Deutsche Bank Research The House Vie · Deutsche Bank Research The House View – 11 April 2014, [email protected], +44 207 545 8465 2 Special report – To QE or not to QE

Research Deutsche Bank

11 April 2014

DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 054/04/2013.

Deutsche Bank Research The House View

Deutsche Bank Research Research The House View – 11 April 2014, [email protected], +44 207 545 8465

2 Special report – To QE or not to QE

1 The House View

mailto:[email protected]


The House View – 11 April 2014

The strength of the global economy has been tested in recent months. The persistence of mixed macro data in

the US and China, in part due to one-off factors, continues to weigh on the global outlook. While we see the

weakness as temporary and continue to expect growth to accelerate in the coming quarters, we have marked

down our growth forecasts for the year in response to the weak Q1

Europe’s modest recovery continues and we see some encouraging signs. But the risk of a prolonged period of

low inflation, or even outright deflation, looms. In our special report this month, we focus on the ECB and its

likely policy response. We argue that the ECB will eventually engage in further easing, starting with the likely

purchase of private assets (‘private QE’) in H2

We expect market uncertainty to remain in the near term until we see greater visibility on the path of the

recovery, central bank policies become clearer, and a number of elections in important EM countries (including

India, Indonesia and South Africa) resolve political questions

We do not believe Q1 earnings in the US will be a major positive market catalyst as we see only modest EPS

growth and an 8th consecutive quarter of anaemic sales growth. Nevertheless, our long-term market views

hold. Equities remain attractive, bonds look expensive, and the US recovery will drive the Fed to signal faster

and earlier rate hikes than suggested by its current guidance or market pricing

David Folkerts-Landau, Group Chief Economist

The views in this publication are informed by Deutsche Bank’s Global Strategy Group, which advises management and

clients on broad market risks and global economic and financial developments. The views and forecasts of the group, which

consists of senior research staff, may occasionally differ from those disseminated by their research colleagues

Editors: Raj Hindocha, Marcos

Arana, Wolf von Rotberg, Sahil

Mahtani, Erin Urquhart

3



We remain bullish on global growth and see 2014-15 as years of acceleration, but have marked down 2014 forecasts on weak Q1

Fed: gradual taper and end of QE by end-2014; do not

expect deviation from taper path despite mixed data.

Expect policy shift in H2 with signal of faster rate hikes

ECB: expect minor easing in June, when new, lower

inflation staff forecasts are published. Private assets

QE likely to follow, with sov. bonds QE only a last resort

BoJ: further easing in H2 only if warranted by data

BoE: on hold, no rate hikes even if u/e continues to fall

PBoC: on hold. No tightening, given inflation is low

EM: mostly on hold, with tightening bias to respond to

FX pressure if needed

Disorderly market sell-off : repricing of monetary policy

expectations stokes market volatility

China crisis: financial crisis / hard landing as China

attempts to rebalance its economy

Deflation / low inflation risk in Europe: slowdown in US

or Eurozone growth, China RMB devaluation results in

imported disinflation

Geopolitical risk: West / Russia escalation, e.g., tit-for-

tat economic sanctions

Bullish view on global growth of 3.4% in 2014, 3.9% in

2015 – with growth accelerating from 2.8% in 2013

US growth of 3.1% in 2014, 3.8% in 2015 – at upper

end of consensus. 2014 marked down on weak Q1;

expect some payback in Q2. Recovery remains intact

Eurozone growth of 1.1% in 2014, 1.5% in 2015.

Recovery on track, with (subdued) growth supported by

domestic demand, export traction, lower fiscal drag

EM growth marked down to 4.7% in 2014, 5.2% in

2015 as China revised down on slow Q1, lower

investment expectations – but still above consensus

Slow start to the year in US, China – but softness is temporary. Expect growth to pick-up in coming quarters

Market uncertainty in near-term until Q1 data weakness passes, CB policies become clearer, EM elections pass

Monetary policy to remain broadly supportive. Major CBs to add nearly USD 1tn extra liquidity in 2014. More policy differentiation with Fed ending QE as first step towards rate hikes, while ECB prepares to ease further

No crisis in EM despite tensions in Ukraine and other well-known weak countries. No material spillover, markets to differentiate between ‘good EM’ & ‘bad EM’

Views on key themes

Economic outlook Central bank watch

Key risks to our view

4 Note: H / M / L indicates estimated probability of risk (High, Medium, Low).

M

M

M

M



Downside risks

Disorderly market sell-off : stronger growth prompts pricing of

earlier / faster rate hikes and stokes market volatility

China crisis: financial crisis / hard landing as China attempts to

rebalance its economy

Deflation / low inflation risk in Europe: slowdown in US or

Eurozone growth, China RMB devaluation results in imported

deflation

Geopolitical risk: West / Russia escalation, e.g., tit-for-tat economic

sanctions

Crisis in EM: increase in capital outflows amid continued turmoil or

China slowdown hurts EM growth

Crisis returns to Europe: slowing reform momentum undermines

potential growth, AQR impedes credit provision to the real

economy; rise of fringe parties in the May European elections

Upside risks

Global growth upside surprise: lower fiscal drag in the US and

Europe, incident-free elections across EM, effective policy stimulus

in Japan support faster-than-expected global growth

Lower oil price boosts growth: geopolitical calm and stronger

supply see oil prices stabilise ~10-15% lower than current prices

Tail risks

Geopolitical tensions escalate and push up oil prices and /or slow

economic activity, e.g., escalation of Syria conflict

Tapering related volatility remains a major risk Over the past month deflation risk in Europe has picked up

Se

ve

re

Sig

nific

an

t M

od

era

te

Lo

ca

lise

d

Low Medium High Tail Risk

Unpredictable

The House View - Risk Matrix

Probability

Imp

act o

n o

ur

ba

se

ca

se

1

2

3

4

5

9

6

1

3

5

6

8

7

9

7

2

* Moves represent change in risk outlook over previous month

5

4

3

8



2014 so far has seen broad dispersion within and between asset classes. Gold, peripheral equities and bonds have outperformed

11 8 8

3 2 1 1 1

0 -2 -2

-3 -4

-14

3 3 2

6 6 5

3 3 2

7 7 5

4 3 1 1 1 0

-1

-8

-35

9

4 3

-3

-10

-20

-15

-10

-5

0

5

10

15

20

25

Italy

Mila

n

Gre

ece A

thex

India

Nifty

Spain

IB

EX

35

MS

CI E

M

Fre

nch C

AC

40

Shanghai C

om

posite

Euro

pe S

toxx 6

00

US

S&

P 5

00

Bra

zil

Bovespa

UK

FT

SE

100

Germ

an D

AX

30

Nasdaq B

iote

ch

Japan N

ikkei

US

IG

US

HY

EU

IG

Spain

Italy

EM

UK

Ge

rma

ny

US

BR

L

IDR

AU

D

JP

Y

INR

TR

Y

GB

P

EU

R

ZA

R

Dolla

r In

de

x

RU

B

UA

H

Gold

Com

modity Index

Silv

er

Bre

nt O

il

Copper

YTD 2014 YTD Peak

Total returns 2014 YTD

Equities Commodities FX Sovereign

debt Corporate

Credit %

-35

6

2013 returns %:

Note: Total return accounts for both income (interest or dividends) and capital appreciation.

Source: Bloomberg Finance LP, Deutsche Bank Research. Prices as of 10 Apr 2014, COB

20 30 8 28 -2 22 -4 22 32 -15 19 25 66 59 -1 7 2 11 7 -6 -4 -2 -3 -13 -21 -14 -18 -11 -17 2 19 4 0 -7 -2 -28 -1 -36 0 -7

Japan is the worst performing major equity

market this year after being the best last year

Biotech stocks have fallen nearly

25% since peaking in late

February

Gold has performed this year

after falling nearly 30% last year



3.4% 3.1% 2.9%

1.5% 1.1%

0.4%

7.8%

5.5%

1.7%

0.6%

-4%

-2%

0%

2%

4%

6%

8%

10%

World US UK Germany Euro- Zone

Japan China India Brazil Russia

2013 Apr-14

Global growth in 2014 will be stronger, despite minor forecast revisions on the back of softer Q1 data

Source: Deutsche Bank Research

Global growth is accelerating in 2014 driven by a pick-up in US growth and the recovery in Europe

In the US, after a temporary weakness partly due to bad weather, growth should accelerate to 3%+ for 2014

Europe’s recovery is on track, led by German demand, US exports and a return to growth in the periphery

Growth in Japan will be pulled back by this month’s consumption tax hike but rebound in coming quarters

EM will accelerate in 2014, but less than we had earlier forecasted

− China forecasts revised down after a soft Q1 – but we remain at the upper end of consensus

− Russia forecast cut sharply in response to crisis in Ukraine

7

Global growth will rise in 2014 as developed markets accelerate; a weak Q1 led us to revise our forecasts down slightly

2014F as of:

Dec-13

World Outlook: waiting for US-led expansion 28th March


http://pull.db-gmresearch.com/p/8791-4BC9/38704136/DB_WorldOutlook_2014-03-28_0900b8c087fe28f2.pdf




Europe

ECB in wait-and-see mode until

June. Path of inflation data will be

key to shaping policy response

European Parliament elections in

May to add to uncertainty

Expect uncertainty in the near-term until Q1 data distortions play out, central bank policies become clearer and EM elections pass

8

Russia / Ukraine

Military escalation unlikely, but

situation remains unpredictable

Ukrainian elections on 25th May

Uncertainty around impact of

sanctions, IMF program

US

No change in Fed’s dovish

stance as Q1 weather-related

distortions weigh on data for a

few months making it difficult to

assess strength of economy

Q1 earnings will not be a major

catalyst. See modest EPS

growth on anaemic sales growth

China

Uncertainty over macro data

and financial system to persist –

hard landing concerns unlikely

to dissipate

Japan

Full impact of consumption

tax hike yet unclear

BoJ remains in wait-and-

see mode, will only ease if

data deteriorate

Emerging market elections

India general elections over next 5 weeks to 12 May. Recent reforms likely to continue regardless of coalition e.g., banking reforms

Indonesia presidential election on 9 July. Recent legislative elections less conclusive than expected, coalition likely to be more fragile

Turkey presidential elections on 10 August; political environment remains toxic

South Africa general elections (7 May), Egypt presidential election (26-27 May); Brazil presidential elections (October )



GDP is on track to be close to its lowest in 20 years

− Below 8% in 2014, vs. an average of ~10% over

the previous two decades

We have marked down our 2014 forecast from

8.6% to 7.8%, still at the upper end of consensus

− A slower than expected start to the year

− Expectation that the government will gradually

pull back investment as exports support growth

We disagree with the view of a structural slowdown,

let alone a hard landing

− Slowdown is mostly cyclical

− Expect growth to trough in Q1 2014

2014 is a year of economic rebalancing as China

continues to transition to a consumer economy

− Financial and structural reforms will continue

− Exports to provide much needed support to

growth

9

While growth in China has slowed, the economy continues to expand steadily and fears of a hard landing appear exaggerated

0

5

10

15

1992 1995 1998 2001 2004 2007 2010 2013

Actual Forecast

Source: Haver Analytics, Deutsche Bank Research

China’s growth has slowed relative to 2010-11, with many observers

seeing a structural slowdown – but in our view this is only cyclical

% yoy

0

200

400

600

800

1000

1200

1400

1990 1993 1996 1999 2002 2005 2008 2011 2014

Despite the slowdown, China continues to grow steadily in real

yuan-value terms from a higher base

CNY bn, yoy

change


Growth in CNY terms

remains substantial due to

the larger size of the

economy

China’s GDP growth

rate (in %) has almost

halved since 2007



10

Europe’s cyclical recovery remains on track, although the pace of growth will be subdued

The recovery in the Eurozone remains on track

− Region overall emerged from recession in 2013

− Positive growth for all major economies in Q4

− PMIs in expansion territory, pointing to an

acceleration – as do other readings (e.g., retail

sales)

− Unemployment (e.g. Spain, Greece) is finally

falling

Recent data point to Q1 growth of 0.4% qoq,

slightly above consensus expectations

Overall for the year, we continue to see growth of

1.1% for 2014

− A clear improvement over 2013’s -0.4%...

− …but subdued compared to pre-crisis averages

-2.5

-1.5

-0.5

0.5

1.5

2010 2011 2012 2013 2014

Retail sales, 3m

Household consumption (GDP component)


Eurozone consumer spending is picking up, and retail sales point to

a further acceleration in the coming months

%yoy

42

44

46

48

50

52

54

56

2012 2013 2014

Eurozone Germany France Italy


Eurozone PMIs are rising, with momentum generally positive across

the region

3mma



Data in recent months have been mixed – mostly

due to weather distortions

− Disappointing ISM, inflation, retail sales

− But other data are improving – e.g., payrolls

We expect these distortions to persist for another

few months – making it difficult to put behind the

uncertainty over the strength of the US economy

− Likely that near-term data may still be distorted

We maintain our view that growth will accelerate

through 2014

− Driven by less fiscal tightening and a continued

recovery in corporate and household spending

− We expect growth will pick up in the second half

of the year

11

Weakness in the US was mostly weather-related and data has started to recover; we expect an acceleration throughout 2014

0

50

100

150

200

250

300

350

400

2012 2013 2014

Payrolls 6m avg


Employment data has recovered strongly after the winter slowdown

Payrolls are leaving behind the winter

weakness; 6m average stands in line with

12m average, just under 200k

1.1

2.5

4.1

2.6

1.9 2.0

4.2

3.5 3.7 3.1

3.8

0

1

2

3

4

5

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2015

Actual Forecast % qoq, saar %yoy

2013 2014

US GDP set to accelerate throughout 2014 and 2015




Housing will play an important role in the US

economy this year

− Direct role via residential investment which will

add 0.4% to GDP

− Indirect role through house price rises that boost

consumer spending - will add 0.45% to GDP

− Rising house prices also help prop up bank

balance sheets, supporting credit origination

Housing data has not been immune to weakness

− Weather-related (e.g., construction, home sales)

− Rise in US rates has affected parts of the market

But house prices continue to rise

− Expect 17.5% over the next 3 years – less than

the 11% gain in 2013, but still significant

− By 2017, nominal prices should rise to previous

peak, restoring equity lost in the financial crisis

Housing share of GDP is well below its long-term

average, suggesting investment should continue

12

The US housing recovery continues and is expected to add just under a percentage point to GDP in 2014

-20

-15

-10

-5

0

5

10

15

20

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Actual Projected

US house price annual returns: further appreciation in coming years to support consumer spending

Source: CoreLogic, Deutsche Bank Research

%

16

18

20

22

24

1960 1970 1980 1990 2000 2010

Recession Total housing expenditure (% of GDP) LT average

Residential Investment: housing’s share of GDP remains well below

the long-term average, indicating further upside potential

Note: (*) Includes residential construction as well as all housing-related spending

Source: BEA, Haver Analytics, Deutsche Bank Research

US housing: the rebound continues - 2nd April


https://ger.gm.cib.intranet.db.com/ger/document/pdf/0900b8c08806d779.pdf





Monetary policy remains ultra accommodative in

the US and Europe

− US QE ongoing, rates at record lows

However, the US and Eurozone economies are at

different stages of their recovery

− US economy accelerating, unemployment

approaching natural rate, inflation rising

− Eurozone GDP still below pre-crisis peak,

unemployment close to peak and expected to

edge down slowly, inflation firmly below target

Monetary policy divergence is justified

− Fed progressing toward exit, rate hikes looming

− ECB to ease further in coming few months

13

Monetary policy remains loose, but policy divergence will pick-up up in 2014 as the Fed prepares to exit and the ECB eases more

5

7

9

11

13

2010 2011 2012 2013 2014 2015

US

Eurozone

Different stages of recovery in US and Eurozone

Unemployment: US approaching equilibrium, Europe close to peak

US unemployment to reach

natural rate by end-2016

Eurozone

US

Current gap

5.2pp

% Eurozone unemployment close to peak


0

1

2

3

2010 2011 2012 2013 2014 2015

US

Eurozone

Core inflation: inflation accelerating in US and Eurozone, but

remaining well-below target in Eurozone

% yoy

Target*

US inflation to rise

above target in 2014

Eurozone inflation to gradually

rise, but remain firmly below target

Note (*): Inflation target = 2% for Fed; close to but below 2% for ECB. Dashed line show DB forecasts


“We are resolute in our determination to maintain a high degree

of monetary accommodation and to act swiftly if required.

Hence, we do not exclude further monetary policy easing.”

Mario Draghi, ECB President, 3 April, 2014



14

US rates are already adjusting to the prospect of a Fed exit: 10Y sold-off in 2013, 5Y sector adjusting now, front-end to follow

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Source: Bloomberg Finance LP, Deutsche Bank Research

US Treasury yield curve: US rates repricing is well underway, as a Fed exit comes closer

%

Current

May-2013

End-2014

10Y 5Y 2Y 1Y

Phase 3:

Pending, to come

in H2

Phase 2:

In progress

Phase 1:

Mostly Complete

Phase Status Description Comments

1. Long-end Mostly

complete

Pricing out of deflation / low

inflation risk

10Y sold-off by >100bp since May-2013

Expect further ~50bp sell-off by end-2014

2. 5Y sector In progress Pricing of stronger growth, bring

forward expectation of rate hikes

Started and currently in progress

Expect further ~75bp sell-off

3. Front-end Pending, to

come in H2

Pricing of Fed rate hikes Next leg of repricing

−Little / no move yet, as Fed forward guidance keeps

front-end rates anchored

−Expect 100bp+ sell-off as recovery strengthens,

inflation picks-up, Fed signals earlier / faster hikes

+100bps

+90bps

+15bps



15

We expect the Fed to signal a faster and earlier rate hiking cycle than current Fed guidance or market pricing

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Dec-13 Dec-14 Dec-15 Dec-16

Market pricing

Fed projections (median)

Source: FOMC Mar-2014 projections, Bloomberg Finance LP, Deutsche Bank Research

Fed Funds rate projections: current Fed guidance or market pricing

imply too slow a hiking cycle

Unemployment

reaches equilibrium

(estimate range)

%

Neutral Fed Funds

rate 3.5-4.0%

Fed projections /

market pricing 100-

150bp too low

First hike around

mid-2015

Fed would normally hike rates to bring monetary

policy to neutral (Fed Funds at 3.5%-4%) when

unemployment reaches equilibrium (5.2%-5.6%)

− Fed projections see unemployment down to

these levels by end-2016 at the latest

Given this has been a weak recovery, the Fed can

be expected to allow lower rates this time around

But current projections (Fed and market) imply a

much slower hiking cycle

− Dec-2016 at 1.8% (market) / 2.4% (Fed) – at

least 100-150bp too low

We expect the Fed to signal faster rate hikes as

data concerns dissipate in the coming months and

inflation picks up in H2



Q1 performance has been negatively impacted by

− Cold weather in the US

− Softening data in China

− Anemic recovery in Europe

− Difficult conditions for Financials

Analysts’ Q1 earnings estimates were cut sharply

during the quarter

− EPS cut by 5.3%, vs. 3-4% in last 3 years for Q1

− In-quarter revisions have been as severe as Q4

2012 (Sandy) and Q4 2011 (Eurozone

recession, US sovereign rating downgrade)

We are forecasting EPS growth of just 4.6% yoy,

sales growth near 4% – making Q1 the 8th

consecutive quarter of anaemic sales growth

− We expect two-thirds of firms to beat EPS

estimates by an average of 3-5%

16

US Q1 earnings season expected to be soft, given the impact from cold weather earlier this year and weaker data out of China

26.8 27.2 27.2

28.7 28.0

29.8 30.3 31.0

20

22

24

26

28

30

32

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Actual DB forecast S&P EPS ($/share)

2013 2014

S&P 500 EPS: we expect weak growth yoy in Q1


35

45

55

65

75

85

2001 2003 2005 2007 2009 2011 2013

EPS Revenue EPS LTA Rev. LTA

We expect two-thirds of firms to beat EPS estimates, in line with the

long-term average

65%

60%


%

Q1 EPS Preview - 4th April


https://ger.gm.cib.intranet.db.com/ger/document/pdf/0900b8c0881c6278.pdf





2 Special report – To QE or not to QE

1 The House View



Special report – To QE or not to QE

While the economic recovery remains on track, several risks continue to weigh on the Eurozone. A strong euro, the

prospect of an extended period of low inflation, and impaired credit extension pose major threats to the economy. As a

result, the region is one external shock (e.g., sharp slowdown in China or the US or escalation of tensions with Russia)

away from a Japan-style era of low growth and deflation

Despite abundant liquidity and low funding rates, bank lending, the principal source of funding for the all-important

SME sector, remains at depressed levels (especially in the periphery) amid bank capital constraints and heightened

regulatory uncertainty

Over recent weeks the ECB has opened the door to additional unconventional easing measures. A range of options

exist to target short-term inflationary dynamics and credit extension, including QE. In June, along with its quarterly

forecast revisions, we expect the ECB to announce a minor easing step (e.g., extension of full allotment) as well as

signal that ‘private QE’ i.e., purchases of corporate loans or related assets, will begin later in the year

In September, we expect that the ECB will commit to ‘private QE’, targeted at SME credit. These purchases could

focus solely on securitised assets. However, because of the limited scale of this market and regulatory constraints to

its future development, the ECB may also target corporate loans held directly by banks. Irrespective of the choice of

asset, it is crucial that the ECB signals it will remain in the market for some time, in order to incentivise banks to

underwrite new loans thus underpinning credit origination and growth

The ECB could also engage in full scale ‘public QE’ (i.e., purchases of sovereign debt as in the US). However, this

would be far less effective in Europe than in the US while the political hurdles remain high. We would only expect

‘public QE’ to materialise if the inflation and growth outlook worsen considerably

18

This special report is based on recent publications from our European Economics and Fixed Income Research teams QE on the ECB's roadmap - 4th April


https://gm.db.com/servlet/ShowContent?templateName=none&indexPage=1&ResourceType=I&ServerLocation=1&ResourceId=1733116





Low inflation, a strong euro and weak credit origination pose major threats to the European recovery

Eurozone inflation is low

− 4½-year low of 0.5% in March

− Spain negative, Germany at 1%

− Excess capacity maintains

downward pressure on prices

Forecasts see inflation gradually

rising but still firmly below 2% target

Long-term inflation expectations are

marginally lower than historically –

but a reduction would raise the risk

of a self-fulfilling deflationary spiral

Euro has strengthened by ~15% vs.

the USD since the 2012 lows

− Imports deflation via lower

import costs – including energy

prices

− Raises export costs, limiting

competitiveness and

constraining growth

External factors account for 70% of

the recent drop in inflation

Credit extension to corporates

remains very weak

− Bank lending to corporates is

still falling in 15 out of 18

Eurozone countries

Significant for European firms which

depend on banks for >70% of their

credit (vs. <30% in US)

Particularly an issue for SMEs

− Account for 67% of jobs and

~52% of GDP in Europe

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2011 2012 2013 2014

Eurozone

Target

Eurozone inflation continues to weaken and

is well below the ECB target

% yoy

Note: Inflation target = close to but below 2% for ECB


1.15

1.20

1.25

1.30

1.35

1.40

Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Bands are “pain thresholds” above which euro starts denting growth


A stronger Euro threatens the economic

recovery and contributes to lowering inflation

France

Italy

Eurozone

-20 -15 -10 -5 0 5

10 15 20 25 30 35

2004 2006 2008 2010 2012 2014

Eurozone

Spain

Italy

Loans to corporates in the Eurozone remain

at depressed levels

% yoy

Note: Spanish credit growth distorted by transfers to SAREB (Spain’s bad bank)

Source: ECB, Deutsche Bank Research

Low inflation 1 Strong euro 2 Weak credit origination 3

19



Since the early 1990s, Japan experienced two lost

decades — years of low inflation and low growth

− Japanese economy not yet back at 1997 peak in

nominal yen terms amid weak growth

− Absence of growth will have pushed gross debt

to 243% of GDP in 2014, highest in the OECD

− Weak private sector borrowing partly a result of

undercapitalised banks

Several metrics show the Eurozone following a path

similar to Japan

− Weak inflation, borrowing and growth

Deflation or persistently low inflation are a drag to

the economy and can lead to stagnation

− Consumers postpone consumption

− Firms become reluctant to borrow and invest

− Can trigger deleveraging due to slower debt

erosion

20

A major concern for the Eurozone is that it will enter a Japan-style era of low growth and deflation

200

250

300

350

400

450

500

550

1980 1984 1988 1992 1996 2000 2004 2008 2012 Source: Cabinet Office, Deutsche Bank Research

Nominal GDP in Japan remains at ~20 year lows

JPY tn, quarterly, saar

-2

-1

0

1

2

3

4

5

-20

-16

-12

-8

-4

0

4

8

12

16

20

24

CPI in Eurozone is following a down-

ward path like post-bubble Japan

% CPI yoy

Number of quarters from trough: Japan Q1-90, Eurozone Q4-07


0

5

10

15

20

25

30

-20

-16

-12

-8

-4

0

4

8

12

16

20

24

Japan

Eurozone

Private sector borrowing in Europe is

also following the path of Japan

Rolling 4Q

private sector

borrowing as a

% of GDP



21

Europe remains one exogenous shock away from a potential growth slowdown and deflationary spiral

While Europe’s recovery remains on track…

− PMIs are comfortably in expansion territory, and

the momentum is positive

− All major countries expected to post positive

growth in 2014

…imported deflation or a growth slowdown in

another major region remain key risks

− China weakness and potential FX devaluation:

after years of gradual appreciation, the Chinese

Yuan has seen a ‘sharp’ depreciation in 2014

− Geopolitical tensions with Russia: an escalation

of tensions could weaken growth

− US growth slowdown: would impact European

exports, delay a Fed exit and weaken the USD

(vs. the Euro)

− Aggressive easing by the BoJ: would place

upward pressure on the Euro (vs. the JPY)

6.0

6.1

6.1

6.2

6.2

6.3

6.3

2013 2014 Source: Global Insight, Deutsche Bank Research

Recent widening of the CNY trading band has been accompanied by

a reversal in the gradual appreciation trend

USD/CNY

One year’s worth

of appreciation

erased in 2 months

16.6

8.5 8.3

3.1

0

4

8

12

16

20

US China Russia+Ukraine Japan

Eurozone trade is very much exposed to the US, China, Russia and

japan

% of total exports (excluding intra-EU trade)

Source: European Commission, Deutsche Bank Research



0

100

200

300

400

500

2007 2008 2009 2010 2011 2012 2013 2014

Fed ECB BoJ

Unlike the Fed / BoJ, which continue to expand their balance sheets

via unconventional support measures, the ECB’s BS is shrinking

100 = Jan 2007


ECB balance sheet shrinking

as banks repay LTROs

Potential ECB measures

Extend full

allotment

regime

Provide unlimited ECB funding at a cheap

fixed rate (short-term or long-term)

Current regime ends in mid-2015

Cut deposit

rates to

negative

Current deposit rate on banks’ excess cash

held at the ECB is 0%

A negative rate equates to a tax on banks’

deposits at the ECB, providing an incentive for

banks to instead lend out these funds

End SMP*

sterilisation

Stop draining liquidity related to 2010-12 SMP

peripheral bond purchases from the market

ECB removes ~EUR 170bn liquidity from

banking system weekly on a rolling basis

Provide

targeted

LTROs**

Provide long-term funding to banks, at a

cheap fixed rate, conditional on making new

loans to corporates

Engage in

‘Private QE’

ECB directly purchases private assets from

market / banks e.g., securitised debt i.e., ABS

(easy), bank loans (hard)

Engage in

‘Public QE’

Outright large-scale sovereign debt purchases

to boost activity via lower rates for

governments, corporates and households

Similar to QE programmes in US, UK, Japan

ECB Governing Council commentary suggests a greater

willingness to deploy unconventional tools

Bundesbank’s Weidmann giving up his opposition to the

principle of QE is a significant development

Most commentary suggests the primary focus will be on

private asset purchases (SME loans, securitised debt)

22

In response to the threat of low inflation and low growth, over recent weeks the ECB has opened the door to additional easing

ECB is “unanimous in its

commitment …to cope effectively

with risks of a too prolonged period

of low inflation”

Mario Draghi, ECB President, Apr 3

2014

“This does not mean that a QE

programme is generally out of the

question…”

Jens Weidmann, Bundesbank

President, Mar 25 2014

* Securities Market Programme: ECB purchases of sovereign bonds. SMP sterilisation was

introduced in 2010 to address political concerns that bond purchases would be inflationary

** Long Term Refinancing Operation – unlimited liquidity provision for banks

QE2

QQE



23

The impact of these policy options on inflation, FX and credit varies, and the constraints and likelihood differ

Tool Overall impact Likelihood and constraints Supports

inflation

Weakens

euro

Raises

lending

Extend full

allotment

Low; limited impact until 2015

Strengthens forward guidance and helps ECB

differentiate from the Fed

Likely in June; easy to implement

Expected by the market -

Negative

deposit rates

Low; impact mostly on currency

Strong FX signal as euro assets less attractive

Impact on lending unclear: banks may engage in

greater lending (esp. cross border) but could also

seek to pass losses on to domestic borrowers

Possible; easy to implement but opinion is divided

Opposed by core banks which have excess

liquidity -

End SMP

sterilisation

Low; modest impact, limited to the short term

Impact limited and not significant enough to resolve

underlying issues

Impacts core banks more; will most likely recycle

liquidity into low-risk assets than lend to periphery

Likely, especially if money market rates spike (i.e.,

threat to bank liquidity)

Has Bundesbank support (a change from their

original position in 2010)

Few technical constraints

- -

Targeted

LTROs

Low; impact limited as bank funding stress has eased

Bank demand for conditional funding will likely be

limited

Unlikely, given limited expected impact

Would only see if bank funding becomes a

constraint again ?*

‘Private QE’

High impact (if implemented in scale)

Incentivises banks to make loans to corporates as

these can then be sold on to the ECB

Enhances credit provision to the real economy via

lower borrowing costs and more liquid markets

Likely in September despite challenges

Existing pool of securitised assets (ABS) limited

while current regulation constrains new issuance

Potential loans for purchase difficult to assess –

although ECB Asset Quality Review (AQR) could

facilitate process

?*

‘Public QE’

High impact

Will have positive inflationary effect

Lower yields limit appeal of sovereign carry trade

and incentivise banks to lend

Only likely as a last resort if conditions worsen;

easy to implement

Political barriers high: savers lose out in the core

Rises moral hazard in the periphery as lower

borrowing costs reduce pressure for reforms

Note: * Impact on euro could be two-way. Stronger support for banks or private assets could

reduce the risk premium on European assets and support foreign purchases (euro positive)

Low

impact

options,

market

expecting

some mix

High

impact

options,

market not

pricing in

Impact

depends

on terms to

banks



While large scale ‘public QE’ would be the most powerful tool, it will be far less effective than in the US and obstacles are high

24

Purchases of US

Treasuries

How US QE worked

Purchases of MBS

Lower long-end

treasury rates,

flatter yield curve

Sovereign Lower funding costs Higher fiscal

spending

Banks Lower funding costs Higher liquidity Supports lending

Corporates Lower funding costs Higher business

spending

Portfolio shifts:

investors pushed

to riskier, higher

yielding assets

Lower mortgage

rates, supports

new mortgages

Higher disposable

income (lower

borrowing costs)

Higher house

prices

Consumer Higher household

wealth Higher spending

If applied in Europe

Lower sovereign yields,

especially in periphery

Flatter yield curve Cheaper borrowing

costs

Lower impact on corporate lending

− Corporate credit in Europe mostly driven by banks

(>70%), i.e., less directly linked to sovereign yields

− European corporates with access to capital

markets can already borrow cheaply

− US corporates obtain >70% of funding via capital

markets, i.e., stronger link to Treasury yields

Reduced wealth effect

− Equities account for <10% of household wealth vs.

>25% in US

− More difficult (sometimes impossible) to withdraw

equity from housing in Europe

− Weaker link between market interest rates and

mortgage rates

Lower propensity to spend wealth gains in Europe

Note: (*) Eurozone banks in the periphery can currently borrow cheaply (either from market or

via ECB) and invest at a profit in higher yielding, low risk sovereign debt. This is relatively risk

free and uses up limited regulatory capital but crowds out lending to the real economy

Main transmission

channel in Europe

Flatter yield curve would

kill the sovereign carry

trade* and push

peripheral banks to lend

more to the real economy

Greater public opposition to purchases of sovereign

bonds

− Opposition from savers, especially in the core,

which could lose out via higher yields

− Moral hazard: lower borrowing costs reduces

pressure on peripheral gov’ts to deliver reforms

Higher prices for

risk assets



ECB to work out details of

private QE

− Technical framework

− e.g., who purchases

(ECB, National CBs)

The ECB will likely engage in ‘private QE’ in September; ‘public QE’ would only follow should conditions deteriorate

25

April - May June July - August September October and beyond

ECB Meeting

CPI Release

3-Jul 31-Jul 7-Aug 29-Aug 4-Sep 30-Apr 8-May 3-Jun 5-Jun 30-Jun

ECB to monitor data

− Inflation (30 Apr/3 Jun)

− EUR exchange rate

− Market yields and rates

− Economic indicators

− SME credit conditions

− External developments

Russia, China, US

ECB to assess impact of

June measures

− Verbal guidance on full

allotment, private QE

signal

AQR continues, assessing

European banks’ balance

sheet quality

ECB to monitor impact of

‘private QE’ closely

− Inflation, euro,

economic data

− Credit conditions for

SMEs in Europe

AQR results provide

transparency on banks’

loan books to ECB and

national central banks

Regulatory progress on

the supervisory treatments

of ABS

5-Jun ECB meeting:

token easing

− Strong verbal guidance

− Signaling of private QE

− Low impact easing

measures e.g.,

extension of full

allotment

4-Sep ECB meeting:

Launch of ‘private QE’

− Targeted at SMEs

− Could involve ABS

− Could include corporate

loans for greater impact

− Crucial for ECB to signal

it will be in the market for

long to incentivise bank

credit origination

EC

B a

cti

on

E

CB

assessm

en

t

If inflation or growth

outlook worsen

considerably

− ECB could pursue full

scale ‘public QE’, i.e.,

purchases of

sovereign bonds

1

3

2



The ECB is likely to engage in ‘private QE’, with a

focus on SME loans

Securitised assets

− Easy to implement (traded securities)

− Even limited purchases can have substantial

impact on credit origination and growth

− Regulation, though, poses a major obstacle to

new ABS origination – and current SME ABS

market is only ~EUR50bn

Corporate loans

− Eligible market unclear but >10x larger than

SME ABS – greater balance sheet expansion

− AQR (results in Oct) to help identify loan

portfolios that could be purchased from banks

‘Public QE’ only if significant deterioration

− Political hurdles remain high – though can be

lowered by purchasing bonds in proportion to

GDP weights

− Substantial effect on FX and short-term

inflationary dynamics

− Limited impact on SME credit origination

26

The different QE options would have varying degrees of impact on new credit to corporates and on inflationary dynamics / euro

Lo

w

Me

diu

m

Hig

h

Low Medium High

Assessment of ECB QE Options

Size of balance sheet expansion

(Impact on short term inflationary dynamics / euro)

Imp

act o

n n

ew

cre

dit to

co

rpo

rate

s

ABS Non-Fin

corporate

loans

Government

Bond QE

Equity tranche in

ABS (too risky)

Bank bonds

(risky,

subordinates

ECB to other

creditors)

Corporate

Bonds (does not

impact SMEs) X

X

X

1

2

3

0

1

2

3

4

5

6

7

8

Total ABS Non-fin corp loans Eurozone government bond market

Source: AFME, Eurostat, Deutsche Bank Research

The limited size of the ABS market may force the ECB to buy

corporate loans or even Eurozone government bonds

EUR tn Some loans are already

placed with the ECB. Other

loans’ ECB eligibility still

needs to be assessed

SME ABS account only

for a tiny share of the

market: EUR 53bn

1

2

3



DB forecasts

27

GDP growth (%)

2012 2013 2014F 2015F

Global 3.1 2.8 3.4 3.9

US 2.8 1.9 3.1 3.8

Eurozone -0.6 -0.4 1.1 1.5

Germany 0.7 0.4 1.5 2.0

Japan 1.4 1.5 0.4 1.4

UK 0.3 1.8 2.9 2.2

China 7.7 7.7 7.8 8.0

India 5.1 3.9 5.5 6.0

EM (Asia) 6.1 5.9 6.4 6.7

EM (Lat Am) 2.8 2.4 2.1 2.8

EM (CEEMEA) 2.8 2.3 2.0 3.2

EM 4.8 4.5 4.7 5.2

DM 1.4 1.2 2.1 2.6

Key market metrics

Current Q2-14 Q3-14 Q1-15

US 10Y yield (%) 2.65 2.50 3.00 3.25

EUR 10Y yield (%) 1.52 1.85 2.05 2.35

EUR/USD 1.39 1.32 1.29 1.20

USD/JPY 101.5 109 112 116

S&P 500 1,833 - 1,850* 2000#

Stoxx 600 333 - - 375*

Oil WTI (USD/bbl) 103.4 98 96 94

Oil Brent (USD/bbl) 107.5 107 106 105

* 2014 end, # 2015 end

Current prices as of 10th April 2014 COB

CPI inflation, YoY* (%)

2012 2013 2014F 2015F

US 2.1 1.5 2.1 2.3

Eurozone 2.5 1.3 0.8 1.3

Japan -0.1 0.4 3.0 1.7

UK 2.8 2.6 1.6 1.8

China 2.6 2.6 2.2 3.0

India 9.7 10.1 6.8 6.9

Central Bank policy rate (%)

Current 2014 2015 2016

US 0-0.25 0-0.25 1.50 3.50

Eurozone 0.25 0.25 0.25 0.75

Japan 0-0.1 0-0.1 0-0.1 0-0.1

UK 0.50 0.50 1.00 2.00

China 3.00 3.00 3.50 3.25

India 7.75 7.50 8.00 8.00

* CPI (%) forecasts are period averages

CEEMEA: Czech Rep., Hungary, Poland, Russia, Turkey, South Africa, Israel, Romania, Kazakhstan,

Ukraine, Egypt, Saudi Arabia and UAE

LATAM: Argentina, Brazil, Chile, Colombia, Mexico, Peru, Venezuela

ASIA: China, HK, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Sri Lanka, Taiwan, Thailand,

Vietnam

DM: US, Japan, Eurozone, UK, Denmark, Norway, Sweden, Canada, Australia, New Zealand, Switzerland



Appendix 1 Important Disclosures Additional Information Available upon Request

Analyst Certification

This report covers more than one security and was contributed to by more than one analyst. The views expressed in this report accurately reflect the

views of each contributor to this compendium report. In addition, each contributor has not and will not receive any compensation for providing a specific

recommendation or view in this compendium report. Raj Hindocha/Marcos Arana

Attribution

The Author of this report wishes to acknowledge the contributions made by Shakun Guleria and Varun Narang, employees of Infosys Ltd., a third

party provider to Deutsche bank offshore research support services.

For disclosures pertaining to recommendations or estimates made on a security mentioned in this report, please see the most recently

published company report or visit our global disclosure look-up page on our website at

http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr.

28


http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr


Regulatory Disclosures

1. Important Additional Conflict Disclosures Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the “Disclosures Lookup” and “Legal” tabs. Investors are strongly

encouraged to review this information before investing.

2. Short-Term Trade Ideas Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank’s existing longer

term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.

3. Country-Specific Disclosures Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand

Financial Advisors Act respectively.

Brazil: The views expressed above accurately reflect personal views of the authors about the subject company(ies) and its(their) securities, including in relation to Deutsche Bank.

The compensation of the equity research analyst(s) is indirectly affected by revenues deriving from the business and financial transactions of Deutsche Bank. In cases where at

least one Brazil based analyst (identified by a phone number starting with +55 country code) has taken part in the preparation of this research report, the Brazil based analyst

whose name appears first assumes primary responsibility for its content from a Brazilian regulatory perspective and for its compliance with CVM Instruction # 483.

EU countries: Disclosures relating to our obligations under MiFiD can be found at http://www.globalmarkets.db.com/riskdisclosures.

Japan: Disclosures under the Financial Instruments and Exchange Law: Company name - Deutsche Securities Inc. Registration number - Registered as a financial instruments

dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, Type II Financial Instruments Firms Association, The Financial Futures

Association of Japan, Japan Investment Advisers Association. This report is not meant to solicit the purchase of specific financial instruments or related services. We may charge

commissions and fees for certain categories of investment advice, products and services. Recommended investment strategies, products and services carry the risk of losses to

principal and other losses as a result of changes in market and/or economic trends, and/or fluctuations in market value. Before deciding on the purchase of financial products and/or

services, customers should carefully read the relevant disclosures, prospectuses and other documentation. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are

not registered credit rating agencies in Japan unless "Japan" or "Nippon" is specifically designated in the name of the entity.

Malaysia: Deutsche Bank AG and/or its affiliate(s) may maintain positions in the securities referred to herein and may from time to time offer those securities for purchase or may

have an interest to purchase such securities. Deutsche Bank may engage in transactions in a manner inconsistent with the views discussed herein.

Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no. 00032) is regulated by the Qatar Financial Centre Regulatory Authority. Deutsche Bank AG - QFC Branch

may only undertake the financial services activities that fall within the scope of its existing QFCRA license. Principal place of business in the QFC: Qatar Financial Centre, Tower,

West Bay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Business

Customers, as defined by the Qatar Financial Centre Regulatory Authority.

Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the

Russian Federation.

Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company, (registered no. 07073-37) is regulated by the Capital Market Authority. Deutsche Securities Saudi

Arabia may only undertake the financial services activities that fall within the scope of its existing CMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al

Olaya District, P.O. Box 301809, Faisaliah Tower - 17th Floor, 11372 Riyadh, Saudi Arabia.

United Arab Emirates: Deutsche Bank AG in the Dubai International Financial Centre (registered no. 00045) is regulated by the Dubai Financial Services Authority. Deutsche Bank

AG - DIFC Branch may only undertake the financial services activities that fall within the scope of its existing DFSA license. Principal place of business in the DIFC: Dubai

International Financial Centre, The Gate Village, Building 5, PO Box 504902, Dubai, U.A.E. This information has been distributed by Deutsche Bank AG. Related financial products

or services are only available to Professional Clients, as defined by the Dubai Financial Services Authority.

29



30

Risks to Fixed Income Positions

Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promise to pay fixed or variable interest rates. For an

investor that is long fixed rate instruments (thus receiving these cash flows), increases in interest rates naturally lift the discount factors applied to the expected cash flows

and thus cause a loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, the higher will be the loss. Upside surprises in

inflation, fiscal funding needs, and FX depreciation rates are among the most common adverse macroeconomic shocks to receivers. But counterparty exposure, issuer

creditworthiness, client segmentation, regulation (including changes in assets holding limits for different types of investors), changes in tax policies, currency convertibility

(which may constrain currency conversion, repatriation of profits and/or the liquidation of positions), and settlement issues related to local clearing houses are also

important risk factors to be considered. The sensitivity of fixedincome instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to

inflation, to FX depreciation, or to specified interest rates - these are common in emerging markets. It is important to note that the index fixings may -- by construction --

lag or mis-measure the actual move in the underlying variables they are intended to track. The choice of the proper fixing (or metric) is particularly important in swaps

markets, where floating coupon rates (i.e., coupons indexed to a typically short-dated interest rate reference index) are exchanged for fixed coupons. It is also important to

acknowledge that funding in a currency that differs from the currency in which the coupons to be received are denominated carries FX risk. Naturally, options on swaps

(swaptions) also bear the risks typical to options in addition to the risks related to rates movements.



Global Disclaimer The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). The information herein is believed to be reliable and has been obtained from public sources believed to be reliable.

Deutsche Bank makes no representation as to the accuracy or completeness of such information.

Deutsche Bank may engage in securities transactions, on a proprietary basis or otherwise, in a manner inconsistent with the view taken in this research report. In addition, others within Deutsche Bank, including strategists and sales staff, may take a view

that is inconsistent with that taken in this research report.

Opinions, estimates and projections in this report constitute the current judgement of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no

obligation to update, modify or amend this report or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Prices and availability of financial instruments are

subject to change without notice. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. Target prices are inherently

imprecise and a product of the analyst judgement. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Stock transactions can lead to losses as a result

of price fluctuations and other factors. If a financial instrument is denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is not necessarily indicative of future

results. Deutsche Bank may with respect to securities covered by this report, sell to or buy from customers on a principal basis, and consider this report in deciding to trade on a proprietary basis.

Derivative transactions involve numerous risks including, among others, market, counterparty default and illiquidity risk. The appropriateness or otherwise of these products for use by investors is dependent on the investors' own circumstances including

their tax position, their regulatory environment and the nature of their other assets and liabilities and as such investors should take expert legal and financial advice before entering into any transaction similar to or inspired by the contents of this

publication. Trading in options involves risk and is not suitable for all investors. Prior to buying or selling an option investors must review the "Characteristics and Risks of Standardized Options," at http://www.theocc.com/components/docs/riskstoc.pdf . If

you are unable to access the website please contact Deutsche Bank AG at +1 (212) 250-7994, for a copy of this important document.

The risk of loss in futures trading and options, foreign or domestic, can be substantial. As a result of the high degree of leverage obtainable in futures and options trading losses may be incurred that are greater than the amount of funds initially deposited.

Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor's home jurisdiction. In the U.S. this report is approved and/or distributed by Deutsche Bank Securities Inc., a member of the

NYSE, the NASD, NFA and SIPC. In Germany this report is approved and/or communicated by Deutsche Bank AG Frankfurt authorized by the BaFin. In the United Kingdom this report is approved and/or communicated by Deutsche Bank AG London, a

member of the London Stock Exchange and regulated by the Financial Conduct Authority for the conduct of investment business in the UK and authorized by the BaFin. This report is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in

Korea by Deutsche Securities Korea Co. This report is distributed in Singapore by Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch (One Raffles Quay #18-00 South Tower Singapore 048583, +65 6423

8001), and recipients in Singapore of this report are to contact Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch in respect of any matters arising from, or in connection with, this report. Where this report is

issued or promulgated in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and regulations), Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia

Limited, Singapore Branch accepts legal responsibility to such person for the contents of this report. In Japan this report is approved and/or distributed by Deutsche Securities Inc. The information contained in this report does not constitute the provision

of investment advice. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the

product. Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register Number in South Africa: 1998/003298/10). Additional information relative to securities, other financial products or issuers discussed in this

report is available upon request. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche Bank's prior written consent. Please cite source when quoting.

Copyright © 2014 Deutsche Bank Securities Inc.

31


Documents

Deutsche Bank Research The House Vie · Deutsche Bank Research The House View – 11 April 2014, [email protected], +44 207 545 8465 2 Special report – To QE or not to QE