Allianz Se · XETR:ALV
Allianz — Investor Presentation (June 2021)
58 slides from Allianz's investor presentation, Jun 9, 2021
Slide 1: Grand Reopening: New Opportunities, Old Risks
©Mārtiņš Zemlickis Textmasterformat bearbaiting GRAND REOPENING: NEW OPPORTUNITIES, OLD RISKS Allianz Research June 9, 2021 © Copyright Allianz
Slide 2: Executive Summary
Textmasterformat bearbaiting EXECUTIVE SUMMARY Message #1: Vaccine security to shape Grand Reopening. While advanced economies delivered on immunization campaigns, vaccine hesitancy and second generation vaccines are first- order priorities. In the meantime, under-vaccination in Asia and in Emerging
Slide 3: Message #1: Vaccines Security Matters
Textmasterformat bearbaiting MESSAGE #1: VACCINES SECURITY MATTERS Expected date of herd immunity Asia relapse: Sanitary situation vs. stringency & mobility (at current vaccination speed) impact, as of end of May (bubble size = vaccine doses administered as % of population; pink bubbles where string
Slide 4: Message #2: Multi-Faceted Recovery
Textmasterformat bearbaiting MESSAGE #2: MULTI-FACETED RECOVERY Real GDP growth forecasts 2022 GDP, compared to 2019 and to pre-crisis forecast 2019 2020 2021 2022 World GDP growth 2.4 -3.5 5.5 4.1 United States 2.2 -3.5 6.3 4.0 6 2022 GDP higher than 2019 and pre-crisis forecast Latin America 0.2 -
Slide 5: Message #3: Revenge Spending to Absorb Only Part of Residual Savings
Textmasterformat bearbaiting MESSAGE #3: REVENGE SPENDING TO ABSORB ONLY PART OF RESIDUAL SAVINGS US retail sales (%, y/y) Eurozone consumer confidence Catch-up consumption expected vs retail sales growth in 2021, % of GDP 20 3.0 2% 10 2.5 0% 0 -2% 2.0 -10 -4% 1.5 -20 -6% -8% 1.0 -30 General economi
Slide 6: Message #4: Cyclical Inflation Is High, Structural One Contained
Textmasterformat bearbaiting MESSAGE #4: CYCLICAL INFLATION IS HIGH, STRUCTURAL ONE CONTAINED Global inflationary pressure index Perceived output gap (latest available) Employment (in million), Eurozone vs US 12 Job conditions Taiwan Q1 2021 2.8% EZ Employment Currencies South Korea Q1 2021 -0.2% EZ
Slide 7: Message #4B: Markets Unimpressed by Inflation Expectations
Textmasterformat bearbaiting MESSAGE #4B: MARKETS UNIMPRESSED BY INFLATION EXPECTATIONS US 10y yield at the upper fair value range No shift in long-term inflation expectations Inflation forecasts by region (yield in %) (yearly inflation in %) 7.0 Eurozone core Forecast Oversold/Overbought range 3.5
Slide 8: Message #5: The Music Keeps On Playing but Mind Endogenous Instabilities
Textmasterformat bearbaiting MESSAGE #5: THE MUSIC KEEPS ON PLAYING BUT MIND ENDOGENOUS INSTABILITIES year-end figures Last Value Unit Old Scenario New Scenario (01.06.2021) Sovereign: Despite the recent increase in long-term EMU 2021 2022 2021 2022 sovereign yields our forecasts maintain the raisin
Slide 9: Message #6: Fiscal Impulse to Stay
Textmasterformat bearbaiting MESSAGE #6: FISCAL IMPULSE TO STAY Eurozone public debt (% GDP) US public debt (% GDP) EMs: Differential between past economic growth and current cost of debt* NGA BRA ZAF UKR KEN RUS COL TUR MEX PER CHL IDN IND THA MYS HUN CZE ROU PHL CHN POL Sources: Refinitiv, Allianz
Slide 10: Message #6B: Monetary Policy for Jobs
Textmasterformat bearbaiting MESSAGE #6B: MONETARY POLICY FOR JOBS EM: Expected number of policy rate hikes Fed's balance sheet ECB Public sector asset purchases until mid-2022 (sorted by region) (USD bn) under PEPP & PSPP (EUR bn) 10000 180 PEPP APP Forecast Expected Expected Country number of rate
Slide 11: Message #7: Hot Fall but No 2012 for Europe
Textmasterformat bearbaiting MESSAGE #7: HOT FALL BUT NO 2012 FOR EUROPE Italy: Tapering rumors weigh on spread, but risk is capped Germany: Public sector debt outstanding (10y spread in bp) Sources: Refinitiv, Allianz Research Sources: Refinitiv, ECB, Allianz Research Tapering rumors weighed on BTP
Slide 12: Message #8: Credit Risk Under Control
Textmasterformat bearbaiting MESSAGE #8: CREDIT RISK UNDER CONTROL Eurozone banks' exposure to Covid-19 sectors Changes in EBITDA margin between Euler Hermes Insolvency Index, yearly vs. return on equity (%) – as of Dec. 2020 FY2019 and FY2020, by sector at the level, base 100 in 2019 global scale S
Slide 13: Message #9: Net Zero Policy Will Require Progressiveness and New Industrial Policy
Textmasterformat bearbaiting MESSAGE #9: NET ZERO POLICY WILL REQUIRE PROGRESSIVENSS AND A NEW INDUSTRIAL POLICY Fossil assets will get stranded as fossil prices fall and become Designing new industrial policies started across the board insufficient to recover OPEX. OPEC will increase its market oil
Slide 14: Message #10: Political Risk Reloaded
MESSAGE #10: POLITICAL RISK RELOADED Textmasterformat bearbaiting United Kingdom: The SNP was short one seat to gain the majority at the May 2021 Scottish Elections in Europe parliament elections. An independence referendum remains the main political Sep 2021: German federal elections (The Green par
Slide 15: Appendix 1 – Macroeconomic Outlook
Textmasterformat bearbaiting APPENDIX 1 – MACROECONOMIC OUTLOOK © Copyright Allianz
Slide 16: Covid-19: Closer to Normality in Advanced Economies
COVID-19: CLOSER TO ‘NORMALITY’ IN ADVANCED Textmasterformat bearbaiting ECONOMIES Expected date of herd immunity Pandemic risk vs sanitary restrictions (at current vaccination speed) 900 1.5 EU Mexico Emerging Economies Argentina 800 (reproduction rate * new cases per million) Argentina Indonesia S
Slide 17: Global Demand: From K-Shape to V-Shape
Textmasterformat bearbaiting GLOBAL DEMAND: FROM K-SHAPE TO V-SHAPE Mobility data, level compared to pre-crisis Container traffic volumes (12m/12m) 20 Germany France United Kingdom 20% North America to Asia 10 United States Italy Spain Europe to Asia 0 15% Asia to North America -10 Asia to Europe -2
Slide 18: Global Investment: Green Light for a Strong Cycle
Textmasterformat bearbaiting GLOBAL INVESTMENT: GREEN LIGHT FOR A STRONG CYCLE Increase in non-financial corporates’ total deposits, Baseline forecast of business investment growth (2020, % of GDP) (current LCU) 8% 7% 6% 5% 4% 3% 2% 1% 0% Germany UK Italy Belgium US Netherlands France Spain Sources:
Slide 19: Global Investment: Cash-Rich Sectors to Have More Active Policies
Textmasterformat bearbaiting GLOBAL INVESTMENT: CASH-RICH SECTORS TO HAVE MORE ACTIVE POLICES Increase in cash positions in 2020 by size of company Cash-hoarding by sectors in main European countries* (bn LCU) (listed companies, EURbn) 200 Big corporates SMEs 180 160 140 120 100 80 60 40 20 0 France
Slide 20: Global Trade: Strong Momentum Despite Short-Term Bottlenecks
Textmasterformat bearbaiting GLOBAL TRADE: STRONG MOMENTUM DESPITE SHORT-TERM HURDLES DUE TO BOTTLENECKS Global trade in goods and services, %y/y Global trade in goods & leading indicator Taiwan production shortfall vs. US & Asia Pacific North America Eurozone input shortage Western Europe Central a
Slide 21: Global Supply: Bottlenecks Can Last Until Year-End
Textmasterformat bearbaiting GLOBAL SUPPLY: BOTTLENECKS CAN LAST UNTIL YEAR-END Assessment of stock levels, manufacturing China credit impulse and price indices (balance of opinion) China PPI %y/y (9m lag) Germany France Italy Eurozone China export price index %y/y (11m lag) 35 Proprietary China cre
Slide 22: Inflation: Cyclical Part High, Structural One Contained
Textmasterformat bearbaiting INFLATION: THE CYCLICAL PART IS HIGH, THE STRUCTURAL ONE REMAINS CONTAINED Global inflationary pressure index Income money velocity (100 = Q4 2019) 12 Job conditions Currencies Producer prices 105 Energy prices Inflationary Pressure Index 10 100 8 6 95 4 90 2 0 85 China
Slide 23: Inflation: Switching from Excess Supply to Excess Demand
Textmasterformat bearbaiting INFLATION: SWITCHING FROM EXCESS SUPPLY TO EXCESS DEMAND WITH BOTLENECKS Catch-up consumption expected in 2021, Real GDP growth % of GDP US China Euro area UK (q/q) (y/y) (q/q) (q/q) 3.0 2019 0.6% 6.0% 0.2% 0.3% 2.5 average 2.0 Q1 1.6% 18.3% -0.6% -1.5% 1.5 Q2 2.2% 7.3%
Slide 24: Inflation: Higher Inflation Means Lower Margins and Purchasing Power
Textmasterformat bearbaiting INFLATION: LIVING WITH HIGHER INFLATION MEANS LOWER MARGINS AND PURCHASING POWER Assessment of shortages and selling price European companies’ pricing power Nominal wage growth (%) expectations by firms, by sector (Europe) Eurozone Risk on profitability Pricing due to in
Slide 25: Inflation: Negative Output Gaps Keep Wage Pressure in Check
Textmasterformat bearbaiting INFLATION: NEGATIVE OUTPUT GAPS WILL KEEP WAGE PRESSURE IN CHECK Perceived output gap (latest available) Sectoral wages in Europe (% total) Taiwan Q4 2020 0.3% China Q1 2021 -0.9% USA Q1 2021 -1.4% South Korea Q4 2020 -2.0% Japan Q1 2021 -3.2% Canada Q4 2020 -5.1% Sweden
Slide 26: Inflation: Gradual Monetary Tightening in Emerging Markets
Textmasterformat bearbaiting INFLATION: GRADUAL MONETARY TIGHTENING IN THE EMERGING MARKETS EM: Inflationary and monetary policy pressures EM: Expected number of policy rate hikes until mid-2022 (sorted by region) 8 7 Countries more NGA Expected Expected likely to hike Country number of rate Country
Slide 27: Corporates: Absorbing Covid-19 Debt Requires Ambitious Fiscal Reforms
Textmasterformat bearbaiting CORPORATES: ABSORBING COVID-19 DEBT REQUIRES AMBITIOUS FISCAL REFORMS Annual change in NFC debt – annual change in What is needed to absorb Covid-19 corporate debt? NFC margins 25% France Germany UK USA Increase Increase Increase Change in LT annual Maximum Year of neede
Slide 28: Insolvencies: Companies in Western Europe Saved by the States
Textmasterformat bearbaiting INSOLVENCIES: 1 OUT OF 2 COMPANIES IN WESTERN EUROPE SAVED BY THE STATES 2020 GDP growth and insolvencies in Western Europe 5-year cumulated number of quarters during which GDP growth is below average by two standard deviations Germany United Kingdom 5.0 United States 4.
Slide 29: Banks: The Risk of Crunching the Recovery
Textmasterformat bearbaiting BANKS: THE RISK OF CRUNCHING THE RECOVERY ECB Eurozone bank lending survey Banks' exposure to Covid-19 sensitive sectors vs. return on equity (%) - as of Dec 2020 Sources: Refinitiv, Allianz Research Sources: EBA, Refinitiv, Allianz Research Note: *Jan – Mar 2021 Eurozon
Slide 30: Global Uncertainty: Continued Protectionism vs. Multilateralism 2.0
Textmasterformat bearbaiting GLOBAL UNCERTAINTY: CONTINUED PROTECTIONISM VS. MULTILATERALISM 2.0 Measures restraining trade Multilateral free trade agreements (underlined: interest in joining CPTPP) (cutoff date each year on 30 April) 400 Net trade interventions (harmful 350 measures - liberalizing
Slide 31: Global Uncertainty: A New US Paternalism Until 2022 Mid-Terms?
Textmasterformat bearbaiting GLOBAL UNCERTAINTY: A NEW US PATERNALISM UNTIL THE MID-TERM ELECTIONS IN 2022? Economic Policy Uncertainty index Towards a leadership by the law • “A family approach” by adopting a multilateral strategy with a comeback to international organizations and a leading role in
Slide 32: Political Risk Is Not Fully Dead
Textmasterformat bearbaiting POLITICAL RISK IS NOT FULLY DEAD UK: The SNP was short one seat to gain the majority at the May 2021 Scottish parliament elections. An independence referendum remains the main political Elections in Europe risk to watch in Scotland and in the UK. Tensions to rise in 2022
Slide 33: German Elections: Evolution, No Revolution
Textmasterformat bearbaiting GERMAN ELECTIONS: EVOLUTION, NO REVOLUTION Germany: Election poll (%) What could a Black-Green coalition (baseline scenario) entail? 50% CDU/CSU SPD Green party FDP Fiscal policy 40% Left party AfD • Temporary suspension & stretched interpretation of debt brake provides
Slide 34: Appendix 2 – Capital Markets Outlook
Textmasterformat bearbaiting APPENDIX 2 – CAPITAL MARKETS OUTLOOK © Copyright Allianz
Slide 35: US Inflation: The Expectation Puzzle
Textmasterformat bearbaiting US INFLATION: THE EXPECTATION PUZZLE US 10y yield at the upper fair value range Rising breakeven don’t mean higher inflation expectations (yield in %) (decomposition of breakeven, in %) 7.0 4.0 Oversold/Overbought range Fair value range (1Std.) 3.0 6.0 Fair value: US 10y
Slide 36: US Inflation: The Expectation Puzzle (II)
Textmasterformat bearbaiting US INFLATION: THE EXPECTATION PUZZLE (II) Inflation surveys show contained inflation fears Term structure models indicate no shift in long-term (Consumer Price Index, in %) expectations ...yet? 3.5 4.0 3.5 3.0 3.0 2.5 2.5 2.0 Survey Professional Forecasters 2.0 1.5 Reute
Slide 37: Euro Sovereigns: Tapering Rumours
Textmasterformat bearbaiting EURO SOVEREIGNS : TAPERING RUMOURS 10y Bund: Catch-up to fair value Italy: Tapering rumors weigh on spread, but risk is capped (10y yield in %) (10y spread in bp) 2% 600 10y Bund yield Total spread Fair value estimate Default risk premium +/- 1 Std. deviation 500 Break-u
Slide 38: This Time Is Different: It's Past Midnight
Textmasterformat bearbaiting THIS TIME IS DIFFERENT: IT’S PAST MIDNIGHT Minsky – Kindleberger Market Cycle Clock Legitimate increase in the Lender of last expected return The recent post-Covid-19 market frothiness has sparked claims resort & Increased demand increased on capital for & supply of of a
Slide 39: Equity Markets: Red Flags (I)
Textmasterformat bearbaiting EQUITY MARKETS: RED FLAGS (I) Long-term EPS growth expectations (in %) # of SPACs IPOs (live & in progress) 30 MSCI USA 600 Rest of the World - In Progress MSCI Europe Rest of the World - Live 25 MSCI EM 500 US - In Progress US - Live 20 400 15 300 10 200 5 100 0 0 1994
Slide 40: Equity Markets: Red Flags (II)
Textmasterformat bearbaiting EQUITY MARKETS: RED FLAGS (II) Ratio of US margin debt to personal income Financial velocity of money 5% 10 5 000 Financial velocity (Turnover by 4% value/M2) at annual rate 3% 1 500 2% 1% Velocity of US M2 in US equity market (L.H.S) Datastream US total market index (R.
Slide 41: Cryptocurrencies: A Red Flag?
Textmasterformat bearbaiting CRYPTOCURRENCIES: A RED FLAG? Cryptocurrencies market capitalization Bitcoin correlations with certain stocks (and Gold) Tesla Gold Apple FB 0.6 0.4 0.2 0.0 -0.2 -0.4 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Sources: Refinitiv, Allianz Research. Correlations are
Slide 42: US Equity: Continuous Policy Dependence
Textmasterformat bearbaiting US EQUITY: CONTINUOUS POLICY DEPENDENCE US equity markets decomposition (y/y % change) S&P500 EPS growth expectations (in %) 30 40 20 2021 30 10 20 2022 0 2017 10 -10 2023 0 2018 -20 2015 2016 2019 2020 -10 -30 2003 2006 2009 2012 2015 2018 2021 -20 M2 Money Supply 10y i
Slide 43: EMU & EM Equity: Not as Stretched as US Equity
Textmasterformat bearbaiting EMU & EM EQUITY: NOT AS STRECHED AS US EQ MSCI EMU EPS growth expectations (in %) MSCI EM EPS growth expectations (in %) 60 60 2021 40 40 2022 2021 20 2017 2017 2016 20 2018 0 2015 2023 2022 2019 2018 -20 2016 2023 2020 0 2019 2020 -40 2015 -60 -20 2012 2013 2014 2015 20
Slide 44: Corporate Credit: A Fragile Equilibrium
Textmasterformat bearbaiting CORPORATE CREDIT: A FRAGILE EQUILIBRIUM IG & HY corporate spreads (in bps) US yoy change in IG corporate spreads decomposition (in bps) 500 US - Investment grade (lhs) 1200 200 EUR - Investment grade (lhs) 150 400 EUR - High yield (rhs) 1000 100 US - High yield (rhs) 50
Slide 45: EM: Taper Tantrum & Inflationary Pressures
Textmasterformat bearbaiting EM: TAPER TANTRUM & INFLATIONARY PRESSURES Increase in Sovereign Bond Yields (LC) in 2021 EM Breakeven Inflation Estimations Nigeria Turkey Brazil Colombia Mexico Peru Russia Chile Ukraine 10Y 1Y Kenya … South Africa India Morocco China -100 0 100 200 300 400 500 600 700
Slide 46: EM: Repercussions on Currencies
Textmasterformat bearbaiting EM: REPERCUSSIONS ON CURRENCIES Inflationary pressures (LHS) and Currency volatilities (LHS) FX Reserves (CB) vs External Gvt Debt 20% 0.07 9 18% 0.06 16% 14% 0.05 6 12% 0.04 10% 8% 0.03 3 6% 0.02 4% 0.01 2% 0 0% 0.00 Philippines Turkey S. Africa Indonesia India Russia T
Slide 47: EURUSD: Will the Trend Hold?
Textmasterformat bearbaiting EURUSD: WILL THE TREND HOLD? EURUSD vs Direct investment EURUSD vs Interest rate differential % on Nominal GDP Direct Investment 1.6 500 8% 1.4 Dollar to 1 Euro (RHS) 1.5 400 1.3 6% 300 1.4 1.2 200 4% 1.3 1.1 100 1.2 2% 1 0 1.1 -100 0.9 0% 1 -200 0.8 0.9 -2% -300 0.7 0.8
Slide 48: Appendix 3 – Medium-Term Trends
Textmasterformat bearbaiting APPENDIX 3 – MEDIUM-TERM TRENDS © Copyright Allianz
Slide 49: Global Rivalry: China's Rise Creates Tensions
Textmasterformat bearbaiting GLOBAL RIVARLY: CHINA’S RISE CREATES TENSIONS World economic center of gravity Total gross written premium*, by region in % 2031 7% 5% 4% 29% 14% North America 2001 Western Europe 1% 38% 20% 6% Asia ex Japan & China China Japan rest of the world 37% 16% 23% *W/o health;
Slide 50: Social Inequality: No Better Tomorrow
Textmasterformat bearbaiting SOCIAL INEQUALITY: NO BETTER TOMORROW The end of the Amercian dream Share of bottom half and top 10 of population in net financial assets* 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2000 2019 Bottom half Top 10 *Unweighted average of 53 countries. Source: Allianz Research. Allian
Slide 51: Public Debt: Low Rates Will Not Be Enough
Textmasterformat bearbaiting PUBLIC DEBT: LOW RATES WILL NOT BE ENOUGH TO ENSURE DEBT SUSTAINABILITY Number of years need to eliminate the Covid-19 debt Public debt (% GDP) overhang Sources: Refinitiv, Allianz Research. Sources: Refinitiv, Allianz Research. A return to fiscal “business as usual” wit
Slide 52: Demography: Growing Old
Textmasterformat bearbaiting DEMOGRAPHY: GROWING OLD World population by age groups, millions Global old age dependency ratio in %* 10,000.0 30.0 9,000.0 8,000.0 25.0 7,000.0 20.0 6,000.0 5,000.0 15.0 4,000.0 3,000.0 10.0 2,000.0 1,000.0 5.0 0.0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Slide 53: Technology: The Great Transformation I
Textmasterformat bearbaiting TECHNOLOGY: THE GREAT TRANSFORMATION I Global electricity generation by source in the Net-Zero-Economy Global data traffic Source: IEA, McKinsey Global Institute. Allianz Research 53
Slide 54: Technology: The Great Transformation II
Textmasterformat bearbaiting TECHNOLOGY: THE GREAT TRANSFORMATION II Fossil assets will get stranded as fossil prices fall and become Fossil prices will fall in the Net Zero Emissions insufficient to recover OPEX. OPEC will increase its market oil scenario (NZE) share from 34% to 52% due to low extr
Slide 55: After Covid-19: A Changed Risk Landscape
AFTER COVID-19: A CHANGED RISK LANDSCAPE Allianz Research 55
Slide 56: Three Major Challenges the Financial Services Sector Is Faced With
Textmasterformat bearbaiting THREE MAJOR CHALLENGES THE FINANCIAL SERVICES SECTOR IS FACED WITH 1. The Faustian Pact: The Covid19 crisis unprecedented policy mix response Unintended consequences on financial markets, wealth inequalities, indebtedness which will call for action Tailwind for finan
Slide 57: Insurance Outlook: Golden 2020s (in Shanghai)
INSURANCE OUTLOOK: GOLDEN 2020S (IN SHANGHAI) Allianz Research 57
Slide 58: Thank You
©Mārtiņš Zemlickis Textmasterformat bearbaiting THANK YOU Allianz Research Team 9 June 2021 © Ekaterina Pokrovsky - stock.adobe.com © Copyright Allianz