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/Sonstiges
Silvia Quandt & Cie. AG, Merchant & Investment Banking: In-between the
lines - Bernhard Eschweiler
13.03.2012 / 09:49
---------------------------------------------------------------------
- This week's correction was the first real setback in this year's equity
rally
- Not all is fine in Euro land, but the rally is probably not yet over
- While market confidence recovers, most of the real adjustment still
lies ahead
- East Germany's integration with the West shows what is still to come
European equity markets experienced their first meaningful correction this
year. On Tuesday, European stock markets lost on average over 3%. Between
last week Thursday and this week Tuesday, the Dax and the EuroStoxx50 fell
by 4.3% and 4.1% respectively. The correction is modest compared to last
year's experience and markets have already recovered some losses.
Nevertheless, it is the first real break in the stellar performance so far
this year and has raised questions whether the rally is over. The
correction has been triggered by a number of factors of which three stand
out:
- Premier Wen Jiabao's announcement that China has cut its growth target
for this year to 7.5%;
- Renewed worries that Greece's debt restructuring with private creditors
may run into difficulties;
- Concerns that the conflict with Iran may escalate and have severe
implications for oil supply.
The last point is a real risk and has the potential to derail the rally for
good if the conflict leads to military action. Concerning the first two
points, however, markets have overreacted. The real message from Wen
Jiabao is not that China is in trouble but that inflation has been tamed
and that policy can now refocus on growth and employment. This shift has
already started at the end of last year and is to continue. On the Euro
side, reports from banks and insurance companies suggest that Greece will
have at least 75% voluntary participation in the debt exchange. If support
falls short of the 90% target, Greece will most likely activate the
collective action clause, which should not come as a surprise.
Labor market adjustment has only just started
The recovery in financial markets so far was driven by signs that global
growth conditions are improving after last year's downturn and that the
Euro debt crisis is not spiraling out of control, thanks in large part to
the ECB's liquidity support. In our judgment, these developments have
still momentum left and will drive markets higher. The real adjustment in
the Euro area, however, has only just begun and is likely to have deeper
implications than markets and policymakers are currently anticipating. In
particular, not fully appreciated is the likely labor market fallout, for
which East Germany's integration with the West provides an insightful case
study.
East Germany's integration revisited
The generous terms of monetary union, the decision to adjust wages to West
German levels as fast as possible and poor productivity standards boosted
East German real unit labor cost by more than 50% after unification. The
result was an almost immediate collapse in production and a 25% decline in
employment in the first two years after unification. Productivity improved
after a couple years, but not rapid enough to restore competiveness. In
response, employment fell further. By the late 1990s, the unemployment
rate reached nearly 20% and more and more people moved to West Germany to
find a job.
The situation only stabilized in 2005. Employment has risen modestly in
recent years and the unemployment rate declined to about 11%. However,
much of the dislocations are irreversible. Employment in the east is 40%
below the pre-unification level, while employment in the west rose by 20%.
The population in the east declined by 3% and in the absence of large
annual fiscal transfers would probably have fallen further. In contrast,
the population in the West increased by 6%.
Lower wages and more migration
The regional competitiveness gaps within the Euro area build up over time
and came not as a sudden shock, but the implications are similar to the
case of East Germany. In the ten years prior to the financial crisis,
Germany became 30% more competitive, while the periphery lost about 15%.
The gap increased during the financial crisis and narrowed only a bit
during the recovery. Unemployment has doubled in response and keeps
rising. Interesting are the divergences. Ireland has made the most
progress in reducing the gap with Germany and its labor market is
stabilizing, albeit at a high level of unemployment. Spain has also
reduced the gap to Germany, but that has not been enough to stop the rise
in unemployment. Greece, Italy and Portugal have so far made no meaningful
progress.
With less of a fiscal transfer cushion, the labor market adjustment to come
is likely to require more flexibility than in the case of East Germany.
Wages in the periphery will have to fall, certainly in real terms but
probably also in nominal terms. That is already the case in Ireland and
is
implied in the latest Greek restructuring plan. However, can labor costs
be sufficiently reduced to restore pre-crisis employment? Probably not!
On the other hand, the periphery cannot count on generous fiscal transfers
as in the case of East Germany. The result is most likely increased
migration to the core, especially Germany. First figures already provide
evidence for this emerging trend. For Germany that would mean less wage
pressure and more domestic demand, especially for housing.
Disclaimer
This analysis was prepared by Bernhard Eschweiler, Senior Economic Advisor,
and was first published 13 March 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: 105 35
Neutral: 37 6
Avoid: 9 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, 13.03.2012
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
---------------------------------------------------------------------
13.03.2012 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
---------------------------------------------------------------------
160294 13.03.2012
DGAP-News: Silvia Quandt & Cie. AG, Merchant & Investment Banking /
Schlagwort(e): Sonstiges/Sonstiges
Silvia Quandt & Cie. AG, Merchant & Investment Banking: In-between the
lines - Bernhard Eschweiler
13.03.2012 / 09:49
---------------------------------------------------------------------
- This week's correction was the first real setback in this year's equity
rally
- Not all is fine in Euro land, but the rally is probably not yet over
- While market confidence recovers, most of the real adjustment still
lies ahead
- East Germany's integration with the West shows what is still to come
European equity markets experienced their first meaningful correction this
year. On Tuesday, European stock markets lost on average over 3%. Between
last week Thursday and this week Tuesday, the Dax and the EuroStoxx50 fell
by 4.3% and 4.1% respectively. The correction is modest compared to last
year's experience and markets have already recovered some losses.
Nevertheless, it is the first real break in the stellar performance so far
this year and has raised questions whether the rally is over. The
correction has been triggered by a number of factors of which three stand
out:
- Premier Wen Jiabao's announcement that China has cut its growth target
for this year to 7.5%;
- Renewed worries that Greece's debt restructuring with private creditors
may run into difficulties;
- Concerns that the conflict with Iran may escalate and have severe
implications for oil supply.
The last point is a real risk and has the potential to derail the rally for
good if the conflict leads to military action. Concerning the first two
points, however, markets have overreacted. The real message from Wen
Jiabao is not that China is in trouble but that inflation has been tamed
and that policy can now refocus on growth and employment. This shift has
already started at the end of last year and is to continue. On the Euro
side, reports from banks and insurance companies suggest that Greece will
have at least 75% voluntary participation in the debt exchange. If support
falls short of the 90% target, Greece will most likely activate the
collective action clause, which should not come as a surprise.
Labor market adjustment has only just started
The recovery in financial markets so far was driven by signs that global
growth conditions are improving after last year's downturn and that the
Euro debt crisis is not spiraling out of control, thanks in large part to
the ECB's liquidity support. In our judgment, these developments have
still momentum left and will drive markets higher. The real adjustment in
the Euro area, however, has only just begun and is likely to have deeper
implications than markets and policymakers are currently anticipating. In
particular, not fully appreciated is the likely labor market fallout, for
which East Germany's integration with the West provides an insightful case
study.
East Germany's integration revisited
The generous terms of monetary union, the decision to adjust wages to West
German levels as fast as possible and poor productivity standards boosted
East German real unit labor cost by more than 50% after unification. The
result was an almost immediate collapse in production and a 25% decline in
employment in the first two years after unification. Productivity improved
after a couple years, but not rapid enough to restore competiveness. In
response, employment fell further. By the late 1990s, the unemployment
rate reached nearly 20% and more and more people moved to West Germany to
find a job.
The situation only stabilized in 2005. Employment has risen modestly in
recent years and the unemployment rate declined to about 11%. However,
much of the dislocations are irreversible. Employment in the east is 40%
below the pre-unification level, while employment in the west rose by 20%.
The population in the east declined by 3% and in the absence of large
annual fiscal transfers would probably have fallen further. In contrast,
the population in the West increased by 6%.
Lower wages and more migration
The regional competitiveness gaps within the Euro area build up over time
and came not as a sudden shock, but the implications are similar to the
case of East Germany. In the ten years prior to the financial crisis,
Germany became 30% more competitive, while the periphery lost about 15%.
The gap increased during the financial crisis and narrowed only a bit
during the recovery. Unemployment has doubled in response and keeps
rising. Interesting are the divergences. Ireland has made the most
progress in reducing the gap with Germany and its labor market is
stabilizing, albeit at a high level of unemployment. Spain has also
reduced the gap to Germany, but that has not been enough to stop the rise
in unemployment. Greece, Italy and Portugal have so far made no meaningful
progress.
With less of a fiscal transfer cushion, the labor market adjustment to come
is likely to require more flexibility than in the case of East Germany.
Wages in the periphery will have to fall, certainly in real terms but
probably also in nominal terms. That is already the case in Ireland and
is
implied in the latest Greek restructuring plan. However, can labor costs
be sufficiently reduced to restore pre-crisis employment? Probably not!
On the other hand, the periphery cannot count on generous fiscal transfers
as in the case of East Germany. The result is most likely increased
migration to the core, especially Germany. First figures already provide
evidence for this emerging trend. For Germany that would mean less wage
pressure and more domestic demand, especially for housing.
Disclaimer
This analysis was prepared by Bernhard Eschweiler, Senior Economic Advisor,
and was first published 13 March 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: 105 35
Neutral: 37 6
Avoid: 9 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, 13.03.2012
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
---------------------------------------------------------------------
13.03.2012 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
---------------------------------------------------------------------
160294 13.03.2012