Topic Understand. Act. Structural and fiscal measures: France – Update Stefan ScheurerVice President, Global Capital Markets & Thematic Research When the EU debt crisis intensified towards the end of 2011, investors became increasingly concerned that contagion effects from the European periph- erals might spread to the core countries. Market participants’ attention shifted and focused above all on France – Europe’s second biggest economy after Germany. This was also reflected in CDS (credit default swaps) and the spreads on 10-year German government bonds, which have widened again in recent months (see Chart 1). In its way, the equity market appears to reflect the loss of competitiveness. The German equity market (DAX) has more than doubled since 2003, the year that saw the start of reform of the German social security system and labour market – better known as “Agenda 2010”. The French stock market (CAC 40) remained almost unchanged over the same period (+20 %) – a fact which might point to a l oss of com- petitiveness (see Chart 2). 2010 2011 2013 2012 basis points basis points 200 180 160 140 120 100 80 60 40 200 150 100 50 0 Spread France to Germany CDS 1 0 y ears F rance ( RH) Chart 1: Risk Premia in France higher lately Credit Default Swaps (CDS) and Risk Premia vs. German 10-year Bunds (–3 years) Source: Datastream, Allianz Global Investors Capital Markets & Thematic Research, July 2013. 2004 2005 2006 2007 20082009 2010 2011 2013 2012 indexed indexed 250 200 150 100 50 250 200 150 100 50 DAX 30 ind exe d CAC 40 ind exe d Chart 2: Equity Market – Indication of less competitiveness? Performance German Equity Index (DAX 30) vs. French Equity Index (CAC 40) (–10 years) Past performance is not a reliable indicator of future results. Source: Datastream, Allianz Global Investors Capital Markets & Thematic Research, July 2013.
6
Embed
Analysis and Trends Structural and Fiscal Measures France Update
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
8/10/2019 Analysis and Trends Structural and Fiscal Measures France Update
Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is notindicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or arecommendation to buy, sell or hold any security and shall not be deemed an of fer to sell or a solicitation of an offer to buy any security.
The views and opinions expressed herein, which are subject to change without notice, are thos e of the issuer or its affiliated companies at the time of publication.Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumedfor any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is notpermitted.
This material has not been reviewed by any regulatory authorities. In mainland China, it is used only as supporting material to the offshore investment products offeredby commercial banks under the Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations.
This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors U.S. LLC, an investment adviser registered with the
U.S. Securities and Exchange Commission (SEC); Allianz Global Investors Europe GmbH, an investment company in Germany, authorized by the German Bundesanstaltfür Finanzdienstleistungsaufsicht (BaFin); RCM (UK) Ltd., which is authorized and regulated by the Financial Services Authority in the UK ; Allianz Global InvestorsHong Kong Ltd. and RCM Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; Allianz Global Investors Singapore Ltd., regulated by theMonetary Authority of Singapore [Company Registration No. 199907169Z]; and Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial InstrumentsBusiness Operator; Allianz Global Investors Korea Ltd., licensed by the Korea Financial Services Commission; and Allianz Global Investors Taiwan Ltd., licensed by FinancialSupervisory Commission in Taiwan.
Imprint
Allianz Global Invest ors Europe GmbH
Bockenheimer Landstr. 42 – 44
60323 Frankfurt am Main
Global Capital Markets & Thematic Research
Hans-Jörg Naumer (hjn), Dennis Nacken (dn),
Stefan Scheurer (st)
Data origin – if not otherwise noted:
Thomson Financial Datastream.
Calendar date of data – if not otherwise noted:
August 2013
Moody’s. This downgrades France’s creditworthiness
by one level and the outlook remains negative.
When seen in the context of France’s refinancing
requirements in the next two years, it could result in
rising interest costs and make efforts to get a grip on
the budget deficit more difficult.
High budget and current-account deficits might
make it more expensive for France to refinance itsdebt on the capital market in the coming years –
particularly in view of the fact that France will have
to raise almost EUR 170 bn during the remainder
of 2013 and about EUR 380 bn in 2014 and 2015
(see chart 9). This total amount may be subject to
change, since possible revisions to budget deficits
could increase the country’s refinancing require-
ments even further.
Chart 9: France’s expected refinancing volume in 2014 and 2015
Source: Bloomberg, Allianz Global Investors Capital Markets & Thematic Research, July 2013.
60
50
40
30
10
20
0
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
2014 2015
bn EUR
Although the structural reforms that the French gov-
ernment has recently undertaken are a step in the
right direction, further reforms will probably be nec-
essary to guide the French economy out of recession