Table of contents
Differentiate 3
Defensives: Prefer personal household goods 8
Consumer cyclicals: Local macro headwinds vs. BRICs exposure 14
Industrial cyclicals: We prefer industrial goods 21
Commodity-related sectors: Still constructive on oil & resources 24
Financials: A grim outlook for the super-sector 27
Disclosures 30


More differentiation in 2010
As we move from the ‘hope’ to the ‘growth’ phase of the cycle, we expect sector performance to be driven increasingly by the
sustainability of growth. This should not preclude some cyclical sectors from outperforming, but those that we prefer reflect expected growth over the course of the cycle rather than economic sensitivity per se.
Stay exposed to commodity-related sectors Commodities and BRICs exposure are two areas of sustainable growth;
we maintain our overweights on oil & gas, basic resources, industrial goods and autos. We raise personal household goods to overweight, reflecting the high EM exposure, particularly for luxury and tobacco.
Less positive on financials We downgrade banks to neutral following strong performance, but continue to favour large global retail banks (GSSBBKGL). We downgrade insurance to underweight as it faces structural issues and islikely to be constrained by low rates.