Allianz SE · XETR:ALV
Allianz — Investor Presentation (March 2022)
54 slides from Allianz's investor presentation, Mar 18, 2022
Slide 1: Outlook: Energy, trade, and financial shockwaves
Outlook: Energy, trade, and financial shockwaves AZR Scenario_Q22022 Allianz Research March 18, 2022
Slide 2: Economic Outlook
Allianz @) Economic Outlook
Slide 3: Russia-Ukraine Scenarios
RUSSIA-UKRAINE SCENARIOS Ceasefire (Probability 5%) Conflict Escalation (Probability 55%) Black-out (Probability 35%)* Ceasefire & search for a diplomatic solution amid Escalation trigger: more extensive sanctions Harsh sanctions freeze economic & financial persistent sanctions (financial & trade, e
Slide 4: Forecasts: Slowflation vs. Stagflation
GLOBAL FORECASTS Forecasts: Slowflation vs. Stagflation GDP growth forecasts Inflation forecasts © Allianz 2022 4 Source: Allianz Research Source: Allianz Research
Slide 5: Trifecta on growth: oil, confidence and supply chain shocks
GLOBAL FORECASTS Trifecta on growth: oil, confidence and supply chain shocks Breakdown of 2022 GDP growth forecasts revisions (pp) Breakdown of 2022 inflation forecasts revisions (pp) © Allianz 2022 Note: the supply-chains factor includes impacts from both the Russia-Ukraine crisis, and the Covid-19
Slide 6: Energy and reopening driving inflation
INFLATION COMPONENTS Energy and reopening driving inflation US CPI Breakdown (y/y% change) Eurozone HICP Breakdown (y/y% change) -5 0 5 10 15 20 25 30 -1 0 1 2 3 4 5 6 7 CPI all HICP all Energy Housing, water, eletricity, gas & other… Transportation goods Transport Household furnishing Food & non-al
Slide 7: Hard landing over the medium term?
ENERGY PRICES Hard landing over the medium term? Oil Supply Shocks: Historical Comparison (mn of barrels/day) 14 12 10 Today's equivalent 1/ 8 Actual 6 4 2 0 © Allianz 2022 Sources: Enerdata, IEA, Our World In Data, Allianz Research. Note: 1/ adjusted for changes in the share of oil in the global en
Slide 8: Central banks prioritize inflation for now
MONETARY POLICY Central banks prioritize inflation for now © Allianz 2022 Markets expect central banks to prioritize inflation over growth in the short term. Positioning for a close end of the escalation phase with return to their pre-crisis short-term policy rate outlook. Within the next 12 months,
Slide 9: Energy prices delay fiscal adjustment
FISCAL POLICY AND MONETARY STANCE Energy prices delay fiscal adjustment © Allianz 2022 Source: Allianz Research. 9
Slide 10: Fiscal support of at least 0.6% of GDP
FISCAL POLICY Fiscal support of at least 0.6% of GDP Additional fiscal support and budget deficits Announced and expected fiscal support to mitigate (% of GDP) energy inflation Adverse scenario Baseline scenario Budget deficit 1/ Foregone consumption tax revenue 2.5 ("blackout scenario") ("conflict
Slide 11: Supply chain bottlenecks prolonged
GLOBAL TRADE Supply chain bottlenecks prolonged Breakdown of 2022 trade growth forecast revisions China port congestion and global delivery times (pp) 3.0 China port congestion index (14-month lead) 10 Global Manufacturing PMI - Suppliers' delivery times 6 12 15 2.5 Confidence and demand 20 4 Supply
Slide 12: Corporate sector affected by the war
GLOBAL ENERGY SHOCK Corporate sector affected by the war Labor costs coupled with commodity costs Profitability decrease if commodity prices remain at current levels (EBITDA, pp) © Allianz 2022 Sources: Refinitiv, Allianz Research Source: Bloomberg, Allianz Research Some sectors are labor intensive
Slide 13: Insolvencies & State support measures
GLOBAL BUSINESS INSOLVENCIES Insolvencies & State support measures Global and regional insolvency indices* Business insolvencies forecasts* (selected countries) Conflict 2019 2020 2021 Escalation Black-out number of cases, thousands 2022f 2023f 2022f 2023f US 22.7 21.6 14.3 15.3 18 16.6 23.2 Germany
Slide 14: Capital Markets Outlook
Allianz @) Capital Markets Outlook
Slide 15: Capital Markets: forecasts 2022-23
CAPITAL MARKETS – SCENARIOS Capital Markets: forecasts 2022-23 Last value year-end figures Unit Conflict Escalation (50%) Black-out (35%) (16.03.2022) EMU 2021 2022f 2023f 2022f 2023f Government Debt Policy rate (ECB deposit rate) -0.5 % -0.5 -0.5 0.0 -0.5 -0.5 10y yield (Bunds) 0.40 % -0.18 0.15 0.
Slide 16: Capital markets changing regimes
CAPITAL MARKETS – MARKET ROTATION Capital markets changing regimes © Allianz 2022 Since Q4 2021 and mostly in 2022, markets have Initially, markets repositioned for a faster than already experienced two structural shifts in market expected monetary policy normalization which sentiment and positionin
Slide 17: Capital markets are nervous
CAPITAL MARKETS – MARKET ROTATION Capital markets are nervous © Allianz 2022 The invasion of Ukraine has exacerbated downside Since Q4 2021, markets have already experienced pressures in capital markets but has yet to trigger a significant deterioration in market sentiment dislocations commonly asso
Slide 18: EQ sell-off consistent with history
CAPITAL MARKETS – MARKET ROTATION EQ sell-off consistent with history © Allianz 2022 The peak-to-date performance of equities has been Aggregated market sentiment has rapidly shifted similar to those experienced during other historical with market participants turning as bearish as were market sell-
Slide 19: Markets rebound after wars
CAPITAL MARKETS – MARKETS IN TIMES OF WAR Markets rebound after wars © Allianz 2022 Historically, publicly-traded assets do not Over the last 30 years, after each crisis, all asset underperform during times of war or geopolitical classes recorded a mildly positive return conflict performance over a
Slide 20: Markets positioned for stagflation
CAPITAL MARKETS – MARKETS IN TIMES OF WAR Markets positioned for stagflation © Allianz 2022 The current market correction at the time of conflict This suggests that this time things might be seems far more abrupt, especially for risky assets. different as the stagflationary environment creates a dou
Slide 21: A hard to hedge market correction
CAPITAL MARKETS – BEARISH ROTATION A hard to hedge market correction © Allianz 2022 High uncertainty has also impacted market liquidity This increase in aggregated hedging has been far and hedging strategies. market participants have more pronounced in Europe than in the US increased their put prote
Slide 22: Frontloaded and shallow hiking cycle
CAPITAL MARKETS – SHORT TERM RATES Frontloaded and shallow hiking cycle © Allianz 2022 Heavily frontloaded forward term structure with hiking cycles entirely priced within the next 18 months. Two main reasons: (i) weakening upside spiral between oil price and inflation expectations and (ii) rising r
Slide 23: Sovereigns in stagflation mood
TOPLINE GOES HERE Sovereigns in stagflation mood US & Germany: 10y yield outlook • Generally, little upside from expected nominal short-term rates given the already ambitious market pricing and (re-)anchoring inflation expectations. • Baseline: 10y US Treasuries around 2% in 2022 and 2.3% in 2023, 1
Slide 24: Equities are central bank dependent
CAPITAL MARKETS – EQUITIES Equities are central bank dependent © Allianz 2022 The expected decline in real yields should stabilize Monetary and fiscal policy will remain a key equity markets as long as the global economy does determinant of future market behavior not end up in a full-fledged recessi
Slide 25: Equities will end the year almost flat
CAPITAL MARKETS – EQUITY SCENARIO Equities will end the year almost flat US Equity market decomposition (y/y%) 30 M2 money supply 10y inflation breakeven 10y real yield 20 USD NEER Estimate S&P500 10 0 -10 -20 2015 2017 2019 2021 © Allianz 2022 Source: Refinitiv , Allianz Research The effective bala
Slide 26: Credit spreads are set to compress
CAPITAL MARKETS – CORPORATE CREDIT SCENARIO Credit spreads are set to compress US IG credit spread decomposition (y/y) 200 100 0 -100 Consumer confidence S&P500 volatility -200 M2 money supply IG spread y/y -300 Estimate y/y 2015 2017 2019 2021 © Allianz 2022 Source: Refinit iv , Allianz Research Th
Slide 27: Emerging markets capital flows
CAPITAL MARKETS – EMERGING MARKETS Emerging markets capital flows Monthly changes in foreign holdings of Chinese Quarterly capital flows from/to EM, by region treasureis (CNY,bn) 120 EM - Asia Ex-China LatAm CEE MEA China 200 90 USD bn 150 60 100 30 50 0 0 -30 -50 -60 -100 2014 2015 2016 2017 2018 2
Slide 28: Regional Outlook
Allianz @) Regional Outlook
Slide 29: Russian economy after sanctions
Russian economy after sanctions Impact & Policy Measures Ruble depreciates by more than 40% CBR raises interest rates from 9.5% to 20% Run on Russian banks, M2 surges by 12.5% ECB warns of Sberbank Europe default Russian companies must cede 80% of their FX revenues © Allianz 2022 Foreigners banned f
Slide 30: How long can Russia survive sanctions?
SOVEREIGN RISK How long can Russia survive sanctions? FX reserves and income vs. FX needs (USD bn) Import and ST external debt (public and private) coverage under various export scenarios © Allianz 2022 Sources: Refinitiv, Central Bank of Russia, Allianz Research estimates Sources: Refinitiv, Centra
Slide 31: The war is not a macro game changer
United States The war is not a macro game changer US job market diffusion index US households excess saving (as number of months to withstand current inflationary shock, per quintiles) © Allianz 2022 Sources: Refinitiv, Allianz Research Sources: national sources, Allianz Research Our US job market d
Slide 32: The Fed cannot afford high inflation risks
United States The Fed cannot afford high inflation risks Explanatory factors of inflationary persistence The Fed to hike six times the FFR in 2022 (%) © Allianz 2022 Sources: Refinitiv, Allianz Research Sources: national sources, Allianz Research Critical variables, such as the stringency index (the
Slide 33: Sharp blow to the recovery pace
EUROZONE Sharp blow to the recovery pace Eurozone real GDP (Y/Y, %) vs. ZEW and Sentix survey Eurozone: Real GDP under different scenarios 106 Ceasefire 104 Conflict 102 escalation 100 Black-out 98 96 94 92 90 2019 2020 2021 2022 2023 © Allianz 2022 Sources: Refinitiv, Allianz Research Sources: Refi
Slide 34: Consumer under pressure
EUROZONE Consumer under pressure Eurozone: Gross household savings rate (rhs, inverted Eurozone: Negotiated wages & inflation (y/y, in %) axis) vs. consumer confidence (lhs) © Allianz 2022 Sources: Refinitiv, Allianz Research Sources: Refinitiv, Allianz Research Excess savings were expected to power
Slide 35: ECB to err on the cautious side
EUROZONE ECB to err on the cautious side Eurozone household one-year inflation expectations, ECB deposit rate (%) Net balances, Z-scored, February 2022 0.5 Ceasefire 0.25 Conflict escalation 0 -0.25 Black-out -0.5 -0.75 © Allianz 2022 2019 2020 2021 2022 2023 Sources: Refinitiv, Allianz Research Sou
Slide 36: Fiscal to the rescue
GERMANY Fiscal to the rescue Germany: Intermediate goods – inventory of finished Germany: Budget balance (% GDP) goods minus demand 3 Official budget balance (% GDP) Off-balance sheet spending 2 1 0 -1 -2 -3 -4 -5 -6 -7 © Allianz 2022 Sources: Refinitiv, Allianz Research Sources: Refinitiv, Allianz
Slide 37: Purchasing power is key, notably in an electoral period
FRANCE Purchasing power is key, notably in an electoral period Estimated energy cost in 2022 (total increase of +30%), pp of disposable income • Despite France’s limited dependency on Russian gas, First quantile Second quantile Third quantile Fourth quantile Fifth quantile confidence channel and hig
Slide 38: Manufacturing sector, already under pressure
ITALY Manufacturing sector, already under pressure © Allianz 2022 Weak start into the year with growth likely to turn Industrial production under pressure even before negative (-0.3% q/q) in Q1. Private consumption Ukraine crisis. Grim lookout for Q1 as just when supply affected by the energy shock
Slide 39: Russia-Ukraine conflict undermines the economic recovery
SPAIN Russia-Ukraine conflict undermines the economic recovery Economic recovery was on track in the beginning of Inflation to stay high for a while the year 9 15 2 8 0 7 CPI 10 -2 6 Core -4 5 5 -6 4 3 -8 0 2 -10 1 Ind. Production YoY(MA 4 quarters) -5 -12 Retail Sales YoY (MA 4 quarters) 0 -14 -1 E
Slide 40: Visible squeeze of incomes
UNITED KINGDOM Visible squeeze of incomes UK 2020 2021 2022 2023 Cash from non-financial corporates and households, GDP -9.4% 7.5% 3.2% 2.0% y/y growth Consumer Spending -10.5% 6.1% 5.0% 1.7% Public Spending -5.4% 14.5% 5.0% 2.0% Investment -8.9% 6.6% -2.1% 2.8% Stocks -0.9% 0.8% -0.4% 0.4% Exports
Slide 41: Substantial contagion risk to emerging markets
Substantial contagion risk to emerging markets © Allianz 2022 EUR spreads of Eastern European countries, which have Eastern European currencies, EUR-centric, will suffer if the been widening in the previous weeks, among the most regional instability continues. However, high commodity sensitive. Simi
Slide 42: Emerging markets most exposed
Emerging markets most exposed Emerging Markets impacted by RU-UA war through Real policy rate vs inflation trend various channels © Allianz 2022 Sources: various, Allianz Research Sources: various, Allianz Research 42
Slide 43: More pressure but there is policy leeway
CHINA More pressure but there is policy leeway Cumulative impact after 4 quarters over GDP growth China credit impulse and breakdown and inflation %y/y 20 0.6 Global policy uncertainty Supply-chain disruptions 15 Oil price 0.5 0.4 Total 10 5 0.2 0 0.0 -5 -0.2 -10 Government bonds -0.3 Corporate bond
Slide 44: Policies to drive the stabilization again
CHINA Policies to drive the stabilization again China labor market: Investment growth (%) * unemployment rate and leading indicator 45 Infrastructure (value) 6.2 20% Housing starts (volume), HP-filtered 50 Manufacturing (value) 6.0 15% 5.8 55 10% 5.6 60 5.4 5% 65 5.2 0% 70 5.0 -5% 4.8 75 -10% 4.6 80
Slide 45: Some catch-up in 2022, despite risks
ASIA-PACIFIC Some catch-up in 2022, despite risks Real GDP, distance to pre-pandemic trend GDP Commodities prices vs. (post-)Covid impacts 10 Infrastructure (value) 10 Commodities net 2022 2021 2023 20% Australia Housing starts (volume), HP-filtered exporters 8 Net exports of commodities * (as % of
Slide 46: Inflationary pressures on the rise
EMERGING EUROPE Inflationary pressures on the rise Inflation (% y/y) Exchange rates (23 February = 100) 14% 60% 105 12% 50% 10% 100 40% 8% 30% 6% 95 20% 4% 10% 90 2% 0% 0% 19-01 19-07 20-01 20-07 21-01 21-07 22-01 22-07 85 23 Feb 28 Feb 05 Mrz 10 Mrz 15 Mrz Poland Czechia Hungary Romania Slovakia Tu
Slide 47: Central Banks will need to do more
EMERGING EUROPE Central Banks will need to do more Monetary policy rates Inflation forecasts 2022 (%, aop), various scenarios 6% 12 11.1 10 9.2 9.6 5% 8.2 8.3 8.1 8.3 7.7 8 7.3 7.3 4% 6.1 6 5.5 3% 4 2% 2 1% 0 Croatia Lithuania Bulgaria Poland Latvia CEE-EU-11 Romania Hungary Slovakia Slovenia Estoni
Slide 48: Rising imbalances and lower growth
EMERGING EUROPE Rising imbalances and lower growth Fiscal and current account balances (% of GDP), 2022f GDP growth forecasts 2022 (%), various scenarios 8 Fiscal balance Current account balance 1 7 6.5 0.5 0 6 -1 5 4.3 -0.7 4.0 4 3.7 -2 -1.2 3.4 3.5 3.0 3.0 -3 -2.0 3 2.6 2.5 -3.1 2.0 2.6 -4 2 -3.7
Slide 49: Oil and gas exporters to benefit
MIDDLE EAST Oil and gas exporters to benefit Real GDP growth (%) Consumer price inflation (% y/y) 2020 2021 2022 2023 7 Middle East -4.5 3.3 4.5 2.7 6 GCC -4.9 3.0 4.9 2.9 5 Saudi A. -4.1 3.3 5.6 2.7 4 UAE -6.1 3.0 4.0 3.5 3 Qatar -3.6 2.5 4.4 2.8 2 Kuwait -8.9 2.2 5.7 2.7 1 Oman -2.8 2.3 3.2 2.5 0
Slide 50: Tailwinds for net commodity exporters
AFRICA Tailwinds for net commodity exporters Share of energy and food imports from Net trade (USD bn) and current account (% GDP) Russia/Ukraine (%) 60 10% Energy net exports (USD bn) Food net exports (USD bn) Size of the bubble= Total 24 50 Trade Balance (USD bn) Current account 2021 (% GDP) 8% imp
Slide 51: Rising food insecurity and social risk
AFRICA Rising food insecurity and social risk Food inflation and rise of terrorism Muted economic recovery in 2021 (3.1%) to be followed with slowdown of growth to 2.5% in 2022 and to 2.3%. Price and demand tailwinds and new market opportunities for oil and commodity exporters (Algeria, Nigeria,
Slide 52: Monetary tightening to further slow growth
LATIN AMERICA Monetary tightening to further slow growth Inflation is particularly high in LatAM Central Banks will keep tightening 125 14 Brazil LatAM Chile headline 12 Colombia 120 Asia headline Mexico 10 115 8 110 6 4 105 2 100 0 03-18 05-18 07-18 09-18 11-18 01-19 03-19 05-19 07-19 09-19 11-19 0
Slide 53: Opportunities from diverted trade flows
LATIN AMERICA Opportunities from diverted trade flows © Allianz 2022 Diverted trade flows from Russia are likely to support the trade balance of other commodities exporters; also, any exclusion of Russian assets would leave the door open to rebalancing of important indexes (and linked products). Yet
Slide 54: Thank you!
Thank you! © Allianz 2022