<p></p><p>Asia: 2008 Outlook<br/>7 December 2007<br/>2 Citigroup Global Markets ª¥ Equity Research<br/>Dear Client<br/>Welcome to the fifth edition of The Road Ahead. Whatever else might be said about the year that is drawing to a close, it<br/>has certainly not been dull or uneventful. Nor do I come across many people who expect 2008 to be any more settled or<br/>predictable. Our promise is that we will intensify our efforts to broaden your range of investment perspectives and<br/>actionable ideas at a time of maximum uncertainty and minimum clarity.<br/>As you will see from the title of this report, our regional strategist Markus Rosgen is<br/>predicting the MSCI Asia ex-Japan will fall 20-25% next year, bringing regional<br/>valuations back to their fair-value trendline. To be clear, though: this is a correction<br/>in a secular bull market and not the end of the Asian growth story. Of course, volatile<br/>markets present excellent opportunities for the informed investor ¨C a window in which<br/>to be greedy while others are fearful, to cite a Warren Buffet coinage. Capital<br/>preservation is not a shameful strategy either. For those who believe the risks are<br/>mostly to the downside, this issue of Road Ahead looks at sectors and stocks that<br/>would be most exposed in various bear-case scenarios.<br/>Our analysts don't need reminding that fading momentum in Asian markets means<br/>they have to challenge rigorously their bottom-up assumptions and valuation<br/>frameworks. We continue to be proud that our 731-strong stock coverage has the<br/>highest proportion of Sells (24%) and smallest ratio of Holds (13%) of any major<br/>research house in Asia. Some of our Sell-rated stocks are the bluest of Asian blue<br/>chips. Many are first-class businesses run in a first-class way, but we will never argue<br/>that stocks are worth buying at any price.<br/>A key part of our function continues to be bringing together investors and corporate decision-makers for group and oneon-<br/>one meetings. To an already busy conference schedule, we added inaugural events in Indonesia, Korea and Taiwan<br/>during 2007, as well as conferences on regional property, climate change, small caps and Indochina. Our second Greater<br/>China Conference built on the success of the first, with hugely positive feedback from clients and corporates alike. We<br/>hope to see you at these events in 2008.<br/>For those of us toiling at the research coal-face, it was reassuring to come across an article sub-titled "Rumours of the<br/>death of research have been exaggerated" that appeared in The Economist in August and that offered the view: "As<br/>uncertainty grows, investors seem to be placing a higher value on research than they did only months ago." The Road<br/>Ahead 2008 is part of our pledge to be visible, anticipatory and bold at a time when the fog of uncertainty is thickening.<br/>Warm regards,<br/>Adrian Faure<br/>Director of Asia Research<br/>7 December 2007, Hong Kong<br/></p>