Professional Documents
Culture Documents
Pilot
072010
July 2010 Credit Research
Euro Credit Pilot
Contents
4 Story of the month: Beware of the "Great Correlation" (part 2)
5 Credit Drivers
5 Macro: Fears of a "globalized Japanese" scenario reign
6 Micro Fundamentals: Earnings Dispersion
7 Debt-Equity Linkage: The correlation game
8 Credit Quality Trend: Default cycle uncertainty
9 Market Technicals – Bond supply vs. market spreads
10 Valuation & Timing
12 Other Credit Markets
12 Credit derivatives – Spreads and the FX rate
13 Securitization: Issuance in the doldrums for longer?
14 EEMEA Corporates: Risk of more recoupling
15 Sector Allocation
16 Appendix
16 Correlation assessment – the (bitter) mathematical truth
18 Fundamental Credit Views
18 Telecommunications (Marketweight)
26 Media (Marketweight)
28 Technology (Marketweight)
30 Automobiles & Parts (Marketweight)
32 Utilities (Marketweight)
38 Oil & Gas (Overweight)
40 Industrial Goods & Services (Core) (Underweight)
44 Aerospace & Defense (Marketweight)
45 Industrial Transportation (Overweight)
47 Basic Resources (Marketweight)
49 Chemicals (Underweight)
51 Construction & Materials (Underweight)
53 Health Care (Underweight)
55 Personal & Household Goods (Core) (Marketweight)
56 Tobacco (Overweight)
58 Food & Beverage (Overweight)
60 Travel & Leisure (Underweight)
61 Retail (Underweight)
62 Banks (Marketweight)
70 Financial Services (Marketweight)
71 Insurance (Marketweight)
75 UniCredit Research Model Portfolio
Throughout the crisis, there has been an increasing level of market correlation, in
particular in times of panic. This tail dependency can be found on the level of different
asset classes (stocks vs. credits vs. rates vs. exchange rates) but also on the level of
individual assets. The central message can summarized in the following way: If
everything is going down the drain, really everything is going down the drain. In this
publication we focus on the elevated correlation in current markets and its potential
implications. Moreover, we describe a simple model that allows to quantify the
"average" correlation within a portfolio.
■ Macro Outlook: A double-dip recession scenario is not our core view, but the latest
battery of early indicators revealed an astonishing congruency in the slowdown of the
headline readings across economies.
■ Micro Fundamentals: As the global growth momentum has peaked, we are likely to
observe higher variability in sector earnings and greater dispersion in sector spreads in the
near future.
■ Credit Quality Trend: The subdued growth outlook brings about great uncertainty
regarding future default rates, due to the correlation between default and economic cycles.
■ Market Technicals: While fundamentals are key in the long run, new bond supply and
liquidity are a major driving force for credit markets in the short to medium term.
■ Valuation & Timing: On a tactical time horizon, the next big topic is the 2Q10 earnings
release season, which will keep investors busy over the next few weeks. While for non-
financials, earnings will probably be in line with OK-ish expectations, earnings data for
European financials will meet more scrutiny from investors.
■ Other Credit Markets: Credit Derivatives: The relationship between credit spreads and the
exchange rate has an impact on the pricing of credit risk in different currencies.
Securitization: in the wake of the sovereign debt crisis, ABS issuance has become scarce
again due to high spread volatility. EEMEA Credits: Uncertainty about the outcome of the
euro zone debt crisis led to a re-coupling of EEMEA corporates with global credits.
■ Allocation: We reduce our sector recommendation for Basic Resources to MW from OW.
With this step, we continue with our de-risking strategy that we announced last month: we
missed an opportunity to reduce exposure to this more cyclical sector, however, we were
reluctant to act in the middle of a panic. All other recommendations were kept unchanged.
■ Model Portfolio: Our financials portfolio underperformed the benchmark by -64bp, while
the non-financials portfolio outperformed by 11bp due to the recovery in cyclicals.
Dr. Philip Gisdakis (UniCredit Bank) Dr. Tim Brunne (UniCredit Bank)
+49 89 378-13228 +49 89 378-13521
philip.gisdakis@unicreditgroup.de tim.brunne@unicreditgroup.de
Bloomberg Internet
UCCR www.research.unicreditgroup.eu
In the current environment, The central message of all these studies can summarized in the following way: If everything is
managing the portfolio beta
is key rather than focusing going down the drain, really everything is going down the drain. This applies not only to
on alpha different asset classes, but also to the individual assets. In an environment in which macro
fears (like a recession) rule the overall sentiment, credit spreads tend to be highly correlated.
The data shown below confirms this hypothesis. In the two charts below, we used the
methodology illustrated in the appendix to estimate the "average" portfolio correlation. Further
details of the algorithm can be found in the "Debt-Equity Linkage" section. In summary, we
refer to about 120 constituents of the current iTraxx Main 13 for which a reasonably long
spread time series is available. For this (static) portfolio we refer to weekly spread changes
and have calculated the correlation over a rolling 24-week period. Moreover, as we did not
use the real iTraxx (but just a subset of the current series), we compare the time series with
the average spread of the subset (left chart) and the corresponding 30D volatility (right chart).
The major findings are, that the historical correlation varies massively and that it is currently at
a very high level. For a portfolio manager the message is simple: in the current environment,
managing the portfolio beta is the key rather than focusing on alpha.
Other statistical concepts However, there is also a methodological interpretation: the data indicates that the normal
to measure dependencies
(such as a Clayton copula) correlation measure is too limited to capture the economically important dependency pattern.
are much more suitable Other statistical concepts that make allowance for a tail dependency (such as, for example
the Clayton copula) are much more suitable to describe these dependencies: in a normal
environment, correlation remains at moderate levels (which allows for alpha and relative value
strategies), while during a crisis correlation jumps substantially (managing beta is then key).
"Average" portfolio correlation versus the average portfolio spread… …and versus the historical (30D) spread volatility
0.8 0.8 8
250
0.7 0.7 7
Avg. Portfolio Spread
Portfolio Correlatrion
Portfolio Correlatrion
Portfolio Volatility
0.5 0.5 5
150
0.4 0.4 4
0.2 0.2 2
50
0.1 0.1 1
0 0 0 0
Dec-07 Jun-08 Nov-08 May-09 Nov-09 May-10 Dec-07 Jun-08 Nov-08 May-09 Nov-09 May-10
*July 2009 edition of the Euro Credit Pilot Source: Bloomberg, UniCredit Research
Credit Drivers
Macro: Fears of a "globalized Japanese" scenario reign
Withdrawal of fiscal stimulus packages in a number of G-20 countries, ongoing
deleveraging of corporate sectors and uncertainty about the final financial markets
regulatory framework are putting a brake on the speed of the economic recovery. The
latest battery of early indicators revealed an astonishing congruency in the slowdown of
the headline readings across economies (see chart), suggesting a broad-based decline
in manufacturing confidence across countries. A double-dip recession scenario is not
our core view; but the more widespread the slowdown becomes the more pressure on
prices across markets and the higher correlation among asset classes will be.
Widespread economic Amid uncertainty regarding the extent of the economic decline in 4Q08, companies cut
slowdown
massively their production plans; in most cases, they overreacted and ran out of stock soon.
Firms were soon forced to raise production in order to catch up, as demand felt positive
impulses from fiscal packages, leading to sharp economic growth acceleration over the last
two quarters, largely on the back of restocking of inventories, while private consumption and
exports are weak. Now, as governments are moving into a consolidation mode, private
consumption in major economies remains weak and China as a major export market is also
implementing tighter policies, sentiment has started to deteriorate. The latest PMI data
reflected again a decline in the new orders-to-inventories ratios, which was in the past a
harbinger of weaker growth. Even more worrying from a credit investor point of view are fears
of deflation. Although this is not our main scenario, core inflation rates in a number of
developed economies are rapidly declining. Against this backdrop, what is dominating
markets currently is investor fears of a repeat of the Japanese double-dip recession scenario
in the 1990s, when the government raised taxes too early and cut public spending in 1996,
just when the economy was starting to show robust growth rates, responding to worries about
a rising fiscal deficit and an aging population. The timing was unfortunate. The economy
started to sputter, and with the onset of the East Asian crisis, it plunged into another severe
recession and the government found itself back in the position of devising stimulus packages,
but starting from a much worse fiscal position. To dispel fears of the Japanese scenario on a
global stage is a big challenge for politicians. Unless a coordinated exit strategy has credibly
been communicated, the above-mentioned fears will continue to rile markets, leading to a
more widespread correlated move in asset prices.
4
50 1.4
2
45 1.2
0
Euroland
40 -2 1.0
US
China -4
35 0.8
-6
30 -8 0.6
Oct-83
Jun-85
Feb-87
Oct-88
Jun-90
Feb-92
Oct-93
Jun-95
Feb-97
Oct-98
Jun-00
Feb-02
Oct-03
Jun-05
Feb-07
Oct-08
Jan-00
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Jun-09
Sep-09
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Dec-09
Mar-10
Jun-10
In economic downturns, the Credit market spreads kept widening in June. Increasing risk aversion on peripheral sovereign
variability of earnings across
sectors rises debt, banks' funding ability and concerns on the economic recovery left spreads substantially
higher from April through June. The Main softened by 50bp to 128bp (+64%) while the
Crossover went out 147bp to 574bp (+31%). With various macroeconomic indicators in the
US, Europe, and China showing a softening of the global recovery in June, the determinant of
investor sentiment became headline risk and macro data, leaving relative value considerations
across credit segments and in between asset classes on the sidelines. Instead, investors'
growing fears of a global recession drove correlations up and caused asset classes to move
in line with each other, even stock prices and bond yields were more closely linked lately. The
correlation of the ten-year Treasury yield and the S&P reached its highest level for the year in
June (see left chart below) as market participants looked for indications on the state of the
economy on a day-to-day basis. Macro being center stage even allowed further compression
of the ratios of Xover to Main and Xover to HiVol, which is stunning, given that the recovery
has topped out. The evolving change in the macroeconomic picture will turn this trend around
and also weigh on earnings of cyclical industries. With ample auctioning of debt by peripheral
sovereigns and rising redemptions of bank paper in the rest of the year, access to funding of
highly levered companies may start to fade. This risk is also flagged by Moody's liquidity
stress index, which worsened for the first time in 15 months, indicating that the share of
speculative grade companies relying on highly uncertain external sources of funding has
increased. The rise from 4.8% to 5% in June was small, but it was the first increase since
March 2009, when the index peaked at 20.9%. The bottoming out of the measure signals that
the improvement in companies' liquidity has ended. In economic downturns, the variability of
earnings across sectors rises (see right chart below) and subsequently dispersion of sector
spreads increases.
CORRELATION OF US TEN-YEAR GOVERNMENT YIELD TO EQUITY AND GDP VS SECTOR EARNINGS GROWTH
Correlation US 10y Treasury Yield & S&P 500 US GDP Growth Rate (real) & Sector Earnings Change
0.8
0.6 100% 5%
0.4
0% 0%
GDP growth
0.2
0.0 -100% S&P 500 CONS DISCRET IDX -5%
S&P 500 ENERGY INDEX
-0.2 S&P 500 FINANCIALS INDEX
-0.4 -200% S&P 500 INDUSTRIALS IDX -10%
S&P 500 INFO TECH INDEX
-0.6 S&P 500 TELECOM SERV IDX
-300% S&P 500 UTILITIES INDEX -15%
-0.8 S&P 500 CONS STAPLES IDX
US real GDP (forecast)
-1.0 -400% -20%
Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Sep-02 Sep-04 Sep-06 Sep-08 Sep-10
We use a simple model The correlation chart below was determined on a moving basis. We derived it for the current
to quantify the "average"
level of correlation within constituents of the Euro STOXX 50 index. The weights were fixed at current levels, which
a portfolio means that any changes in weights were not reflected in the calculation. As this fixation of the
weight affects the index level, we derived the portfolio variance not from the real Euro STOXX 50
time price series, but from the calculated weighted average of individual asset returns.
Moreover, we prefer to calculate correlations on a more stable weekly basis rather than on a
very volatile daily basis. The moving variances in the calculation were derived for a (moving)
24-week period. The resulting time series of historical moving correlation is given in the charts
below (red line) – versus the Euro STOXX 50 index (left chart) and versus the implied volatility
of the Euro STOXX 50 (right chart).
Findings: How can the results be interpreted? First, the volatility of the correlation is substantial. During
1) volatility of correlation
is substantial the period under consideration, it ranges from 10% to 70%. This finding places a question
mark on a Markowitz-style portfolio optimization. Second, the current level of the correlation is
2) current level higher than
after the Lehman default
even higher than during the post-Lehman shock period. Third, there is a remarkable
dependency between the volatility and the correlation (right chart), while the dependency
3) remarkable dependency between the index level and the correlation is not that high. Nevertheless, the chart shows
between correlation and
volatility that the correlation is rather event-driven. During the two phases of stress – the Lehman
collapse and the sovereign debt crisis – the correlation rose significantly. This, however, is no
surprise. If there is an important external factor that is driving markets, all assets typically
behave in the same way and this is also the time when risk aversion (measured by implied
volatility) is high. This finding refers to the concept of tail-dependency. In simple terms, this
means that during normal times (i.e. in the belly of the distribution), asset returns may be
moderately correlated, while under extreme conditions (i.e. in the tail of the distribution), the
correlation jumps and assets tend to be highly correlated. In mathematical terms, this
dependency pattern can be modeled using a suitable copula function. What can a portfolio
manager learn from this analysis? When everything is correlated, it is not the time for relative
value plays but for maintaining the absolute value of a portfolio.
"Average" portfolio correlation versus the index level… …and versus implied volatility
Average correlation
60
Implied volatility
Euro STOXX
0.0 0 0.0 0
Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10
US historical default rates The left chart below shows the historical 12M trailing default rate for the US corporate sector.
The data provided by Moody's comprises the defaults in the portfolio of corporate debt issuers
rated publicly or non-publicly by the rating agency. For the speculative-grade rated sub-
portfolio, separate default rate figures are published on a monthly basis (red line), which are
markedly higher than the historical rates for the whole portfolio. During the past decades,
default cycles in the US were usually associated with economic recessions. The peak of the
trailing default rates occurs usually towards the end or shortly after the recessionary period.
Recessions and default rates Therefore, the economic growth outlook for the US and Europe should have immediate
consequences for the default rates and credit quality trend for corporate credit. Moody's most
recent default forecasts for the European (right chart) and US (left chart) speculative grade
corporate sectors reflect precisely this fact. The baseline scenario foresees for both regions a
vigorous decline of the default rate until the end of 2010 and beyond. This scenario assumes
moderate economic growth but no economic contraction. Interestingly, the baseline case does
not differ dramatically from the optimistic forecast in both regions.
A large gap between the The pessimistic scenario involves a double-dip recession. Although this is an unlikely scenario
baseline and pessimistic
scenarios according to mainstream economists, the consequences for high-yield default rates are
dramatic according to Moody's. In particular, for Europe a renewed economic contraction
could lead to a high-yield default rate in June 2011, which is of the same magnitude as the
peak level in November 2009 (11.8%). There is clearly a great gap between the pessimistic
and baseline default projections for June 2011. Correspondingly, uncertainty regarding
economic growth is amplified by the future default rate development. Credit spreads will
certainly need to reflect this default rate uncertainty.
US BUSINESS CYCLES* AND CORPORATE DEFAULT RATES SG DEFAULT RATES AND FORECASTS FOR EUROPE**
optimistic forecast
10% 10%
8% 8%
6% 6%
4% 4%
2% 2%
0% 0%
Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan 99 Jan 02 Jan 05 Jan 08 Jan 11
*The NBER has not yet formally announced the end of the 2007-2009 recession Source: Bloomberg, Moody's, UniCredit Research
**Moody's speculative grade default rate forecasts as of 8 June 2010
New Issuance activity On primary markets, investors are – on the one hand – demanding a spread pick-up for new issues
is negatively correlated
with credit spread and as an investment incentive and compensation for rising debt levels. On the other hand, liquidity is
positively with liquidity improving gradually with a (moderately) higher outstanding bond volume of an issuer. But
especially in crisis mode, wider spreads accompany declining primary activity as issuance
becomes costly and demand shrinks. Thus, liquidity declines with rising risk aversion of
investors. Vice versa, narrowing spreads are fueling new bond supply. This relationship is
especially pronounced: a) after an external shock or within a recovery leg from market turmoil,
or b) the riskier the assets class and the more center stage it is in a crisis. In practice, High
Yield issuance totally eroded from Sept 07 with deepening risk aversion from the subprime
spillover and issuance returned with significant volume in Jan 09 when spreads narrowed on
the economic recovery. However, recent volatility led to subdued high yield primary activity
again. In Financials, the spread blowouts particularly in Jun 07 (subprime), Sept 08 (Lehman)
and in 2Q10 (Greece) led to a halt in issuance. In the corporate universe, narrowing spreads
in March 2008 and April 2009 were fueling new issuance, while primary markets were
subdued in 2Q07, 3Q-4Q08 as well as in 2Q10. With a marginal stabilization of market
spreads, the technical situation should slightly improve in 3Q.
bn
4
600
3
400 2
200 1
0 0
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Corporate Bond Issuance iTraxx Main iBoxx Non Fin Financial Bond Issuance iTraxx FinSen iBoxx Finsen
350 40 400 35
300 35 350 30
30 300
250 25
25 250
200 20
20
bp
200
bn
bn
bp
150 15
15 150
100 10
10 100
50 5 50 5
0 0 0 0
Nov-07
Aug-09
Nov-07
Aug-09
Feb-06
Sep-06
Apr-07
Jun-08
Jan-09
Mar-10
Feb-06
Sep-06
Apr-07
Jun-08
Jan-09
Mar-10
200 200
150 150
bp
bp
150 150
100 100
100 100
50 50
50 50
0 0 0 0
Jun-09 Aug-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jun-09 Aug-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10
actual forecast
1400 1400
HY iTraxx Xover
1300 1300 Index 1-3M 3-6M
800 800
Short-term correlation is weak The left chart below shows the past year's trends of both the EUR/USD rate and the SovX
Western Europe CDS spread. The chart shows that both indicators are cointegrated, meaning
that they were driven by the same macro-economic developments. However, the short-term
correlation of the sovereign CDS spreads and the exchange rate is indeed weak, like the
correlation of daily changes. Spread and rate changes are correlated meaningfully only if
changes are calculated for periods of a few weeks.
Quanto adjustment historically Credit spreads for the same issuer but for credits in different currencies differ and according
important for emerging market
credits to pricing theory, they should do so. This is best motivated in terms of CDS cash flows: The
protection leg of a CDS in a currency that would usually depreciate (e.g. EUR) before the
respective entity defaults or when its credit quality deteriorates (e.g. euro-zone government) is
worth less than the CDS protection leg in another currency (e.g. USD) that is not cointegrated
with the credit spread. This leads to a tighter spread in the former currency. Historically, the
issue arose in the context of emerging market debt (e.g., Finkelstein, 1999) but regained
importance in the current crisis in conjunction with EUR and USD, the most liquidly traded pair
and the two currencies in which more than 98% of global CDS are denominated in!
Current quanto adjustments Usually, CDS are quoted in a single currency only. The spread difference between EUR and
traded in the market
USD denominated CDS (the quanto adjustment) is currently available for sovereign and some
corporate names. For Greece (see right chart below), the absolute level of the quanto
adjustment increased during the past few months. Relative to the Greek sovereign CDS
spread, the adjustment remained rather constant (≈-5%). Recently, however, the ratio of the
CDS-spread quanto-adjustment increased markedly for better credit qualities. For example,
the relative quanto adjustment for Germany CDS reached -20% to -25% recently.
COINTEGRATED CREDIT SPREADS AND EXCHANGE RATES QUANTO SPREAD ADJUSTMENT FOR 5Y GREECE CDS
0 800
120 1.25
CDS spread (bp)
-10 700
exchange rate
Steady primary issuance is Securitization issuance today remains dominated by transactions structured for central bank
not to be expected soon
refinancing (e.g. via repo facilities) by the originator. The largest part of securitized exposure
since last July is made up of retained RMBS deals (EUR 154bn), which are mainly related to
tranches from the Netherlands (25%), the UK (23%), Italy (24%) and Spain (8%). Retained
exposure today contains, to a large degree, non-senior, hardly-sellable tranches, some
refinancing of maturing transactions, as well as exposure related to higher fundamental risk
(e.g., CMBS, CLOs) for which the primary spread is relatively wider and public issuance
hardly feasible economically. But structuring for repos has natural limits (effectual exposure is
already placed with the ECB, while loan volumes are off their peaks) – hence, also ABS
central bank refinancing has declined and overall ABS outstanding amortized slightly below
EUR 3.1tn. Recent credit volatility and the blowout in financials/ sovereigns have made it once
more difficult for originators to structure cost effectively and find investors. Currently, the
public primary market remains open only for well established mainly high quality originators
within the Dutch & UK prime RMBS and Auto ABS sector. Will primary market activity remain
in the doldrums for longer? Future ABS amortization (more than EUR 40bn in 2010 and 2011)
and distorted wholesale funding options are continuing to keep the pressure on originators.
With prolonged high volatility, dismal securitization activity is furthermore accompanied by
declining primary activity elsewhere on credit markets, thus from a pure funding perspective,
securitization still has a reason to exist. Furthermore, securitization volumes are hardly
absorbed by other sectors with a stable investor base and tighter issuance spreads, like
covered bonds (CB), as an alternative to RMBS. As the ECB's CB purchase program ended,
the CB primary market is now no longer running on extra steam. In addition, CBs are no
substitute from a regional point of view, as paper is mainly referencing French and German
mortgages while RMBS is predominantly backed by UK, Spanish, Dutch or Italian mortgages.
Demand for Spanish CB remains subdued as well and CB are no alternative with respect to
non-senior debt. In any case, it takes at least two preconditions in order to achieve a healthy
primary market: a) risk aversion needs to clearly decline, while b) a regulatory reliable
environment has to be established. Both are unlikely to materialize in the short term.
EUROPEAN SECURITIZATION MARKETS: ISSUANCE VOLUMES AND OUTSTANDING SINCE JULY 2009
Cumulative issuance activity in securitization Issuance activity per month & securitization outstanding*
ABS retained CDO retained CLO retained CMBS retained ABS retained CDO/ CLO retained CMBS retained
RMBS retained ABS placed CMBS placed RMBS placed RMBS retained ABS placed CMBS placed
RMBS placed Covered Bonds Outstanding (RS)
350
80 3.2
300
70
Outstanding (EUR trn)
250 60
200 50
EUR bn
40 3.0
150
30
100
20
50 10
0 0 2.8
Aug-09
Nov-09
Aug-09
Nov-09
May-10
Jul-09
Oct-09
Jan-10
Mar-10
Apr-10
Jun-10
Jul-09
Sep-09
Oct-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
Jun-10
*covered bonds include only Euro 500mn+ issues Source: UniCredit Research
Scope for less than "perfect" We think, however, that the most important channel causing a potentially quick rise in
correlation between EEMEA
and eurozone credits correlation between EEMEA and global credits is the credit transmission channel: core
European banks present an important (contagion) bridge between eurozone periphery and
Emerging Europe: between 77% (Turkey) and 99% (Estonia) of Emerging European external
borrowing comes from Western European banks, which are at the same time important
creditors to the eurozone periphery. Thus, there is a risk that core European banks facing
troubles in the periphery might tighten credit links to Emerging Europe. We think that there are
reasons why the correlation between Emerging European and major markets' credits should
be less than "perfect": (1) Emerging European banks' fundamentals are improving, which
allows them to scale up domestic lending, thus substituting to a certain extent international
lending. (2) The Russian government built up a reputation of strong support for "strategically
important" issuers during the Lehman crisis, something we expect to happen again, if
required. (3) Rating momentum turned positive in Emerging European credits in 1H10, which
should remain supported by our macro view that the fiscal consolidation in the euro-zone
periphery should not affect too dramatically the Emerging European growth outlook. The latter
are primary dependent on Germany, where fiscal adjustments are weaker; CEE 17 are
expected to grow by 3.1% and 4.3% in 2010 and 2011. (4) Refinancing needs in 2H10 are
moderate and even if risk appetite dries up again, maturities throughout 2H10 remain
manageable. Nonetheless, as the eurozone crisis creates substantial downside growth risks
including deflationary risks, and growth momentum looks to be abating also in China, which
would be a bad omen for commodities notably oil, industrial metals and steel prices, we
recommend only defensive positioning in quasi-sovereign credits and private credits with very
strong fundamentals (e.g. GAZPRU, TMENRU, TPSA, RSHB, VTB).
EEMEA 5Y CDS* correlation with iTraxx Crossover Correlation of ML HY Index and EEMEA components of CEMBI
-0.4 -0.200
-0.6 -0.400
RU QuasiSov
RU Private
Metals&Mining
Kazakh3
RU OIG
Russia10
CEE3
RU Banks
RU Telecoms
-0.600
Corp.
07-May-08
07-Nov-08
07-May-09
07-Nov-09
07-May-10
07-Jan-08
07-Mar-08
07-Jul-08
07-Jan-09
07-Sep-08
07-Mar-09
07-Jul-09
07-Jan-10
07-Sep-09
07-Mar-10
RU
Sector Allocation
Given the expected growth deceleration in China and its implications for commodity demand,
we reduce our sector recommendation for Basic Resources to Marketweight from Overweight.
With this step, we continue with our de-risking strategy that we announced last month: we
missed an opportunity to reduce exposure to this more cyclical sector, however, we were
reluctant to act in the middle of a panic. All other recommendations were kept unchanged.
Appendix
Correlation assessment – the (bitter) mathematical truth
In the following, we aim at deriving a mathematical framework to assess the price correlation
in a portfolio of risky assets. Note that this refers to the price correlation, not to the event
correlation, such as the default correlation. We start by assuming a portfolio consisting of n
assets Si with individual weights wi . The volatility of each asset is given by σi and the
σP = ∑w w σ σ
i, j
i j i j ρi, j (1)
Let us define an average correlation of the individual assets by the following substitution
ρ i, j = ρ . Equation (1) can this be reformulated in the following way:
σP = ∑w w σ σ
i≠ j
i j i j ρ+ ∑w σ 2
i i
2
(2)
144244
3 1
424
3
i
off diagonal elements diagonal elements
This means that we pursued the following substitution of an example correlation matrix
⎛ 1 ρ1, 2 ρ1,3 ⎞ ⎛ 1 ρ ρ⎞
⎜ ⎟ ⎜ ⎟
⎜ ρ1, 2 1 ρ 2,3 ⎟ → ⎜ ρ 1 ρ⎟
⎜ρ ρ 2,3 1 ⎟⎠ ⎜⎝ ρ ρ 1 ⎟⎠
⎝ 1,3
In the next step, we want to rearrange equation (2) such that we can solve for the average
correlation ρ .
∑w w σ σ
i≠ j
i j i j ρ + ∑ wi2σ i2 = σ P2
i
σ P2 − ∑ wi2σ i2
ρ= i
∑w w σ σ
i≠ j
i j i j
This means that we can calculate the "average" correlation in an index from the volatility (or better:
from the variance) of the index and the volatility (variance) of the individual assets. This
concept is useful when dealing with so-called equity dispersion products. In such a product,
an investor buys a variance swap on an index and sells variance swaps on the underlying
individual assets (or vice versa). In the above-mentioned notation, this residual variance can
be described as follows:
⎛ ⎞
σ{P2 − ⎜ ∑ wi2σ i2 ⎟ = ρ ⋅ ∑ wi w j σ iσ j
Variance of index ⎝1i4243⎠ 14 i≠ j
42443
Variance of individual assets Residual variance
In this way, one can isolate the residual variance of a long index variance swap and short a
portfolio of individual variance swaps. The ρ is thus a parameter that – besides the
volatilities σ i and σ j describes this residual variance in this portfolio.
Another way to approximate a mean pair-wise correlation ρ~ is to calculate the average over
the individual pair-wise correlations ρ i, j (assuming equal weights). The factor ½ in the
1 1
ρ~ ≈ ⋅ ⋅ ∑ ρi , j
2 n i≠ j
Finally, one can also approximate the "level of correlation" within a portfolio by calculating the
"mean" correlation of the individual assets to the total portfolio. However, this quantity is
typically higher than taking the full pair-wise correlation matrix into account.
1 n
ρ~ ≈ ⋅ ∑ ρ i,P
n i =1
Note, however, that this "mean" correlation is a rather artificial mathematical concept. The
figure has a limited "real" life meaning, other than being the "mean" correlation that leaves the
portfolio volatility invariant. It is a similar concept that is typically used for deriving an average
default correlation in a credit portfolio in order to calculate implied correlations for tranches. In
such a tranche pricing model (i.e. a credit portfolio model), one derives an average correlation
of the individual assets to an overall economic factor.
Media (Marketweight)
Sector key figures Sector Wrap-Up
Weight in iBoxx NFI: 1.5% Sector drivers: Major spread drivers are the cyclical recovery in advertising expenditures, consumer confidence and
corporate expenditures. We believe that in the current environment, shareholder-friendly financial policies are not on
Current ASW spread: 133.0bp the agenda. However, the sector also consists of less cyclical businesses like Pearson, WPP (market research
change mom/YTD: -13.8 / -2.3 businesses of subsidiary Kantar and acquired TNS), Wolters Kluwer, Reed Elsevier, SES and Eutelsat. More cyclical
are Bertelsmann and Publicis. Nevertheless, WPP, RTL and Publicis saw a stabilization in their markets in 1Q and
expect this also for 2010. The refinancing possibilities of the sector are good.
Euro STOXX MDI YTD: -4.6%
Last month's recap: In June, the iBoxx average media sector spread tightened by around 13bp with SESGLX 20,
EUTELS 17 and BERTEL 14 outperforming and PUBFP12, BERTEL 12 and REEDLN 13 underperforming.
Technology (Marketweight)
Sector key figures Sector Wrap-Up
Weight in iBoxx NFI: 0.8% Sector drivers: A gradually improving economy should result in better demand patterns for technology companies in 2010.
However, the biggest threat to IT spending in 2010 is the fragile economy, particularly in Europe, and the weak
Current ASW spread: 111.4bp recovery in the US, as well as the resulting impact on consumer and business confidence. Therefore, we have a stable
change mom/YTD: +15.4 / +10.0 but cautious technology sector outlook for 2010. Most issuers so far provided no or just vague guidance for 2010,
indicating that market visibility is low despite the economic recovery and the positive impact on the particular industry.
Low market visibility often indicates that high earnings volatility might continue. However, the rising number of positive
Euro STOXX THE YTD: -2.7% indicators for an economic recovery, although a bumpy one, caused spreads in the technology sector to tighten
strongly. We keep our marketweight recommendation for the technology sector, as we currently expect a further
stabilization of results in 2010. This should also be reflected in relatively stable ratings.
Last month's recap: In June, the iBoxx Technology sector spread widened by around 20bp to 113bp and the non-
financials index widened by 2bp to 115bp mainly driven by ASML and Nokia bonds.
Utilities (Marketweight)
Sector key figures Sector Wrap-Up
Weight in iBoxx NFI: 25.2% Sector drivers: Major spread drivers of this sector are M&A activities, as well as regulatory risk and the development
of fuel prices and emission certificates. The bulk of M&A transactions has already occurred (Enel/Endesa, Suez/GdF,
Current ASW spread: 100.0bp National Grid/KeySpan, Iberdrola/Scottish Power/East Energy, RWE/Essent, Gas Natural/Union Fenosa). Nevertheless, for 2010
change mom/YTD: +3.4 / +25.3 we expect M&A activities to continue, primarily driven by asset disposal programs (e.g., E.ON, EDF, Enel, Gas Natural, Veolia).
Last month's recap: In June, the average spread level in the utility sector widened by around 5bp. This development
Euro STOXX UTS YTD: -22.7% was primarily influenced by Southern European names being adversely affected by spread pressure on their respective sovereign.
Chemicals (Underweight)
Sector key figures Sector Wrap-Up
Weight in iBoxx NFI: 4.4% Sector drivers: The start into 2010 was promising, with all companies reporting a significant recovery. Given the
rigorous cost-cutting and efficiency measures earnings, too, showed a significant rebound. However, persisting
Current ASW spread: 89.9bp overcapacities will haunt the industry for the foreseeable future. Pricing power and thus margins will therefore remain
change mom/YTD: -7.2 / +0.8 under pressure in the medium term. Against this background, we expect all industry players to continue to focus on
cash flow generation, while benefits from working capital related cash releases should diminish. Capex budgets should
continue to be controlled tightly. With regard to ratings, we expect a "cease fire" for the time being, while rating
Euro STOXX CHE YTD: -1.4% pressure could re-emerge should volumes in 2010 fall short of expectations or if margins start to come under pressure as a
result of waning pricing power. The VCI expects industrial production to increase by 4.5% and chemical production to
gain 5.0% in 2010. Against this background, M&A activity remains a key credit driver for the chemical industry.
Last month's recap: In June, Linde's perp, K+S and Lanxess issues were the main outperformers, while Solvay, DSM
and Air Liquide underperformed the iBoxx Chemicals index.
Tobacco (Overweight)
Sector key figures Sector Wrap-Up
Weight in iBoxx NFI: 2.4% Sector drivers: Reported results for FY09 were not surprising. Organic growth (before FX effects and M&A) of
covered companies was in a range of 1.4% (Japan Tobacco) and 5.3% (Philip Morris). However, organic growth was
Current ASW spread: 95.1bp more supported by higher prices, especially in the Western Hemisphere, rather than by higher sold cigarette volumes.
change mom/YTD: -1.1 / +2.3 However, FX effects burdened top-lines (e.g., Philip Morris, Japan Tobacco), eventually fully offsetting the organic
growth. The market expects sales to rise by ca. 2% in 2010 and by ca. 3% in 2011, which compares to an organic
growth rate of 3.6% in 2009. As tobacco companies are faced with slowing growth and further government measures,
Euro STOXX PHG YTD: +11.3% Imperial together with Japan Tobacco and BAT announced their intention to seek a judicial review of the government's
proposal to introduce a display ban in the UK from October 2011 onwards. In our view, such a ban would be a further
pin-prick for tobaccos' operating performance, which might be spread across other European countries in the medium
term. Even if the protest of tobacco firms is successful, companies can't stop the initiated process of the European
Commission to reduce the number of smokers by 10% in the EU until 2014. As a result, growth perspectives will suffer
from further price increases, mainly driven by additional tax burdens in mature markets in the medium-to-long term.
Nevertheless, tobacco companies are still in the comfortable position to steer their balance sheets as they want as
cash flows are strong enough to finance capex and dividend payouts with ease. Furthermore, the almost fully
consolidated sector does not offer potential larger acquisition targets anymore, eventually resulting in an eased M&A
risk in the tobacco sector. M&A risk might increase again if tobacco firms decide to diversify their activities into other
sectors like food & beverages in the medium-to-long term.
Last month's recap: In June, the iBoxx Personal & Household Goods remained almost unchanged. While almost all
IMTLN issues outperformed the index, issues of PM showed a weaker performance than the index. Bonds moved in a
range between -17bp and +20bp.
Retail (Underweight)
Sector key figures Sector Wrap-Up
Weight in iBoxx NFI: 3.8% Sector drivers: Consumer sentiment and GDP growth are the main drivers in this sector. However, as iBoxx members
of the Retail sector are mostly well diversified from a regional standpoint, stronger economies (Asia, Latin America)
Current ASW spread: 99.0bp should offset the challenges in the Western countries and the most recent challenges in Eastern Europe. The iTraxx
change mom/YTD: -2.2 / +13.6 members from the UK also lack regional diversification (strong revenue dependence on the home market). Whenever
LBO activities are rumored to be picking up again, spreads of UK retailers are the first to show inquietude in terms of
spread development, reflecting the fact that an LBO is comparatively easy.
Euro STOXX RET YTD: +7.3%
Last month's recap: In May, RET sector spreads widened ca. 10bp, with the TSCO 03/16 (-5bp to ASW +65bp) being
the best performer. The COFP 02/17 bond widened most (+30bp to ASW +150bp).
Banks (Marketweight)
Sector key figures Sector Wrap-Up
Weight in iBoxx FIN: 81.3% Sector drivers: Midsummer Night was recently celebrated, marking the turn of the seasons. We doubt that the same
occasion in accounting terms, i.e., the end of 1H10, will lead to the same level of festivities once results start being
Current ASW spread: SEN: 149.2bp released. Too obvious are the differences between the old pagan tradition and the dull reality of contemporary
LT2: 336.1bp financials' fundamentals. Midsummer, celebrated on the year's longest day after springtime has brightened the mood,
UT2: 423.0bp welcomes the start of summer that brings warmth and sunshine. Financials' 1H10 accounts, in contrast, are being
T1: 754.9bp assembled during the sector's darkest days after many problems have spoiled the mood, and the outlook is for tough
times full of uncertainty. Uncertainty also means opportunity, but is this the right time to invest? Spreads appear
tempting, but the fundamental outlook is frightening. Moreover, markets are not yet in a panic mode that has led to
Euro STOXX BAK YTD: -28.7% overly bearish spread levels. Hence, we expect spreads to continue their widening trend, with deep subs
underperforming default-triggering debt, and insurance faring better than banks.
Last month's recap: The iTraxx Financials is off the ytd record highs from early June, which saw the 5Y and 10Y
senior at 200bp (all-time high was 210bp in March 2009), and the subs at almost 300bp (405bp). Following a long rally
from the March 2009 peak, cash spreads for bank and insurance paper tightened for more than a year before widening
pronouncedly as of mid-April this year.
Insurance (Marketweight)
Sector key figures Sector Wrap-Up
Weight in iBoxx FIN: 10.5% Sector drivers: We maintain our position on the insurance sector: underweight on sub-debt and overweight on senior
debt. The outlook for the life sector is more bearish, hence we continue to underweight life. The European insurance
Current ASW spread: SEN: 165.7bp sector has fared well relative to banks over the past two years. While insurers were not the cause of the financial
T1: 560.5bp turmoil, they still suffer some of its consequences. The highest degree of negative rating actions occurred in the life
and health sector, followed by property & casualty, with reinsurance showing a greater level of rating stability. 3Q09, 4Q09
and 1Q10 results of the major insurers that we cover have overall been positive, showing recovery and/or continuing
Euro STOXX INN YTD: -11.9% improvements in their operating performance and financial condition. Going forward, we expect the overall stabilization
in capital market conditions to continue to ease valuation pressures on insurers' balance sheets, even put values back,
while improving access to debt capital markets, despite elevated uncertainties in the course of this year. Stabilizing
macroeconomic conditions should also support operating performance. For the insurers that we cover, we expect a
stabilizing credit rating environment, and continued improvement in spreads, although we do not expect a marked
increase in debt issuance. For the 2010 outlook, Moody's says the market focus has moved away from capital. For the
Insurance earnings outlook, the fundamentals are challenging with increasing combined ratios for P&C, depressed top
and bottom lines for Life, and investment returns being at historical lows. Consolidation could be a solution to premium
decline in emerging markets as well as in providing funding alternatives. With respect to the regulatory environment,
Solvency II could either be a threat or opportunity.
Last month's recap: The tightening spree for Insurance senior and sub-debt reversed in February, with spreads
widening in line with general market nervousness on sovereign risk, and the perception of fragility of the worldwide
economic recovery. A sharp recovery followed in the course of March for both senior and sub-debt spreads, which
continued in April, then another spike in May before recovering once more, then inching up in June.
Overview of this month's The main bond portfolio changes are summarized in the table below.
cash changes
ISIN Ticker Coupon Maturity Price Mid mDur ASW Rating (Moody's/S&P/Fitch)
Aerospace & Defense (MW)
XS0402476963 FNCIM 8.125 3/12/2013 115.42 2.93 172 A3/BBB/BBB+
Automobiles & Parts (MW)
XS0173501379 BMW 5 6/8/2018 107.69 6.37 131 A3/A-/--
XS0403611204 DAIGR 9 30/1/2012 110.31 1.46 118 A3/BBB+/BBB+
XS0427926752 RENAUL 8.125 15/5/2012 107.79 1.72 263 Baa2/BBB-/--
XS0412447632 VW 5.625 9/2/2012 105.45 1.52 102 A3/A-/BBB+
Basic Resources (OW)
XS0202202957 GLEINT 5.375 30/9/2011 101.66 1.14 291 Baa2/BBB-/--
XS0431928760 MTNA 8.25 3/6/2013 112.11 2.60 235 Baa3/BBB/BBB
XS0305188533 XTALN 5.25 13/6/2017 103.37 5.73 224 Baa2/BBB/--
Chemicals (UW)
XS0259604329 LINGR 7.375 14/7/2016 107.11 4.52 376 Baa2/BBB/--
XS0423036663 LXSGR 7.75 9/4/2014 116.20 3.28 148 Baa2/BBB/BBB
Construction & Materials (UW)
XS0430786581 CRHID 7.375 28/5/2014 114.05 3.41 179 Baa1/BBB+/BBB+
XS0207037507 HOLZSW 4.375 9/12/2014 105.09 3.92 123 Baa2/BBB/BBB
Food & Beverage (OW)
BE0934984015 ABIBB 7.375 30/1/2013 112.53 2.33 85 Baa2/BBB+/--
FR0010612713 BNFP 5.5 6/5/2015 113.62 4.27 51 A3/A-/--
XS0196608003 EEEKGA 4.375 15/7/2011 101.92 0.96 144 A3/A*-/--
XS0353181190 KFT 6.25 20/3/2015 114.27 4.07 106 Baa2/BBB-/BBB-
DE0008461021 SUEDZU 5.75 27/2/2012 105.69 1.56 108 Baa2/--/--
Health Care (UW)
XS0497185511 MRKGR 3.375 24/3/2015 102.81 4.29 75 A3*-/BBB+/--
XS0415624393 ROSW 4.625 4/3/2013 106.97 2.49 40 A2/AA-/AA-
ISIN Ticker Coupon Maturity Price Mid mDur ASW Rating (Moody's/S&P/Fitch)
Industrial Goods & Services (Core) (UW)
XS0252915813 ABB 4.625 6/6/2013 106.75 2.73 65 A3/A/BBB+
XS0302740328 ATCOA 4.75 5/6/2014 108.02 3.57 80 A3/A-/--
XS0306488627 JMVOIT 5.375 21/6/2017 105.11 5.75 209 Baa2/--/--
XS0429612566 MANAG 7.25 20/5/2016 118.23 4.85 167 A3/BBB+/--
Industrial Transportation (OW)
XS0271758301 ABESM 4.875 27/10/2021 88.28 7.96 303 --/BBB/--
XS0427290357 ATLIM 5.625 6/5/2016 110.63 4.96 142 A3/A-/A-
Media (MW)
XS0408678133 BERTEL 7.875 16/1/2014 115.98 3.06 144 Baa2/BBB/BBB+
XS0357251726 WKLNA 6.375 10/4/2018 116.37 6.16 146 Baa1/BBB+/BBB+
Oil & Gas (OW)
XS0411044653 ENIIM 5 28/1/2016 109.92 4.79 91 Aa2/A+/AA-
XS0220790934 GAZPRU 5.875 1/6/2015 104.60 4.19 280 Baa1/BBB/BBB
XS0422624980 OMV 6.25 7/4/2014 112.23 3.35 108 A3/--/A-
XS0306900795 TNEFT 5.381 27/6/2012 103.44 1.86 229 Baa1/BBB/--
XS0402228471 TOTAL 4.75 10/12/2013 108.75 3.12 41 Aa1/AA/AA
Personal & Household Goods (Core) (MW)
FR0010206284 MOET 3.375 22/6/2012 102.79 1.90 70 --/A-/BBB+
FR0010094714 MOET 4.625 1/7/2011 102.94 0.97 59 --/A-/BBB+
XS0237323943 PG 4.125 7/12/2020 106.59 8.28 50 Aa3/AA-/--
Retail (UW)
FR0000488413 COFP 6 27/2/2012 106.27 1.56 98 --/BBB-/BBB-
FR0010208660 PRTP 4 29/1/2013 102.88 2.39 131 --/BBB-/--
XS0295018070 TSCOLN 5.125 4/10/2047 106.89 16.85 166 A3/A-/A-
Technology (MW)
XS0274906469 IBM 4 11/11/2011 103.27 1.30 46 A1/A+/A+
XS0435008726 LMETEL 5 24/6/2013 106.92 2.76 99 Baa1/BBB+/BBB+
Telecommunications (MW)
DE000A0T5X07 DT 6 20/1/2017 114.52 5.36 122 Baa1/BBB+/BBB+
XS0148956559 DT 8.125 29/5/2012 110.98 1.79 102 Baa1/BBB+/BBB+
FR0000471948 FRTEL 7.25 28/1/2013 112.49 2.33 73 A3/A-/A-
XS0275164084 KPN 4.75 17/1/2017 107.25 5.50 116 Baa2/BBB+/BBB+
XS0173549659 OTE 5 5/8/2013 95.19 2.62 490 Baa2/BBB-/BBB
XS0356044643 T 6.125 2/4/2015 115.28 4.13 73 A2/A/A
XS0162867880 TELEFO 5.125 14/2/2013 106.28 2.41 112 Baa1/A-*-/A-
XS0368055959 TELEFO 5.58 12/6/2013 107.07 2.71 149 Baa1/A-*-/A-
XS0269252077 TELNO 4.5 28/3/2014 107.86 3.41 54 A3/A-/BBB+
XS0418508924 TITIM 8.25 21/3/2016 118.50 4.57 254 Baa2/BBB/BBB
XS0465576030 TLIASS 4.75 16/11/2021 106.52 8.54 108 A3/A-/A-
XS0429817538 TPSA 6 22/5/2014 110.62 3.46 133 A3/BBB+/BBB+
XS0408285913 VOD 6.25 15/1/2016 114.53 4.63 127 Baa1/A-/A-
Tobacco (OW)
XS0352065584 BATSLN 5.875 12/3/2015 113.31 4.08 89 Baa1/BBB+/BBB+
XS0275431111 IMTLN 4.375 22/11/2013 104.92 3.06 116 Baa3/BBB/BBB-
Travel & Leisure (UW)
FR0010720045 ACCOR 7.5 4/2/2014 111.17 3.09 249 --/BBB-/BBB-
XS0292924775 EXHO 4.5 28/3/2014 106.54 3.40 90 --/BBB+/BBB+
XS0471074822 LTOIM 5.375 5/12/2016 101.84 5.18 267 Baa3/BBB-/--
ISIN Ticker Coupon Maturity Price Mid mDur ASW Rating (Moody's/S&P/Fitch)
Utilities (MW)
XS0171463788 AWLN 4.625 7/10/2013 106.63 2.94 85 A3/A-/A
XS0271020850 CEZCO 4.125 17/10/2013 105.04 2.99 86 A2/A-/A
XS0223249003 DANGAS 5.5 29/6/2015 97.32 4.22 394 Baa3/BBB/BBB-
XS0409744744 EDF 5.125 23/1/2015 111.13 4.02 60 Aa3/A+/AA-
XS0441402681 EDNIM 4.25 22/7/2014 104.45 3.56 125 Baa2/BBB+/BBB+
XS0399861086 ENBW 6.875 20/11/2018 124.89 6.41 91 A2/A-/--
XS0306644344 ENEL 5.25 20/6/2017 109.84 5.83 125 A2/A-/A
XS0408095387 EOANGR 5.5 19/1/2016 113.93 4.74 65 A2/A/A+
DE000A0DLU69 EWE 4.875 14/10/2019 109.45 7.26 95 A2/A-/--
XS0180181447 FRTUM 5 19/11/2013 109.07 3.05 53 A2/A/A
FR0000475741 GSZFP 5.125 24/6/2015 110.25 4.40 89 Aa3/A/--
XS0222372178 IBESM 3.5 22/6/2015 100.44 4.49 134 A3/A-/A
XS0170798325 NGGLN 5 2/7/2018 108.11 6.58 125 Baa1/BBB+/BBB+
FR0010612622 RTE 4.875 6/5/2015 110.34 4.31 60 --/A+/--
XS0292873683 STATK 4.625 22/9/2017 108.47 5.94 84 Baa1/A-/BBB+
XS0223129445 VATFAL 5.25 29/6/2015 97.73 4.26 361 Baa1/BBB/A-
XS0424019437 VERBND 4.75 17/4/2015 108.03 4.25 96 A2/A/--
ISIN Ticker Coupon Maturity Price Mid mDur ASW Rating (Moody's/S&P/Fitch)
Banks (MW)
XS0432092137 ACAFP 5.875 11/6/2019 111.27 6.98 171 Aa2/A+/A+
XS0455308923 AIB 4.5 1/10/2012 94.18 1.96 561 A1/A-/A-
XS0459200035 BPIM 4.125 22/10/2014 102.34 3.79 163 A2/A-/A-
XS0287195233 DANBNK 4.878 15/5/2017 80.75 5.37 537 Baa3/BB+/A-
XS0365303675 ISPIM 5.75 28/5/2013 102.62 2.61 318 Aa3/A/A+
XS0201065496 RBS 4.625 22/9/2021 75.97 4.72 633 Ba2/BBB*-/A
XS0337453202 SEB 7.0922 21/12/2017 94.00 5.52 533 Ba2/BBB-/A-
XS0149298860 SNSSNS 5.625 14/6/2012 105.20 1.84 167 A3/A-/A-
XS0365303329 SOCGEN 7.756 22/5/2013 89.89 2.37 961 Baa2/BBB+/--
Insurance (MW)
XS0425811865 AEGON 7 29/4/2012 106.41 1.70 219 A3/A-/A
XS0159527505 ALVGR 6.5 13/1/2025 105.87 3.78 313 A2/A+/A
XS0416215910 ASSGEN 4.875 11/11/2014 106.97 3.81 127 A1/A+/A+
XS0434882014 AXASA 4.5 23/1/2015 106.23 4.03 109 A2/A/A-
FR0010409789 CNPFP 4.75 22/12/2049 63.67 4.67 827 --/A/--
XS0433923108 EUREKO 7.375 16/6/2014 112.09 3.44 233 --/A-/--
XS0187043079 HANRUE 5.75 26/2/2024 99.00 3.14 421 --/A/A-
XS0267516598 INTNED 4 18/9/2013 101.86 2.89 172 Baa1/A-/BBB+*-
XS0304987042 MUNRE 5.767 12/6/2017 86.42 5.35 534 A3/A/A
XS0429265159 SCHREI 7 19/5/2014 113.58 3.41 153 A1/A+/--
XS0201168894 ZURNVX 4.5 17/9/2014 105.89 3.70 114 A2/A+/A
ASW as of ASW as of
01/06/2010 06/07/2010 carry MtM P&L
Benchmark: iBoxx € Non-Financials 113 116 10.86 -11.89 -1.03
Non-Financials 137 140 13.18 -3.38 9.80
Aerospace & Defense
FNCIM 8.125% 03/12/13 149 171 14.25 -79.95 -65.70
Automobiles & Parts
BMW 5% 28/05/15 126 98 12.06 134.54 146.60
DAIGR 9% 30/01/12 128 115 12.23 22.48 34.72
RENAUL 4.375% 27/01/15 263 264 25.26 -1.49 23.77
VW 7% 09/02/16 147 125 14.06 122.69 136.75
Basic Resources
GLEINT 5.375% 30/09/11 343 291 32.90 66.73 99.63
MTNA 8.25% 03/06/13 296 231 28.40 195.49 223.89
XTALN 5.25% 13/06/17 237 222 22.77 93.51 116.28
Chemicals
LINGR 7.375% 14/07/16 387 368 37.08 97.48 134.57
LXSGR 7.75% 09/04/14 161 148 15.41 50.77 66.17
Construction & Materials
CRHID 7.375% 28/05/14 238 176 22.79 244.11 266.91
HOLZSW 4.375% 09/12/14 136 120 13.04 69.60 82.64
Food & Beverage
ABIBB 7.375% 30/01/13 82 85 7.83 -9.20 -1.37
BNFP 5.5% 06/05/15 52 52 5.00 -0.37 4.64
EEEKGA 4.375% 15/07/11 143 139 13.67 3.89 17.56
KFT 6.25% 20/03/15 105 105 10.03 -0.99 9.04
SUEDZU 5.75% 27/02/12 100 107 9.57 -12.16 -2.60
Health Care
MRKGR 3.375% 24/03/15 82 76 7.87 28.18 36.05
ROSW 4.625% 04/03/13 41 40 3.95 3.33 7.29
Industrial Goods & Services (Core)
ABB 4.625% 06/06/13 63 64 6.06 -1.84 4.22
ATCOA 4.75% 05/06/14 72 79 6.88 -29.02 -22.14
JMVOIT 5.375% 21/06/17 203 207 19.49 -25.35 -5.86
MANAG 7.25% 20/05/16 164 168 15.77 -18.22 -2.45
Industrial Transportation
ABESM 4.875% 27/10/21 222 304 21.25 -669.77 -648.53
ATLIM 5.625% 06/05/16 139 151 13.35 -65.02 -51.67
Media
BERTEL 7.875% 16/01/14 158 143 15.13 56.60 71.72
WKLNA 6.375% 10/04/18 159 145 15.22 97.37 112.59
ASW as of ASW as of
01/06/2010 06/07/2010 carry MtM P&L
Oil & Gas
ENIIM 5% 28/01/16 82 92 7.90 -50.94 -43.04
GAZPRU 5.875% 01/06/15 311 277 29.86 151.51 181.37
OMV 6.25% 07/04/14 96 110 9.21 -52.55 -43.34
TNEFT 5.381% 27/06/12 261 227 25.02 68.75 93.77
TOTAL 4.75% 10/12/13 25 41 2.39 -58.81 -56.42
Personal & Household Goods (Core)
MOET 3.375% 22/06/12 42 69 4.00 -55.88 -51.88
MOET 4.625% 01/07/11 57 60 5.42 -3.87 1.55
PG 4.125% 07/12/20 49 49 4.75 3.60 8.35
Retail
COFP 6% 27/02/12 81 98 7.76 -30.91 -23.14
PRTP 4% 29/01/13 128 128 12.24 -0.97 11.28
TSCOLN 5.125% 04/10/47 188 162 18.04 459.38 477.42
Technology
IBM 4% 11/11/11 33 45 3.18 -17.92 -14.74
LMETEL 5% 24/06/13 79 99 7.58 -62.70 -55.12
Telecommunications
DT 6% 20/01/17 131 121 12.52 58.00 70.52
DT 8.125% 29/05/12 78 100 7.50 -46.45 -38.95
FRTEL 7.25% 28/01/13 50 71 4.84 -58.12 -53.28
KPN 4.75% 17/01/17 121 116 11.65 32.75 44.39
OTE 5% 05/08/13 293 487 28.12 -544.51 -516.39
T 6.125% 02/04/15 73 74 6.99 -4.62 2.37
TELEFO 5.125% 14/02/13 106 110 10.18 -11.25 -1.06
TELEFO 5.58% 12/06/13 130 150 12.47 -59.57 -47.10
TELNO 4.5% 28/03/14 51 54 4.91 -11.22 -6.31
TITIM 8.25% 21/03/16 247 252 23.67 -29.54 -5.87
TLIASS 4.75% 16/11/21 110 106 10.55 42.61 53.17
TPSA 6% 22/05/14 116 133 11.15 -64.75 -53.60
VOD 6.25% 15/01/16 127 126 12.19 3.72 15.91
Tobacco
BATSLN 5.875% 12/03/15 86 91 8.27 -22.17 -13.90
IMTLN 4.375% 22/11/13 115 115 11.05 0.83 11.88
Travel & Leisure
ACCOR 7.5% 04/02/14 264 251 25.34 49.31 74.65
EXHO 4.5% 28/03/14 77 91 7.36 -54.11 -46.74
LTOIM 5.375% 05/12/16 267 266 25.62 7.68 33.29
Utilities
AWLN 4.625% 07/10/13 71 84 6.85 -40.46 -33.61
CEZCO 4.125% 17/10/13 65 87 6.27 -70.63 -64.36
DANGAS 5.5% 29/06/15 409 382 39.22 112.68 151.90
EDF 5.125% 23/01/15 59 61 5.63 -13.02 -7.39
EDNIM 4.25% 22/07/14 119 123 11.44 -15.45 -4.01
ENBW 6.875% 20/11/18 99 90 9.53 77.81 87.35
ENEL 5.25% 20/06/17 133 125 12.73 50.70 63.43
EOANGR 5.5% 19/01/16 68 64 6.55 22.55 29.11
EWE 4.875% 14/10/19 87 93 8.37 -49.40 -41.03
FRTUM 5% 19/11/13 35 53 3.39 -60.68 -57.29
GSZFP 5.125% 24/06/15 60 86 5.78 -130.52 -124.75
IBESM 3.5% 22/06/15 122 136 11.66 -66.98 -55.32
NGGLN 5% 02/07/18 109 123 10.46 -99.10 -88.64
RTE 4.875% 06/05/15 57 61 5.43 -19.91 -14.48
STATK 4.625% 22/09/17 89 84 8.57 35.09 43.66
VATFAL 5.25% 29/06/15 363 354 34.82 38.27 73.09
VERBND 4.75% 17/04/15 89 97 8.55 -35.08 -26.53
ASW as of ASW as of
01/06/2010 06/07/2010 carry MtM P&L
Benchmark: iBoxx € Financials 225 235 21.61 -39.26 -17.65
Financials 323 361 30.98 -113.04 -82.06
Banks
ACAFP 5.875% 11/06/19 165 170 15.83 -34.70 -18.87
AIB 4.5% 01/10/12 439 561 42.05 -250.00 -207.94
BPIM 4.125% 22/10/14 194 164 18.60 122.06 140.66
DANBNK 4.878% 15/05/17 536 529 51.41 31.18 82.59
ISPIM 5.75% 28/05/13 256 320 24.50 -180.21 -155.71
RBS 4.625% 22/09/21 546 632 52.35 -341.67 -289.32
SEB 7.0922% 21/12/17 569 527 54.58 217.54 272.12
SNSSNS 5.625% 14/06/12 146 166 14.00 -39.78 -25.77
SOCGEN 7.756% 22/05/13 868 958 83.26 -202.92 -119.66
Insurance
AEGON 7% 29/04/12 163 217 15.59 -105.43 -89.84
ALVGR 6.5% 13/01/25 303 306 29.09 -9.34 19.75
ASSGEN 4.875% 11/11/14 126 127 12.08 -5.27 6.81
AXASA 4.5% 23/01/15 101 109 9.67 -36.99 -27.32
CNPFP 4.75% 22/12/49 620 818 59.44 -711.02 -651.58
EUREKO 7.375% 16/06/14 202 233 19.33 -123.79 -104.45
HANRUE 5.75% 26/02/24 388 407 37.25 -60.17 -22.92
INTNED 4% 18/09/13 144 173 13.81 -89.94 -76.13
MUNRE 5.767% 12/06/17 479 528 45.92 -233.39 -187.47
SCHREI 7% 19/05/14 120 154 11.47 -136.19 -124.72
ZURNVX 4.5% 17/09/14 98 115 9.41 -70.82 -61.41
Notes
Notes
Notes
Disclaimer
Our recommendations are based on information obtained from, or are based upon public information sources that we consider to be reliable but for the completeness and
accuracy of which we assume no liability. All estimates and opinions included in the report represent the independent judgment of the analysts as of the date of the issue. We reserve the
right to modify the views expressed herein at any time without notice. Moreover, we reserve the right not to update this information or to discontinue it altogether without notice.
This analysis is for information purposes only and (i) does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to buy or subscribe for any
financial, money market or investment instrument or any security, (ii) is neither intended as such an offer for sale or subscription of or solicitation of an offer to buy or subscribe
for any financial, money market or investment instrument or any security nor (iii) as an advertisement thereof. The investment possibilities discussed in this report may not be
suitable for certain investors depending on their specific investment objectives and time horizon or in the context of their overall financial situation. The investments discussed
may fluctuate in price or value. Investors may get back less than they invested. Changes in rates of exchange may have an adverse effect on the value of investments.
Furthermore, past performance is not necessarily indicative of future results. In particular, the risks associated with an investment in the financial, money market or investment
instrument or security under discussion are not explained in their entirety.
This information is given without any warranty on an "as is" basis and should not be regarded as a substitute for obtaining individual advice. Investors must make their own
determination of the appropriateness of an investment in any instruments referred to herein based on the merits and risks involved, their own investment strategy and their legal,
fiscal and financial position. As this document does not qualify as an investment recommendation or as a direct investment recommendation, neither this document nor any part
of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever. Investors are urged to contact their
bank's investment advisor for individual explanations and advice.
Neither UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler A.Ş.,
Zagrebačka banka, UniCredit Bulbank nor any of their respective directors, officers or employees nor any other person accepts any liability whatsoever (in negligence or
otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection therewith.
This analysis is being distributed by electronic and ordinary mail to professional investors, who are expected to make their own investment decisions without undue reliance on
this publication, and may not be redistributed, reproduced or published in whole or in part for any purpose.
Responsibility for the content of this publication lies with:
a) UniCredit Bank AG, Am Tucherpark 16, 80538 Munich, Germany, (also responsible for the distribution pursuant to §34b WpHG). The company belongs to UCI Group.
Regulatory authority: “BaFin“ – Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt, Germany.
b) UniCredit Bank AG London Branch, Moor House, 120 London Wall, London EC2Y 5ET, United Kingdom.
Regulatory authority: “BaFin“ – Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt, Germany and subject to limited regulation by the Financial
Services Authority (FSA), 25 The North Colonnade, Canary Wharf, London E14 5HS, United Kingdom. Details about the extent of our regulation by the Financial Services
Authority are available from us on request.
c) UniCredit Bank AG Milan Branch, Via Tommaso Grossi, 10, 20121 Milan, Italy, duly authorized by the Bank of Italy to provide investment services.
Regulatory authority: “Bank of Italy”, Via Nazionale 91, 00184 Roma, Italy and Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt, Germany.
d) UniCredit CAIB AG, Julius-Tandler-Platz 3, 1090 Vienna, Austria
Regulatory authority: Finanzmarktaufsichtsbehörde (FMA), Praterstrasse 23, 1020 Vienna, Austria
e) UniCredit Securities, Boulevard Ring Office Building, 17/1 Chistoprudni Boulevard, Moscow 101000, Russia
Regulatory authority: Federal Service on Financial Markets, 9 Leninsky prospekt, Moscow 119991, Russia
f) UniCredit Menkul Değerler A.Ş., Büyükdere Cad. No. 195, Büyükdere Plaza Kat. 5, 34394 Levent, Istanbul, Turkey
Regulatory authority: Sermaye Piyasası Kurulu – Capital Markets Board of Turkey, Eskişehir Yolu 8.Km No:156, 06530 Ankara, Turkey
g) Zagrebačka banka, Paromlinska 2, HR-10000 Zagreb, Croatia
Regulatory authority: Croatian Agency for Supervision of Financial Services, Miramarska 24B, 10000 Zagreb, Croatia
h) UniCredit Bulbank, Sveta Nedelya Sq. 7, BG-1000 Sofia, Bulgaria
Regulatory authority: Financial Supervision Commission (FSC), 33 Shar Planina str.,1303 Sofia, Bulgaria
This report may contain excerpts sourced from UniCredit Bank Russia, UniCredit Tiriac Bank, Bank Pekao or Yapi Kredi all members of the UniCredit group. If so, the pieces and
the contents have not been materially altered.
Key 1a: UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler A.Ş.,
Zagrebačka banka and UniCredit Bulbank and/or a company affiliated with it (pursuant to relevant domestic law) owns at least 2 % of the capital stock of the company.
Key 1b: The analyzed company owns at least 2% of the capital stock of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch,
UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated with it (pursuant to relevant domestic law).
Key 2: UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch and UniCredit Securities, UniCredit Menkul Değerler A.Ş.,
Zagrebačka banka and UniCredit Bulbank and/or a company affiliated with it (pursuant to relevant domestic law) belonged to a syndicate that has acquired securities or any
related derivatives of the analyzed company within the twelve months preceding publication, in connection with any publicly disclosed offer of securities of the analyzed company,
or in any related derivatives.
Key 3: UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch and UniCredit Securities, UniCredit Menkul Değerler A.Ş.,
Zagrebačka banka and UniCredit Bulbank and/or a company affiliated (pursuant to relevant domestic law) administers the securities issued by the analyzed company on the
stock exchange or on the market by quoting bid and ask prices (i.e. acts as a market maker or liquidity provider in the securities of the analyzed company or in any related
derivatives)
Key 4: The analyzed company and UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch and UniCredit Securities, UniCredit
Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated (pursuant to relevant domestic law) concluded an agreement on services in
connection with investment banking transactions in the last 12 months, in return for which the Bank received a consideration or promise of consideration.
Key 5: The analyzed company and UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch and UniCredit Securities, UniCredit Menkul
Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated (pursuant to relevant domestic law) have concluded an agreement on the preparation of
analyses.
Key 6a: Employees of UniCredit Bank AG Milan Branch and/or members of the Board of Directors of UniCredit (pursuant to relevant domestic law) are members of the Board of
Directors of the Issuer. Members of the Board of Directors of the Issuer hold office in the Board of Directors of UniCredit (pursuant to relevant domestic law).
Key 6b: The analyst is on the supervisory/management board of the company they cover.
Key 7: UniCredit Bank AG Milan Branch and/or other Italian banks belonging to the UniCredit Group (pursuant to relevant domestic law) extended significant amounts of credit
facilities to the Issuer.
Issuer level:
Marketweight: We recommend having the same portfolio exposure in the name as the respective reference index (the iBoxx index universe for high-grade names and the ML
EUR HY index for sub-investment grade names).
Overweight: We recommend having a higher portfolio exposure in the name as the respective reference index (the iBoxx index universe for high-grade names and the ML EUR
HY index for sub-investment grade names).
Underweight: We recommend having a lower portfolio exposure in the name as the respective reference index (the iBoxx index universe for high-grade names and the ML EUR
HY index for sub-investment grade names).
Instrument level:
Core hold: We recommend holding the respective instrument for investors who already have exposure.
Sell: We recommend selling the respective instrument for investors who already have exposure.
Buy: We recommend buying the respective instrument for investors who already have exposure.
Trading recommendations for fixed-interest securities mostly focus on the credit spread (yield difference between the fixed-interest security and the relevant government bond or
swap rate) and on the rating views and methodologies of recognized agencies (S&P, Moody’s, Fitch). Depending on the type of investor, investment ratings may refer to a short
period or to a 6 to 9-month horizon.
The prices used in the analysis are the closing prices of the appropriate local trading system or the closing prices on the relevant local stock exchanges. In the case of unlisted
stocks, the average market prices based on various major broker sources (OTC market) are used.
Coverage Policy
A list of the companies covered by UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit
Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank is available upon request.
Frequency of reports and updates
It is intended that each of these companies be covered at least once a year, in the event of key operations and/or changes in the recommendation. Companies for which UniCredit Bank AG
Milan Branch acts as Sponsor or Specialist must be covered in accordance with the regulations of the competent market authority.
SIGNIFICANT FINANCIAL INTEREST:
UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and
UniCredit Bulbank and/or a company affiliated (pursuant to relevant national German, Italian, Austrian, UK and Russian law) with them regularly trade shares of the analyzed
company. UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler A.Ş.,
Zagrebačka banka and UniCredit Bulbank may hold significant open derivative positions on the stocks of the company which are not delta-neutral.
Analyses may refer to one or several companies and to the securities issued by them. In some cases, the analyzed issuers have actively supplied information for this analysis.
ANALYST DECLARATION
The author’s remuneration has not been, and will not be, geared to the recommendations or views expressed in this study, neither directly nor indirectly.
ORGANIZATIONAL AND ADMINISTRATIVE ARRANGEMENTS TO AVOID AND PREVENT CONFLICTS OF INTEREST
To prevent or remedy conflicts of interest, UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit Securities,
UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank have established the organizational arrangements required from a legal and supervisory aspect,
adherence to which is monitored by its compliance department. Conflicts of interest arising are managed by legal and physical and non-physical barriers (collectively referred to
as “Chinese Walls”) designed to restrict the flow of information between one area/department of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG,
UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and another. In particular, Investment Banking
units, including corporate finance, capital market activities, financial advisory and other capital raising activities, are segregated by physical and non-physical boundaries from
Markets Units, as well as the research department. In the case of equities execution by UniCredit Bank AG Milan Branch, other than as a matter of client facilitation or delta
hedging of OTC and listed derivative positions, there is no proprietary trading. Disclosure of publicly available conflicts of interest and other material interests is made in the
research. Analysts are supervised and managed on a day-to-day basis by line managers who do not have responsibility for Investment Banking activities, including corporate
finance activities, or other activities other than the sale of securities to clients.
ADDITIONAL REQUIRED DISCLOSURES UNDER THE LAWS AND REGULATIONS OF JURISDICTIONS INDICATED
Notice to Austrian investors
This document does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to buy or subscribe for any securities and neither this document
nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever.
This document is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on to any other person or published, in
whole or part, for any purpose.
Notice to Czech investors
This report is intended for clients of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit Securities,
UniCredit Menkul Değerler A.Ş., Zagrebačka banka or UniCredit Bulbank in the Czech Republic and may not be used or relied upon by any other person for any purpose.
Notice to Italian investors
This document is not for distribution to retail clients as defined in article 26, paragraph 1(e) of Regulation n. 16190 approved by CONSOB on October 29, 2007.
In the case of a short note, we invite the investors to read the related company report that can be found on UniCredit Research website www.research.unicreditgroup.eu.
Notice to Russian investors
As far as we are aware, not all of the financial instruments referred to in this analysis have been registered under the federal law of the Russian Federation “On the Securities
Market” dated April 22, 1996, as amended, and are not being offered, sold, delivered or advertised in the Russian Federation.
Notice to Turkish investors
Investment information, comments and recommendations stated herein are not within the scope of investment advisory activities. Investment advisory services are provided in
accordance with a contract of engagement on investment advisory services concluded with brokerage houses, portfolio management companies, non-deposit banks and the
clients. Comments and recommendations stated herein rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not suit
your financial status, risk and return preferences. For this reason, to make an investment decision by relying solely on the information stated here may not result in consequences
that meet your expectations.
Notice to Investors in Japan
This document does not constitute or form part of any offer for sale or subscription for or solicitation of any offer to buy or subscribe for any securities and neither this document
nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever.
Notice to UK investors
This communication is directed only at clients of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit
Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank who (i) have professional experience in matters relating to investments or (ii) are persons
falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations, etc.”) of the United Kingdom Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 or (iii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This communication must
not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant
persons and will be engaged in only with relevant persons.
UniCredit Research*
Dr. Ingo Heimig
Thorsten Weinelt, CFA Head of Research Operations
Global Head of Research & Chief Strategist +49 89 378-13952
+49 89 378-15110 ingo.heimig@unicreditgroup.de
thorsten.weinelt@unicreditgroup.de
Credit Research
Publication Address
UniCredit Research
Corporate & Investment Banking Bloomberg
UniCredit Bank AG UCCR
Arabellastrasse 12
D-81925 Munich Internet
Tel. +49 89 378-18927 www.research.unicreditgroup.eu
Fax +49 89 378-18352
*UniCredit Research is the joint research department of UniCredit Bank AG (UniCredit Bank), UniCredit CAIB AG (UniCredit CAIB), UniCredit Securities (UniCredit Securities),
UniCredit Menkul Değerler A.Ş. (UniCredit Menkul), Zagrebačka banka and UniCredit Bulbank.