Silvia Quandt & Cie. AG, Brokerage & Investment Banking: In-between the lines - Bernhard Eschweiler
DGAP-News: Silvia Quandt & Cie. AG, Merchant & Investment Banking /
Schlagwort(e): Sonstiges
Silvia Quandt & Cie. AG, Brokerage & Investment Banking: In-between
the lines - Bernhard Eschweiler
17.08.2012 / 10:23
---------------------------------------------------------------------
- Euro-area fiscal adjustment has progressed more than is perceived
- Overall Euro-area debt and deficit figures better than US, UK and Japan
- Still, debt sustainability is not assured for some Euro members
The Euro-area debt crisis has sparked a fierce debate about the right pace
of fiscal adjustment. For some, the crisis countries are not doing enough.
Others believe that fiscal tightening is squeezing growth too much.
Missing in the debate are often the facts. Have the Greeks really done
nothing? What exactly is the impact of tightening on growth? This is not
the place for detailed answers, but a look at the latest IMF Fiscal Monitor
provides some interesting insights.
Headline versus structural deficit
First, headline deficits often disguise the true fiscal adjustment, which
is better seen in the structural deficit (excluding cyclical effects).
Since the end of the recession in 2009, headline deficits have generally
declined. However, some countries enjoyed positive cyclical effects
(notably Germany and also France) and tightened relatively little, while
others tightened drastically (most PIIGS, especially Greece) and yet their
deficits fell less due to unfavorable economic effects. The same is also
true for countries outside the Euro area. The UK has tightened more than
the headline deficit suggests, while the US has tightened much less and
Japan actually eased. Interestingly, all three countries as well as the
Euro area have similarly easy monetary policy.
Gradualism versus cold turkey
Second, fiscal tightening has an immediate negative impact on the recovery.
Plotting the changes in structural fiscal balances between 2009 and 2012
versus the corresponding changes in output gaps reveals a surprisingly
robust relationship. Fiscal tightening in the Euro area and elsewhere
since 2009 has dampened the pace of recovery relative to potential and in
some cases
led to recession. To be sure, this does not imply that fiscal tightening
has negative long-term effects on growth. In fact, the opposite may be
true. Interesting is the impact of different degrees of tightening on
growth. If the tightening is modest (up to 1% of GDP per year) the pace of
recovery moderates, but not below the potential growth rate. Thus, the
output gap still narrows ('Sweet Spot' area). This is the case for the
Euro area as a whole (notably Germany and France) as well as the US.
Annual fiscal tightening of 1%-to-2% of GDP pushes actual growth below its
potential. Economic activity essentially stagnates, but outright recession
is avoided. This applies to the PIIGS as a group as well as the UK.
Further tightening leads to recession, which is most evident in the case of
Greece and probably also applies to Portugal.
The whole is much better .
Third, overall Euro-area fiscal figures are better than it is often
perceived.
- As a whole, the Euro area has significantly lower headline and
structural budget deficits than the UK, US and Japan.
- The trade-off between fiscal tightening and economic performance is
well balanced ('Sweet Spot' area) similar to the US.
- Finally, the debt/GDP ratio is not higher. The Euro-area debt/GDP
ratio is on par with the UK, below the US and much below Japan.
Moreover, the debt buildup in the Euro area since the start of the
financial crisis has been significantly smaller than in the US, UK and
Japan (below trend line).
Indeed, the fiscal adjustment of the Euro area as a whole is on a better
path than the UK, US and Japan. As outlined in the box, the effort needed
to stop and reverse the debt build-up depends on the gap between the real
interest paid on government debt and real growth as well as the current
debt/GDP ratio. Unlike the US, the Euro area gets no help from the gap
between real interest rates and growth. However, its primary balance is
already on the verge of moving into surplus and the starting debt/GDP ratio
is not too high to undermine the tightening efforts. Thus, based on the
latest IMF figures, the Euro area should be able to stabilize its debt/GDP
ratio within the next few years with only modest additional tightening. In
contrast, the UK, the US and Japan would have to apply significantly more
fiscal tightening to achieve the same result.
. than some of the parts
The problem of the Euro area is that some parts are much worse than the
whole. Based on current real interest rate, growth, deficit and debt
conditions, the crisis countries will struggle to escape the debt trap.
Yet, judging by the evidence so far, a cold-turkey approach will probably
back fire. Instead, needed is a multi-pronged strategy that reduces the
gap between real interest rates and growth and simultaneously improves the
fiscal position. Structural reforms and adherence to a medium-term
deficit reduction plan are necessary conditions for
success. If that is assured then other Euro members and the ECB can help
reduce interest rates and restructure the debt burden. We believe the Euro
area is moving in this direction, but the process is politically
complicated and will take a long time. Spain has made good progress and is
likely to get help, but some others, most notably Italy, have more homework
to do.
Disclaimer
This analysis was prepared by Bernhard Eschweiler, Senior Economic Advisor,
and was first published 17 August 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: 72 25
Neutral: 53 8
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, 17.08.2012
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
---------------------------------------------------------------------
17.08.2012 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
---------------------------------------------------------------------
182036 17.08.2012
DGAP-News: Silvia Quandt & Cie. AG, Merchant & Investment Banking /
Schlagwort(e): Sonstiges
Silvia Quandt & Cie. AG, Brokerage & Investment Banking: In-between
the lines - Bernhard Eschweiler
17.08.2012 / 10:23
---------------------------------------------------------------------
- Euro-area fiscal adjustment has progressed more than is perceived
- Overall Euro-area debt and deficit figures better than US, UK and Japan
- Still, debt sustainability is not assured for some Euro members
The Euro-area debt crisis has sparked a fierce debate about the right pace
of fiscal adjustment. For some, the crisis countries are not doing enough.
Others believe that fiscal tightening is squeezing growth too much.
Missing in the debate are often the facts. Have the Greeks really done
nothing? What exactly is the impact of tightening on growth? This is not
the place for detailed answers, but a look at the latest IMF Fiscal Monitor
provides some interesting insights.
Headline versus structural deficit
First, headline deficits often disguise the true fiscal adjustment, which
is better seen in the structural deficit (excluding cyclical effects).
Since the end of the recession in 2009, headline deficits have generally
declined. However, some countries enjoyed positive cyclical effects
(notably Germany and also France) and tightened relatively little, while
others tightened drastically (most PIIGS, especially Greece) and yet their
deficits fell less due to unfavorable economic effects. The same is also
true for countries outside the Euro area. The UK has tightened more than
the headline deficit suggests, while the US has tightened much less and
Japan actually eased. Interestingly, all three countries as well as the
Euro area have similarly easy monetary policy.
Gradualism versus cold turkey
Second, fiscal tightening has an immediate negative impact on the recovery.
Plotting the changes in structural fiscal balances between 2009 and 2012
versus the corresponding changes in output gaps reveals a surprisingly
robust relationship. Fiscal tightening in the Euro area and elsewhere
since 2009 has dampened the pace of recovery relative to potential and in
some cases
led to recession. To be sure, this does not imply that fiscal tightening
has negative long-term effects on growth. In fact, the opposite may be
true. Interesting is the impact of different degrees of tightening on
growth. If the tightening is modest (up to 1% of GDP per year) the pace of
recovery moderates, but not below the potential growth rate. Thus, the
output gap still narrows ('Sweet Spot' area). This is the case for the
Euro area as a whole (notably Germany and France) as well as the US.
Annual fiscal tightening of 1%-to-2% of GDP pushes actual growth below its
potential. Economic activity essentially stagnates, but outright recession
is avoided. This applies to the PIIGS as a group as well as the UK.
Further tightening leads to recession, which is most evident in the case of
Greece and probably also applies to Portugal.
The whole is much better .
Third, overall Euro-area fiscal figures are better than it is often
perceived.
- As a whole, the Euro area has significantly lower headline and
structural budget deficits than the UK, US and Japan.
- The trade-off between fiscal tightening and economic performance is
well balanced ('Sweet Spot' area) similar to the US.
- Finally, the debt/GDP ratio is not higher. The Euro-area debt/GDP
ratio is on par with the UK, below the US and much below Japan.
Moreover, the debt buildup in the Euro area since the start of the
financial crisis has been significantly smaller than in the US, UK and
Japan (below trend line).
Indeed, the fiscal adjustment of the Euro area as a whole is on a better
path than the UK, US and Japan. As outlined in the box, the effort needed
to stop and reverse the debt build-up depends on the gap between the real
interest paid on government debt and real growth as well as the current
debt/GDP ratio. Unlike the US, the Euro area gets no help from the gap
between real interest rates and growth. However, its primary balance is
already on the verge of moving into surplus and the starting debt/GDP ratio
is not too high to undermine the tightening efforts. Thus, based on the
latest IMF figures, the Euro area should be able to stabilize its debt/GDP
ratio within the next few years with only modest additional tightening. In
contrast, the UK, the US and Japan would have to apply significantly more
fiscal tightening to achieve the same result.
. than some of the parts
The problem of the Euro area is that some parts are much worse than the
whole. Based on current real interest rate, growth, deficit and debt
conditions, the crisis countries will struggle to escape the debt trap.
Yet, judging by the evidence so far, a cold-turkey approach will probably
back fire. Instead, needed is a multi-pronged strategy that reduces the
gap between real interest rates and growth and simultaneously improves the
fiscal position. Structural reforms and adherence to a medium-term
deficit reduction plan are necessary conditions for
success. If that is assured then other Euro members and the ECB can help
reduce interest rates and restructure the debt burden. We believe the Euro
area is moving in this direction, but the process is politically
complicated and will take a long time. Spain has made good progress and is
likely to get help, but some others, most notably Italy, have more homework
to do.
Disclaimer
This analysis was prepared by Bernhard Eschweiler, Senior Economic Advisor,
and was first published 17 August 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: 72 25
Neutral: 53 8
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, 17.08.2012
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
---------------------------------------------------------------------
17.08.2012 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
---------------------------------------------------------------------
182036 17.08.2012