Capital Market Presentation
August 2011:
Real Assets
Hans-Jörg Naumer, Dennis Nacken,
Stefan Scheurer
Not for circulation to
private investors
Where Do I Invest My Money?
Performance of different asset classes (in %)
Gold
Commoditiy Futures
Equities USA
Equities World
Bonds Emerging Markets
Bonds Advanced Economies
Equities Germany
Equities Emerging Markets
Corporate Bonds
Equities Japan
Equities Europe
-10
-7
-4
-1
Performance -1 Month
Source: Datastream; Allianz Global Investors Capital Market Analysis
2
5
8
11
14
17
20
Performance ytd
2
Concern 1: Fear of Escalation of European Debt Crisis
Risk premia of 10y European government bonds vs. German government bonds (-1 year)
2/8/11
Euro area (EU-17)
Germany
France
Italy
Spain
Netherlands
Belgium
Austria
Greece
Finland
Portugal
Ireland
Slovakia
Luxembourg
Slovenia
Cyprus
Estonia
Malta
Debt as % of
GDP 2011
87,7%
82,4%
84,7%
120,3%
68,1%
63,9%
97,0%
73,8%
157,7%
50,6%
101,7%
112,0%
44,8%
17,2%
42,8%
62,3%
6,1%
68,0%
Debt as % of
GDP 2012
88,5%
81,1%
86,8%
119,8%
71,0%
64,0%
97,5%
75,4%
166,1%
52,2%
107,4%
117,9%
46,8%
19,0%
46,0%
64,3%
6,9%
67,9%
GDP
2011
1,6%
2,6%
1,8%
1,0%
0,8%
1,9%
2,4%
2,4%
-3,5%
3,7%
-2,2%
0,6%
3,5%
3,4%
1,9%
1,5%
4,9%
2,0%
GDP Public Budget Public Budget
2012 Balance 2011 Balance 2012
1,8%
-4,3%
-3,5%
1,9%
-2,0%
-1,2%
2,0%
-5,8%
-5,3%
1,3%
-4,0%
-3,2%
1,5%
-6,3%
-5,3%
1,7%
-3,7%
-2,3%
2,2%
-3,7%
-4,2%
2,0%
-3,7%
-3,3%
1,1%
-9,5%
-9,3%
2,6%
-1,0%
-0,7%
-1,8%
-5,9%
-4,5%
1,9%
-10,5%
-8,8%
4,4%
-5,1%
-4,6%
3,8%
-1,0%
-1,1%
2,5%
-5,8%
-5,0%
2,4%
-5,1%
-4,9%
4,0%
-0,6%
-2,4%
2,2%
-3,0%
-3,0%
16
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
0
0
N
O
S
A
Spread Italy - Germany (10y)
Spread Spain - Germany
Spread Greece - Germany
Source: European Commission, Datastream; Allianz Global Investors Capital Market Analysis
D
J
J
M
A
M
F
Spread Portugal - Germany
Spread Ireland - Germany
J
3
Concern 2: US Debt
US debt in % of GDP since 1792
Great depression
& World War II
122%
130
Forecast 2015
~100%
120
110
100
90
Financial Crisis
70%
80
70
60
50
Civil War
27%
40
30
20
10
0
1792
1802
1812
1822
1832
1842
1852
1862
1872
1882
Source: Congressional Budget Office; Allianz Global Investors Capital Market Analysis
1892
1902
1912
1922
1932
1942
1952
1962
1972
1982
1992
2002
2012
4
Concern 2: US Economy
US labor market recovering slowly; US housing market lagging behind
2/8/11
300
2/8/11
1600
220
1500
350
240
220
200
1400
200
400
1300
180
180
450
1200
160
500
160
1100
1000
550
140
140
120
900
120
600
100
800
100
650
80
700
700
2006
2007
2008
US Initial Jobles s Claims (inverted)
S&P 500 (rhs)
600
2009
2010
2011
Sourc e: T homs on Datas tream
Source: Datastream; Allianz Global Investors Capital Market Analysis
80
60
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Case-Shiller Hous e Price Index
US New One Family Houses Completed & For Sale (rhs)
Us Exis ting One Family Homes Available For Sale (rhs)
5
Concern 3: Growth – Sliding into a New Recession?
Leading indicators suggest cooling down but remain largely on expansionary side.
2 /8 /1 1
1 2 0
6 5
1 1 5
6 0
1 1 0
5 5
1 0 5
5 0
1 0 0
4 5
9 5
4 0
9 0
3 5
8 5
8 0
2 0 0 2
2 0 0 3
2 0 0 4
2 0 0 5
2 0 0 6
i fo -In d e x
I S M P u rc h a s i n g M a n a g e r I n d e x (U S ) (rh s )
C h in a P u rc h a s i n g M a n a g e r In d e x (rh s )
Source: Datastream; Allianz Global Investors Capital Market Analysis
3 0
2 0 0 7
2 0 0 8
2 0 0 9
2 0 1 0
6
Concern 4: Inflation – Especially for China
Expansive monetary policy in industrial nations, restrictive monetary policy in growth countries.
16
0 2/0 8/1 1
16
14
14
12
2 /8 /11
4
80
3
70
12
2
60
10
10
1
8
8
50
0
6
6
40
-1
4
4
2
2
-2
0
2 00 9
2 01 0
2 01 1
Ch in a T a rge t Rate
B razil T a rg e t Ra te
S o urc e: T ho m s o n Da ta s tre a m
-3
0
2 00 6
2 00 7
E CB S ho rt T e rm Re po Rate
Fed Fu nd s T a rge t Rate
J ap an T arg et Ra te
2 00 8
Source: Datastream; Allianz Global Investors Capital Market Analysis
2 00 5
2 00 6
2 00 7
2 00 8
2 00 9
2 01 0
Co ns um er P ri c e s Foo d (y/y, i n %)
Ch in a P u rc h a s i n g Ma na g er Ind ex - Inp u t p ric e s (+4 m o nth s ) (rhs )
30
20
2 01 1
7
Valuations Continue to Suggest Equity Investments
P/E ratios 12 months forward
2 /8 /1 1
2 6
2 /8 /1 1
2 6
2 4
2 4
2 4
2 4
2 2
2 2
2 0
2 0
2 2
2 2
1 8
1 8
1 6
1 6
1 4
1 4
1 2
1 2
1 0
1 0
8
8
2 0
2 0
1 8
1 8
1 6
1 6
1 4
1 4
1 2
1 2
1 0
9 0
9 1
9 2
P /E
ra t i o 1 2 m
+ 1 S td
-1 S td
1 0
9 3
9 4
9 5
fw d U S A
9 6
9 7
9 8
9 9
0 0
0 1
0 2
0 3
A v e ra g e
0 4
0 5
0 6
0 7
S o u rc e : T h o m
0 8
s o n
0 9
1 0
D a ta s t re a m
6
9 0
9 1
9 2
P /E
ra t i o 1 2 m
+ 1 S td
-1 S td
6
9 3
9 4
9 5
9 6
9 7
9 8
9 9
f w d E m e rg i n g M a rk e t s
0 0
0 1
0 2
0 3
A v e ra g e
0 4
0 5
0 6
0 7
S o u rc e : T h o m
0 8
s o n
2 /8 /1 1
0 9
1 0
D a ta s t re a m
2 /8 /1 1
2 6
2 6
2 6
2 6
2 4
2 4
2 4
2 4
2 2
2 2
2 2
2 2
2 0
2 0
2 0
2 0
1 8
1 8
1 8
1 8
1 6
1 6
1 6
1 6
1 4
1 4
1 2
1 2
1 0
1 4
1 4
1 2
1 2
1 0
1 0
8
8
1 0
6
8
6
9 0
9 1
9 2
P /E
ra t i o 1 2 m
+ 1 S td
-1 S td
9 3
9 4
9 5
9 6
fw d E u ro p e
9 7
9 8
9 9
0 0
0 1
0 2
0 3
A v e ra g e
0 4
0 5
0 6
0 7
0 8
S o u rc e : T h o m s o n
Source: Datastream; Allianz Global Investors Capital Market Analysis
0 9
1 0
D a ta s t re a m
9 0
9 1
9 2
P /E
ra t i o 1 2 m
+ 1 S td
-1 S td
8
9 3
9 4
fw d W
9 5
9 6
o rl d
9 7
9 8
9 9
0 0
0 1
0 2
0 3
A v e ra g e
0 4
0 5
0 6
0 7
0 8
S o u rc e : T h o m s o n
0 9
1 0
D a ta s t re a m
8
Earnings Season: Excessive Expectations
71% of S&P 500 Q2 2011 reports exceeded analysts‘ expectations.
100%
Consumer Discret.
90%
Consumer Staples
Energy
80%
Financials
70%
(thereof: Banks)
60%
19%
24%
19%
16%
9%
10%
Healthcare
22%
14%
8%
10%
10%
8%
71%
68%
68%
71%
Q2 2011
Q1 2011
Q4 2010
Q3 2010
Positive
Neutral
20%
14%
50%
Industrials
40%
Information Tech.
Materials
30%
Telecom Services
20%
Utilities
10%
Total
75%
78%
66%
0%
0%
20%
40%
better than expected
60%
as expected
Source: Bloomberg; Allianz Global Investors Capital Market Analysis
80%
worse than expected
100%
Q2 2010
Q1 2010
Average
2002-2010
Negative
9
Earnings Season: Sales Growth but Margin Pressure on the Horizon
Sales growth & EBITDA margins (12m fwd) in the US, Europe and Emerging Markets.
30
02/08/11
30
25
25
20
20
02/08/11
24
23
23
22
22
21
21
20
20
19
19
18
18
17
17
15
15
10
10
5
5
0
0
-5
-5
2009
2008
2007
2006
MS CI US A s ales growth (12M FW D)
MS CI E urope s ales growth (12M FW D)
MS CI E merging Markets s ales growth (12M FW D)
24
2010
2011
S ourc e: T homs on Datas tream
Source: Datastream; Allianz Global Investors Capital Market Analysis
16
2007
2008
2009
E B IT DA margin (MS CI US A )
E B IT DA margin (MS CI E urope)
E B IT DA margin (MS CI E merging Markets )
16
2010
2011
S ourc e: T homs on Datas tream
10
Market Participants Remain on the Sidelines
Robust equity market despite reticent investors.
2 /8 /1 1
1 6 0 0
0 .4 0
1 5 0 0
0 .2 0
1 4 0 0
0
1 3 0 0
-0 .2 0
1 2 0 0
-0 .4 0
1 1 0 0
-0 .6 0
1 0 0 0
-0 .8 0
9 0 0
-1 .0 0
8 0 0
-1 .2 0
7 0 0
6 0 0
2 0 0 6
2 0 0 7
B u l l s (3 -m o n t h -a v e ra g e ) (rh s )
S & P
5 0 0
B u l l s (rh s )
Source: Datastream; Allianz Global Investors Capital Market Analysis
-1 .4 0
2 0 0 8
2 0 0 9
2 0 1 0
S o u rc e :
T
h o m
2 0 1 1
s o n
D a ta s t re a m
11
Investment Theme: Small Caps
Small caps continue to drive performance vs. average premium paid in the US.
240
02/08/11
240
220
220
80%
Ø premium Small Caps: 24,2%
Ø premium Mid Caps: 27,3%
Ø premium Large Caps: 7,6%
70%
200
200
60%
180
180
50%
160
160
40%
140
140
30%
120
120
100
100
Ø Mid Caps
Ø Small Caps
20%
10%
Ø Large Caps
0%
80
80
-10%
60
2001 2002 2003 2004 2005 2006
MSCI AC World Small Cap (T otal Return)
MSCI AC World Large Cap (T otal Return)
MSCI AC World (T otal Return)
60
2007
2008
2009
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2010
Small-Caps
Mid-Caps
Large-Caps
Source: T homson Datastream
Source: Datastream, Bloomberg; Allianz Global Investors Capital Market Analysis
12
Decisive Insights:
 Despite weaker leading indicators, the underlying trend in the global economy
seemingly continues to be positive, making it seem unlikely that the global economy will
slip into a second recession.
 The EU rescue package is likely to provide a boost to the capital markets, although
concerns about the US and its debt problems displaced the relief felt following the EU
summit.
 The artificial growth created through debt and an increasing risk of inflation present
unfavourable conditions for bond investors.
 In spite of the continued uncertainty, we believe that a slight overweight in equities is
advisable. The reasons for this include the attractive valuation of equities versus bonds
and the confidence resulting from the second quarter reporting season
In spite of the continued uncertainty, we believe that a slight overweight in equities is advisable.
13
www.allianzglobalinvestors.de/capitalmarketanalysis
14
Disclaimer
This presentation has been issued and approved by Allianz Global Investors Europe GmbH, a subsidiary of Allianz Global Investors AG (part of the Allianz Group).
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accept any liability for any direct or consequential losses arising from its use.
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repeated in the future; consequently, there is no assurance that a portfolio will match the returns shown in this document.
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This document is marketing material according to Art. 19 European Directive 2004/39/EC (MiFiD) and § 31 section 2 German Securities Trading Act
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15