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Transcript of Vlerick alumni presentation chief economists debate_final
HOW IS THE BELGIAN ECONOMY MANAGING THE CRISIS IN EUROPEAN AND GLOBAL PERSPECTIVE?
Frank Smets – Director General, DG Research at European Central Bank
Peter Vanden Houte – Chief Economist, ING
Edwin De Boeck – Chief Economist, KBC Bank
Frank Lierman – Chief Economist, Belfius
Bart Van Craeynest – Chief Economist, Petercam
Moderator: Dirk Selleslagh – News Manager, Tijd.TV
4 February 2013
Vlerick Finance Alumni partner:
How to excel in networking MBA Alumni 7 Feb 2013
Buying your own company Platform for Entrepren. Buyouts 21 Feb 2013
Alum. Nights All alumni sections 21 Feb 2013
Latest science on Burn-out MGM Alumni 26 Feb 2013
Improving a CV/Cover Letter MBA Alumni 27 Feb 2013
Sustainability at your company Exec Alumni 5 Mar 2013
Meet the Industry: Shipping Finance Alumni 14 Mar 2013
Visit ThromboGenics Exec Alumni 20 Mar 2013
Entering the job market MBA Alumni 20 Mar 2013
Meet the industry: Media Finance Alumni Apr/May 2013
Event Controllership Finance Alumni 22 May 2012
Workshop on family businesses Finance Alumni Jun 2013
UPCOMING EVENTS
Vlerick Finance Alumni partner:
GLOBAL OVERVIEW
Peter Vanden Houte Chief Economist, ING
Vlerick Finance Alumni partner:
4
World Economic Update From half empty to half full Peter Vanden Houte Chief economist ING Belgium
February 2013
5
What do investors consider to be the biggest “tail risk”?
Source BoA-ML Global Fund Manager Survey January 2013
Should be settled in next 3 months
Downgrade Spain? Elections Italy
Cyprus (elections 17 Feb, bail-out?)
Seems OK
Elections Iran in June
6 6
OECD Leading indicator
2008 2009 2010 2011 2012 2013 93
94
95
96
97
98
99
100
101
102
103
104
US
China
EMU
Belgium
7
US housing sector is recovering strongly
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -30
-25
-20
-15
-10
-5
0
5
10
15
0
-20
-15
-10
-5
5
10
15
20
US Case-Shiller house price yoy%
US residential construction yoy%
8
Chinese economy is picking up
2006 2007 2008 2009 2010 2011 2012 2013 94
96
98
100
102
104
106
108
30
35
40
45
50
55
60
65
70
China new order index
China real estate climate index
9
An improvement in sentiment is not enough in Europe
The Governing Council continues to
expect euro area economic activity
to recover, albeit very gradually, in
the course of 2012, supported by
developments in global demand,
very low short-term interest rates
and all the measures taken to
support the functioning of the
financial sector.(ECB Jan 2012) 2011 2012
-0.40
-0.20
0
0.20
0.40
0.60
0.80
ECB report
EMU quarterly GDP growth
Remember 2012...
10
Divergence within Eurozone remains huge...
-25
-20
-15
-10
-5
0
DE FI AT BE EA ES FR NL GR IT PT CY
Economic sentiment indicator: divergence from lt-average (Jan 2013)
11
...but population still euro supportive
0
10
20
30
40
50
60
FI
NL
LU
IE
DE
FR
BE
AT
GR
ES
IT
PT
EU
27
CY
Balance of opinion in favour of EUR
12 12 12 12
2011 2012 2013 2014
USA 1.8 2.3 1.7 2.3
Eurozone 1.5 -0.5 0.0 1.2
Belgium 1.8 -0.2 0.2 1.2
Japan -0.7 2.1 1.3 1.5
China 9.2 7.7 9.0 8.4
Growth outlook
13
The US energy bonanza
2004 2005 2006 2007 2008 2009 2010 2011 2012 0
50
100
150
200
250
300
350
0
50
100
150
200
250
300
350
Zeebrugge
London
Henry Hub
Natural gas price in euro (January 2004 = 100)
14
It’s a gas, gas, gas
15
Spare capacity oil producers is rising
0
1
2
3
4
5
6
7
1Q
20
01
4Q
20
01
3Q
20
02
2Q
20
03
1Q
20
04
4Q
20
04
3Q
20
05
2Q
2006
1Q
20
07
4Q
20
07
3Q
2008
2Q
20
09
1Q
20
10
4Q
20
10
3Q
20
11
2Q
20
12
1Q
20
13
4Q
20
13
3Q
20
14 0
20
40
60
80
100
120
140
Spare Capacity WTI Real Price (GDP Deflated, Rhs)
Source:EIA
RESPONSES TO THE CRISIS
Frank Lierman Chief Economist, Belfius
Vlerick Finance Alumni partner:
Responses to the crisis :
Japanese and European
experience. Frank Lierman, Chief Economist
Vlerick Finance Alumni
Brussels, February 4, 2013
Towards a japanisation of the eurozone ?
The European initiatives.
Responses to the crisis : Japanese and
European experience.
18
Towards a japanisation of the eurozone ?
19
General context before the crisis.
Japan
1992
Eurozone
2008 Financial liberalisation and deregulation √ √
Abundant liquidity via interbankmarket √ √
Sharp increase of credit (mainly real estate, SME,
consumers) √ (2 x GDP growth) √ (2 x GDP growth)
Relaxation credit conditions (smaller margins,
longer duration, …) √ √
Explosion bank balance sheets, but also off
balance volumes √ √
Increased risk appetite √ √
Increase of currency (resp. JPY en EUR) √ √
Increase stock markets √ (topnr 38.916 pt on
19.02.89) √ (top middle 2007)
Real estate bubble √ √ (especially Anglo-saxo and
South European land’s)
Tightening monetary policy √ (from 30.06.89) √ (summer 2008)
Recommandations to limit real estate credits √ (from 2710.89) √ (afterwards)
GDP (% over 1Y)
20
Eurozone 04-13 = or ≠ Japan 88-97.
Export (% over 1 Y)
-5
-3
-1
1
3
5
7
1988 /
2004
1989 /
2005
1990 /
2006
1991 /
2007
1992 /
2008
1993 /
2009
1994 /
2010
1995 /
2011
1996 /
2012
1997 /
2013
Japan 1988 - 1997
Eurozone 2004 - 2013
-13
-8
-3
2
7
12
1988 /
2004
1989 /
2005
1990 /
2006
1991 /
2007
1992 /
2008
1993 /
2009
1994 /
2010
1995 /
2011
1996 /
2012
1997 /
2013
Towards a japanisation of the eurozone ?
Inflation (% over 1Y)
21
Unemployment
0
2
4
6
8
10
12
14
1988 /
2004
1989 /
2005
1990 /
2006
1991 /
2007
1992 /
2008
1993 /
2009
1994 /
2010
1995 /
2011
1996 /
2012
1997 /
2013
Japan 1988 - 1997
Eurozone 2004 - 2013
Towards a japanisation of the eurozone ?
-1
0
1
2
3
4
1988 /
2004
1989 /
2005
1990 /
2006
1991 /
2007
1992 /
2008
1993 /
2009
1994 /
2010
1995 /
2011
1996 /
2012
1997 /
2013
Eurozone 04-13 = or ≠ Japan 88-97.
Budget balance
(% of GDP)
22
Public debt
(% of GDP)
-8
-6
-4
-2
0
2
1988 /
2004
1989 /
2005
1990 /
2006
1991 /
2007
1992 /
2008
1993 /
2009
1994 /
2010
1995 /
2011
1996 /
2012
1997 /
2013
55
65
75
85
95
105
1988 /
2004
1989 /
2005
1990 /
2006
1991 /
2007
1992 /
2008
1993 /
2009
1994 /
2010
1995 /
2011
1996 /
2012
1997 /
2013
Japan 1988 - 1997
Eurozone 2004 - 2013
Towards a japanisation of the eurozone ? Eurozone 04-13 = or ≠ Japan 88-97.
23
Japan
1992 Eurozone 2008
Increase impairments √ √
Erosion collateral √ √
Decline value portfolio equities √ √
Lower ratings √ √
Sharp increase funding cost √ √
Increase corporate bonds √ √
Failure of banks From 1995 on
Immediately (mainly
smaller), but some “too big
to fail”
Mergers of banks From 1995 on From 2009
Accounting rules Japanese GAAP- problems
hidden
IFRS – mark to market
problems instant known
Direct consequences for banking sector.
Towards a japanisation of the eurozone ?
24
Reaction of central banks.
Japan Eurozone
Base rate
- from 8 to 0,5% (between ‘92 and ‘95)
- 0% (between Feb ‘99 and July ’06)
- from 4,25 to 1% (between Oct ’08 an
May ’09)
- 0,75% (since July ’12)
Liquidity injection
- QE (between March ’01 and March
’06)
- Buying bank equity from Febr ’02
(max 3 trilj JPY)
-covered bonds (in ‘10 and ‘12)
- SMP (between Spring ‘10 and
Autumn ‘11)
- LTRO with durations of 3,6m (‘08),
12m (‘09), 3Y (Dec ’11 and Febr’12)
’12)
- OMT (max 3Y)
Towards a japanisation of the eurozone ?
25
Japan Eurozone
Stimulative measures for
economy
- 10 packages between Aug ’91 and
Oct ’99 (124.4 trilj JPY)
- European Commission and national
governments (in ’09, some are
extinct)
Injection tax payers money
- coop company to buy credits (Jan
’93)
- rules bad loans (Febr ’04)
- resolution for housing loans (Dec
’95 and June ’96)
- injection money:
o 685 mia JPY (1995)
o 1,8 trilj JPY (1998)
o 7,5 trilj JPY (1999)
Some 83,2 bn EUR
- ESRB (Jan ’10)
- ESFS (Jan ’10) met EBA, EIOPA en
ESMA
- between ’08 and ’11 227,6 bn EUR
for recapitalisation; 761,2 bn EUR for
guarantees and 204,8 bn EUR for
asset rellief and liquidity;
Total : 1 196,6 bn EUR
Towards a japanisation of the eurozone ? Reaction of governments.
26
Japan Eurozone
Regulation
- Deposit guarantee (Febr ’98)
- Financial stability function (Febr ’98)
-Commission for financial
reconstruction (March ’99)
-EFSF (May ’10) –ESM (Oct ’12)
- Depositguarantee 100 000 EUR
(2008)
- Pact stronger EUR (March ’11)
- Six pack (Dec ’11)
- Two pack (July ’12)
- Treaty for stability, coordination and
governance in EMU (March’02) with
fiscal compact
- Banking Union (June - Dec’12)
- Growth pact (June ’12)
- Liikanen report (Sept ’12)
- Rescue of Greece, Ireland, Portugal,
Cyprus (2010-2012)
- Recapitalisation of Spanish banks
(Dec ’12)
- …
Towards a japanisation of the eurozone ? Reaction of governments. (2)
27
Japan Eurozone
National crisis
Credit economic banking
crisis.
No panic, bankprofits sufficient to
cover credit losses due to Japanese
accounting rules. Bad debtors were
hidden during some 5 years.
Deflation and positive real interest
rate consumption decline
savings stimulated.
European crisis
Credit- and bankingcrisis
economic debtcrisis.
Sense of urgency immediately due
to IFRS rules (mark to market).
Inflation and negative real interest
rate consumption decline
savings stimulated.
Towards a japanisation of the eurozone ? Major differences.
Towards a japanisation of the eurozone ?
The European initiatives.
Responses to the crisis : Japanese and
European experience.
28
European Systemic Risk Board (January 2010)
European System of Financial Supervisors (January 2010)
EBA
EIOPA
ESMA
EFSF (May 10, 2010)
Rescue packages for Greece (May 2010, July2011 and Decembeer
2012), Ireland (December 2010), Portugal (May, 2011) and Cyprus
(Q1, 2013)
A pack for a stronger euro (March, 24-25, 2011)
ESM (March 24-25, 2012, start in October 2012)
Liikanen report on bankstructures (September 2012)
Recapitalisation of Spanish banks (December 2012)
29
Risk management and rescue measures.
The European initiatives.
30
Governance.
Sixpack Twopack TSCG(¹)
What? 5 EU Regulationds and 1 EU Directive
2 EU Regulations (currently being negotiated)
International treaty
Who ? UE-27 (with some distinction between the euro area countries and the others)
Euro area countries UE-25 (excluding UK and CZ)
Date of entry
into force 13 December 2011 Expected : summer 2012
(after the trialogue procedure)
After ratification by at least 12 euro area countries (target: January 2013)
Content
° stricter and broader fiscal
surveillance (e.g. operational
debt criterion and expenditure
rule)
° broader macroeconomic
surveillance
° new decision-making
procedures
° minimum requirements for
national budgetary frameworks
° more advanced fiscal
surveillance and coordiantion in
the euro area
° independent national
institutions responsible for
monotoring compliance with the
fiscal rules
° precise timetable for the
annual budget and preliminary
review by the EC
o tougher surveillance regime for
countries with financial difficulties
(automatic for those receiving
assistance)
° limit on the structural deficit,
preferably enshrined in the
constitution
° the euro area countries comit
to accepting in principe the EC’s
recommendations regarding the
excessieve deficit prodecure(²)
° role for the European Court of
Justice
° provides for enhanced
coordination
(¹) Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. The term ‘fiscal contact’ is often
used to refer to the fiscal issues whch it includes.
(²) The euro area countries agree to accept any EC recommendation concerning the existence of an excessive deficit unless
the recommendation is rejected by a qualified majority.
Source : NBB
The European initiatives.
Proposals for stronger EMU (June 26, 2012)
an integrated financial system
bank supervision (ECB as of March 2014)
bank resolution fund
deposit guarantee scheme
an integrated budget
stability and growth pact (revisited)
treaty for stability, coordination and governance
budget union
Euro bonds
solidarity
European Finance Commissioner
an integrated economic management
European semester
Euro plus act
enforcement of democracy
31
The European initiatives.
ACTIONS AND RESPONSES BY THE ECB
Frank Smets Director General, DG Research at European Central Bank and Professor International Economics at the Centre for Economic Studies at the KU Leuven
Vlerick Finance Alumni partner:
ECB monetary policy in
challenging times
Frank Smets
Vlerick Alumni Chief Economists Debate
4 February 2013
The views expressed are my own and not necessarily those of the ECB.
Euro area HICP inflation elevated esp. due to indirect tax and
energy price increases – but expected to decline to < 2% in 2013
Sources: Eurostat and ECB.
Latest observation: September 2012 for overall HICP and August 2012 for HICP excluding food and energy.
(annual rates of change)
34
35 35
Inflation expectations are in line with price stability
Sources: Thomson Reuters, ECB, Consensus. Latest observation: 04 Jan 13
Euro area swap-implied HICP path (% p.a.)
0,0
1,0
2,0
3,0
4,0
2010 2011 2012 2013 2014 2015 2016 2017
Realised y-o-y HICP inflation
Swap-implied HICP inflation path (6 Sep 12)
Swap-implied HICP inflation path (30 Nov 12)
Swap-implied HICP inflation path (4 Jan 13)
Consensus (Nov-12 survey for '12 and '13 and Oct-12 for rest)
Systemic stress in the euro area (CISS)
Source: Hollo, Kremer and Lo Duca (2012)
Standard monetary policy: Policy-controlled interest rates and EONIA
• Standard monetary policy in ‘normal’ times:
o Changes in policy-controlled rates …
o translate into money market rates and longer-term
interest rates and asset prices and …
o affect aggregate demand and thus the inflation outlook.
• If some of the links in the transmission process are
impaired due to the financial crisis, standard monetary
policy becomes less effective:
o Changes in policy interest rates do not produce the
desired impact on inflation and …
o risk to price stability ensue.
Why non-standard measures?
38
• Non-standard measures (NSMs) are the tools we use to
address malfunctioning financial markets and offset
impairments in the monetary transmission mechanism:
o NSMs’ immediate objective is to restore the effectiveness
of our standard policy tool, so that it can produce its
normal effects
o NSMs’ ultimate objective is to maintain price stability;
without deploying them, we would have lost control over
inflation
o The precise features of the NSMs have changed over
time, so as to address the particular impairment prevailing
at any point
Why non-standard measures? (cont.)
39
• Key disruption: freeze of the interbank market; need for
banks to obtain liquidity from other sources
o risks of hasty assets liquidation; through lower asset
prices, spill overs to whole banking system (“fire sale”) …
o … and of a sharp reduction in credit (“credit crunch”)
o through a credit crunch, risk of a fall in aggregate
demand and production; downward pressure on prices
• Non-standard response mainly targeted at banking
sector
o Fixed-rate full allotment
o Expansion of eligible collateral list
o Longer maturity LTROs (up to 12 months)
o Covered bond purchase programme
o USD funding programme
ECB non-standard measures: Phase 1
40
0
0,5
1
1,5
2
2,5
0
0,5
1
1,5
2
2,5
2004 2005 2006 2007 2008 2009 2010 2011 2012
pe
rce
nt
pe
r an
nu
m
US & Euro Area 3-month spreads
Euribor-OISspread
USD Libor-USD OIS
Risk premia in the interbank market
-2
-1
0
1
2
3
4
5
6
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2007 2008 2009 2010 2011 2012 2013
% change in ECB BS (8 week moving average) RHS
Crisis threshold
Composite indicator of systemic stress (CISS)
Source: Rostagno; Euro area CISS from Hollo, Kremer and Lo Duca (2012): "CISS - A Composite Indicator of Systemic Stress in the
Financial System", ECB Working Paper No. 1426. Balance sheet data from ECB. Own calculations.
Note: Weekly data. Last observation: 9 Nov 2012. - Developments in the CISS can be decomposed into contributions from five stress
subindices (relating to money market, bond market, equity market, financial intermediaries, FX market) and the overall contribution from the
cross-subindex correlations.
Systemic stress and liquidity support
• Key disruption: Persistently elevated sovereign bond
yields in selected euro area Member States; partly driven
by self-fulfilling expectations and redenomination risk
o Pass-through of high sovereign yields to lending rates to
firms and households, hence downward pressure on
aggregate demand and prices and …
o mutually reinforcing interaction with fragile banking
systems and risk of financial fragmentation.
• Non-standard measures extended to include direct
intervention in financial markets
o Securities Market Programme (SMP)
o 3-year LTRO; decrease of required reserve ratio; ACCs
o Outright Monetary Transactions (OMT)
ECB non-standard measures: Phase 1I
43
0
50
100
150
200
250
300
350
400
450
500
0 50 100 150 200 250 300 350 400 450 500
Ban
k C
DS
Sovereign CDS
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
12Q4
Interaction sovereign and banking risks
Positive impact of the 3-year LTROs and OMT announcement on
sovereign yield spreads and interbank credit risk
Sovereign yield spreads in Italy and Spain and interbank credit risk
(basis points, daily data)
Source: Bloomberg and ECB calculations.
Note: Daily data, last observation is 21 Dec 2012. The sovereign yield spreads are calculated vis-à-vis the 10-year
German Bund. Vertical lines represent the 3-year LTRO announcement and Draghi London speech (December
2011 and July 2012).
0
25
50
75
100
125
150
175
200
0
100
200
300
400
500
600
700
800Ja
n/0
7
Jun
/07
No
v/0
7
Ap
r/0
8
Sep
/08
Feb
/09
Jul/
09
De
c/0
9
May
/10
Oct
/10
Mar
/11
Au
g/1
1
Jan
/12
Jun
/12
No
v/1
2
10-yr IT sovereign spreads 10-yr ES sovereign spreads
3-month EURIBOR-OIS (rhs)
Draghi's London speech
3-year LTROs announcement
INTERACTIVE DEBATE
Chief Economists and Audience Moderator: Dirk Selleslagh – News Manager, Tijd.TV
Vlerick Finance Alumni partner:
HOW IS THE BELGIAN ECONOMY MANAGING THE CRISIS?
Edwin De Boeck Chief Economist, KBC Bank
Vlerick Finance Alumni partner:
The Belgian economy - Outlook & challenges -
Vlerick Alumni, 4 February 2013
Edwin De Boeck
Chief Economist KBC Group
49
Business cycle Belgian economy stagnating since the beginning of 2011
Real GDP
(Q4 2007 = 100)
93
94
95
96
97
98
99
100
101
102
103Belgium
Germany
Netherlands
France
Euro-periphery (*)
(*) Euro-periphery = Portugal, Ireland, Italy , Greece & Spain
10
11
12
13
14
15
16
17
18
19
20
98
99
100
101
102
103
104
105
106
Real private consumption (Q4 2007 = 100)
Real household disposable income (Q4 2007 = 100)
Household savings rate (rhs)
Consumption indicators
8/03/2013 50
5
6
7
8
9
10
11
-20
-10
0
10
20
30
40
50
60
70
80Unemployment expectations +12M (consumer survey)
Unemployment rate (rhs)
Confidence still very weak ….but consumers seem too negative
-3,5
-2,5
-1,5
-0,5
0,5
1,5
Employment outlook mfg. (NBB-survey)
Employment outlook services (NBB-survey)
Households' employment expectations (rhs)
Employment expectations
8/03/2013 51
External trade Exports suffering from European slowdown & deteriorating
competitiveness
Real exports
(Q4 2007 = 100)
80
85
90
95
100
105
110
115
Belgium
Germany
EMU (ex. Germany)
98
100
102
104
106
108
110
112
114
Belgium
Germany
Netherlands
France
Nominal unit labour costs
(Q4 2007 = 100)
-4
-2
0
2
4
6
8
Belgium
Germany
France
Deficit (-)/surplus (+) on the current
account balance
(in % of GDP)
External position Watch out for the negative trend
70
75
80
85
90
95
100
105
110
115
120
Belgium
Germany
France
Development of market share on
the country’s export markets
(1999 = 100)
53
60
70
80
90
100
110
120
130
Belgium (KBC calculation) (*)
Belgium (Stability Programme Spring 2012)
Euro Area
6.5 53.6
Public debt ratio
(% of GDP)
(*) Under unchanged policy assumption for 2014-2015
Budget balance under
unchanged policy
Budget balance total Belgian government
(in % of GDP)
Public finances The road of fiscal austerity
-5,9 -4,8 -3,6 -2,8 -2.15 -1,1 0,0
-6
-5
-4
-3
-2
-1
0
Realised figures Target Stability Programme (April 2012)
Need for extra savings
(KBC estimate)
4.7 bn.
0.7 bn.
8/03/2013 54
25
30
35
40
45
2010 2015 2020 2025 2030
2012 Ageing Report EC
2009 Ageing Report EC
2006 Ageing Report EC
2003 Ageing Report EC
Belgium - Old-age dependency ratio
(population aged 65+ in % of 15-64)
20
25
30
35
2010 2015 2020 2025 2030
Belgium - Total public sector expenditure
resulting from ageing (in % of GDP)
Public finances LT-sustainability still at risk given unfavourable ageing costs
Source: EC (Ageing Reports)
95
96
97
98
99
100
101
102
103
104
105
106
107
Belgium (ECB-index)
Belgium (FOD-index)
Belgium (Eurostat-index)
EMU (Eurostat-index)
Recent development Belgian property prices
(2011Q1 = 100)
Housing market Prices not (yet) cooling off, on the contrary
-60
-40
-20
0
20
40
60
80
Change in credit conditions
Change in mortgage loan demand
Tightening of banks’ lending standards for
housing loans (lending survey NBB)
(*) A negative sign indicates at a strengthening of the lending criteria
resp. a decline in mortgage loan demand (and vice versa)
-0,2
0
0,2
0,4
0,6
0,8
1
1,2
1,4
1,6
1,8
Consensus forecast made in month
EMU
Germany
Belgium
Belgium (KBC)
8/03/2013 56 56
Growth outlook 2013 & 2014 (in%) Evolution of consensus forecasts of
real GDP growth in 2013 (in %)
2013 Belgium EMU Germany
EC 0.7 0.1 0.8
OECD 0.5 -0.1 0.6
IMF 0.3 0.1 0.9
NBB -0.1 -0.9/0.3 -
Consensus 0.1 -0.1 0.7
4 Belgian banks 0.3 - -
KBC 0.5 0.0 0.9
2014 Belgium EMU Germany
EC 1.6 1.4 2.0
OECD 1.6 1.3 1.9
IMF 1.0 1.2 1.4
KBC 1.5 1.4 1.9
Growth outlook 2013 & 2014
57
Interest rates
Declining credit spreads
(in basis points)
0
50
100
150
200
250
300
350
400
Interest differential vs.10 Y. Bunds
CDS 5Y Sovereign Premium
Political crisis
June 2010 -
November 2011
Yield 10-year government bonds
(in %)
0
1
2
3
4
5
6US
Germany
Belgium
KBC outlook
End of year (in %)
10-year rates
+6m +12m
US 2.25 2.75
Germany 1.75 2.25
Belgium 2.45 2.95
IMPACT OF THE OUTLOOK FOR INVESTORS
Bart Van Craeynest Chief Economist, Petercam
Vlerick Finance Alumni partner:
59/25 21-09-2011
Titre de la présentation
Monday 4 February 2013
Institutional Asset Management
Vlerick Alumni Debate
60/25 04-02-2013 | Petercam Macro Presentation |
60
Goldilocks is back (for now)
-4
-3
-2
-1
0
1
2
-15
-10
-5
0
5
10
15
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Global Industrial production (yoy)
Global leading indicator (rhs)
Global growth accelerates
Global growth is picking up
Inflation remains under control
Monetary policy remains supportive
Political risks have eased
61 04-02-2013 | Petercam Macro Presentation |
Government bonds getting very expensive
0
2
4
6
8
10
12
14
16
Jan-50 Jan-55 Jan-60 Jan-65 Jan-70 Jan-75 Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10
US bond yield
62 04-02-2013 | Petercam Macro Presentation |
Bonds have had a spectacular run
0
1
2
3
4
5
6
7
8
9
Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
A Indu 5yr Yld UST 5yr Yld IG credit spread
0
2
4
6
8
10
12
14
Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
BB Indu 5yr Yld UST 5yr Yld HY spread
Investment Grade credit High yield
63 04-02-2013 | Petercam Macro Presentation |
Bonds very expensive relative to equity
0
2
4
6
8
10
12
14
16
Jan-50 Jan-55 Jan-60 Jan-65 Jan-70 Jan-75 Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10
Bond yield Dividend yield
64 04-02-2013 | Petercam Macro Presentation |
You can fool some people sometimes, but…
-600
-400
-200
0
200
400
600
800
1000
1200
1400
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12
Into equity Into bonds
US mutual fund flows (cumulative, bn usd)
65 04-02-2013 | Petercam Macro Presentation |
Global economic activity is key
-2
-1
0
1
2
3
4
5
6
-50
-40
-30
-20
-10
0
10
20
30
40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
S&P500 Global GDP Annual change in %
66/25 04-02-2013 | Petercam Macro Presentation |
66
Investment strategy
┃ Overweight Equities
Prefer Emerging markets and Europe
Cyclicals over defensives
┃ Underweight Bonds
High yield over credit and government bonds
Inflation-linked over nominals
┃ Hold positions in gold and USD
Gold as ‘insurance’
USD looks attractive
67/25 04-02-2012 | Petercam Macro Presentation |
67
Bart Van Craeynest Hoofdeconoom [email protected] Tel.: +32 (0)2 229 62 32 https://insights.petercam.com
Petercam N.V. Sint Goedeleplein 19 1000 Brussel Tel.: +32 (0)2 229 63 11 Fax : +32 (0)2 229 65 98
Brussels – Frankfurt – London - Luxemburg - Madrid - Geneva
INTERACTIVE DEBATE
Chief Economists and Audience Moderator: Dirk Selleslagh – News Manager, Tijd.TV
Vlerick Finance Alumni partner:
THANK YOU
You are kindely invited to the networking reception
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