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Capital Market Presentation

September 2011:

Limits to growth

Hans-Jrg Naumer, Dennis Nacken,

Stefan Scheurer

Not for circulation to

private investors


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Limits to growth

OECD-Leading Indicators: Almost every economic indicator is weakening.

Source: Datastream; Allianz Global Investors Capital Market Analysis

3 0 / 0 8 /1 1

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0

- 1 5

- 1 0

- 5

0

5

1 0

1 5

U S A

E M UO E C D

J a p a n

- 1 5

- 1 0

- 5

0

5

1 0

1 5

S o u r c e : T h o m s o n D a t a s t re a m


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CDS premia are close to their peak levels.

iTraxx Senior Financials & iTraxx Europe


3 0 / 8 /1 1

2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1

0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

3 0 0

0

2 0

4 0

6 0

8 0

1 0 0

1 2 0

1 4 0

1 6 0

1 8 0

2 0 0

2 2 0

I t r a x x S e n i o r F i n a n c i a l s ( 5 y e a r s )

I t r a x x E u r o p e ( 5 y e a r s ) ( r h s )

S o u r c e : T h o m s o n D a t a s t re a m


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Emerging Markets: Economic strength

Share of global economic growth and market capitalisation. (MSCI World AC, in US-Dollar).

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Russia

India

Brazil

China

Japan

Europe

USA

Share market cap Share economic growth



5/125

Economic leading indicators: Affected by capital market sentiment.

ifo-busines climate index and purchasing manager indices of the US and China.


3 0 / 8 /1 1

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0

8 0

8 5

9 0

9 5

1 0 0

1 0 5

1 1 0

1 1 5

1 2 0

3 0

3 5

4 0

4 5

5 0

5 5

6 0

6 5

i f o - I n d e x

I S M P u r c h a s i n g M a n a g e r I n d e x ( r h s )P u r c h a s i n g M a n a g e r I n d e x C h i n a ( r h s )

S o u r c e : T h o m s o n D a t a s t r e a m


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Most regional surprise indices are at their historical turning

points.

Surprise-Indicators are calculated as the deviation between actual economic data and the consensus estimates.

Indicators concerning surprise events in global macro data (Surprise Indicators)

-200

-150

-100

-50

0

50

100

150

19.

05.

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08.

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11.

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05

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08.

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US EMU JAP

Source: Datastream; RCM


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P/E ratios 12 months forward.

Valuations continue to suggest equity investments


3 0 / 8 /1 1

9 2 9 3 9 4 9 5 9 6 9 7 9 8 9 9 0 0 0 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0

5

1 0

1 5

2 0

2 5

3 0

3 5

4 0

4 5

5 0

D A X P / E r a t i o ( b a s i s : 1 2 - m o n t h - f w d - p r o f i t s )

D A X P / E a v e r a g e1 0 y B u n d s P / E ( 1 0 0 / y i e l d )

B u n d s P / E a v e r a g e

5

1 0

1 5

2 0

2 5

3 0

3 5

4 0

4 5

5 0



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Investment theme: Dividends

The Standard & Poors 500 also shows that dividends made up most of the losses caused by price

fluctuations.

Capital gains/losses Dividend income



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Investment theme: High Yields

Solid liquidity reserves and the ongoing trend in the coming year of conservative corporate financial policy

should continue to provide a positive environment for corporate bonds.


3 0 / 8 / 1 1

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0

0

0 . 5 0

1 . 0 0

1 . 5 0

2 . 0 0

2 . 5 0

3 . 0 0

3 . 5 0

4 . 0 0

4 . 5 0

0

5

1 0

1 5

2 0

2 5

E M U H Y - G o v e r n m e n t B o n d s ( M L ) ( r h s )

E M U C o r p o r a t e B o n d s - G o v e r n m e n t B o n d s ( M L )



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Decisive Insights:

It is advisable to retain a neutral weighting between equities and bonds

In terms of price/earnings ratios, the equity markets are already anticipating aneconomic decline and a drop in earnings. Equities now look distinctly cheap relative to

government bonds, although there are regional variations here, too.

Concerns about the economy and the (EU) debt crisis dominate the picture and are

apparently also beginning to have an effect on real economic sentiment indicators. This

widespread pessimism provides room for positive surprises.

The medium- to longer-term outlook for equities is positive. However, given the current

uncertainties, not least about progress in resolving the debt crisis, it is advisable to

retain a neutral weighting between equities and bonds.


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Disclaimer

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