Economic Forecast and Valuation Review 

4Q13 Global Strategic Outlook 
 
Economic forecast summary
  2013 2014
AllianzGI Consensus AllianzGI Concensus
US
Real GDP % chg SAAR* 1.60 1.60 2.50 2.65
CPI** 1.60 1.60 2.00 1.90
Short-Term (official) Rates 0.0-0.25 0.25 0.0-0.25 0.25
10 Year Rates 3.00 2.85 3.25 3.35
US Dollar Index 85.75 82.60 85.50 84.60
UK
Real GDP % chg SAAR* 1.40 1.30 2.50 2.00
HCPI*** 2.70 2.70 2.40 2.30
Short-Term (official) Rates 0.50 0.50 0.50 0.50
10 Year Rates 3.05 2.77 3.30 3.26
GBP/USD 1.59 1.56 1.56 1.52
Euroland
Real GDP % chg SAAR* -0.29 -0.40 1.50 1.00
CPI** 1.40 1.50 1.40 1.50
Short-Term (official) Rates 0.50 0.50 0.50 0.50
10 Year Rates (Germany) 2.05 1.91 2.40 2.29
EUR/USD 1.35 1.32 1.32 1.25
Japan
Real GDP % chg SAAR* 1.80 1.90 2.00 1.55
CPI** 0.30 0.20 2.00 2.30
Short-Term (official) Rates 0.0-0.10 0.10 0.0-0.10 0.10
10 Year Rates 0.90 0.85 1.50 1.08
JPY/USD 105.00 102.00 110.00 110.00
China
Real GDP % chg SAAR* 7.40 7.60 7.00 7.40
CPI** 2.60 2.60 2.80 3.10
1 Y Lending Rate 6.00 6.00 6.00 6.00
10 Year Rates 4.20 4.11 4.25 4.07
USD/CNY 6.05 6.10 6.00 6.04
Hong Kong
Real GDP % chg SAAR* 4.60 5.70 5.10 4.80
CPI** 11.00 6.10 9.00 9.05
3 M Interbank Rate 7.50 7.50 7.25 7.50
10 Year Rates 8.75 8.56 8.00 8.04
USD/HKD 64.00 63.00 63.00 62.00
Commodities
Gold 1400 1413 1300 1285
Oil 105 99 108 101

*Seasonally Adjusted Annual Rate. **Consumer Price Index. ***Harmonized Consumer Price Index.
Source: Allianz Global Investors, as at 4 October 2013. Forecasts are not a reliable indicator of future results.

Financial markets review
  30-Sep-13 Qtr-to-date
30-Jun-13
30-Sep-13
Yr-to-date
31-Dec-12
30-Sep-13
% Change From Calendar Year 2012
Calendar Year High Calendar Year Low
Equities US
S&P 500 3000.18 5.25% 19.79% -2.49% 19.79% 16.00%
NASDAQ 3771.48 10.82% 24.90% -0.47% 24.90% 15.91%
MS Value 8606.03 2.95% 20.23% -2.95% 20.23% 14.99%
MS Growth 5893.72 8.58% 20.12% -1.78% 20.12% 17.30%
S&P 500 VIX 16.60 -1.54% -7.88% -18.98% 46.90% -22.99%
NASDAQ VIX 16.73 1.58% -18.63% -18.63% 39.07% -11.11%
Equities Japan
Nikkei 225 14455.80 5.69% 39.06% -7.50% 39.06% 22.94%
Equities Europe
DJ Euro Stoxx 50 2776.23 6.59% 7.71% -2.33% 10.35% 8.78%
FTSE 100 6462.22 3.97% 9.57% -5.53% 9.57% 5.84%
Dax 30 8589.12 7.54% 12.83% -1.70% 15.02% 30.37%
Cac 40 4143.44 10.82% 13.80% -1.49% 15.24% 15.23%
Equities Asia-Pacific
MSCI Asia Pacific ex-Japan (USD) 1352.11 8.99% 1.90% -7.56% 11.64% 19.40%
Currencies
EUR/USD 1.3505 3.25% 2.36% -1.02% 5.77% 1.97%
USD/YEN 98.2300 -0.91% 13.31% -4.83% 13.31% 12.71%
GBP/USD 1.6194 6.77% -0.38% -0.55% 9.19% 4.59%
Commodities
oil brent 108.89 6.12% -1.33% -8.61% 11.60% 1.92%
gold (USD) 1330.84 9.50% -19.95% -21.38% 9.54% 5.58%
S&P Goldman Sachs Commodity Index 4845.28% 4.78% -0.89% -5.55% 7.50% 0.08%
Short-Term Rates
Fed Funds Target 0.25% 0 bps 0 bps 0 bps 0 bps 0 bps
3-Month
T-Bill
0.02% -2 bps -3 bps -12 bps 2 bps 3 bps
3-Month Euro 0.23% 1 bps 4 bps -1 bps 4 bps -117 bps
3-Month Yen 0.23% 0 bps -8 bps -8 bps 0 bps -2 bps
Long-Term Government Bonds
2-Year Treasuries 0.32% -2 bps 7 bps -19 bps 11 bps 1 bps
5-Year Treasuries 1.36% 0 bps 64 bps -47 bps 71 bps -12 bps
10-Year Treasuries 2.62% 14 bps 86 bps -35 bps 99 bps -13 bps
10-Year Bund 1.78% 5 bps 47 bps -25 bps 59 bps -53 bps
10-Year JGB 0.69% -15 pbs -10 bps -24 bps 25 bps -20 bps
US Corporate Bonds
Barclays US Aggregate AAA 10+ years 4.08% 10 bps 139 bps -40 bps 139 bps -110 bps
Barclays US Aggregate BAA 10+ years 5.60% 7 bps 97 bps -26 bps 103 bps -77 bps
spread BAA/AAA 1.52% -3 bps -42 bps 14 bps -36 bps 33 bps
Barclays High Yield 8.22% -54 bps -83 bps -99 bps 151 bps -311 bps
EMU Corporate Bonds
Barclays Euro Aggregate AAA 1.22% 0 bps 34 bps -24 bps 43 bps -118 bps
Barclays Euro Aggregate BAA 1.57% -1 bps 36 bps -23 bps 46 bps -250 bps
spread BAA/AAA 0.35% -1 bps 2 bps 1 bps 3 bps -132 bps

The periodic changes for equity indices are percentage changes, whilst for bond indices the change is given in basis points. A 1% point change is equivalent to 100 basis points. The calendar high and low columns represent the deviation of the index in percentage or basis points terms accordingly, compared to the index level at the end of the period of review. Source: Datastream, as at 30 September 2013. Past performance is not a reliable indicator of future results.

Implied earnings per share growth (5-year)
Global sectors AllianzGI top-down 5 year earnings growth estimate (p.a.) Market implied 5 year earnings growth (p.a.) Estimated growth minus market implied growth Rank
Oil & Gas 1.5% -4.1% 5.6% 1
Materials 2.4% 4.5% -2.2% 6
Industrials 1.6% 5.6% -4.0% 9
Consumer Goods 1.3% 4.2% -2.9% 8
Consumer Services 1.6% 8.1% -6.5% 12
Health Care 1.9% 8.3% -6.4% 11
Telecom 0.7% 3.3% -2.6% 7
Utilities 1.3% 3.3% -2.0% 5
Financials 1.7% -1.4% 3.1% 3
Banks 2.1% -2.8% 4.9% 2
Insurance 1.7% -0.5% 2.2% 4
Technology 1.8% 6.8% -5.0% 10

Source: Allianz Global Investors, as at 1 October 2013. Past performance is not a reliable indicator of future results.

Relative sector valuations
  Z-Score average Delta to 3 month ago Z-Score relative P/E Z-Score relative P/B Z-Score relative P/CF Z-Score relative DY
Oil & Gas -0.4 0.0 -0.5 -0.5 -1.0 -0.5
Oil Production -0.6 0.0 -0.8 -0.8 -1.2 -0.5
Oil Services 0.1 0.0 -0.3 0.4 0.5 0.4
Basic Materials -0.1 0.3 0.5 -0.8 0.2 0.4
Chemicals 1.2 0.0 0.8 1.7 1.4 -0.8
Bas Resources -0.5 0.3 0.3 -1.4 -0.3 0.6
Industrials 1.2 0.3 0.9 1.7 1.9 -0.5
Construction & Materials 0.3 0.1 0.9 -0.2 0.3 -0.4
Industrial Goods + Services 1.5 0.4 0.5 2.2 2.8 -0.3
Consumer Goods 1.2 -0.3 0.4 2.3 1.7 -0.6
Auto 0.9 0.0 -0.4 1.3 1.6 -1.2
Food & Beverages 1.1 -0.4 1.3 1.3 0.8 -0.8
Personal Household Goods 1.5 -0.4 0.8 2.7 1.8 -0.5
HealthCare 0.3 -0.1 1.1 0.2 -0.8 -0.7
Consumer Services 0.5 0.0 0.3 2.0 -0.3 -0.2
Retail 0.9 -0.1 0.8 2.4 0.2 -0.1
Media 0.1 0.1 -0.1 1.0 -0.7 -0.4
Travel & Leisure 0.2 0.0 0.0 0.7 0.2 0.1
Telecoms -0.4 -0.1 0.2 -0.2 -1.0 0.5
Utilities 0.2 0.0 1.3 -1.1 -0.3 -0.7
Financials -0.5 -0.1 -0.9 -1.0 0.4 0.5
Banks -0.8 0.0 -0.8 -1.3 -0.5 0.5
Insurance -0.5 -0.1 -0.5 -1.1 -0.1 0.4
Technology -0.3 0.1 -0.6 0.3 -0.5 0.6
Software -0.2 0.1 -0.4 0.7 -0.1 1.0
Hardware -0.8 0.1 -0.7 -0.3 -0.8 1.3

Note: The table summarizes AllianzGI’s constant monitoring of relative sector valuations: We compare the current relative valuation with the average historic relative valuation by using z-scores for four widely used valuation measures, namely Price/ Earnings (P/E), Price/Book (P/B), Price/Cash flow (P/CF), and dividend yield (DY). The z-score average column describes the average of all four valuation measures. The dividend yield enters the average with inverse sign, as a high dividend yield indicates a low valuation.
Source: Datastream, AllianzGI, as at October 2013.

Legend: Numbers in green indicate z-scores of below -1 (attractive relative valuation)
  Numbers in red indicate z-scores of above +1 (expensive relative valuation)


4Q13 Global Strategic Outlook

Global Strategic Outlook

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Equities Outlook - Asia-Pacific
North Asia Rebounds, South East Asia Still Lags
Economic Forecast and Valuation Review

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AGI-2013-10-31-8157 

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