Good morning,

Markets are trading higher this morning after the Euro Stoxx 50 ended the week 2.14% lower in Europe pushing down the year to date performance to a negative 2.5%. The main reason for the positive start this week is the report issued by the Japanese Government that indicated a removal of caps on equity ownership in pension funds. Tensions in Ukraine and Iraq will continue to drive volatility in the markets. However, this creates attractive entry points into equities. An investor can take advantage of the negative momentum in the markets and position his portfolio for when the markets turn positive. Rather than trying to pick a bottom (which is impossible) look at the technical indicators and amalgamate them with fundamentals giving you a better picture for the long term. The most important thing is to invest in companies which are trading on attractive multiples, have visibility into future earnings and the current price is taking into account a greater discount for the current geopolitical risks than is warranted for the company in question.

From a technical point of view the Euro Stoxx 50 is indicating that the markets are trading at the lower level of the range. An investor may look at investing in the Euro Stoxx 50 and/or individual companies within the index which in his option are in an oversold position. The best performers in the Index so far this year which have seen an appreciation in price close to 20% are Orange, Intesa Sanpaolo, Enel and Iberdrola. Whereas companies which have underperformed and dragged down the performance of the index so far this year include Inditex, Axa, BNP, Societe Generale, Deutsche Post and Airbus. A strategy an investor might want to adopt is to go long the Euro Stoxx 50 which is indicating an attractive entry point. That way an investor would have taken advantage of the weakness in the market and added a position in a diversified index with Blue Chip companies. Together with the index, an investor could carry out a valuation (or get professional advice to do so) on the stocks within the index in order to take some positions in these individual names. These positions will create alpha in the portfolio. Obviously, the valuations and assumptions within the valuations will make all the difference. This type of strategy is adopted by most fund managers whose job is that of beating the index. Being exposed to just the index will result in an individual’s portfolio moving in line with the market. The target of the manager is to beat this index and he does so by picking up undervalued stocks with the expectations that they will generate higher returns than the index when the market momentum turns back to being positive.

In company news, Amazon is taking on Walt Disney and its superheroes in its fight to gain more control over pricing online. Amazon blocked pre-orders of Disney’s summer hit movie “Captain America: The Winter Soldier” and other titles in disk form, repeating a tactic used in recent disputes with book publisher Hachette and Warner Bros. The move signals that Amazon, the world’s largest Web

retailer, is increasingly willing to keep certain items from consumers to put pressure on its vendors. It also spotlights the extent of Amazon’s clout in the home-entertainment market. Studios count on sales of DVD and Blu-ray versions of their movies to help deliver profits because few films reach profitability in theaters.

BNP Paribas Chairman Baudouin Prot may leave in the next few months and be succeeded by Jean Lemierre, a senior adviser at the French bank, Le Journal du Dimanche reported, without saying where it got the information. BNP Paribas last month posted its largest ever quarterly loss and replaced its compliance chief after a record fine for doing business with Sudan and other countries blacklisted by the U.S. BNP Paribas, based in Paris, was fined $8.97 billion after pleading guilty to criminal charges in the U.S. in June.

Good day and happy trading!

Kristian Camenzxuli