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Notable trends and dislocations (Asia) Most regions in Asia reported modest declines last week, led by Hong Kong’s HSCEI, which lost 2.0% week-over-week. Much of the decline came on Thursday following the US Fed’s decision to hike rates 25bps. Also in China, the People’s Bank of China (PBOC) injected 410bn yuan (about $60bn) into the financial system via reverse-repos, the largest cash boost since January. The central bank said the funds are meant to ease concern amid a seasonal funding squeeze. The biggest contributors to the index’s loss were financials names, including China Life Insurance (2628 HK), which fell 5.7%, Ping An Insurance Group Co of China Ltd (2318 HK}, which dropped 3.7%, Bank of China Ltd (3988 Hk), which declined 1.8%, and China Merchants Bank Co Ltd (3968 Hk), which fell 5.7%. We saw a similar decline from Hong Kong’s HSI index, which lost 1.6% percent last week. After the HSCEI and HSI, last week’s biggest losers were Korea’s KOSPI and India’s NIFTY, which each returned -0.8% week-over-week. In Japan, the Nikkei fell 0.3%. On Friday, the Bank of Japan (Bo}) left its monetary policy unchanged—it will continue to control the yield curve via its negative benchmark rate and its asset purchasing program. The final region to report a loss last week was Taiwan’s TWSE, which lost 0.4%. On the other hand, the only region to see a gain last week was Australia, which saw its ASX 200 benchmark increase 1.7% week-over-week. The biggest contributors to the gain were Commonwealth Bank of Australia (CBA AU}, which gained 3.4%, Westpac Banking Corp (WBC AU), which increased 1.9%, and CSL Ltd (CSL AU), which added 2.9%. 10 day realized vol picked up in Asia last week, up 2.0 vol points to 9.6% « Asian 3m ATM volatility declined on average 0.1 vol point to 12.3% last week, while 10 day realized vol increased on average 2.0 vol points to 9.6%. Notably, the HSI's realized vol increased 5.4 vol points, the biggest increase in the region. On the other hand, the NKY was the only index to see a decline in 10 day realized vol—it dropped 4.3 vol points week-over-week to 7.2%. ¢ On average, term structures among Asian indices steepened by 0.2 vol points to 4.2% last week. The TWSE 12M-1M term structure steepened the most, increasing 1.0 vol point to 2.9%. On the other hand, Hong Kong’s HS! saw the only flattening as its term structure flattened 0.1 vol point to 4.9%. e Asian 3M 90-110% skews widened 0.5 vol points on average to 3.8%. Taiwan’s TWSE widened the most, increasing 2.3 vol points to -0.2%. Table 7: Volatility measures of major Asian indices (data as of 16-Jun-17) 3Mth ATM Implied Volatility 10D Realized Volatility {2Mth-1Mth ATM Vol Spread 3Mth 90-110 Skew Spread Equity Market Weekly 4Yr Weekly 4Yr Weekly 4Yr Weekly 4Yr Weekly Current change percentile Current change percentile Current change percentile Current change percentile return HSI 124% 0.2% 2.1% 10.2% 54% 20.6% 49% 0.1% 97 8% 3.3% 0.9% 414% -1.6% HSCEI 15.0% 0.4% 0.0% 10.7% 48% 78% 5.4% 0.2% 98.1% 14% 0.5% 36.5% -2.0% NKY 13.8% 0.2% 0.1% 7.2% 43% 1.8% 5.8% 0.5% 99.9% 5.8% 0.0% 13.9% 0.3% KOSPI 200 = 12.2% 0.2% 19.7% 11% 11% 53.1% 40% 0.2% 17.0% 3.8% 0.3% 43.7% -0.8% ASX 200 11.8% 0.2% 17.7% 157% 51% TT 1% 2.1% 0.0% 59.5% 6.4% 0.1% 22.5% 1.7% NIFTY 10.7% 0.2% 2.2% 48% 1.0% 0.4% 4.0% 0.0% 16.1% 5.9% 0.1% 64.1% -0.8% TWSE 10.5% 0.6% 1.2% 78% 1.0% 20.3% 2.9% 1.0% 112% 0.2% 2.3% 3.9% 0.4% Source: BofA Merrill Lynch Global Research Bankof America 18 Global Equity Volatility Insights | 20 June 2017 Merrill Lynch HOUSE_OVERSIGHT_014989