PresseKat - DGAP-News: Silvia Quandt&Cie. AG, Brokerage&Investment Banking: In-between the lines

(firmenpresse) - 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

12.10.2012 / 09:16

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- Market sentiment stuck between central banks and economic news

- Restoration of loan market activity in the US much better than in
Europe

- European high yield activity has picked up but not enough to offset
loan slump

The central bank induced rally in financial markets has run out of steam.
Equity markets are trading in a more volatile sideway range and sovereign
spreads in the Euro periphery are no longer falling. Nevertheless, market
sentiment is quite resilient, given the number of negative news, such as
the credit rating downgrade of Spain yesterday and various reductions of
growth forecast by official institutions like the IMF and the World Bank.
We remain positive for financial markets medium term and see better growth
prospects for next year, given the amount of financial stimulus applied by
central banks around the world. However, the fourth quarter is likely to
see more volatility. A particular issue is the deadlock around Spain.
Most likely, it will have to come to another climax before Spain seeks and
receives EU support and the ECB activates its OMT program.

A tale of two loan markets

To be sure, central banks cannot fix it all. One critical area is the
health of the financial system. Central bank support is critical for the
restoration of financial health, but more is required than just cheap
money. In the US, the restoration of financial sector health is well
advanced. Banks have disposed most of their bad assets, insolvent banks
have been wound up and others have been recapitalized. Banks are still

cautious, but lending activity is starting to pick up. The restoration of
banking sector health is also a reason why the housing market has started
to recover this year.

The restoration of financial health is also visible in other areas of the
US financial system. A good example is the leveraged loan market. With an
annual issuance volume of around USD500 billion, the leveraged loan market
is an important factor in US corporate finance and the overall economy.
The financial crisis caused a collapse in loan

issuance, both relative to the pre-crisis peak as well as the pre-crisis
cyclical average. Today, the US loan market is back in business.
September was one of the best months since the crisis. The number of new
deals year-to-date already exceeds last year's level. Activity is not
quite back to the pre-crisis peak and spreads are wider, but issuance
volumes are well above the previous cyclical average. An important factor
in the recovery of the loan market, besides the general restoration of
corporate and financial health, has been the growing demand by
institutional investors, also through the revival of collateralized loan
obligations (CLOs).

In contrast, the European loan market remains depressed. Activity
recovered somewhat in 2010/11, but fell again this year and remains far
below the pre-crisis peak and the previous cyclical average. Spreads have
also widened relative to the US although both markets experienced a similar
deteriorationin average credit quality. Before the crisis, European
spreads were lower than US spreads, due partly to tighter supply conditions
(European loan issuance used to be about a third of US loan issuance). The
withdrawal of issuers from the periphery and overseas explains some of the
drop in overall issuance activity, but by far not all. The share of
issuers from the periphery fell from 8.5% in 2007 to 4.5% in 2012. The
share of overseas issuers fell from 11% in 2007 to 6% in 2012.

Most of the drop in activity is due to less issuance from the Euro-area
core, the UK and Scandinavia, which reflects both supply and demand
conditions. Corporate-sector health is mostly good, but companies are
cautious about new investments. Especially M&A activity is very low.
Institutional demand is also weak. In particular the CLO market has
collapsed and there is no sign that it will recover soon as it has in the
US.

European HY bonds make up some of the gap

Some of the gap left by the leveraged loan market has been picked up by the
high yield market. Compared to the US, the European HY market has been
historically much smaller (just about an eighth). Issuance completely
dried up in 2008, but the market recovered nicely in 2009/10 as
institutional investors looked for cheap credits and companies rushed to
close their funding gaps. At the end of 2010, the number of deals was
twice as large as on average in 2006/07. The expansion came to an end in
2011, however. Some of that reflects the withdrawal of overseas issuers
(from a deal share of about 15% in 2010 to near zero in 2012). Similarly
big was the impact of the Euro debt crisis. The issuance volume from
periphery countries dropped from EUR7.9 billion in 2010 to just EUR1.6
billion so far this year.

Monetary policy cannot fix the structural problems behind these problems in
the financial sector. Nevertheless, monetary policy can ensure that the
financial system does not collapse. Moreover, ultra-low interest rate and
quantitative easing will push investors into riskier assets and, thus, help
restore liquidity.

Disclaimer

This analysis was prepared by Bernhard Eschweiler, Senior Economic Advisor,
and was first published 12 October 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: 78 25
Neutral: 53 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
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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
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indirectly, in the United States of America.

Frankfurt am Main, 12.10.2012

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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12.10.2012 Veröffentlichung einer Corporate News/Finanznachricht,übermittelt durch die DGAP - ein Unternehmen der EquityStory AG.
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188564 12.10.2012