Akademija-Zagrebacke-burze-Erste group research_global_markets_zagreb_june_2014

Erste Group Research 2

Economics

United States Outlook 2014

• Forecasting GDP growth of +2.5% in 2014 and +2.7% in 2015.

• Fed likely to continue gradual reduction of purchases by approx. USD 10bn per meeting

• The first rate hike is not to be expected before mid-2015.

• 10Y Treasury expected to increase to 3.0% by Dec. 2014. (current: 2.6%)


Economics

Eurozone Outlook 2014

• Forecasting moderate GDP growth of +1.1% in 2014 and +1.5% in 2015.

• Gradual 10Y Bund increase to 1.8% by Dec. 14 (current: 1.4%)


Economics

Global Growth Outlook 2014e & 2015e

GDP y/y

Source: IMF, Erste Group Research


Global Trends

Economic Cycle Signals Buy Equities

Source: Datastream, Erste Group Research

Global Economy Clock: IFO Index


Global Trends

Economic Cycle | Developed Markets


Economy Clock: IFO Index


Global Trends

Economic Cycle | Emerging Markets


Economy Clock: IFO Index


Trends Global

Performances: Equities, Bonds, Gold


VIX Index:

9

Global Trends

Volatility below long term average

Quelle: Datastream, Erste Group Research


Global Trends

Emerging Markets Currencies have stabilised


Emerging Markets Currencies vs USD


Global Trends

JPY vs. SPX correlation picked up again in Q2

Source: Datastream

12 months: S&P 500 and JPY/USD:


Trends Global

Deflationary Trend for Basic Resources ex. Softs


Basic Resource Indices indexed in USD


Source: Datastream Source: Datastream

US FED Total Assets vs. S&P 500 BOJ Total Assets vs. Nikkei 225

Global Trends

Central Bank Balance Sheet Expansion continues



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Global Trends

Negative Economic Surprises outweigh

Global Economic Surprise Index vs. MSCI World


Global Trends

No euphoria for equities in the US (1)


AAII Sentiment Survey


Global Trends

No euphoria for equities in the US (2)


AAII Asset Allocation Survey


Trend United States

Expected Earnings growth in the US picking up

Source: Factset

S&P 500 EPS 2014e & 2015e


Trend Europe

Eurozone Banks correlate with Periphery-Yields

EuroStoxx Banks vs. Spanish and Italian 10Y Bonds (inverse)


Global Sectors

Overweight: Discretionary, Health Care, Industrials


Relative Strenght of Sektor-Indices vs. MSCI World:


Global Trends

2014e: EPS Growth in all Sectors positive

20


MSCI World AC expected EPS growth:

Sector MSCI AC World Weight % EPS y/y 14e Perf 3M

Materials 6 11% 2.8%

Industrials 11 11% 4.3%

Consumer Discr. 12 9% 1.0%

Consumer Staples 10 6% 7.4%

Technology 13 13% 4.5%

Telecom 4 -3% 6.4%

Health Care 11 9% 1.8%

Utilities 3 4% 8.0%

Energy 10 9% 10.2%

Financials 22 31% 5.5%


Global Trends

2014e: EPS Growth in all Regions positive

21


MSCI Indices expected EPS growth 2014:


EQUITIES

United States

22

S&P 500 at all-time high

Solid EPS growth of 8% and 11% (14e & 15e)

FED balance sheet expansion and weak USD support equities

Our technical volume indicators point to further increases

Share buy backs are an important factor for the performance


S&P 500

A heavy weight in Tech and Financials

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2%

3%

3%

10%

10%

10%

13%

13%

16%

19%

0% 10% 20% 30%

Telecom

Utilities

Materials

Energy

Consumer Staples

Industrials

Consumer Discretionary

Health Care

Financials

Technology

Sectorweights S&P 500 Main Equities

Source: Bloomberg

1.3%

1.4%

1.4%

1.4%

1.5%

1.6%

1.8%

2.3%

2.4%

2.7%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%

Chevron

Wal-Mart

Wells Fargo

GE

Johnson & J.

Berkshire

Microsoft

Google

Exxon

Apple

Source: Bloomberg


US | Fundamental Outlook

All Sectors with EPS growth higher 5% expected

Source: Datastream

Sector EPS growth MSCI USA FY1 & FY2


Green: OBV 120 weeks.

Blue: OBV 40 weeks

Red: OBV 20 weeks (ls)

Actual situation: blue>red>green | positive and all indicators are above neutral zone of 50.

S&P 500

On-Balance volume of single stocks

Source: Erste Group Research


S&P 500

Volatility of single stocks



S&P 500

Volume weighted average price (VWAP)



S&P 500

Erste Group Research Technical Buy & Sell indicators



EQUITIES

Western Europe

29

Solid EPS growth of 8% and 13% (14e & 15e)

EPS momentum is showing a slowing trend (as in prev. years)

Strong performance of southern markets (Italy & Spain)

Falling EPS: Telecom and Utilities

Strong growth: Technology, Discretionary and Industrials

Technically the upward trend is intact


Western Europe

Countries - MSCI Europe EPS growth 14e and 15e


EPS growth FY1 and FY2


Western Europe

Sectors - MSCI Europe EPS growth 14e and 15e


EPS growth FY1 and FY2


0%

4%

5%

5%

8%

12%

13%

14%

14%

25%

0% 5% 10% 15% 20% 25% 30%

Energy

Utilities

Consumer Staples

Telecom

Technology

Industrials

Materials

Health Care

Financials

Consumer Discretionary

DAX

Strong weighting in Discretionary

Index Sectorweights Weighting of Top Equities

Source: Bloomberg

3.5%

3.6%

4.3%

4.7%

7.0%

7.3%

7.7%

8.7%

9.7%

10.3%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

Linde

Volkswagen

Deutsche Bank

Dt. Telecom

SAP

Allianz

Daimler

BASF

Siemens

Bayer

Source: dax-indices.com


Green: OBV 120 weeks.

Blue: OBV 40 weeks

Red: OBV 20 weeks (ls)

Actual situation: blue>green>red | positive and all indicators are above neutral zone of 50.

DAX

On-Balance volume of single stocks



Demography US vs. Europe

US- Equities long-term more attractive than Europe


Gold

43% Jewellery Demand, India & China main customers

Gold Demand in 2012:

Source: World Gold Council

Regional Demand for Gold in t:

Source: World Gold Council


Gold

Strong Seasonality in Q3 & Q4

Gold Price Seasonality




Gold

Consolidiating Formation


Gold Price in USD


Silver

50% an Industrial Metal


Long Term Silver Price in USD/oz

Source: The Silver Insitiute, Erste Group Research

Long Term Silver Price in USD/oz Global Silver Demand 2012:


Silver

The volatile Derivative of Gold


xxxxx

Q1


ShortTerm Silver & Gold Chart Long Term Silver & Gold Chart


Bund Future

We expect a downward trend

Bund Future vs Bund Yield 10Y Bund expected yield development



Thank you for your attention.

41


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