Outlook 2015: Europe & Germany

Transcription

1 Part of the M&G Group Outlook 215: Europe & Germany Research presentation 27 th November 214

2 European Economic Fundamentals Update & Outlook 2

3 Economic recovery broadening GDP growth by country Q3 214 GDP growth (%) Year-on-year GDP growth Quarter-on-quarter GDP growth Unexpected slowdown in Eurozone 3 biggest economies 3 Source: Bloomberg, Sept 14

4 Private sector confidence losing some momentum European Purchasing Managers Index Nov-8 Feb-9 May-9 Aug-9 Nov-9 Feb-1 May-1 Aug-1 Nov-1 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Composite PMI Indicator Eurozone Composite PMI Output Level consistent with % GDP growth Eurozone GDP But still above level consistent with % GDP growth Source: Bloomberg

5 German ZEW Survey German ZEW Survey ZEW Economic Sentiment Oct-8 Jan-9 Apr-9 Jul-9 Oct-9 Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 German ZEW Index ZEW Long Term Average Germany GDP ZEW economic sentiment points to renewed, slow recovery Source: Bloomberg

6 Mar-14 Sep-1 Mar-2 Sep-2 Mar-3 Sep-3 Mar-4 Sep-4 Mar-5 Sep-5 Mar-6 Sep-6 Mar-7 Sep-7 Mar-8 Sep-8 Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Sep-14 Unemployment rates edging down Unemployment Rates Across Europe Unemployment rate (%) Eurozone Germany Spain Italy France Portugal Netherlands Belgium Greece Sweden Labour markets showing signs of improvement Source: Bloomberg, October 214

7 European Economic Growth Forecasts GDP Growth Forecasts by Country, Real GDP Growth (% p.a.) Economic recovery to strengthen in short to medium term 7 Source: Consensus Economics, Nov 14

8 Inflation slowing down Consumer Price Index France Sweden Spain Eurozone Germany Italy Netherlands Belgium Portugal Finland Poland 8 Source: Bloomberg

9 European Property Market Update & Outlook 9

10 Prime Rental Change YTD (%) Office Industrial Retail Shops Source: JLL, Q3 214

11 European Transaction Volumes (ex. UK) Transaction Volumes ( bn) Investment activity reached 68bn in the year to Q3 214, + 8bn compared to the same period in Q3. Throughout 214, the share of investment in the core markets of Germany and France slowed down from 63% in Q1 to 5% in Q3. At 4.6bn, European investment volumes targeting the peripheral markets in Q3, was greater than in France and the Nordics. Other CEE Netherlands France Peripheral countries Nordics Belgium Germany 11 Source: DTZ, Oct 14

12 Government Bond Yields 8 1 Year Government Bond Yields 1 Year Government Bond Yield (%) Australia USA France Germany Japan UK Spain Canada Yields for many European bonds now at record lows; Spanish bond yields below those on US treasuries 12 Source: Bloomberg (Nov 214)

13 Prime Yield Movements to Q3 214 Office Industrials Retail Shops Oslo Stockholm Warsaw Rome Vienna Amsterdam Frankfurt Brussels Munich Dusseldorf Berlin Helsinki Lyon Hamburg Lux. Paris Prague Milan Madrid Dublin Barcelona Lisbon Q1 Q2 Q3 Stockholm Barcelona Rome Paris Milan Brussels Lyon Munich Hamburg Frankfurt Dusseldorf Amsterdam Warsaw Lux. Dublin Helsinki Berlin Prague Lisbon Madrid Q1 Q2 Q3 Munich Hamburg Dusseldorf Paris Helsinki Rome Milan Frankfurt Amsterdam Stockholm Warsaw Brussels Berlin Lyon Prague Madrid Barcelona Lisbon Dublin Q1 Q2 Q3 Prime yields compressing in recovering peripheral markets 13 Source: JLL, Q3 214

14 Secondary yields compressing in core markets 7 6 Secondary Yields in Germany (%) High street Shopping centres Retail warehouses Offices Sep-13 Dec-13 Mar-14 Jun-14 Sep Source: CBRE

15 15 Industrial values remain the furthest from their peak Jun-7 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Prime Capital Values in Europel ex-uk & Russia (Base: June 27 = 1) Retail shops Offices Industrials Source: JLL

16 Retail Shops Spread between current yields and yields achieved in 27-1 Hamburg Berlin Dusseldorf Frankfurt Munich Source: JLL, Bloomberg

17 Offices Spread between current yields and yields achieved in 27-5 Hamburg Dusseldorf Frankfurt Berlin Munich Source: JLL, Bloomberg

18 Industrials Spread between current yields and yields achieved in Dusseldorf Frankfurt Hamburg Munich Berlin Source: JLL, Bloomberg

19 Summary Modest economic forecasts but positive business sentiment Relative to government bonds, prime real estate seen as good value Industrial capital values furthest from previous peak Prime yields compressing in recovering markets Secondary yields compressing in core markets Capital markets to support total returns in the short term Occupational markets to support total returns in the medium term 19

20 Important Information This document is for the recipient only and should not be passed to anyone else as further distribution might be restricted or illegal in certain jurisdictions. It reflects the authors present opinions reflecting current market conditions which are subject to change without notice and involve a number of assumptions which may not prove valid. It has been written for informational purposes only and should not be considered as investment advice or as a recommendation of any particular security, strategy or investment product. Past performance is not a guide to future performance. The value of investments can fall as well as rise. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and you should ensure you understand the risk profile of the products or services you plan to purchase. This document is issued by M&G Investment Management Limited. The services and products provided by M&G Investment Management Limited are available only to investors who come within the category of the Professional Client as defined in the Financial Conduct Authority s Handbook. They are not available to individual investors, who should not rely on this communication. Information given in this document has been obtained from, or based upon, sources believed by us to be reliable and accurate although M&G does not accept liability for the accuracy of the contents. M&G Investments and M&G Real Estate are business names of M&G Investment Management Limited and are used by other companies within the Prudential Group. M&G Investment Management Limited is registered in England and Wales under numbers with its registered office at Laurence Pountney Hill, London EC4R HH. M&G Investment Management Limited is authorised and regulated by the Financial Conduct Authority. M&G Real Estate Limited is registered in England and Wales under number with its registered office at Laurence Pountney Hill, London EC4R HH. M&G Real Estate Limited forms part of the M&G Group of companies. 2