Silvia Quandt & Cie. AG, Merchant & Investment Banking: In-between the lines - Bernhard Eschweiler
DGAP-News: Silvia Quandt & Cie. AG, Merchant & Investment Banking /
Schlagwort(e): Sonstiges
Silvia Quandt & Cie. AG, Merchant & Investment Banking: In-between the
lines - Bernhard Eschweiler
24.02.2012 / 15:44
---------------------------------------------------------------------
- Greece becomes sideshow as confidence in Euro recovers ...
- ... and economic news improve
- Target2 balances reflect ECB's interbank policy and not transfer
payments
- Deleveraging, however, means the party will not last forever
The equity rally has taken a breather for the last few days, partly
triggered by worries over tensions in the Middle East, but a lasting change
in direction seems unlikely. Market optimism reflects signs that global
economic activity is reaccelerating and rising confidence that the Euro
debt crisis will not spiral out of control. From Germany, the key news
this week was the better-than-expected February IFO survey, which provides
further evidence that the economy is recovering from the soft patch at the
end of last year.
Of course, trouble spots such as Greece remain. The second Greek bailout
package is highly conditional and could fall apart in a few weeks if Greece
fails to implement the promised reforms. But the risk of a Greek default
is troubling markets less. Especially the ECB liquidity injections, which
are spreading from the banking sector into sovereign bonds, have been
instrumental in turning confidence. All the good news, however, should not
disguise the fact that we are in the middle of a deleveraging period. That
means economic and market cycles are shorter. The party is not yet over
but may not last as long as in the good old days.
Target2 balances and ECB liquidity measures
The return of confidence is visible across financial markets. Equity
markets have taken the lead followed by sovereign and bank credits. The
10-year PIIGS spread over Bunds, for example, dropped 150bps since the
start of the year. Liquidity measures have also improved. The 3-month
OIS-Euribor spread fell from 101bps to 67bps. To be sure, the interbank
market is still impaired, but a meltdown has been averted by ECB liquidity
injections.
Encouragingly, after hitting record highs in January, bank deposits at the
ECB have dropped visibly in the last weekly report (from EUR508 billion to
EUR454 billion). Further success in stabilizing the Euro debt crisis
should also result in a gradual decline of the Target2 balances, which some
commentators view as hidden fiscal transfer from Germany and a few other
core countries to the periphery. The surge in Target2 balances (positive
and negative) is a reflection of the ECB's policy response to the collapse
of the interbank market and not a design flaw that makes a few surplus
countries pay for the debts of the deficit countries. If the latter was
true, not the Germans but the citizens of Luxembourg would be the biggest
losers (per capita Target2 claims in Luxembourg are about a quarter million
Euros versus just about EUR6000 in Germany).
According to the latest Target2 figures, the imbalance between surplus
countries and deficit countries exceeds EUR800 billion, an increase of more
than EUR400 billion from a year earlier. The rise is much larger than what
could be explained by current account imbalances. In fact, Austria and
Belgium had current account surpluses yet their Target2 balances slipped
further into the red. Instead, the main source of current imbalances
within the Euro area is capital flows. Those capital flow imbalances,
however, equate only into similar Target2 imbalances if the ECB
accommodates banks' liquidity needs.
By granting the banks unlimited liquidity at low rates and relaxing
collateral criteria the ECB prevented a financial crisis that would have
been much worse than the Lehman crisis. Interestingly, ECB claims versus
the banking system increased by about the same amount as the increase of
Target2 imbalances over the last year. If the ECB would conduct its
liquidity operations directly with the banks and not through the NCBs no
smart German professor would have spotted it. Reducing the Target2
balances, which means healing the Euro-area interbank market, will take a
long time, but there are some positive signs. Ireland reduced its negative
balance by EUR29 billion in 2011. Portugal's banks needed no additional
liquidity support last year and the same has been true for Italian banks
since the start of the year.
Deleveraging changes cyclical patterns
Better economic news, more stability in the Euro area and improved market
sentiment cannot change the fact that the major industrialized economies,
especially the US and much of Europe, are in a deleveraging period. That
has far reaching economic and financial implications. For the real
economy, deleveraging causes lower trend growth as well as higher output
volatility. In particular, upswings are not amplified and extended by the
creation of credit. As a result, the impact of short-term factors such as
inventory swings, tech cycles and shocks like the Japanese earth quake or
the Thai floods becomes more pronounced. Indeed, most major economies have
already undergone two up-and-down swings since the financial crisis and are
currently entering the third upswing.
The positive momentum in leading indicators will probably last into the
second quarter, but the probability that this will be followed by another
downswing increases toward the middle of the year. The German economy is
not plagued by excess leverage. In fact, the earlier restructuring means
that its growth potential has probably increased. However, that does not
insulate Germany from the short-term swings in global activity.
Deleveraging has a similar impact on financial markets as on economic
activity. This is most visible in equity markets. Equity markets trace
the movements in economic activity closely. Thus, more economic volatility
means also more market volatility. This is further compounded by the
structural withdrawal of long-term investors, such as insurance companies,
from risky assets such as equity. Deleveraging leads also to lower equity
valuations. The DAX PE ratio, for example, is currently a third lower than
its pre-crisis cyclical average. Companies use less credit to raise
shareholder value, while the demand for stocks is restrained by the lack of
leverage. Higher cyclical volatility and lower valuations means that
equity markets will behave more like trading markets. For the DAX, the
trading range is probably between 5,000 and 7,500.
Disclaimer
This analysis was prepared by Bernhard Eschweiler, Senior Economic Advisor,
and was first published 24 February 2012, Silvia Quandt Research GmbH,
Grüneburgweg 18, 60322 Frankfurt is responsible for its preparation. German
Regulatory Authority: Bundesanstalt für Finanzdienstleistungsaufsicht
(BaFin), Graurheindorfer Str. 108, 53117 Bonn and Lurgiallee 12, 60439
Frankfurt.
Publication according to article 5 (4) no. 3 of the German Regulation
concerning the analysis of financial instruments (Finanzanalyseverordnung):
Number of recommendations Thereof recommendations for issuers to which
from Silvia Quandt Research investment banking services were provided
during
GmbH in 2012 the preceding twelve months
Buys: 98 36
Neutral: 51 6
Avoid: 10 0
Company disclosures
Article 34b of the German Securities Trading Act (Wertpapierhandelsgesetz)
in combination with the German regulation concerning the analysis of
financial instruments (Finanzanalyseverordnung) requires an enterprise
preparing a securities analysis to point out possible conflicts of interest
with respect to the company or companies that are the subject of the
analysis. A conflict of interest is presumed to exist, in particular, if an
enterprise preparing a security analysis:
(a) holds more than 5 % of the share capital of the company or companies
analysed;
(b) has lead managed or co-lead managed a public offering of the
securities of the company or companies in the previous 12 months;
(c) has provided investment banking services for the company or companies
analysed during the last 12 months for which a compensation has been or
will be paid;
(d) is serving as a liquidity provider for the company's securities by
issuing buy and sell orders;
(e) is party to an agreement with the company or companies that is the
subject of the analysis relating to the production of the recommendation;
(f) or the analyst covering the issue has other significant financial
interests with respect to the company or companies that are the subject of
this analysis, for example holding a seat on the company's boards.
In this respective analysis the following of the above-mentioned conflicts
of interests exist: none
Silvia Quandt Research GmbH, Silvia Quandt & Cie. AG, and its affiliated
companies regularly hold shares of the analysed company or companies in
their trading portfolios. The views expressed in this analysis reflect the
personal views of the analyst about the subject securities or issuers. No
part of the analyst's compensation was, is or will be directly or
indirectly tied to the specific recommendations or views expressed in this
analysis. It has not been determined in advance whether and at what
intervals this report will be updated.
Equity Recommendation Definitions Silvia Quandt Research GmbH analysts rate
the shares of the companies they cover on an absolute basis using a 6 -
12-month target price. 'Buys' assume an upside of more than 10% from the
current price during the following 6 - 12-months. These securities are
expected to out-perform their respective sector indices. Securities with an
expected negative absolute performance of more than 10% and an
under-performance to their respective sector index are rated 'avoids'.
Securities where the current share price is within a 10% range of the
sector performance are rated 'neutral'. Securities prices used in this
report are closing prices of the day before publication unless a different
date is stated. With regard to unlisted securities median market prices are
used based on various important broker sources (OTC-Market).
Disclaimer This publication has been prepared and published by Silvia
Quandt Research GmbH, a subsidiary of Silvia Quandt & Cie. AG. This
publication is intended solely for distribution to professional and
business customers of Silvia Quandt & Cie. AG. It is not intended to be
distributed to private investors or private customers. Any information in
this report is based on data obtained from publicly available information
and sources considered to be reliable, but no representations or guarantees
are made by Silvia Quandt Research GmbH with regard to the accuracy or
completeness of the data or information contained in this report. The
opinions and estimates contained herein constitute our best judgement at
this date and time, and are subject to change without notice. Prior to this
publication, the analysis has not been communicated to the analysed
companies and changed subsequently. This report is for information purposes
only; it is not intended to be and should not be construed as a
recommendation, offer or solicitation to acquire, or dispose of, any of the
securities mentioned in this report. In compliance with statutory and
regulatory provisions, Silvia Quandt & Cie. AG and Silvia Quandt Research
GmbH have set up effective organisational and administrative arrangements
to prevent and avoid possible conflicts of interests in preparing and
transmitting analyses. These include, in particular, inhouse information
barriers (Chinese walls). These information barriers apply to any
information which is not publicly available and to which any of Silvia
Quandt & Cie. AG and Silvia Quandt Research GmbH or its affiliates may have
access from a business relationship with the issuer. For statutory or
contractual reasons, this information may not be used in an analysis of the
securities and is therefore not included in this report. Silvia Quandt &
Cie. AG and Silvia Quandt Research GmbH, its affiliates and/or clients may
conduct or may have conducted transactions for their own account or for the
account of other parties with respect to the securities mentioned in this
report or related investments before the recipient has received this
report. Silvia Quandt & Cie. AG and Silvia Quandt Research GmbH or its
affiliates, its executives, managers and employees may hold shares or
positions, possibly even short sale positions, in securities mentioned in
this report or in related investments. Silvia Quandt & Cie. AG in
particular may provide banking or other advisory services to interested
parties. Neither Silvia Quandt Research GmbH, Silvia Quandt & Cie. AG or
its affiliates nor any of its officers, shareholders or employees accept
any liability for any direct or consequential loss arising from any use of
this publication or its contents. Copyright and database rights protection
exists in this publication and it may not be reproduced, distributed or
published by any person for any purpose without the prior express consent
of Silvia Quandt Research GmbH. All rights reserved. Any investments
referred to herein may involve significant risk, are not necessarily
available in all jurisdictions, may be illiquid and may not be suitable for
all investors. The value of, or income from, any investments referred to
herein may fluctuate and/or be affected by changes in exchange rates. Past
performance is not indicative of future results. Investors should make
their own investment decisions without relying on this publication. Only
investors with sufficient knowledge and experience in financial matters to
evaluate the merits and risks should consider an investment in any issuer
or market discussed herein and other persons should not take any action on
the basis of this publication.
Specific notices of possible conflicts of interest with respect to issuers
or securities forming the subject of this report according to US or English
law: None
This publication is issued in the United Kingdom only to persons described
in Articles 19, 47 and 49 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2001 and is not intended to be distributed,
directly or indirectly, to any other class of persons (including private
investors). Neither this publication nor any copy of it may be taken or
transmitted into the United States of America or distributed, directly or
indirectly, in the United States of America.
Frankfurt am Main, 24.02.2012
Silvia Quandt Research GmbH
Grüneburgweg 1860322 Frankfurt
Tel: + 49 69 95 92 90 93 -0
Fax: + 49 69 95 92 90 93 -11
Ende der Corporate News
---------------------------------------------------------------------
24.02.2012 Veröffentlichung einer Corporate News/Finanznachricht,
übermittelt durch die DGAP - ein Unternehmen der EquityStory AG.
Für den Inhalt der Mitteilung ist der Emittent / Herausgeber
verantwortlich.
Die DGAP Distributionsservices umfassen gesetzliche Meldepflichten,
Corporate News/Finanznachrichten und Pressemitteilungen.
Medienarchiv unter http://www.dgap-medientreff.de und
http://www.dgap.de
---------------------------------------------------------------------
158028 24.02.2012
DGAP-News: Silvia Quandt & Cie. AG, Merchant & Investment Banking /
Schlagwort(e): Sonstiges
Silvia Quandt & Cie. AG, Merchant & Investment Banking: In-between the
lines - Bernhard Eschweiler
24.02.2012 / 15:44
---------------------------------------------------------------------
- Greece becomes sideshow as confidence in Euro recovers ...
- ... and economic news improve
- Target2 balances reflect ECB's interbank policy and not transfer
payments
- Deleveraging, however, means the party will not last forever
The equity rally has taken a breather for the last few days, partly
triggered by worries over tensions in the Middle East, but a lasting change
in direction seems unlikely. Market optimism reflects signs that global
economic activity is reaccelerating and rising confidence that the Euro
debt crisis will not spiral out of control. From Germany, the key news
this week was the better-than-expected February IFO survey, which provides
further evidence that the economy is recovering from the soft patch at the
end of last year.
Of course, trouble spots such as Greece remain. The second Greek bailout
package is highly conditional and could fall apart in a few weeks if Greece
fails to implement the promised reforms. But the risk of a Greek default
is troubling markets less. Especially the ECB liquidity injections, which
are spreading from the banking sector into sovereign bonds, have been
instrumental in turning confidence. All the good news, however, should not
disguise the fact that we are in the middle of a deleveraging period. That
means economic and market cycles are shorter. The party is not yet over
but may not last as long as in the good old days.
Target2 balances and ECB liquidity measures
The return of confidence is visible across financial markets. Equity
markets have taken the lead followed by sovereign and bank credits. The
10-year PIIGS spread over Bunds, for example, dropped 150bps since the
start of the year. Liquidity measures have also improved. The 3-month
OIS-Euribor spread fell from 101bps to 67bps. To be sure, the interbank
market is still impaired, but a meltdown has been averted by ECB liquidity
injections.
Encouragingly, after hitting record highs in January, bank deposits at the
ECB have dropped visibly in the last weekly report (from EUR508 billion to
EUR454 billion). Further success in stabilizing the Euro debt crisis
should also result in a gradual decline of the Target2 balances, which some
commentators view as hidden fiscal transfer from Germany and a few other
core countries to the periphery. The surge in Target2 balances (positive
and negative) is a reflection of the ECB's policy response to the collapse
of the interbank market and not a design flaw that makes a few surplus
countries pay for the debts of the deficit countries. If the latter was
true, not the Germans but the citizens of Luxembourg would be the biggest
losers (per capita Target2 claims in Luxembourg are about a quarter million
Euros versus just about EUR6000 in Germany).
According to the latest Target2 figures, the imbalance between surplus
countries and deficit countries exceeds EUR800 billion, an increase of more
than EUR400 billion from a year earlier. The rise is much larger than what
could be explained by current account imbalances. In fact, Austria and
Belgium had current account surpluses yet their Target2 balances slipped
further into the red. Instead, the main source of current imbalances
within the Euro area is capital flows. Those capital flow imbalances,
however, equate only into similar Target2 imbalances if the ECB
accommodates banks' liquidity needs.
By granting the banks unlimited liquidity at low rates and relaxing
collateral criteria the ECB prevented a financial crisis that would have
been much worse than the Lehman crisis. Interestingly, ECB claims versus
the banking system increased by about the same amount as the increase of
Target2 imbalances over the last year. If the ECB would conduct its
liquidity operations directly with the banks and not through the NCBs no
smart German professor would have spotted it. Reducing the Target2
balances, which means healing the Euro-area interbank market, will take a
long time, but there are some positive signs. Ireland reduced its negative
balance by EUR29 billion in 2011. Portugal's banks needed no additional
liquidity support last year and the same has been true for Italian banks
since the start of the year.
Deleveraging changes cyclical patterns
Better economic news, more stability in the Euro area and improved market
sentiment cannot change the fact that the major industrialized economies,
especially the US and much of Europe, are in a deleveraging period. That
has far reaching economic and financial implications. For the real
economy, deleveraging causes lower trend growth as well as higher output
volatility. In particular, upswings are not amplified and extended by the
creation of credit. As a result, the impact of short-term factors such as
inventory swings, tech cycles and shocks like the Japanese earth quake or
the Thai floods becomes more pronounced. Indeed, most major economies have
already undergone two up-and-down swings since the financial crisis and are
currently entering the third upswing.
The positive momentum in leading indicators will probably last into the
second quarter, but the probability that this will be followed by another
downswing increases toward the middle of the year. The German economy is
not plagued by excess leverage. In fact, the earlier restructuring means
that its growth potential has probably increased. However, that does not
insulate Germany from the short-term swings in global activity.
Deleveraging has a similar impact on financial markets as on economic
activity. This is most visible in equity markets. Equity markets trace
the movements in economic activity closely. Thus, more economic volatility
means also more market volatility. This is further compounded by the
structural withdrawal of long-term investors, such as insurance companies,
from risky assets such as equity. Deleveraging leads also to lower equity
valuations. The DAX PE ratio, for example, is currently a third lower than
its pre-crisis cyclical average. Companies use less credit to raise
shareholder value, while the demand for stocks is restrained by the lack of
leverage. Higher cyclical volatility and lower valuations means that
equity markets will behave more like trading markets. For the DAX, the
trading range is probably between 5,000 and 7,500.
Disclaimer
This analysis was prepared by Bernhard Eschweiler, Senior Economic Advisor,
and was first published 24 February 2012, Silvia Quandt Research GmbH,
Grüneburgweg 18, 60322 Frankfurt is responsible for its preparation. German
Regulatory Authority: Bundesanstalt für Finanzdienstleistungsaufsicht
(BaFin), Graurheindorfer Str. 108, 53117 Bonn and Lurgiallee 12, 60439
Frankfurt.
Publication according to article 5 (4) no. 3 of the German Regulation
concerning the analysis of financial instruments (Finanzanalyseverordnung):
Number of recommendations Thereof recommendations for issuers to which
from Silvia Quandt Research investment banking services were provided
during
GmbH in 2012 the preceding twelve months
Buys: 98 36
Neutral: 51 6
Avoid: 10 0
Company disclosures
Article 34b of the German Securities Trading Act (Wertpapierhandelsgesetz)
in combination with the German regulation concerning the analysis of
financial instruments (Finanzanalyseverordnung) requires an enterprise
preparing a securities analysis to point out possible conflicts of interest
with respect to the company or companies that are the subject of the
analysis. A conflict of interest is presumed to exist, in particular, if an
enterprise preparing a security analysis:
(a) holds more than 5 % of the share capital of the company or companies
analysed;
(b) has lead managed or co-lead managed a public offering of the
securities of the company or companies in the previous 12 months;
(c) has provided investment banking services for the company or companies
analysed during the last 12 months for which a compensation has been or
will be paid;
(d) is serving as a liquidity provider for the company's securities by
issuing buy and sell orders;
(e) is party to an agreement with the company or companies that is the
subject of the analysis relating to the production of the recommendation;
(f) or the analyst covering the issue has other significant financial
interests with respect to the company or companies that are the subject of
this analysis, for example holding a seat on the company's boards.
In this respective analysis the following of the above-mentioned conflicts
of interests exist: none
Silvia Quandt Research GmbH, Silvia Quandt & Cie. AG, and its affiliated
companies regularly hold shares of the analysed company or companies in
their trading portfolios. The views expressed in this analysis reflect the
personal views of the analyst about the subject securities or issuers. No
part of the analyst's compensation was, is or will be directly or
indirectly tied to the specific recommendations or views expressed in this
analysis. It has not been determined in advance whether and at what
intervals this report will be updated.
Equity Recommendation Definitions Silvia Quandt Research GmbH analysts rate
the shares of the companies they cover on an absolute basis using a 6 -
12-month target price. 'Buys' assume an upside of more than 10% from the
current price during the following 6 - 12-months. These securities are
expected to out-perform their respective sector indices. Securities with an
expected negative absolute performance of more than 10% and an
under-performance to their respective sector index are rated 'avoids'.
Securities where the current share price is within a 10% range of the
sector performance are rated 'neutral'. Securities prices used in this
report are closing prices of the day before publication unless a different
date is stated. With regard to unlisted securities median market prices are
used based on various important broker sources (OTC-Market).
Disclaimer This publication has been prepared and published by Silvia
Quandt Research GmbH, a subsidiary of Silvia Quandt & Cie. AG. This
publication is intended solely for distribution to professional and
business customers of Silvia Quandt & Cie. AG. It is not intended to be
distributed to private investors or private customers. Any information in
this report is based on data obtained from publicly available information
and sources considered to be reliable, but no representations or guarantees
are made by Silvia Quandt Research GmbH with regard to the accuracy or
completeness of the data or information contained in this report. The
opinions and estimates contained herein constitute our best judgement at
this date and time, and are subject to change without notice. Prior to this
publication, the analysis has not been communicated to the analysed
companies and changed subsequently. This report is for information purposes
only; it is not intended to be and should not be construed as a
recommendation, offer or solicitation to acquire, or dispose of, any of the
securities mentioned in this report. In compliance with statutory and
regulatory provisions, Silvia Quandt & Cie. AG and Silvia Quandt Research
GmbH have set up effective organisational and administrative arrangements
to prevent and avoid possible conflicts of interests in preparing and
transmitting analyses. These include, in particular, inhouse information
barriers (Chinese walls). These information barriers apply to any
information which is not publicly available and to which any of Silvia
Quandt & Cie. AG and Silvia Quandt Research GmbH or its affiliates may have
access from a business relationship with the issuer. For statutory or
contractual reasons, this information may not be used in an analysis of the
securities and is therefore not included in this report. Silvia Quandt &
Cie. AG and Silvia Quandt Research GmbH, its affiliates and/or clients may
conduct or may have conducted transactions for their own account or for the
account of other parties with respect to the securities mentioned in this
report or related investments before the recipient has received this
report. Silvia Quandt & Cie. AG and Silvia Quandt Research GmbH or its
affiliates, its executives, managers and employees may hold shares or
positions, possibly even short sale positions, in securities mentioned in
this report or in related investments. Silvia Quandt & Cie. AG in
particular may provide banking or other advisory services to interested
parties. Neither Silvia Quandt Research GmbH, Silvia Quandt & Cie. AG or
its affiliates nor any of its officers, shareholders or employees accept
any liability for any direct or consequential loss arising from any use of
this publication or its contents. Copyright and database rights protection
exists in this publication and it may not be reproduced, distributed or
published by any person for any purpose without the prior express consent
of Silvia Quandt Research GmbH. All rights reserved. Any investments
referred to herein may involve significant risk, are not necessarily
available in all jurisdictions, may be illiquid and may not be suitable for
all investors. The value of, or income from, any investments referred to
herein may fluctuate and/or be affected by changes in exchange rates. Past
performance is not indicative of future results. Investors should make
their own investment decisions without relying on this publication. Only
investors with sufficient knowledge and experience in financial matters to
evaluate the merits and risks should consider an investment in any issuer
or market discussed herein and other persons should not take any action on
the basis of this publication.
Specific notices of possible conflicts of interest with respect to issuers
or securities forming the subject of this report according to US or English
law: None
This publication is issued in the United Kingdom only to persons described
in Articles 19, 47 and 49 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2001 and is not intended to be distributed,
directly or indirectly, to any other class of persons (including private
investors). Neither this publication nor any copy of it may be taken or
transmitted into the United States of America or distributed, directly or
indirectly, in the United States of America.
Frankfurt am Main, 24.02.2012
Silvia Quandt Research GmbH
Grüneburgweg 1860322 Frankfurt
Tel: + 49 69 95 92 90 93 -0
Fax: + 49 69 95 92 90 93 -11
Ende der Corporate News
---------------------------------------------------------------------
24.02.2012 Veröffentlichung einer Corporate News/Finanznachricht,
übermittelt durch die DGAP - ein Unternehmen der EquityStory AG.
Für den Inhalt der Mitteilung ist der Emittent / Herausgeber
verantwortlich.
Die DGAP Distributionsservices umfassen gesetzliche Meldepflichten,
Corporate News/Finanznachrichten und Pressemitteilungen.
Medienarchiv unter http://www.dgap-medientreff.de und
http://www.dgap.de
---------------------------------------------------------------------
158028 24.02.2012