We are lowing our recommended weighting in Japanese
banks from Overweight to Marketweight.
• Without further rate rises from the Bank of Japan (BOJ)
we see spreads contracting and bank earnings stalling.
Higher credit costs are also a concern.
• Due to recent sharp underperformance, we are raising
Chuo Mitsui Trust from In Line to Outperform but cutting
Sumitomo Trust from Outperform to In Line.
• Due to strong valuations support we continue to
maintain an Overweight position in Insurance, despite
the sector’s recent outperformance.
• Sompo Japan and Sony Financial Holdings are our
preferred insurance picks.

TABLE OF CONTENTS
Summary.............................................................................................................................. 4
Fair values – changing the matrix .................................................................................... 10
Banks ............................................................................................................................................ 10
Insurers ......................................................................................................................................... 13
Take your pick .................................................................................................................... 15
Interest rates....................................................................................................................... 16
Banks ............................................................................................................................................ 16
Non-life insurance .......................................................................................................................... 20
Life insurance................................................................................................................................ 22
Equity markets ................................................................................................................... 23
Banks ............................................................................................................................................ 23
Non-life insurers ............................................................................................................................. 24
Life insurers................................................................................................................................... 25
Subprime and international credit.................................................................................... 26
Mega banks................................................................................................................................... 27
Insurers ......................................................................................................................................... 28
Domestic credit .................................................................................................................. 30
Banks ............................................................................................................................................ 30
Insurers ......................................................................................................................................... 32
Appendix: International credit exposures....................................................................... 33
Disclosure information ...................................................................................................... 37