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Classification of recommendations
The content provided on the web site is intended solely as information, and is not intended as an offer to buy or sell securities. In addition, the recommendation categories listed below mean the following depending on the given asset class:
|Buy:||anticipated performance higher than the average performance of the equities under coverage|
|Hold:||anticipated performance in line with the average performance of the equities under coverage|
|Sell:||anticipated performance lower than the average performance of the equities under coverage|
Bonds in general
Unless otherwise noted, our bond recommendations always pertain to the performance of the bonds in local currency (excluding any exchange rate developments). The expected development of the exchange rate is the subject of a separate recommendation.
Recommendations made in EUR terms (the total performance in such cases consists of the bond performance in the local currency plus the anticipated exchange rate performance vis-à-vis the EUR) are always specifically designated as such.
We recommend buying the investment instrument, as the expected total performance (change in price plus accrued interest) for the recommendation horizon exceeds the expected return on the money market (1) of the respective currency in absolute terms by more than 100 basis points.(2)
We expect the investment instrument to move sideways (or view the likelihood of a price increase as approximately the same as that of a price decrease). As a result, the expected performance (change in price plus accrued interest) for the recommendation horizon is broadly comparable with the alternative rate of interest on the money market1 of the respective currency (expected performance: money market rate +/- max. 100 basis points). For investors who do not have the option of short selling, we recommend holding the existing position in the investment instrument (no additional purchases, but no sale of existing positions). In the case of a “Neutral” recommendation, investors who are able to engage in short selling of the investment instrument should not maintain a position in the investment instruments (close existing long or short positions).
We recommend selling the investment instruments, as the expected total performance (change in price plus accrued interest) for the recommendation horizon is in absolute terms more than 100 basis points lower than the alternative rate of interest on the money market1 of the respective currency.
(1) Alternative rate of interest on the money market for the corresponding currency and recommendation horizon, i.e. for a 3-month recommendation horizon on EUR bonds = 3M Euribor, 6-month recommendation = 6M Euribor, 12-month recommendation = 12M Euribor.
(2)Example: the expected total performance of bond X over a 6M horizon = 2.2% (non-annualised), whereas the 6M Euribor yields 1.1% (non-annualised) over the coming 6 months; hence, the expected return of 2.2% is more than 100 basis points higher than the alternative rate of interest 1.1% (in this case the return on the bond is 110 bp higher, or 1.1%), and we thus recommend a Buy.
Special recommendations for corporate bonds
We recommend buying the investment instrument, as in our opinion the asset swap spread (spread to the swap curve) of the instrument will decline. The extent of the anticipated decline, however, can be different for each bond or issuer. We only issue a Buy recommendation if we believe that the decline in the asset swap spread will be adequate in consideration of the maturity and risk.
Our recommendation on an investment instrument is “Neutral” (Hold) when we are of the opinion that the asset swap spread on the instrument will not change materially. We only issue a “Neutral” recommendation if we believe that there will be no increase or decrease in the asset swap spread adequate in consideration of the maturity and risk.
We recommend selling the investment instrument, when in our opinion the asset swap spread on the instrument will increase. The extent of the anticipated increase, however, can be different for each bond or issuer. We only issue a Sell recommendation if we believe that the increase in the asset swap spread will be significant in consideration of the maturity and risk.
Relative value recommendations
We recommend an overweight position in an investment instrument, as we believe that the spread of the instrument will decline compared to the spread of the overall market. (3)
We recommend equal-weighting of an investment instrument because in our opinion the spread of the instrument is not expected to change materially compared to the spread of the overall market.
We recommend an underweight position on an investment instrument as we believe that the spread of the instrument will increase compared to the spread of the overall market.
(3) The overall market is measured by the MSCI Euro Corporate Non Financial Index (Bloomberg: MCINSP), and for high yield instruments the Euro High Yield Constrained Index (Bloomberg: HEC0) is used.
Recommendation for new issues
Fundamentally speaking, the same recommendation categories are used for the primary market, with the exception that the spread recommendation cannot be “Sell”. Instead of a Sell recommendation, in such cases we issue a "Do not buy" recommendation.
Do not buy:
We recommend that investors do not buy the investment instrument, when in our opinion the asset swap spread of the instrument will increase. The extent of the anticipated increase, however, can be different for each bond or issuer. We only issue this recommendation if we believe that the increase in the asset swap spread will be significant in consideration of the maturity and risk.
Exchange rate recommendations
These recommendations are based exclusively on the expected exchange rate movements themselves, without consideration of any possible differences in interest rates.
We expect the exchange rate to increase in numerical terms, with due regard to the financial markets’ traditional method of quoting the currency pair in question.(4)
We expect that the exchange rate will move sideways in the fluctuation band normal for the currency in question.
We expect the exchange rate to decrease in numerical terms, with due regard to the financial markets’ traditional method of quoting the currency pair in question. (5)
(4) For example, EUR/JPY (sometimes also written as EURJPY) is usually quoted on the financial markets as 1 EUR = x JPY. Thus, a Buy recommendation for EUR/JPY implies that the EUR/JPY exchange rate is set to rise in numerical terms, e.g. from EUR/JPY 130 to EUR/JPY 140, i.e. in this case, the yen depreciates against the euro, as the EUR appreciates vis-à-vis the JPY.
(5) For example, EUR/CHF (sometimes also written as EURCHF) is usually quoted on the financial markets as 1 EUR = x CHF. Thus, a Sell recommendation for EUR/CHF implies that the EUR/CHF exchange rate is set to decrease in numerical terms, e.g. from EUR/CHF 1.60 to EUR/CHF 1.50, i.e. in this case, the Swiss franc appreciates against the euro, as the EUR depreciates vis-à-vis the CHF.
Special regulations for the United Kingdom of Great Britain and Northern Ireland (UK)
This publication has been either approved or issued by Raiffeisen Bank International AG (RBI) in order to promote its investment business. Raiffeisen Bank International AG, London Branch is authorised by the Austrian Financial Market Authority and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. This publication is not intended for investors who are Retail Customers within the meaning of the FCA rules and should therefore not be distributed to them. Neither the information nor the opinions expressed herein constitute or are to be construed as an offer or solicitation of an offer to buy (or sell) investments. RBI may have affected an Own Account Transaction within the meaning of FCA rules in any investment mentioned herein or related investments and or may have a position or holding in such investments as a result. RBI may have been, or might be, acting as a manager or co-manager of a public offering of any securities mentioned in this report or in any related security.
Specific Restrictions for the United States of America and Canada
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Specific Information for the United States of America and Canada
This research report is intended only for institutional investors and is not subject to all of the independence and disclosure standards that may be applicable to debt research prepared for retail investors. This report has been provided to you through RB International Markets (USA) LLC, a U.S. registered broker-dealer (‘RBIM’) but has been prepared by our non-U.S. affiliate, Raiffeisen Bank International AG (‘RBI’). Any order for the purchase or sale of securities covered by this report must be placed with RBIM. You may reach RBIM at 1133 Avenue of the Americas, 16th Floor, New York, NY 10036, 212-600-2588. This research has been prepared outside the United States by one or more analysts who may not have been subject to rules regarding the preparation of reports and the independence of research analysts comparable to those in effect in the United States. The analyst or analysts who prepared this research (i) are not registered or qualified as research analysts with the Financial Industry Regulatory Authority (FINRA) in the United States and (ii) may not be associated persons of RBIM and therefore may not be subject to FINRA regulations, including regulations related to the conduct or independence of research analysts.
The opinions, estimates and projections contained in this report are those of RBI only as of the date of this report and are subject to change without notice. The information contained in this report has been compiled by RBI from sources believed to be reliable but no representation or warranty, express or implied, is made by RBI or its affiliated companies or any other person as to the report’s accuracy, completeness or correctness. Those securities that are not registered in the United States may not be offered or sold, directly or indirectly, within the United States or to U.S. persons (within the meaning of Regulation S under the Securities Act of 1933 (the ‘Securities Act’) except pursuant to an exemption under the Securities Act. This report does not constitute an offer with respect to the purchase or sale of any security within the meaning of Section 5 of the Securities Act and neither this report nor anything contained herein shall form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. This report provides general information only. In Canada it may only be distributed to persons who are resident in Canada to whom trades of the securities described herein may be made exempt from the prospectus requirements of applicable provincial or territorial securities laws.
RESEARCH ANALYST COMPENSATION
Research analysts employed by RBI are not compensated for specific investment banking transactions. The author(s) of this report receive(s) compensation that is based on (among other factors) the overall profitability of RBI, which includes earnings from RBI’s investment banking and other businesses. RBI generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or futures of any companies that the analysts cover.
Each RBI analyst who is involved in the preparation of this research report certifies that:
a) the views expressed in the research report accurately reflect such research analyst´s personal views about the subject securities and issuers; and b) that no part of his or her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in the research report.
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