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Credit suisse mexico breakfast meeting march v22012
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Transcript of Credit suisse mexico breakfast meeting march v22012
BlackRock European Equity Team
2012 Outlook for European Equities
March 2012
FOR INSTITUTIONAL AND QUALIFIED INVESTORS IN MEXICO ONLY – NOT FOR PUBLIC DISTRIBUTION
FOR INSTITUTIONAL AND QUALIFIED INVESTORS IN MEXICO ONLY – NOT FOR PUBLIC DISTRIBUTION
• US was the outperformer amongst major markets
• Europe outperformed emerging markets
-MSCI Europe 2011 Total Return (€) -7.5%
-MSCI Emerging Markets 2011 Total Return (€) -15.4%
• UK and Switzerland outperformed in Europe
• Italy was the worst performer in Europe
-25.00% -20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00%
DOW JONES
S&P 500
NASDAQ
S&P/TSX
BRAZIL BOVESPA
MEXICO IPC
EURO STOXX 50
STOXX EUROPE 600
FTSE 100
FRANCE CAC 40
DAX 30
IBEX 35
FTSE MIB £
AEX INDEX
OMX STOCKHOLM 30
SWISS MARKET
HANG SENG
NIKKEI 225
100
110
120
130
140
150MSCI Europe - Tot Return Ind
2
Year 2011 in Review – Market Moves
Local Currency Index Performance 2011 (%)
A negative year except in USA
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Year 2011 in Review – Styles & Sector Moves
•Defensives best performing sectors
•Financials suffer from Euro crisis
•Cyclicals suffer from worries over global growth
•Growth outperforms Value
•Large caps outperformed small caps
MSCI Europe Sector Performance 2011 (%)
A year of defensives, energy and non-cyclical growth
MSCI Europe
Grow th
MSCI Europe Value
Stoxx 200 Large
Stoxx Mid 200
Stoxx Small 200
MSCI Europe
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0
Style/Size Index Performance 2011 (%)
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0%
10%
20%
30%
40%
50%
60%
70%
80%
4
Year 2011 in Review – Volatility and Risk
A year of elevated volatility dominated by the risk on/risk off trade
European equity market volatility 2011 Explanatory Power of the Largest Principal Component
60% of returns
explained by ‘Risk
on, Risk off’
Source: BlackRock RQA as at March 2012
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5
Europe remains under owned
Need investor confidence to unlock value
Asset Allocation to Europe
Source: Credit Suisse December 2011
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%
Ene-02 Jul-03 Ene-05 Jul-06 Ene-08 Jul-09 Ene-11
Global funds allocation to Cont Eur, Manager Simple (Germany, France, Spain, Italy, Greece) Average
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6
The two sides of Europe
Source: Google images
Which way out of the crisis?
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ECB is offering vital support
7
Source: Deutsche Bank February 2012, Barclays/Bloomberg March 2012
ECB Balance sheet (EUR, Billion)
Crisis has been averted for now
Growth of Balance sheets during the crisis
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Ireland - the cost of fiscal austerity
Source: Goodbody, as at January 2012
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
Q1 0
6
Q2 0
6
Q3 0
6
Q4 0
6
Q1 0
7
Q2 0
7
Q3 0
7
Q4 0
7
Q1 0
8
Q2 0
8
Q3 0
8
Q4 0
8
Q1 0
9
Q2 0
9
Q3 0
9
Q4 0
9
Q1 1
0
Q2 1
0
Q3 1
0
Q4 1
0
Q1 1
1
Q2 1
1
Q3 1
1
GNP
Irish domestic demand continually declining since recession Irish GNP growth turned negative in Q3 2011
Nominal Irish GNP has fallen 25% since the end of 2007
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
Q1 0
6
Q2 0
6
Q3 0
6
Q4 0
6
Q1 0
7
Q2 0
7
Q3 0
7
Q4 0
7
Q1 0
8
Q2 0
8
Q3 0
8
Q4 0
8
Q1 0
9
Q2 0
9
Q3 0
9
Q4 0
9
Q1 1
0
Q2 1
0
Q3 1
0
Q4 1
0
Q1 1
1
Q2 1
1
Q3 1
1
Domestic demand
9
Global leading indicators - tentative signs of recovery?
Source: Barclays as at February 2012, GS as at March 2012
Global Leading indicators showing tentative signs of recovery
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10
Positive signs emerging for Europe’s global leading franchises
Purchasing Manager Indices (PMI’s) inflecting upwards
Source: Barclays as at January 2012, GS as at December 2011
Weaker Euro benefits Europe’s international earners
MSCI Europe Geographical Revenue Exposure 2012
30
35
40
45
50
55
60
65
Ene-08Jul-0
8
Ene-09Jul-0
9
Ene-10Jul-1
0
Ene-11Jul-1
1
Ene-12
US Eurozone China
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The corporate profit cycle
Source: Morgan Stanley March 2012 Credit Suisse, as at January 2012
Potentially positive, but this is not March 2009
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
US Europe
Pan-Europe and US net profit margins (%) Earnings revisions ratio becoming less negative
12
European valuation
Valuations cheap relative to history and USA
Pan-Europe Price to Earnings ratio
Source: Citigroup as at December 2011,
5
10
15
20
25
30
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Pan Europe PE Average +1Stdev -1Stdev
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13
Equity Yield vs. bond yield
Europe offers most attractive dividend yields
Traditional investments yields Developed World Dividend Yields
Source: Yield data as at 31 December 2011source Bloomberg, Societe Generale. Cash rate is UK 3M Libor. Citigroup as at December 2011
%
0
1
2
3
4
5
6
7
8
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Japan US Europe ex UK UK
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Year 2012 Outlook – Key themes
Stock selection essential to navigating turbulent environment
What are we emphasising in portfolios?
Quality Companies
- Strong balance sheet
- Proven management
- Reliable business model
Free Cash Flows
- Dividends
- Share buyback
- Capital returns
International Earnings
- Undervalued cyclical companies
- US and Emerging market exposure
Non-cyclical growth
What are we avoiding in portfolios?
Highly leveraged businesses
Companies exhibiting signs of financial distress
Large domestic peripheral earnings exposure
Overvalued stocks
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Appendix
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FOR INSTITUTIONAL AND QUALIFIED INVESTORS IN MEXICO ONLY – NOT FOR PUBLIC DISTRIBUTION
BlackRock European Equity Team
Extensive coverage across European markets
• Team AUM U$15.6bn as at 29 February 2011
• 13 sector analysts
• Average 19 years experience of senior PMs
Bottom-up fundamental investors with macro
awareness
• All Fund Managers & analysts conduct research
• Team produces proprietary research, not reliant on
broker recommendations
• Best ideas are delivered through team debate &
collaboration
• Leverage BlackRock’s Global resources
Portfolio construction that builds portfolios
around high conviction ideas
Highly Experienced, Rigorous Approach, Global Reach
Nigel Bolton
Head of European Equity Team
Real Estate
Stefan Gries
Energy
Brian Hall
Capital Goods/
Construction
Amy Dey
Banks
Andreas Zoellinger
Insurance
Michael Constantis
IT – Telecoms,
Media
Alice Gaskell
Other Financials
Vincent Devlin
Consumer /
Commercial Services
Anne Osborne
Healthcare
Utilities
Zehrid Osmani
Cons Staples &
Luxury Goods
Alister Hibbert
Banks
Simon Hunter
Autos, Tobacco, Retailing,
Transport
Hampus Lundh
Materials &
Mining
Kathleen Dickson
Product Specialist Dugal Bain
Product Specialist
Joe Williams
Product Specialist
Laurence Gallo
Product Specialist
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BlackRock European Equity Team: Investment process overview
17
Structured, disciplined research framework
Idea
Generation In-Depth Company Analysis Portfolio
Construction
Sophisticated risk
systems to control
risks & maximise
rewards
Challenge
Assumptions
Financial
Modelling
Fundamental
Analysis
Company
Meetings
Team Sector Analysts
Screening
External Research
Macro/Thematic
Recommendation
& Rating Research Pipeline
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16 June 2011 FOR INSTITUTIONAL AND QUALIFIED INVESTORS IN MEXICO ONLY – NOT FOR PUBLIC DISTRIBUTION 18
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recipient of this document nor an invitation to respond to it by making an offer to enter into an investment agreement.
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