The political risk outlook investment pack examines political risk trends & events for the month ahead and discusses the implications for market. This summary pack is made available one-week after the release of the full pack for subscribers.

1. www.politicalmonitor.com.au!
Poli%cal
risk
outlook
–
investment
pack
April
2014

2. OUTLINE!
This presentation provides a summary of Political Monitor’s monthly Political risk outlook
– investment pack. It includes Political Monitor’s proprietary risk scores and indices and
domestic, regional and global analysis of the commercial implications of political trends
and events. The full pack is released to subscribers at the beginning of each month.!
!
To find out more about subscribing to the full monthly pack please contact:!
!
Damian Karmelich ! ! ! ! ! ! !Steve Cusworth!
Partner – Sydney ! ! ! ! ! ! !Partner - Melbourne!
p. 0407 772 548 ! ! ! ! ! ! !p. 0417 178 697!
e. karmelichd@politicalmonitor.com.au ! ! !e. cusworths@politicalmonitor.com.au !

3. CONTENTS!
• Australian Political Risk Outlook …………………………………………………………… p. 4!
• Asia Political Risk Outlook ………………………………………………………………….. p. 8!
• Food prices add to social tensions …… ……..….………..… ……...….……... p. 9!
• Elections in key markets …………...…………..…………………..…….……… p. 11!
• Global issues ………………………………..………………………….….……………...…. p. 13!
• Latest reports ……………………………………………………….……………...………… p. 18!
• Appendix 1 – Australian Political Risk Index methodology…….……………...…………. p. 21!
• Appendix 2 - Economic & investment impact of political and social instability ……….. p. 22!
!
! ! ! !!
Political risk outlook! 3!

4. AUSTRALIAN
POLITICAL
RISK
OUTLOOK

5. AUSTRALIAN POLITICAL RISK INDEX – political uncertainty
hit a 6 month high in March!
Political risk outlook! 5!
• Events
in
Crimea
and
the
Abbo:
Government’s
failure
to
repeal
the
carbon
and
mining
taxes
pushed
the
index
to
its
highest
level
in
6
months.
While
uncertainty
eased
in
the
la:er
half
of
March
the
index
remained
vola%le.
• While
the
Government’s
failure
to
repeal
the
two
taxes
was
expected
it
did
focus
investor
minds
on
the
reality
that
a
double-­‐dissolu%on
elec%on
in
the
second
half
of
the
year
is
a
real
possibility.
• The
outcome
of
the
Senate
elec%on
re-­‐run
in
Western
Australia
will
provide
cri%cal
insight
into
the
likelihood
of
a
new
Senate
in
July
repealing
the
taxes
or
pushing
the
country
toward
an
early
poll.
Any
elec%on
outcome
other
than
a
strong
showing
by
the
Government
will
increase
uncertainty
about
the
path
forward.
• Ongoing
tensions
in
Ukraine
are
likely
to
keep
investors
on
edge
as
the
crisis
begins
to
impact
prices
for
natural
gas,
gasoline
and
wheat
futures.
0
2
4
6
8
10
12
14
16
18
Poli%cal
Uncertainty
Score
Poli%cal
Risk
Index

6. AUSTRALIAN POLITICAL RISK INDEX & ASX200 – political &
policy uncertainty continues to weigh on key indices!
Political risk outlook! 6!
4800
4900
5000
5100
5200
5300
5400
5500
0
2
4
6
8
10
12
14
16
18
ASX
200
Poli%cal
Uncertainty
Score
Poli%cal
Risk
Index
vs.
ASX
200
PRI
ASX
200

7. STATE GOVERNMENT RISK INDEX – state governments
present elevated risk for investors!
Political risk outlook! 7!
• There
is
elevated
risk
across
a
number
of
states,
influenced
by
recent
elec%ons,
minority
government
and
con%nuing
budget
challenges.
However,
the
trend
is
improving
in
all
states
except
Victoria.
• New
South
Wales
edges
out
Western
Australia
as
the
state
with
the
lowest
level
of
poli%cal
risk
due
to
an
improving
budget
posi%on,
a
stable
Cabinet
and
a
large
parliamentary
majority.
• The
ongoing
instability
of
the
minority
Victorian
Government
is
an
obvious
factor
in
its
elevated
risk
levels
and
despite
leading
the
index
with
the
lowest
rela%ve
budget
risk,
Victoria
has
the
second
highest
overall
risk
score.
• The
outcome
of
the
South
Australian
elec%on
exposes
the
state
to
an
extended
period
of
elevated
risk
with
minority
government
and
budget
challenges
producing
significant
headwinds.
0
10
20
30
40
50
60
70
80
90
100
Total
Risk
Score
Budget
Risk
Policy
Risk
Stability
Risk
Reputa%onal
Risk
State
Poli%cal
Risk
Index
March
2014
NSW
Vic
Qld
WA
SA
Tas

8. ASIA
POLITICAL
RISK
OUTLOOK

9. ASIA
POLITICAL
RISK
INDEX
–
rising
food
prices
are
adding
to
tensions
already
evident
across
the
region
Political risk outlook! 9!
80
100
120
140
160
180
200
220
240
260
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Consumer
prices
–
Food
indices
(Food
&
Agriculture
Organisa%on,
United
Na%ons)
World
Asia
South
Eastern
Asia
East
Asia
• Household
budgets
across
Asia
are
coming
under
increasing
pressure
with
global
food
prices
experiencing
their
largest
increase
since
mid-­‐2012.
• The
United
Na2ons
Food
and
Agriculture
Organiza2on’s
monthly
food-­‐price
index
rose
5.2
points
in
February
as
drought
in
a
number
of
countries
pushed
up
the
price
of
soe
commodi%es
such
as
wheat
and
beef.
• Emerging
markets
generally
suffer
more
from
rising
food
prices
as
a
larger
propor%on
of
household
budgets
are
commi:ed
to
foodstuffs.
• Rising
food
prices
were
a
cri%cal
factor
in
the
Arab
spring
uprisings,
which
brought
thousands
of
residents
to
the
streets
angry
at
the
failure
of
largely
corrupt
governments
to
respond
quickly
to
the
stress
many
households
were
feeling.

10. ASIA
POLITICAL
RISK
INDEX
–
price
rises
are
greatest
in
countries
already
rated
a
VERY
HIGH
risk
on
the
Asia
Poli2cal
Risk
Index
Political risk outlook! 10!
Indonesia
–
rising
prices
are
increasing
the
pressure
on
household
budgets
in
a
country
where
nearly
45%
of
income
is
dedicated
to
foodstuffs
and
food
security
is
compara%vely
low.
Food
and
fuel
prices
will
be
core
issues
in
forthcoming
parliamentary
&
presiden%al
elec%ons.
China
–
with
around
one
third
of
household
budgets
dedicated
to
foodstuffs
rising
prices
are
always
a
cause
for
concern
for
the
Government
as
they
keep
a
close
eye
on
community
disquiet
about
extravagance
among
the
country’s
elite.
Thailand
–
while
rated
a
rela%vely
low
risk
the
validity
of
Thailand’s
rice
subsidy
program
and
rising
food
prices
are
combining
to
increase
the
pressure
on
Prime
Minister
Yingluck
Shinawatra.
0
50
100
150
200
250
300
350
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Consumer
prices
–
Food
indices
(Food
&
Agriculture
Organisa%on,
United
Na%ons)
China
Indonesia
Malaysia
Philippines
Thailand
Vietnam

11. ELECTIONS
IN
KEY
MARKETS
INDONESIA:
HIGH
RISK
• Jakarta
Governor
Joko
Widodo
has
emerged
as
firm
favourite
for
the
presidency.
However,
Indonesia’s
geographic,
ethnic
and
religious
diversity
means
he
will
likely
rely
on
a
parliamentary
coali%on
to
govern
making
it
harder
to
push
through
economic
reform.
• With
youth
unemployment
approaching
30%
in
a
country
where
over
25%
of
the
popula%on
is
under
the
age
of
30
there
remains
considerable
scope
for
social
discontent.
This
is
fer%le
ground
for
religious
extremists
in
par%cular.
• Rising
prices
are
also
a
cause
for
social
disquiet
with
the
price
of
Brent
crude
rising
over
20%
in
local
currency
terms
pumng
pressure
on
fuel
prices.
This
has
been
further
exacerbated
by
an
end
to
government
fuel
subsidies.
• The
elec%on
has
coincided
with
a
rise
in
economic
na%onalism
that
may
con%nue
aeer
the
parliamentary
and
presiden%al
elec%ons,
par%cularly
if
Widodo
feels
such
policies
are
necessary
to
build
an
effec%ve
parliamentary
majority.
Political risk outlook! 11!
0
5
10
15
20
25
30
Percentage
increase
in
ICE
Brent
crude
(local
currency)
1
July
2013
-­‐
24
February
2014
%
increase
in
local
currency
%
ICE
Brent
Crude
Increase
9000
9500
10000
10500
11000
11500
12000
12500
1/04/2013
1/05/2013
1/06/2013
1/07/2013
1/08/2013
1/09/2013
1/10/2013
1/11/2013
1/12/2013
1/01/2014
1/02/2014
1/03/2014
1/04/2014
USD
:
Indonesian
Rupiah

12. ELECTIONS
IN
KEY
MARKETS
–
INDIA:
HIGH
RISK
• The
outlook
for
the
Indian
elec%on
is
uncertain.
While
the
BJP
are
polling
strongly
local
state
based
par%es
are
also
faring
well
and
are
likely
to
influence
the
make-­‐up
of
any
eventual
government.
• Key
themes
remain
corrup%on,
employment
and
investment.
However,
the
level
of
government
support
for
farmers
also
remains
a
central
issue
and
this
introduces
a
major
impediment
to
significant
structural
reform.
• The
risk
of
social
discord
is
ever
present
with
around
30%
of
the
popula%on
living
below
the
poverty
line
and
tens
of
millions
of
young
people
unemployed.
• Food
prices
are
also
a
concern
with
around
35%
of
household
budgets
dedicated
to
foodstuffs.
• While
investors
are
hopeful
of
a
new
government
that
will
pursue
reform
they
should
be
mindful
of
the
likely
challenges
for
either
of
the
major
par%es
in
building
a
governing
coali%on
and
the
implica%ons
for
reform
in
the
second
half
of
2014.
Political risk outlook! 12!
50
52
54
56
58
60
62
64
66
68
70
USD
:
Indian
rupee

13. GLOBAL
ISSUES

14. CRISIS
IN
THE
UKRAINE
–
MARKETS
STARTING
TO
PAY
ATTENTION
• Events
in
Ukraine
are
beginning
to
have
ramifica%ons
beyond
Eastern
Europe
with
prices
for
hard
and
soe
commodi%es
rising
off
the
the
back
of
growing
uncertainty.
• Natural
gas
prices
have
been
vola%le
rising
as
much
as
6%
in
Q1
2014
before
easing
at
the
end
of
the
quarter
while
gasoline
prices
increased
over
8%
during
the
same
period.
Wheat
futures
rose
over
16.5%
in
a
poten%al
boon
for
Australian
farmers.
Russia
&
Ukraine
combined
contribute
around
17%
of
global
wheat
exports.
• Tensions
are
likely
to
remain
vola%le
in
the
region
with
Russia
set
to
con%nue
meddling
in
the
east
of
Ukraine
to
disrupt
efforts
by
Kiev
to
form
a
strong
central
government.
• Sanc%ons
are
unlikely
to
dissuade
Vladimir
Pu%n
from
further
ac%on.
He
is
well
aware
of
Europe’s
dependence
on
Russia
for
energy
and
an
end
to
the
US$200bn
–
US$300bn
in
gas
subsidies
to
Ukraine
will
more
than
offset
the
cost
of
sanc%ons.!
! ! ! !!
!
Political risk outlook! 14!
550
600
650
700
750
2/01/2014
2/02/2014
2/03/2014
CBOT
Wheat
Futures
3.5
4
4.5
5
5.5
6
6.5
2/01/2014
2/02/2014
2/03/2014
NYMEX
Natural
Gas
Futures

15. THE
FUTURE
OF
THE
EU
–
ELECTIONS
APPROACH
• EU
elec%ons
in
May
will
determine
the
extent
to
which
Europe’s
leader
can
push
on
with
a
program
of
deeper
integra%on
including
a
banking
union
&
public
debt
guarantees.
• A
coali%on
of
right-­‐wing
par%es
across
the
con%nent
are
campaigning
on
a
promise
to
join
forces
in
Brussels
and
wind
back
the
European
project.
The
popularity
of
these
par%es
rest
on
sluggish
growth
in
countries
like
France,
concerns
about
migra%on
within
the
EU
&
hos%lity
to
austerity.
• The
early
signs
are
good
for
this
coali%on:
the
Front-­‐
Na%onal
(FN)
in
France
gained
control
of
11
local
councils
in
recent
elec%ons
(up
from
its
record
high
of
4);
Freedom
Party
of
Austria
won
over
20%
of
the
vote
in
2013
elec%ons;
Swiss
People’s
Party
won
26%
of
the
vote
in
2011;
and
polls
show
strong
support
for
the
UK
Independence
Party.
!
! Political risk outlook! 15!
0
50
100
150
200
250
1/01/08
1/05/08
1/09/08
1/01/09
1/05/09
1/09/09
1/01/10
1/05/10
1/09/10
1/01/11
1/05/11
1/09/11
1/01/12
1/05/12
1/09/12
1/01/13
1/05/13
1/09/13
Economic
Policy
Uncertainty
Index
-­‐
Europe
2
2.5
3
3.5
4
4.5
5
French
share
of
global
GDP
based
on
PPP,
%

16. THE
FUTURE
OF
THE
EU
–
UNEMPLOYMENT
A
KEY
DRIVER
OF
SUPPORT
FOR
RIGHT
WING
PARTIES
Political risk outlook! 16!
European
unemployment
rates
–
Feb
2014
(seasonally
adjusted)

17. THE
FUTURE
OF
THE
EU
–
ELEVATED
LEVELS
OF
YOUTH
UNEMPLOYMENT
UNDERPIN
ANTI-­‐EU
SUPPORT
Political risk outlook! 17!
8.0
10.0
12.0
14.0
16.0
18.0
20.0
22.0
24.0
26.0
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
2013Q2
2013Q3
2013Q4
EU
unemployment
-­‐
total
pop.
versus
youth
Unemployment
-­‐
total
popula%on
(%)
Unemployment
-­‐
youth
(%)

18. LATEST
REPORTS
! ! !Australian
PoliEcal
Risk
Index
Weekly
updates
on
our
proprietary
index
tracking
poli%cal
and
policy
uncertainty
in
Australia.
State
Government
Risk
Index
Which Australian states present the greatest risk and offer the biggest !
! ! !opportunity for investors? Our State Government Risk Index provides a
! ! !comparative analysis.!
PoliEcal
risk,
ESG
&
markeEng
performance
Poli%cal
Monitor
examines
the
latest
data
on
the
link
between
ESG
and
market
performance. ! ! !!
Political risk outlook! 18!

19. Detailed analysis on these and other political risks confronting investors can be found at
www.politicalmonitor.com.au!
!
To find out more contact:!
!
Damian
Karmelich
Steve
Cusworth
Partner
-­‐
Sydney
Partner
-­‐
Melbourne
p.
0407
772
548
p.
0417
178
697
e.
karmelichd@poli%calmonitor.com,au
e.
cusworths@poli%calmonitor.com.au!
!
About Political Monitor!
Political Monitor is a political risk research and advisory firm. Our analysis provides
insight into the implications of political risk for commercial valuations, asset selection,
investment decisions, strategic planning and operational decisions. !
!
Political risk outlook! 19!

20. DISCLAIMER & COPYRIGHT!
Disclaimer !
Information in this document is subject to change without notice and does not represent a commitment on the part of Seller.!
Seller does not warrant the accuracy, completeness or timeliness of any of the data and/or programs (“Information”) available within the report.
The Information is provided “as is” without warranty of any kind, express or implied, including, but not limited to, implied warranties of
merchantability, fitness for a particular purpose, title or non-infringement.!
In no event will Seller or its affiliates be liable to any party for any direct, indirect, special, consequential or other damages for any use of or
reliance upon the Information found within the report, or on any other reference documentation, including, without limitation, lost profits,
business interruption, loss of programs or other data, even if Seller is expressly advised of the possibility of such damages.!
The disclaimer is in addition to the specific terms and conditions that apply to the products or services offered by Seller.!
Copyright!
Copyright © Political Monitor Pty Ltd 2014. This document is copyright and contains confidential information that is the property of Seller.
Except for the purposes of executing or applying this report, no part of this document may be copied, stored in a retrieval system or divulged to
any other party without written permission. Such rights are reserved in all media.!
Intellectual property rights associated with the methodology applied in arriving at this document, including templates and models contained
there in, reside with Political Monitor Pty Ltd, excepting client information it contains that is demonstrably proprietary to the client or covered by
an agreement or contract defining it as such.!
No part of this report may be reproduced, transmitted, stored in a retrieval system, or translated into any language in any form by any means,
without the written permission of Political Monitor Pty Ltd.!
© Political Monitor Pty Ltd 2014. All Rights Reserved . ACN 166 162 572.!
Political risk outlook! 20!

21. APPENDIX
1
-­‐
AUSTRALIAN
POLITICAL
RISK
INDEX
METHODOLOGY
The
Poli%cal
Monitor
Australian
Poli2cal
Risk
Index
is
a
dynamic
index
that
tracks
the
level
of
policy
uncertainty
in
Australia
relying
on
a
number
of
variables
including
market
vola%lity
and
the
dispersion
of
private
sector
economic
forecasts.
The
index
is
refreshed
daily
providing
an
up
to
date
gauge
of
poli%cal
and
policy
uncertainty.
!
!
!
!
!
Political risk outlook! 21!

22. APPENDIX
2
-­‐
ECONOMIC
&
INVESTMENT
IMPACT
OF
POLITICAL
&
SOCIAL
INSTABILITY
–
DOES
IT
MATTER?
• Poli%cal
risk
is
the
second
ranked
concern
for
publicly
traded
companies
…
"Looking
ahead,
investors
con%nue
to
be
wary
about
the
effects
of
systemic
risk,
poli%cs
and
regula%on
on
the
world's
markets
and
how
they'll
perform.”
(BNY
Mellon,
Global
Trends
in
Investor
Rela2ons,
2014).
• In
general
poli%cal
instability
results
in:
• (a)
lower
economic
growth
(Aisen
&
Veiga,
2013)
• (b)
reduced
private
sector
investment
(Alesina
&
PeroQ)
• (c)
increased
infla%on
levels
&
vola%lity
(Aisen
&
Veiga,
2008).
• The
economic
effects
of
poli%cal
&
social
instability
remain
for
an
observable
period
of
2
–
3
years.
The
key
determinant
of
whether
the
effect
of
instability
ceases
at
that
point
is
the
speed
with
which
countries
implement
reforms
&
improve
governance
(Bernal-­‐Verdugo,
Furceri
&
Guillaume,
IMF
Working
Paper,
2013).
• An
increase
in
economic
policy
uncertainty
foreshadows
a
decline
in
economic
growth
and
employment
in
the
following
months
(Baker,
Bloom
&
Davis,
EPU).
• The
Interna%onal
Monetary
Fund
(IMF)
es%mates
the
economic
loss
to
Libya,
Egypt,
Tunisia,
Syria,
Yemen,
and
Bahrain
in
2011
at
USD$20.56
billion
as
a
result
of
poli%cal
and
social
conflict.
!
! ! ! !! Political risk outlook! 22!