International plc (QFC Branch), regulated by the Qatar
Financial Centre Regulatory Authority (the QFCRA), and is directed at business customers and market counterparties only and is not intended for Retail
Customers as defined by the QFCRA.
As required by the Capital Markets Board of Turkey, investment information, comments and recommendations stated here, are not within the scope of
investment advisory activity. Investment advisory service is provided exclusively to persons based on their risk and income preferences by the authorized firms.
Comments and recommendations stated here are general in nature. These opinions may not fit to your financial status, risk and return preferences. For this
reason, to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations.
© 2019 Morgan Stanley

12