November 8, 2019

German corporates more attractive as car sector benefits from policy measures and overall outlook improves

Highlights:

We see German activity improving on the back of receding trade uncertainty, easing Brexit concerns and a turn in the global manufacturing cycle. Over the course of 2020 we expect the economy to grow at rates close to potential again.
Moreover, as a result of the “car summit” the government has announced measures supporting electric cars, aimed at protecting the outlook of the German auto sector and car maker profitability in the coming years.
Latest proposals by German Finance Minister Scholz about the European Deposit Insurance Scheme have fired on the market’s imagination. However, we view this just as a very first step in a still lengthy and cumbersome process.
That said, the rift in the coalition about a basic pension as well as within coalition parties increased the risk of a coalition breakup towards the end of this year.
Overall, we see the latest developments as an immediate positive for the German car sector and non-financial sector in general while we keep our cautious stance on the German private sector banks.