Download s - Research Portal

Economic Research
e
Economic Insight
10 December 2015
Ireland: Phoenix from the ashes
Ireland continues to exceed economic expectations with GDP growth likely to reach
almost 7% this year and close to 5% in 2016. As a consequence Ireland remains on
track to reduce its huge fiscal imbalances. So far, pretty much everything has gone
right but Ireland remains vulnerable to global headwinds, with Brexit potentially high
up the list. With the initial phase of fiscal austerity apparently consigned to the past,
the challenge will be to ensure that Ireland can build on the hard work of recent years.
Key points
•
Economic growth and the improvement in public finances exceeded expectations in the
course of 2015. With real GDP expected to grow by almost 5% next year, all the
indications are that 2016 will bring another year of good economic news.
•
Tax revenues have performed particularly strongly this year and the government was
able to announce a fiscally expansionary budget for 2016. Ireland will likely meet its
target of a structurally balanced budget by 2019.
•
Although great progress has been made in cleaning up the banking sector, credit
growth remains muted. This has not prevented a big surge in house prices, where
activity is being driven by cash buyers in a supply-constrained market.
•
The possibility of Brexit poses a risk to the Irish economy, primarily via distortions to
trade links with the UK. But any restrictions to the free flow of labour would reduce the
effectiveness of a safety valve that has helped to curb unemployment.
So far, so good but the hard work is not yet over
Over the past year Ireland has continued its remarkable phoenix-like recovery from the
ashes of fiscal meltdown, and all the signs indicate that further progress will be made in
2016. After posting GDP growth last year of 5.2% Ireland looks set to register a near-7%
rate of expansion this year before moderating to around 5% in 2016. This comes after a
prolonged period of fiscal consolidation which allowed Ireland to exit the EU-IMF financial
assistance programme in December 2013 and to return to the capital markets as public
sector deficits and debt continue to decline (chart 1). Progress has also been made with
regard to recapitalising the banking system, which returned to profitability in 2014 for the first
time since 2008.
But for all the positive macroeconomic news, Ireland remains a small, open economy which
is vulnerable to global events and the spectre of Brexit might pose significant potential
challenges. Moreover, the magnitude of the fiscal squeeze was such that concerns have
been raised about the impact on income disparities, and despite all the good macro news,
there is still a long way to go before large sections of the population will share in the fruits of
recovery. Just as Ireland showed how much fiscal progress could be made as a result of
belt-tightening, so it will lead the way for other euro zone economies as they count the cost
of returning to normality.
CHART 1: The decline in Irish deficit- (l) and debt-to-GDP (r) ratios
10
140
5
120
0
100
-5
-10
80
-15
60
Author:
40
Peter Dixon
-20
-25
-30
-35
Ex. capital value of bank
Promissory Notes
1998 2000 2002 2004 2006 2008 2010 2012 2014
+44 20 747 51808
[email protected]
20
0
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Source: Department of Finance, NTMA, Commerzbank Research
For important disclosure information please see page 8.
research.commerzbank.com / Bloomberg: CBKR / Research APP available
Chief Economist:
Dr. Jörg Krämer
+49 69 136 23650
[email protected]
Economic Research | Economic Insight
CHART 2: Job growth is making steady progress
CHART 3: Consumer sentiment back at pre-recession
levels
Employment, Q1 2008=100
Q4 1995=100
102
140
100
130
98
120
96
110
94
100
92
90
90
88
80
86
70
84
2008
2009
2010
2011
2012
2013
2014
2015
Source: CSO
Growth is beginning to look
more broad-based as
domestic demand recovers
Fiscal improvement in 2015
has beaten expectations
60
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Source: Global Insight
The economic recovery: Based on solid foundations
One of the features of Irish growth over the past couple of years is that we are now seeing signs
of much stronger domestic demand. Over the period 2011 to 2013, net trade accounted for an
average of 1.9 percentage points of GDP growth per year whereas domestic demand continued
to act as a significant drag. As a result, GDP growth averaged only 1.4% p.a. over this period.
But over 2014 and 2015 we have seen a bigger pickup in household consumption and
investment. The consumer recovery can be partially explained by the job market recovery, with
employment in Q2 2015 5.5% above the Q1 2012 lows, thus taking it back to mid-2009 levels
(chart 2). A recovery in property prices and the boost to real wages from low inflation have
helped spur a sharp rise in consumer sentiment back to pre-recession levels (chart 3). Although
latest data show a surge in investment which is the product of volatile factors, underlying
investment demand also remains strong, driven by a recovery in machinery and equipment.
Assessing fiscal improvement
According to Department of Finance estimates, the general government deficit is set to come in
at 2.1% of GDP in 2015 versus a projection made a year ago of 2.7%. This represents a near-12
percentage point improvement versus the 2009 trough (after we correct for the effects of the
capital value of bank Promissory Notes which drove the deficit in 2010 to 32% of GDP). The
debt-to-GDP ratio is estimated to fall to 97% of GDP this year, reflecting a 23 percentage point
improvement compared to the 2012 peak, and compares with a forecast made a year ago for a
debt ratio of 108.5%.
In broad terms, the improvement in the deficit relative to expectations this year was driven by
higher-than-expected tax revenues – notably corporate taxes, which in the first eleven months of
the year contributed the bulk of the revenue overshoot. Nonetheless, tax revenues relative to
GDP remain considerably below pre-recession levels (chart 4), and are only back at 2008 levels,
CHART 4: Tax revenues remain below pre-recession levels
Four quarter average of tax receipts relative to nominal GDP, percent
25
24
23
22
21
20
19
18
17
2000 2001 2003 2004 2006 2007 2009 2010 2012 2013 2015
Source: Department of Finance, Global Insight, Commerzbank Research
2
CHART 5: Spending cuts form basis of consolidation
Percent of GDP
45
40
35
30
25
20
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Outlays
Revenues
Source: Department of Finance, Commerzbank Research
10 December 2015
Economic Research | Economic Insight
CHART 6: The fiscal squeeze seems to be over
CHART 7: Irish ratings on the way back
Fiscal consolidation, percent of GDP
7
Last ten ratings actions by S&P and Moody’s
May- Jul08
09
5.8
6
Jul11
Jan- May- Dec14
14
14
AA+/Aa1
3.7
4
2.6
3
AA/Aa2
2.3
2
2.1
AA-/Aa3
A+/A1
1.8
0.6
A/A2
0.6
0
-1
Oct- Dec- Apr10
10
11
AAA/Aaa
5
1
Jul10
A-/A3
-0.7
2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Department of Finance, Commerzbank Research
BBB+/Baa1
BBB/Baa2
BBB-/Baa3
BB+/Ba1
Source: Bloomberg
whereas outlays have declined by 7.2 percentage points of GDP compared to the 2010 peak
(chart 5). Clearly, the bulk of budget consolidation has been achieved by reducing spending. But
the days of ongoing fiscal squeeze now appear to be over. The 2015 budget implied a fiscal
easing equivalent to 0.5% of GDP (partially offsetting the 1.1 percentage point tightening
outlined in 2014) whilst the measures outlined for 2016 imply an easing of 0.7% (chart 6).
2016 budget framed with
one eye on the general
election
In part, the 2016 budget has been framed with one eye on the general election, which must take
place no later than 8 April 2016. Whilst latest polls suggest that Fine Gael’s share of the vote –
the senior coalition partner – has held up, that of Labour – the junior partner – has fallen sharply.
Although there are no market concerns regarding a possible change in the composition of the
government coalition next year, the rise of Sinn Fein at the expense of Labour should raise some
concerns that the fiscal stance may not be as tight in future as currently projected, given that
Sinn Fein’s policies imply a much greater role for the state in the economy.
Medium-term fiscal
objectives likely to be
achieved
Nonetheless, by reducing the general government deficit to 2.1% of GDP this year, Ireland will
meet its objective of reducing it below the 3% threshold as specified in the EU Stability and
Growth Pact (SGP). It will thus exit the corrective arm of the SGP and enter the preventive arm,
which in Ireland’s case requires it to achieve a structurally balanced budget by 2019 at a rate of
improvement of “more than” 0.5% of GDP per year. The 2016 budget is framed with reference to
this policy objective. According to the government’s own forecasts, this is expected to be
achieved, with the structural surplus projected at 0.6% of GDP by 2019 rising to 2.5% by 2021.
This is largely the result of rising tax revenues on the back of steady income growth with nominal
GDP projected to grow at an annual average rate of 4.5% over the forecast period.
And rating agencies
continue to upgrade Ireland
Public finance issues have significantly influenced the main credit rating agencies. Between April
2009 and December 2011, Moody’s cut Ireland’s rating by 10 notches (S&P by 7) but in a
process starting in early 2014 both agencies have since raised it by three notches (chart 7). The
decision taken in 2013 to issue longer maturity bonds in exchange for a promissory note issued
in 2010 to recapitalise the banking sector proved to be a turning point1. This reduced state
financing costs and it is estimated to reduce the deficit-to-GDP ratio by 0.6% per year over the
longer-term. On our calculations, this move extended the average time to maturity of Irish debt
by almost 18 months – a point which the rating agencies could not ignore.
Bank balance sheets are
being reduced
Issues of concern: (i) The banking sector
Ireland’s recent problems have primarily stemmed from an over-extension of bank balance
sheets, which at one point reached well over 800% of GDP. Today, it has fallen back to levels
last seen in the early years of the century (chart 8). This deleveraging has been driven by a
decline in both lending and deposit taking, which has affected both sides of the balance sheet,
and which reflects the collapse of Anglo Irish Bank. Unlike countries such as Greece, which
experienced a substantial outflow of domestic capital, Irish banks have seen domestic deposits
broadly hold up although there has been a significant reduction in the degree of foreign
involvement in the banking system (chart 9).
1
10 December 2015
‘Ireland: One step forward’, Economic Insight, 11 February 2013
3
Economic Research | Economic Insight
CHART 8: The rise and fall of the banking system
CHART 9: Foreign depositors have exited the Irish market
Credit institutions’ balance sheet, percent of GDP
Bank deposits by sector, €bn
900
900
800
700
600
500
400
300
200
100
0
2003
800
700
600
500
400
300
2003
2005
2007
2009
2011
2013
2007
Irish private sector
2015
Source: Central Bank of Ireland, Commerzbank Research
2005
2009
2011
Emu residents
2013
2015
RoW residents
Source: Central Bank of Ireland
Irish private sector deposits are a modest 3% below end-2009 levels, which may be explained by
emigration and corporates running down cash balances. But euro area residents have reduced
their holdings by 65% and non-EMU foreign residents have cut their holdings by a massive 76%.
Banks are now profitable
and adequately capitalised
One consequence of the crisis is that there has been a significant restructuring of the banking
sector, and the five major financial institutions which operated prior to 2008 have been reduced
to three. Although much of the international evidence suggests that banks do not contribute
much to the immediate economic turnaround following a financial crash, their efficient functioning
is a crucial part of the longer-term recovery story. The good news is that in 2014 they recorded a
pre-tax profit for the first time since 2008 (chart 10). In common with banks across much of
Europe, the survivors of the Irish banking meltdown have been forced to take radical action to
improve their asset quality and capital ratios. Common equity Tier 1 ratios remain above the
minimum requirements (chart 11), which is an indication that banks have made considerable
progress on recapitalisation.
But the flow of credit
remains restricted
Nonetheless, the flow of credit throughout the Irish economy is not yet showing much sign of
recovery with credit to both households and corporates continuing to decline (chart 12). The
Bank Lending Survey for Ireland, conducted on behalf of the ECB, has shown no change in
credit standards in lending to enterprises over the last four years and is an indication that banks
are continuing to prioritise the cleaning up of their balance sheets at the expense of business
expansion. If this situation persists, it will increasingly act as a drag on indigenous Irish
businesses. The fact that it is not perceived to be a major problem today reflects the fact that a
large proportion of corporate investment is funded by multinationals.
CHART 10: The Irish banking sector is back in profit
Pre-tax profits as percent of capital employed for Allied Irish Bank,
Bank of Ireland and Permanent TSB
5
0
-5
-10
17.4
15.9 15.4
14.1 13.6 13.4
CET1 (Transitional)
AIB
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Bloomberg, Commerzbank Research
4
CET1 capital ratios, June 2015
20
18
16
14
12
10
8
6
4
2
0
10
-15
CHART 11: Bank capital ratios are more than adequate
CET1 (Fully loaded)
BoI
PTSB
Source: NTMA
10 December 2015
Economic Research | Economic Insight
CHART 12: Credit continues to contract …
CHART 13: … But the housing market is booming
Lending by sector, year-on-year percent change
10
8
6
4
2
0
-2
-4
-6
-8
-10
2009
House prices, national average, year-on-year percent change
20
15
10
5
0
-5
-10
-15
2010
2011
Households
2012
2013
2014
2015
Non-financial corporates
Source: Central Bank of Ireland
The housing market is
booming as cash buyers
drive the market
-20
-25
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Bloomberg
(ii) The housing market
Although the banking system is not injecting a significant amount of credit into the economy, the
Irish housing market continues to perform well (chart 13). Prices are up 35% from the March
2013 trough, although they are still 33% below the September 2007 peak. In the absence of a
surge in bank credit, it is safe to assume that the housing market is being driven by cash buyers.
Indeed, data from the Banking and Payments Federation of Ireland, which compares mortgage
drawdowns with mortgage approvals, suggests that over the past four years almost half of all
transactions have been financed without a mortgage (chart 14). This has raised some concerns
that the market is once again in bubble territory and may be heading for a correction.
Mortgage arrears remain
high but are now on the
decline
But such fears appear overblown. Housing market corrections have a particularly devastating
effect on the economy when the decline in prices leaves house buyers with an asset worth less
than their mortgage liabilities. But this is unlikely to be a major issue in an environment where
mortgage liabilities are low. Indeed, the ratio of household mortgage debt to income – although
high, at around 156% – is at ten year lows and heading downwards (chart 15). Mortgage arrears
are also declining, with 9.3% of all mortgages in arrears by more than 90 days compared with a
high of 12.9% in Q3 2013. Although the value of the mortgage book in arrears is higher, at
13.4%, reflecting the fact that those borrowing large amounts prior to the housing market crash
have taken the biggest hit, this is down from a peak of 17.3% and is consistent with the picture of
a banking sector which is making progress in clearing out its balance sheet.
Residential market also
being driven by a lack of
supply
One of the other factors driving the market is that the housing supply-demand balance has
become considerably tighter in recent years. Housing completions peaked at 93.4k units in 2006
but this had fallen to 11.0k by 2014 (a similar figure is likely in 2015). With the Irish population
already at its highest in 150 years and the excess supply generated prior to the bust being
eroded rapidly, The Housing Agency reckons that Ireland currently needs 21k new units per
year. At current rates of construction, we are well below these levels, which suggests that at
least part of the elevated rate of price inflation is due to a shortage of properties.
CHART 14: Cash buyers are driving the housing market
Percentage of housing transactions not funded by a mortgage
65
60
55
50
45
40
35
30
2012
Source: BPFI
10 December 2015
2013
2014
2015
CHART 15: Mortgage debt is on the decline
Long-term household liabilities as percentage of disposable income
220
210
200
190
180
170
160
150
140
130
120
110
100
90
2002
2004
2006
2008
2010
2012
2014
Source: CSO, Central Bank of Ireland, Commerzbank Research
5
Economic Research | Economic Insight
(iii) Brexit
Trade links with the UK
have traditionally been
strong
We have noted previously that the UK’s departure from the EU would have implications for the
2
remaining EU members . But nowhere is this more of an issue than Ireland, for which the UK is
the second largest single export market and the most important in Europe (chart 16). Indeed,
Ireland is the only country which shares a land border with the UK, and the province of Northern
th
Ireland alone was the 11 most important destination for Irish exports last year – one place
ahead of China. That said, the importance of the UK to the Irish economy has declined: Forty
years ago, it absorbed 56% of Irish exports – a rate almost four times higher than today.
Nonetheless, merchandise trade is concentrated in a small number of product types, and any
rise in trade tariffs which affects these sectors could have a disproportionate impact on Irish
export volumes. Moreover the share of imports from the UK is double the export share,
suggesting that issues which significantly impact on UK export prices could weigh heavily on
Ireland.
In the worst case
scenarios, Brexit could
adversely affect Irish GDP
growth
The extent to which Ireland will be affected by Brexit issues depends upon the nature of the
3
relationship between the UK and the EU. One study calculated that in the case where the UK
and the EU negotiate a bilateral agreement, trade between the EU and the UK would be reduced
by more than 20%. If a similar reduction were to occur in the Irish case, it could result in a 3.3
percentage point decline in Irish merchandise exports. Given that export volumes account for
more than 100% of Irish GDP we calculate that such a decline over a two-year period would
halve the rate of GDP growth.
Any impediments to the
flow of labour to the UK
may reduce the
effectiveness of a useful
safety valve
Another possible consequence of Brexit might be to impact on labour flows between Ireland and
the UK. Traditionally, links between the two countries have been strong and although the
relationship is less clear cut than in the past, a mechanism is still in place whereby “net flows
4
from Ireland to the UK increase when the Irish unemployment rate rises relative to the UK rate.”
There are two factors which are likely to come into play in the event of Brexit. In the first
instance, Irish emigrants may choose other destinations in place of the UK which is likely to
result in reduced outflows due to the greater distances involved and possible linguistic barriers.
A second outcome may be that EU immigrants are diverted to Ireland who would otherwise have
gone to the UK, which would again result in a higher domestic labour force.
Simulation analysis
suggests this would also
depress Irish wages
Barrett et al (2015) conducted a simulation exercise in which the Irish labour force is assumed
to rise by 60,000 (roughly the extent of net Irish emigration to the UK over the period 2011-13),
in an attempt to capture greater restrictions on labour outflows. With the bulk of the adjustment
assumed to fall on low-skilled workers, either via wages or employment levels, the overall effect
is to raise employment levels but produce a very sharp decline in wages (chart 17).
4
CHART 16: UK remains a big market for Irish exports
CHART 17: Restrictions on UK-Irish labour flows would
depress wages
Top 10 export destinations 2014, percent of total
Percentage change versus baseline
3.8
2.8 2.4 2.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
22.2
5.2
5.9
6.6
15.1
13.2
US
UK
BE
GY
SZ
Source: CSO, Commerzbank Research
FR
NL
SP
IT
JP
2.2
2.0
-3.7
-3.9
Low skilled employment
adjustment
Employment
Low skilled wage adjustment
Average wage
Source: Barrett et al (2015)
2
‘Brexit: A primer’, Economic Insight, 3 September 2015
Hufbauer, G. and J. Schott (2009). ‘Fitting Asia-Pacific Agreements into the WTO system’ in Richard
Baldwin and Patrick Low (eds.) Multilateralizing Regionalism: Challenges for the Global Trading System,
Cambridge: Cambridge University Press.
4
Barrett, A., A. Bergin, J. FitzGerald, D. Lambert, D. McCoy, E. Morgenroth, J. Siedschlag and Z. Studnicka
(2015) ‘Scoping the Possible Economic Implications of Brexit on Ireland’, ESRI Research Series 48
3
6
10 December 2015
Economic Research | Economic Insight
Ireland is generally in
better shape than we might
have dared hope …
Final thoughts
Ireland has emerged from the worst of the fiscal squeeze in better shape than we might have
dared hope. But as the austerity chapter is brought to a close, Ireland will face significant
challenges going forward. One is that the recent improvement in public finances owes a lot to tax
revenues, particularly from corporates, which cannot be relied upon to continue growing strongly
in a world of less buoyant growth. It remains to be seen whether Ireland will be able to afford
further fiscal giveaways in future or whether it may be forced to resume a tight fiscal stance once
the election is out of the way.
… although further
progress in bank
restructuring is necessary
The good news is that the ECB’s easy monetary stance has offset some of the fiscal pain. But
despite the fact that restructuring in the banking sector has helped restore it to partial health,
banks continue to curb their lending activities. Unless we see further progress on this front in the
coming years, this will increasingly act as a drag on growth. Although the strength of the housing
market is cited as a possible source of instability, and has awakened fears that Ireland has not
learned the lessons of the boom-and-bust, the market is being driven by cash-buyers operating
in an environment of increasingly limited supply. Indeed, a recent survey by the CSO pointed out
that across 80% of the country it is more expensive to rent than to buy, suggesting that there is a
major structural problem in the residential sector. Accordingly, we do not view a housing bust as
a major risk to the economy, although any price correction which impacts on already-high levels
of mortgage arrears could act as a hindrance to banking sector reform.
The political challenge will
be to ensure that people
gain the full benefit of their
sacrifices
One lesson which Ireland offers to other European nations facing structural fiscal issues is that it
is possible to weather the storm so long as the government does its part to maintain social
cohesion. During the initial phase of the fiscal tightening, social welfare payments were largely
protected although they were subsequently reduced. The readiness of younger segments of the
Irish labour force to emigrate also played a role by reducing unemployment relative to the
outcome which would have occurred with a more static labour force, and further reduced the
welfare burden. But anecdotal evidence indicates that many people have yet to feel many of the
benefits evident in the macro data. Ireland’s biggest political and economic challenge in the
coming years will be to ensure that they do.
10 December 2015
7
Economic Research | Economic Insight
This document has been created and published by the Corporates & Markets division of Commerzbank AG, Frankfurt/Main or Commerzbank’s branch offices mentioned in the
document. Commerzbank Corporates & Markets is the investment banking division of Commerzbank, integrating research, debt, equities, interest rates and foreign exchange.
The author(s) of this report, certify that (a) the views expressed in this report accurately reflect their personal views; and (b) no part of their compensation was, is, or will be
directly or indirectly related to the specific recommendation(s) or views expressed by them contained in this document. The analyst(s) named on this report are not registered /
qualified as research analysts with FINRA and are not subject to NASD Rule 2711.
Disclaimer
This document is for information purposes only and does not take into account specific circumstances of any recipient. The information contained herein does not constitute the
provision of investment advice. 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 financial
instruments and/or securities mentioned in this document and will not form the basis or a part of any contract or commitment whatsoever. Investors should seek independent
professional advice and draw their own conclusions regarding suitability of any transaction including the economic benefits, risks, legal, regulatory, credit, accounting and tax
implications.
The information in this document is based on public data obtained from sources believed by Commerzbank to be reliable and in good faith, but no representations, guarantees or
warranties are made by Commerzbank with regard to accuracy, completeness or suitability of the data. Commerzbank has not performed any independent review or due
diligence of publicly available information regarding an unaffiliated reference asset or index. The opinions and estimates contained herein reflect the current judgement of the
author(s) on the date of this document and are subject to change without notice. The opinions do not necessarily correspond to the opinions of Commerzbank. Commerzbank
does not have an obligation to update, modify or amend this document or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection,
forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
This communication may contain trading ideas where Commerzbank may trade in such financial instruments with customers or other counterparties. Any prices provided herein
(other than those that are identified as being historical) are indicative only, and do not represent firm quotes as to either size or price. The past performance of financial
instruments is not indicative of future results. No assurance can be given that any financial instrument or issuer described herein would yield favourable investment results. Any
forecasts or price targets shown for companies and/or securities discussed in this document may not be achieved due to multiple risk factors including without limitation market
volatility, sector volatility, corporate actions, the unavailability of complete and accurate information and/or the subsequent transpiration that underlying assumptions made by
Commerzbank or by other sources relied upon in the document were inapposite.
Commerzbank and or its affiliates may act as a market maker in the instrument(s) and or its derivative that has been mentioned in our research reports. Employees of
Commerzbank and or its affiliates may provide written or oral commentary, including trading strategies, to our clients and business units that may be contrary to the opinions
conveyed in this research report. Commerzbank may perform or seek to perform investment banking services for issuers mentioned in research reports.
Neither Commerzbank nor any of its respective directors, officers or employees accepts any responsibility or liability whatsoever for any expense, loss or damages arising out of
or in any way connected with the use of all or any part of this document.
Commerzbank may provide hyperlinks to websites of entities mentioned in this document, however the inclusion of a link does not imply that Commerzbank endorses,
recommends or approves any material on the linked page or accessible from it. Commerzbank does not accept responsibility whatsoever for any such material, nor for any
consequences of its use.
This document is for the use of the addressees only and may not be reproduced, redistributed or passed on to any other person or published, in whole or in part, for any purpose,
without the prior, written consent of Commerzbank. The manner of distributing this document may be restricted by law or regulation in certain countries, including the United
States. Persons into whose possession this document may come are required to inform themselves about and to observe such restrictions. By accepting this document, a
recipient hereof agrees to be bound by the foregoing limitations.
Additional notes to readers in the following countries:
Germany: Commerzbank AG is registered in the Commercial Register at Amtsgericht Frankfurt under the number HRB 32000. Commerzbank AG is supervised by both the
German regulator, Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), Graurheindorfer Strasse 108, 53117 Bonn, Marie-Curie-Strasse 24-28, 60439 Frankfurt am Main and
the European Central Bank, Sonnemannstrasse 20, 60314 Frankfurt am Main, Germany.
United Kingdom: This document has been issued or approved for issue in the United Kingdom by Commerzbank AG London Branch. Commerzbank AG, London Branch is
authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), and the European Central Bank and is subject to limited regulation by the Financial Conduct Authority and
Prudential Regulation Authority. Details on the extent of our regulation by the Financial Conduct Authority and Prudential Regulation Authority are available from us on request.
This document is directed exclusively to eligible counterparties and professional clients. It is not directed to retail clients. No persons other than an eligible counterparty or a
professional client should read or rely on any information in this document. Commerzbank AG, London Branch does not deal for or advise or otherwise offer any investment
services to retail clients.
United States: This document has been approved for distribution in the US under applicable US law by Commerz Markets LLC (‘Commerz Markets’), a wholly owned subsidiary of
Commerzbank AG and a US registered broker-dealer. Any securities transaction by US persons must be effected with Commerz Markets, and transaction in swaps with Commerzbank
AG. Under applicable US law; information regarding clients of Commerz Markets may be distributed to other companies within the Commerzbank group. This research report is
intended for distribution in the United States solely to “institutional investors” and “major U.S. institutional investors,” as defined in Rule 15a-6 under the Securities Exchange Act of
1934. Commerz Markets is a member of FINRA and SIPC. Commerzbank AG is a provisionally registered swap dealer with the CFTC.
Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities
described herein, solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada
will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under
applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is
made. Under no circumstances is the information contained herein to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the
recipient. In Canada, the information contained herein is intended solely for distribution to Permitted Clients (as such term is defined in National Instrument 31-103) with whom
Commerz Markets LLC deals pursuant to the international dealer exemption. To the extent that the information contained herein references securities of an issuer incorporated, formed
or created under the laws of Canada or a province or territory of Canada, any trades in such securities may not be conducted through Commerz Markets LLC. No securities
commission or similar regulatory authority in Canada has reviewed or in any way passed upon these materials, the information contained herein or the merits of the securities described
herein and any representation to the contrary is an offence.
European Economic Area: Where this document has been produced by a legal entity outside of the EEA, the document has been re-issued by Commerzbank AG, London
Branch for distribution into the EEA.
Singapore: This document is furnished in Singapore by Commerzbank AG, Singapore branch. It may only be received in Singapore by an institutional investor as defined in
section 4A of the Securities and Futures Act, Chapter 289 of Singapore (“SFA”) pursuant to section 274 of the SFA.
Hong Kong: This document is furnished in Hong Kong by Commerzbank AG, Hong Kong Branch, and may only be received in Hong Kong by ‘professional investors’ within the
meaning of Schedule 1 of the Securities and Futures Ordinance (Cap.571) of Hong Kong and any rules made there under.
Japan: Commerzbank AG, Tokyo Branch is responsible for the distribution of Research in Japan. Commerzbank AG, Tokyo Branch is regulated by the Japanese Financial
Services Agency (FSA).
Australia: Commerzbank AG does not hold an Australian financial services licence. This document is being distributed in Australia to wholesale customers pursuant to an
Australian financial services licence exemption for Commerzbank AG under Class Order 04/1313. Commerzbank AG is regulated by Bundesanstalt für
Finanzdienstleistungsaufsicht (BaFin) under the laws of Germany which differ from Australian laws.
© Commerzbank AG 2015. All rights reserved. Version 9.21
Commerzbank Corporates & Markets
Frankfurt
Commerzbank AG
DLZ - Gebäude 2, Händlerhaus
Mainzer Landstraße 153
60327 Frankfurt
Tel: + 49 69 136 21200
8
London
Commerzbank AG, London Branch
PO BOX 52715
30 Gresham Street
London, EC2P 2XY
Tel: + 44 207 623 8000
New York
Commerz Markets LLC
225 Liberty Street,
32nd floor
New York, NY 10281 - 1050
Tel: + 1 212 703 4000
Singapore Branch
Commerzbank AG
71, Robinson Road, #12-01
Singapore 068895
Tel: +65 631 10000
Hong Kong Branch
Commerzbank AG
15th Floor, Lee Garden One
33 Hysan Avenue, Causeway Bay
Hong Kong
Tel: +852 3988 0988
10 December 2015