Raising the Dax end 2011 target to 8,000


We would see the current Dax weakness due to Eurozone debt fears & end of   QE2 concerns as a buying opportunity.  In our view, the strength of German  corporates will be the more important Dax  driver than the sovereign weakness.  We increase our Dax end 2011 target from  ….

Global Markets Research -Fundamental Index Views 17-05-2011

Deutsche Bank

from 7,410 to 8,000.

This is backed by

1)  strong economic momentum: Last week the strongest German Q1 GDP growth  yoy since unification was announced. Our economists now expect 2011E German  GDP growth of 3.2% instead of 2.5%. 

2) Strong Q1 reporting: German large  caps reported particularly strong 79% of  the German market cap has positively  surprised on the earnings level. Our earlier worries that higher input costs could  lead to margin squeezes have not materialized in the strong Q1 reporting given  good pricing power and low capex levels. The positive Q1 reporting continues to  trigger a strong positive upgrade momentum among DB analysts in the last week  with 12 target price upgrades vs. 1 target price downgrade . 

3)  Strong earnings momentum: The recent revision ratio for the Dax has a level of  +0.24 clearly ahead of the European Stoxx600 at -0.10 . 

4) Undemanding valuation: Stable earnings estimates and a stable 12-month  forward P/E level of 10.7 for seven months would bring the Dax would already up  to 7.900, so our new Dax target requires nearly no multiple expansion.  

10 structural arguments in favour of GER support our bullish view on the Dax  

Key structural arguments in favor of Germany include

1) a relatively high and stable  production share of GDP over the last decade in stark contrast to most other  developed countries, 

2) a currency which is too weak relative to the strength of  the economy,

3) stable unit labour costs over the last decade,

4) strong exports to  emerging markets,

5) German companies benefitting  from the increased division  of labour and the proximity to Eastern Europe, 

6) Germany benefitting from a  strong German “Mittelstand” and a high number of world market leaders, 

7) stable house prices, 

8) business confidence is at a 20-year high and consumer  confidence is increasing,

9) moderate debt levels of German households and

10)an unemployment rate close to its 18-year low.

Valuation & Risks

We derive our target price for the Dax by using a stable 12M fwd PE of 10.7 and  12M fwd EPS of E748. Key risks include

1) a slow-down in Emerging Markets  growth,

2) an earlier than expected restructuring of Greek debt (we do not expect  a potential hard haircut before 2013),

3) worsening situation surrounding the  market’s perception of US national debt and the potential necessity to raise the  debt-ceiling deadline scheduled for 02 August 2011 and 4) a strengthening in the  EUR/USD rate above a level of 1.50.


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ETF Obbligazionario Corporate – IBOXX EUR CORPORATE
COMMENTO: perdita di spinta rialzista per il titolo, con le quotazioni che dai minimi di marzo-aprile (109,40) si portano al test di 120,00/50, per poi stazionare nelle ultime settimane fra quest’ultimo livello e 118,00. Per le prossime settimane un nuovo superamento di 120,50 consentirebbe un ulteriore salita con prossimi obiettivi 122,00 e 123,00. Indebolimento nelle prossime settimane in caso di ritorni sotto 118,00 con probabile discesa verso 116,50, quindi 115,00.
Dividendi: stacco il 26 agosto’09 di 1,2941 euro, pagamento il 23 settembre.

ETF Obbligazionario – EuroMts Inflation Linked (Lyxor)
COMMENTO: l’Etf dei titoli di stato europei legato all’inflazione ad aprile riesce a superare la forte resistenza statica a 109,50-110,00, avviando un consistente movimento rialzista verso 120,00 (max. 117.87), per poi rettificare nelle ultime sedute. Per le prossime settimane sono possibili movimenti di riaccumulazione fra 115,00/20 e 117,00/50, prima di tentare nuovi spunti rialzisti verso 120,00. Il quadro tecnico per i prossimi mesi si indebolirebbe sotto 115,00/20, determinando la continuazione della discesa verso 111,50-112,50, dove sono attesi nuovi acquisti.

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