DGAP-News: 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

13.02.2012 / 11:01

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– Confidence revival continues despite Greek ordeal

– German GDP weaker in Q4 2011 but set to recover in Q1 2012

– –Mittelstand– and Emerging Markets key to German growth prospects

Market confidence continues to improve. Even Greece–s struggle to agree to
the terms of the second rescue package could not spoil the good mood.
Equity markets moved sideways this week, which is impressive after the
rally last week and the mix of political and economic news this week.
Euro-area sovereign spreads generally inched lower. Particularly
interesting is the decline of Portuguese spreads (the ten-year spread over
Bunds dropped from above 1200bps to below 1100bps), which implies that
investors are less worried about contagion risks should Greece default.

The improved market sentiment reflects growing confidence that a sharp
downturn in economic activity will be avoided and that the Euro debt crisis
will not spiral out of control. Monetary policy action, especially the
liquidity injections by the ECB, has been instrumental for the change in
sentiment. It is too early to say whether the optimism is fully justified,
yet most signs are encouraging. When we went to press today, no final
agreement has been reached between Greece and the Troika. Some uncertainty
remains, but the probability of a positive conclusion is very high. Greece
has already accepted most conditions, which shows that the priority of the
key political parties is to avoid default.

Germany to return to positive growth in Q1

Actual economic news have been mixed. Activity reports show widespread
weakness in the final quarter of last year. Most forward-looking
indicators suggest that activity will rebound in the first quarter of this
year. This is also true for Germany. The weak December industrial
production report suggests that real GDP probably declined by 2% annualized
in the fourth quarter. The continued improvement in business confidence
through

January and better-than-expected manufacturing orders in December, on the
other hand, are pointing to a reversal in the first quarter. The temporary
nature of the fourth-quarter weakness is supported by the undeterred
improvement in labor market conditions through January. We expect economic
momentum to return to potential, which would imply 2012 annual growth of
1.5%.

Exports to lead again

Despite stronger domestic demand fundamentals, especially the improvement
in labor market conditions, exports remain the largest cyclical driver in
the German economy. Especially upturns are first driven by exports and
this time will be no different. Already, the manufacturing order data is
showing a turn. After plunging 14.6% annualized in the fourth quarter,
foreign orders were flat in Q4 with an improvement in December. Orders
from the Euro area fell sharply in Q4, but that was offset by a bounce in
orders from the rest of the world.

That mix is likely to improve further in 2012. The Euro area will probably
remain a drag. However, the latest leading indicators suggestthat the
downturn is moderating and not getting worse. Demand from the rest of the
world, on the other hand, is set to accelerate. That forecast is already
reality in the US as seen in the latest labor market reports. The next to
turn is Asia. Outside of China, much of Asia has been plagued by weakness
in the second half of last year, especially in the tech sector. The latest
data now shows that the underlying inventory correction is over, while
orders are rising again. The recovery is helped by the gradual easing of
monetary conditions. Especially Chinese policy is focusing on growth and
employment again after inflation pressures have eased (the inflation
increase in January was due to the shift of the Lunar New Year
festivities).

The recovery in China, the rest of Asia and Emerging Markets more broadly
is important for Germany. Europe and especially the Euro area is still the
largest export destination for Germany, but the share is declining. The
growth momentum comes from Emerging Markets. And that is not only because
Emerging Markets are growing faster. The growing share of exports to
Emerging Markets shows that German companies have shifted their focus. A
study by the Bundesbank last year showed for example that German companies
have exploited the growing market opportunities in China much more than
their main Euro-area peers.

The –Mittelstand– powers ahead

The shift toward Emerging Markets by Germany–s industrial titans is well
documented. Less known is that this is also true for the so-called
–Mittelstand–, which is the core of Germany–s industrial base. According
to a study by KfW, more mid-sized companies are focusing on Emerging
Markets. The Euro area is still the largest market, but the growth is
coming primarily from Emerging Markets.

Besides trade, the health of the –Mittelstand– is vital for Germany–s
growth prospects in general, not least because it is the largest employer.
Encouraging in that context is a recently published survey by the German
Savings Banks Association (DSGV). The survey reported that 50% of
mid-sized companies judge business conditions going into 2012 as better
than a year before. Just 2% felt worse off. Nearly 60% of companies said
that their equity base has further improved (note that the average equity
ratio rose over the last ten years by a fivefold to nearly 20%). And
despite increased political, economic and financial uncertainties, almost
40% and 30% of companies plan to increase investment and employment
respectively in 2012. Most other companies intend to keep investment and
employment unchanged in 2012.

Disclaimer

This analysis was prepared by Bernhard Eschweiler, Senior Economic Advisor,
and was first published 13 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: 96 35
Neutral: 45 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
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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, 13.02.2012

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

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13.02.2012 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

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156436 13.02.2012

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