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Vienna, 10 January 2013
First signs of economic recovery
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Liquidity is driving the markets
Global monetary policy remains heavily expansive
Recommendation (Timeline: end of the 1st quarter 2013.)for the global market: shares (in
Europe, Japan, USA), government bonds (Spain) and corporate bonds
Revised growth outlook for CEE
Falling interest rate trend in CEE
Buy recommendations for Austrian and CEE shares: RHI, CA Immo, Bogdanka, Ciech and
MTS
“Falling profit estimates, continuing recession in Europe, which is also reaching the core Euro states, and
no final breakthrough on the Eurozone debt issue, yet risky assets confirmed their upward trend in the
fourth quarter of 2012. This discrepancy is expected to continue at the beginning of 2013,” said Peter
Brezinschek, head of Raiffeisen Research, a unit of Raiffeisen Bank International AG (RBI).
For Brezinschek, the GDP figures for the Eurozone show the sharpest fall in the economic cycle in the
final quarter of 2012 and a clear adjustment in growth is also to be taken into consideration for the USA.
The leading indicators (Purchasing Managers’- and ISM-Index) are bottoming out and should start to
climb again in the first half of the year. The conclusion: stagnation in the Eurozone and marginal growth
in the US market for the winter quarter of 2013.
“From the middle of the year, therefore, net exports and ­- due to falling inflation rates - private
consumption could start adding to growth again,” said chief-analyst Peter Brezinschek. The GDP of the
Eurozone should gradually rise to 0.1 per cent (per quarter) in Q2 and then to 0.4 per cent (per quarter)
from Q3. GDP growth in the USA should climb from 0.2 (Q1) to 0.5 per cent (Q3).
Pleasing news from the peripheral countries: the structural reforms put in place are gradually taking effect
and the Research team therefore expects growth rates in these countries to start inching up again from the
second half of 2013. Italy still represents an uncertainty factor, as a new government is to be voted in
there shortly. Inflation is also showing signs of easing. “Inflation rates are expected to head downwards in
two stages, once at the beginning of the year and again in the third quarter. This applies to both Europe
and the USA,” added Brezinschek.
Impact on monetary policy
The Raiffeisen Research team does not expect any change in the key interest rate for the whole of 2013.
“Far more decisive than a reduction in interest rates is the extremely expansive central bank money
supply of the Euro financial sector”, said analyst Brezinschek. The Euribor interest rates of between 0 and
0.3 per cent on the money market will therefore remain well below the refinancing rate. The Federal
Reserve has announced another round of quantitative easing from January (tied to the unemployment
rate).
Liquidity bubble also on the stock markets?
The central banks have opened the money floodgates wide and nothing will change here. The
consequence of this was/is the formation of a bubble to a greater or lesser extent in virtually all classes of
investment. Property prices are rising hand-in-hand with raw materials (gold), energy costs are soaring
despite the poor global economic growth due to high oil prices, half-way safe government bonds are at
least yielding a negative real yield, some corporate bonds are paying lower returns, even with worse
creditworthiness, than many shares are in dividends. And in 2012, most established stock market indexes
rose to new multi-year highs. Bubble formation? “We say: no. And the answer to why we are certain
about this can be found in the valuation,” said Helge Rechberger, head of Equity Market Research. He
justifies this by saying that the PE ratios will settle at a moderate 11 and 12 across large parts of Europe
through to an also not entirely excessive 16 in Japan. Rechberger said that “US shares may in some ways
appear expensive, while European stock markets have a much more moderate valuation.” And: shares
offer sometimes highly attractive dividend yields. What is also helping the stock market is the lack of
profit-generating investment alternatives and the reduction in risk aversion.
Euro/dollar development
The Research team expects the euro-dollar exchange rate to trade sideways. The reasons for this: the
decision of the Federal Reserve (Fed) to ramp up its bond-buying programme at the beginning of the new
year is putting pressure on the dollar. The current exchange rate is around 5 cents above the level implied
by the interest rate difference between 2-year German and American government bonds. As there will be
virtually no movement in the interest rate differential this year, room to manoeuvre for EUR/USD is
heavily limited. “We therefore expect exchange rates in a range of +/- 5 cents around 1.32 EUR/USD
until the middle of 2013,” according to the Raiffeisen strategy report for the first quarter of 2013.
Economic weakness now also affecting CEE
During the second half of 2012, the economic downturn also reached the growth bastions Germany and
Austria, and was also visible in the Q3 GDP figures of Eastern European states. While the agricultural
harvest failures had a negative impact across the region, the decreasing GDP growth of the Czech
Republic, Hungary, Romania and Croatia was largely due to weak domestic demand. Even former growth
motors such as Poland and Slovakia are now faced with the intensity of the recession in Europe. “We
have therefore lowered our GDP growth forecasts for all countries in Central Europe (CE) and
Southeastern Europe (SEE),” said Brezinschek. Although the debt crisis in the Eurozone, initially only
affected SEE, the downturn is now also spreading in CE via the circuitous route of net exports.
With just 0.5 per cent GDP growth in 2013 and the danger of granting further “election gifts”, the already
loosened budget target of minus 2.3 per cent of GDP will be difficult to achieve.
Russia is sensing the economic impact the least because the boom in private customer loans is supporting
domestic consumption. For Russia, GDP growth of at least 3 per cent is expected in 2013.
On balance, the GDP expectations for the regions are CEE 2.1 per cent (previous year: 2.2 per cent), SEE
1.3 per cent (previous year: -0.2 per cent), CE 0.5 per cent (previous year: 0.9 per cent) and CIS 3.0 per
cent (previous year: 3.2 per cent). Compared to the Eurozone: GDP expectation for 2013 of -0.1 per cent
(previous year: -0.5 per cent).
On a positive note, a fall in consumer prices is expected for most countries. For Austria, the Research
team sees an inflation rate of below 2 per cent from Q3.
Buy recommendation for CEE growth markets
The following CEE indexes are of particular interest for head analyst Peter Brezinschek. For example the
Russian MICEX index. The recently completed increase from 30 to 50 index members has done nothing
to change the basic characteristics of the MICEX. This is because the energy, finance and raw materials
sectors continue to set the tone. With a low valuation and rising dividend payments, the MICEX is a clear
buy recommendation for the Research team. Also on the buy list is the Polish Index WIG20. Even if the
first signs of weakness are appearing in Poland, the WIG remains attractive. Also recommended as a buy
is the Czech PX, where an average profit growth of about 15 per cent for 2013 is expected.
ATX target price: 2,570 points in March 2013
“The ATX target price for March 2013 is at 2,570 points, which currently equals a "buy" recommendation
for the Austrian market. Over the next 12 months we see the index at 2,650,” said Stefan Maxian, chief
analyst with Raiffeisen Centrobank (RCB), a subsidiary of RBI. He points out that the dividend yield (2.6
per cent) still exceeds the yield for 10-year bonds (1.8 per cent).
Austrian favourites: RHI and CA Immo
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As to share investments the research team of RCB particularly emphasizes the Austrian refractory
company RHI as well as CA Immo. The investment case for RHI (target price EUR 29.50) is founded on
the development and expansion of the company's production sites in the USA and the BRIC growth
markets, as well as on an increase in commodity self-supply. As to CA Immo the target price is at EUR
12.7. RCB analysts reckon the share price to be bolstered by a continued high real estate sales volume, a
cut in total indebtedness as well as by a substantial discount to the NAV.
CEE top picks: Bogdanka, Ciech and MTS
RCB’s current recommendation list includes the Polish coal producer Bogdanka (target price PLN 170).
Backed by its competitive prices, the company should be the clear market winner on the Polish coal
market in the current market phase. Moreover, analysts expect a rise in the dividend yield from 3.7 per
cent based on the 2012 profit to 5 per cent this year. As to cyclical industrial stocks RCB emphasizes the
Polish chemical company Ciech, which is currently undergoing a restructuring plan. The company
research team of RCB reiterates its buy recommendation (target price PLN 26) against the backdrop of an
optimistic outlook for soda in 2013 and expects positive effects from the group's restructuring.
As to the telecom sector the Russian MTS (target price USD 21.80) is recommended. MTS posted a very
favourable result in Q3 2012. In contrast to its competitors, the company has announced to amend its
dividend policy and intends to pay out an increase of 25 per cent for the 2012-2014 period compared to
2009-2011. Owing to the new dividend policy the dividend yield at present comes up to 7.6 per cent for
common shares and to 6.5 per cent/ for ADR.
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This press release contains recommendations in the context of § 48f of the Austrian Stock Exchange Act (BörseG).
Disclaimer and Disclosures, see https://www.rcb.at/en/news-info/securities-prospectus/
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Raiffeisen Bank International AG (RBI) regards both, Austria, where it is a leading corporate and investment bank,
and Central and Eastern Europe (CEE) as its home market. In CEE, RBI operates an extensive network of subsidiary
banks, leasing companies and a range of other specialised financial service providers in 17 markets.
RBI is the only Austrian bank with a presence in both the world's financial centres and in Asia, the group's further
geographical area of focus.
In total, around 61,000 employees service about 14.1 million customers through more than 3,100 business outlets,
the great majority of which are located in CEE.
RBI is a fully consolidated subsidiary of Raiffeisen Zentralbank Österreich AG (RZB). RZB indirectly owns around
78.5 per cent of the common stock, the remainder is in free float. RBI's shares are listed on the Vienna Stock
Exchange. RZB is the central institution of the Austrian Raiffeisen Banking Group, the country's largest banking
group, and serves as the head office of the entire RZB Group, including RBI.
For further information, please contact:
Ingrid Krenn-Ditz (+43-1-71 707-6055, [email protected]) or
David Hell (+43-1-71 707-5627, [email protected]).
http://www.rbinternational.com, http://www.rzb.at
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Raiffeisen Centrobank AG, the equity company of Raiffeisen Bank International, is a leading Austrian investment
bank with a strong focus on the CEE region. It offers the entire range of services and products having to do with
stock, derivatives and equity transactions in and around the stock market. On the basis of this position, the
investment bank also offers exclusive individual Private Banking services.
For further information, please contact:
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Andrea Pelinka-Kinz (+43-1-51 520-614, [email protected]), http://www.rcb.at
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