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Vlerick alumni presentation chief economists debate_final

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Vlerick alumni presentation chief economists debate_final

  1. 1. HOW IS THE BELGIAN ECONOMY MANAGING THECRISIS IN EUROPEAN AND GLOBAL PERSPECTIVE?Frank Smets – Director General, DG Research at European Central BankPeter Vanden Houte – Chief Economist, INGEdwin De Boeck – Chief Economist, KBC BankFrank Lierman – Chief Economist, BelfiusBart Van Craeynest – Chief Economist, PetercamModerator: Dirk Selleslagh – News Manager, Tijd.TV4 February 2013 Vlerick Finance Alumni partner:
  2. 2. UPCOMING EVENTSHow to excel in networking MBA Alumni 7 Feb 2013Buying your own company Platform for Entrepren. Buyouts 21 Feb 2013Alum. Nights All alumni sections 21 Feb 2013Latest science on Burn-out MGM Alumni 26 Feb 2013Improving a CV/Cover Letter MBA Alumni 27 Feb 2013Sustainability at your company Exec Alumni 5 Mar 2013Meet the Industry: Shipping Finance Alumni 14 Mar 2013Visit ThromboGenics Exec Alumni 20 Mar 2013Entering the job market MBA Alumni 20 Mar 2013Meet the industry: Media Finance Alumni Apr/May 2013Event Controllership Finance Alumni 22 May 2012Workshop on family businesses Finance Alumni Jun 2013 Vlerick Finance Alumni partner:
  3. 3. GLOBAL OVERVIEWPeter Vanden HouteChief Economist, ING Vlerick Finance Alumni partner:
  4. 4. World Economic UpdateFrom half empty to half fullPeter Vanden HouteChief economist ING BelgiumFebruary 2013 4
  5. 5. What do investors consider to be the biggest “tail risk”? Should be settled in next 3 months Downgrade Spain? Elections Italy Cyprus (elections 17 Feb, bail-out?) Seems OK Elections Iran in June Source BoA-ML Global Fund Manager Survey January 2013 5
  6. 6. OECD Leading indicator104103102 US101 China100 EMU 99 Belgium 98 97 96 95 94 93 2008 2009 2010 2011 2012 2013 6
  7. 7. US housing sector is recovering strongly15 20 US Case-Shiller house price yoy%10 15 5 10 0 5 -5 0-10 -5-15 -10-20 US residential construction yoy%-25 -15-30 -20 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 7
  8. 8. Chinese economy is picking up108 70106 65 60104 China new order index 55102 50100 45 98 40 96 35 China real estate climate index 94 30 2006 2007 2008 2009 2010 2011 2012 2013 8
  9. 9. An improvement in sentiment is not enough in Europe Remember 2012...The Governing Council continues to 0.80 EMU quarterly GDP growthexpect euro area economic activity 0.60to recover, albeit very gradually, in 0.40 ECB reportthe course of 2012, supported bydevelopments in global demand, 0.20very low short-term interest rates 0and all the measures taken tosupport the functioning of the -0.20financial sector.(ECB Jan 2012) -0.40 2011 2012 9
  10. 10. Divergence within Eurozone remains huge... Economic sentiment indicator: divergence from lt-average (Jan 2013) 0 -5 -10 -15 -20 -25 DE FI AT BE EA ES FR NL GR IT PT CY 10
  11. 11. ...but population still euro supportive605040302010 0 FI IE IT FR DE BE ES AT CY PT NL LU GR EU27 Balance of opinion in favour of EUR 11
  12. 12. Growth outlook 2011 2012 2013 2014USA 1.8 2.3 1.7 2.3Eurozone 1.5 -0.5 0.0 1.2Belgium 1.8 -0.2 0.2 1.2Japan -0.7 2.1 1.3 1.5China 9.2 7.7 9.0 8.4 12 12
  13. 13. The US energy bonanza350 Natural gas price in euro (January 2004 = 100) 350300 300250 250200 Zeebrugge 200150 150 London100 100 50 50 Henry Hub 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 13
  14. 14. It’s a gas, gas, gas 14
  15. 15. 0 1 3 4 5 6 7 2 1Q 2001 4Q 2001 3Q 2002 2Q 2003 1Q 2004 4Q 2004 3Q 2005 2Q 2006 Spare Capacity 1Q 2007 4Q 2007 3Q 2008 2Q 2009 1Q 2010 4Q 2010 3Q 2011 Spare capacity oil producers is rising 2Q 2012 1Q 2013 Source:EIA WTI Real Price (GDP Deflated, Rhs) 4Q 2013 3Q 2014 0 20 60 80 40 100 120 14015
  16. 16. RESPONSES TO THE CRISISFrank LiermanChief Economist, Belfius Vlerick Finance Alumni partner:
  17. 17. Responses to the crisis :Japanese and Europeanexperience.Frank Lierman, Chief EconomistVlerick Finance AlumniBrussels, February 4, 2013
  18. 18. Responses to the crisis : Japanese andEuropean experience. Towards a japanisation of the eurozone ? The European initiatives.18
  19. 19. Towards a japanisation of the eurozone ? General context before the crisis. Japan Eurozone 1992 2008Financial liberalisation and deregulation √ √Abundant liquidity via interbankmarket √ √Sharp increase of credit (mainly real estate, SME, √ (2 x GDP growth) √ (2 x GDP growth)consumers)Relaxation credit conditions (smaller margins, √ √longer duration, …)Explosion bank balance sheets, but also off √ √balance volumesIncreased risk appetite √ √Increase of currency (resp. JPY en EUR) √ √ √ (topnr 38.916 pt onIncrease stock markets √ (top middle 2007) 19.02.89) √ (especially Anglo-saxo andReal estate bubble √ South European land’s)Tightening monetary policy √ (from 30.06.89) √ (summer 2008)Recommandations to limit real estate credits √ (from 2710.89) √ (afterwards) 19
  20. 20. Towards a japanisation of the eurozone ? Eurozone 04-13 = or ≠ Japan 88-97. GDP (% over 1Y) Export (% over 1 Y)7 125 73 21 -3-1 -8-3-5 -13 1988 / 1989 / 1990 / 1991 / 1992 / 1993 / 1994 / 1995 / 1996 / 1997 / 1988 / 1989 / 1990 / 1991 / 1992 / 1993 / 1994 / 1995 / 1996 / 1997 / 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Japan 1988 - 1997 Eurozone 2004 - 2013 20
  21. 21. Towards a japanisation of the eurozone ? Eurozone 04-13 = or ≠ Japan 88-97. Inflation (% over 1Y) Unemployment4 14 123 102 8 61 40 2-1 0 1988 / 1989 / 1990 / 1991 / 1992 / 1993 / 1994 / 1995 / 1996 / 1997 / 1988 / 1989 / 1990 / 1991 / 1992 / 1993 / 1994 / 1995 / 1996 / 1997 / 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Japan 1988 - 1997 Eurozone 2004 - 2013 21
  22. 22. Towards a japanisation of the eurozone ? Eurozone 04-13 = or ≠ Japan 88-97. Budget balance Public debt (% of GDP) (% of GDP)2 1050 95-2 85-4 75-6 65-8 55 1988 / 1989 / 1990 / 1991 / 1992 / 1993 / 1994 / 1995 / 1996 / 1997 / 1988 / 1989 / 1990 / 1991 / 1992 / 1993 / 1994 / 1995 / 1996 / 1997 / 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Japan 1988 - 1997 Eurozone 2004 - 2013 22
  23. 23. Towards a japanisation of the eurozone ? Direct consequences for banking sector. Japan Eurozone 2008 1992Increase impairments √ √Erosion collateral √ √Decline value portfolio equities √ √Lower ratings √ √Sharp increase funding cost √ √Increase corporate bonds √ √ Immediately (mainlyFailure of banks From 1995 on smaller), but some “too big to fail”Mergers of banks From 1995 on From 2009 Japanese GAAP- problems IFRS – mark to marketAccounting rules hidden problems instant known 23
  24. 24. Towards a japanisation of the eurozone ? Reaction of central banks. Japan Eurozone - from 8 to 0,5% (between ‘92 and ‘95) - from 4,25 to 1% (between Oct ’08 anBase rate - 0% (between Feb ‘99 and July ’06) May ’09) - 0,75% (since July ’12) - QE (between March ’01 and March -covered bonds (in ‘10 and ‘12) ’06) - SMP (between Spring ‘10 and - Buying bank equity from Febr ’02 Autumn ‘11)Liquidity injection (max 3 trilj JPY) - LTRO with durations of 3,6m (‘08), 12m (‘09), 3Y (Dec ’11 and Febr’12) ’12) - OMT (max 3Y) 24
  25. 25. Towards a japanisation of the eurozone ? Reaction of governments. Japan Eurozone - 10 packages between Aug ’91 and - European Commission and nationalStimulative measures for Oct ’99 (124.4 trilj JPY) governments (in ’09, some areeconomy extinct) - coop company to buy credits (Jan - ESRB (Jan ’10) ’93) - ESFS (Jan ’10) met EBA, EIOPA en - rules bad loans (Febr ’04) ESMA - resolution for housing loans (Dec ’95 and June ’96)Injection tax payers money - injection money: - between ’08 and ’11 227,6 bn EUR o 685 mia JPY (1995) for recapitalisation; 761,2 bn EUR for o 1,8 trilj JPY (1998) guarantees and 204,8 bn EUR for o 7,5 trilj JPY (1999) asset rellief and liquidity; Some 83,2 bn EUR Total : 1 196,6 bn EUR 25
  26. 26. Towards a japanisation of the eurozone ? Reaction of governments. (2) Japan Eurozone - Deposit guarantee (Febr ’98) -EFSF (May ’10) –ESM (Oct ’12) - Financial stability function (Febr ’98) - Depositguarantee 100 000 EUR -Commission for financial (2008) reconstruction (March ’99) - Pact stronger EUR (March ’11) - Six pack (Dec ’11) - Two pack (July ’12) - Treaty for stability, coordination and governance in EMU (March’02) withRegulation 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) -… 26
  27. 27. Towards a japanisation of the eurozone ? Major differences. Japan Eurozone National crisis  European crisis Credit  economic  banking  Credit- and bankingcrisis crisis. economic  debtcrisis. No panic, bankprofits sufficient to  Sense of urgency immediately duecover credit losses due to Japanese to IFRS rules (mark to market).accounting rules. Bad debtors werehidden during some 5 years. Deflation and positive real interest  Inflation and negative real interestrate  consumption decline  rate  consumption decline savings stimulated. savings stimulated. 27
  28. 28. Responses to the crisis : Japanese andEuropean experience. Towards a japanisation of the eurozone ? The European initiatives.28
  29. 29. The European initiatives.Risk management and rescue measures. 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
  30. 30. The European initiatives. Governance. Sixpack Twopack TSCG(¹) 5 EU Regulationds and 2 EU RegulationsWhat? International treaty 1 EU Directive (currently being negotiated) UE-27 (with some distinctionWho ? between the euro area countries Euro area countries UE-25 (excluding UK and CZ) and the others)Date of entry Expected : summer 2012 After ratification by at least 12 13 December 2011 (after the trialogue procedure) euro area countries (target:into force January 2013) ° stricter and broader fiscal ° more advanced fiscal ° limit on the structural deficit, surveillance (e.g. operational surveillance and coordiantion in preferably enshrined in the debt criterion and expenditure the euro area constitution rule) ° independent national ° the euro area countries comit ° broader macroeconomic institutions responsible for to accepting in principe the EC’s surveillance monotoring compliance with the recommendations regarding the ° new decision-making fiscal rules excessieve deficit prodecure(²)Content procedures ° precise timetable for the ° role for the European Court of ° minimum requirements for annual budget and preliminary Justice national budgetary frameworks review by the EC ° provides for enhanced o tougher surveillance regime for coordination countries with financial difficulties (automatic for those receiving assistance) (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. 30 Source : NBB
  31. 31. 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 democracy31
  32. 32. ACTIONS AND RESPONSES BY THE ECBFrank SmetsDirector General, DG Research at European Central Bankand Professor International Economics at the Centre for EconomicStudies at the KU Leuven Vlerick Finance Alumni partner:
  33. 33. ECB monetary policy in challenging times Frank Smets Vlerick Alumni Chief Economists Debate 4 February 2013The views expressed are my own and not necessarily those of the ECB.
  34. 34. Euro area HICP inflation elevated esp. due to indirect tax andenergy price increases – but expected to decline to < 2% in 2013 (annual rates of change) Sources: Eurostat and ECB. Latest observation: September 2012 for overall HICP and August 2012 for HICP excluding food and energy. 34
  35. 35. Inflation expectations are in line with price stability Euro area swap-implied HICP path (% p.a.) 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) 4,0 Consensus (Nov-12 survey for 12 and 13 and Oct-12 for rest) 3,0 2,0 1,0 0,0 2010 2011 2012 2013 2014 2015 2016 2017 Sources: Thomson Reuters, ECB, Consensus. Latest observation: 04 Jan 13 35
  36. 36. Systemic stress in the euro area (CISS) Source: Hollo, Kremer and Lo Duca (2012)
  37. 37. Standard monetary policy:Policy-controlled interest rates and EONIA
  38. 38. Why non-standard measures?• 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. 38
  39. 39. Why non-standard measures? (cont.)• 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 39
  40. 40. ECB non-standard measures: Phase 1• 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 40
  41. 41. Risk premia in the interbank market US & Euro Area 3-month spreads 2,5 2,5 2 2 Euribor-OIS spreadpercent per annum 1,5 1,5 1 1 USD Libor- USD OIS 0,5 0,5 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012
  42. 42. Systemic stress and liquidity support 1 6 % change in ECB BS (8 week moving average) RHS 0.9 Crisis threshold 5 Composite indicator of systemic stress (CISS) 0.8 4 0.7 3 0.6 0.5 2 0.4 1 0.3 0 0.2 -1 0.1 0 -2 2007 2008 2009 2010 2011 2012 2013Source: Rostagno; Euro area CISS from Hollo, Kremer and Lo Duca (2012): "CISS - A Composite Indicator of Systemic Stress in theFinancial 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 stresssubindices (relating to money market, bond market, equity market, financial intermediaries, FX market) and the overall contribution from thecross-subindex correlations.
  43. 43. ECB non-standard measures: Phase 1I• 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) 43
  44. 44. Interaction sovereign and banking risks 500 450 400 10Q1 350 10Q2 10Q3 300 10Q4 Bank CDS 11Q1 250 11Q2 200 11Q3 11Q4 150 12Q1 12Q2 100 12Q3 12Q4 50 0 0 50 100 150 200 250 300 350 400 450 500 S overeign CDS
  45. 45. Positive impact of the 3-year LTROs and OMT announcement onsovereign yield spreads and interbank credit risk Sovereign yield spreads in Italy and Spain and interbank credit risk (basis points, daily data) 10-yr IT sovereign spreads 10-yr ES sovereign spreads 3-month EURIBOR-OIS (rhs) 800 200 Draghis London speech 700 175 3-year LTROs announcement 600 150 500 125 400 100 300 75 200 50 100 25 0 0 Oct/10 Jan/07 Mar/11 Jan/12 Jun/07 Nov/07 Jul/09 Aug/11 Jun/12 Nov/12 Sep/08 Feb/09 Dec/09 May/10 Apr/08 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).
  46. 46. INTERACTIVE DEBATEChief Economistsand AudienceModerator: Dirk Selleslagh – News Manager, Tijd.TV Vlerick Finance Alumni partner:
  47. 47. HOW IS THE BELGIAN ECONOMY MANAGING THECRISIS?Edwin De BoeckChief Economist, KBC Bank Vlerick Finance Alumni partner:
  48. 48. The Belgian economy - Outlook & challenges - Vlerick Alumni, 4 February 2013 Edwin De Boeck Chief Economist KBC Group
  49. 49. Business cycle Belgian economy stagnating since the beginning of 2011 Real GDP Consumption indicators 106 20 (Q4 2007 = 100) 19103 Belgium 105 Germany102 18 Netherlands France 104101 Euro-periphery (*) 17100 103 1699 102 1598 1497 101 1396 10095 12 99 Real private consumption (Q4 2007 = 100)94 Real household disposable income (Q4 2007 = 100) 11 Household savings rate (rhs)93 98 10 (*) Euro-periphery = Portugal, Ireland, Italy , Greece & Spain  49
  50. 50. Confidence still very weak ….but consumers seem too negative Employment expectations Employment outlook mfg. (NBB-survey) Employment outlook services (NBB-survey) 80 11 Unemployment expectations +12M (consumer survey) Households employment expectations (rhs) 70 Unemployment rate (rhs)1,5 10 600,5 50 9 40-0,5 30 8 20-1,5 7 10 0-2,5 6 -10-3,5 -20 5  50  8/03/2013 
  51. 51. External trade Exports suffering from European slowdown & deteriorating competitiveness Real exports Nominal unit labour costs (Q4 2007 = 100) (Q4 2007 = 100)115 114110 112105 110100 10895 10690 104 Belgium Belgium Germany Germany 102 Netherlands85 EMU (ex. Germany) France 10080 98  51  8/03/2013 
  52. 52. External position Watch out for the negative trend Development of market share on Deficit (-)/surplus (+) on the current the country’s export markets account balance120 (1999 = 100) 8 (in % of GDP)115 Belgium Germany 6110 France105 410095 290 085 Belgium80 Germany -275 France70 -4
  53. 53. Public finances The road of fiscal austerity Budget balance total Belgian government Public debt ratio (in % of GDP) (% of GDP) 130 -5,9 -4,8 -3,6 -2,8 -2.15 -1,1 0,0 Belgium (KBC calculation) (*) 0 Belgium (Stability Programme Spring 2012) 120 -1 Euro Area 4.7 bn. 110 -2 0.7 bn. 100 -3 53.6 Need for extra savings 6.5 (KBC estimate) -4 90 -5 Budget balance under 80 unchanged policy -6 70 60 Realised figures Target Stability Programme (April 2012) (*) Under unchanged policy assumption for 2014-2015 53 
  54. 54. Public finances LT-sustainability still at risk given unfavourable ageing costs Belgium - Old-age dependency ratio Belgium - Total public sector expenditure (population aged 65+ in % of 15-64) resulting from ageing (in % of GDP) 45 35 40 30 35 25 30 2012 Ageing Report EC 2009 Ageing Report EC 2006 Ageing Report EC 2003 Ageing Report EC 25 20 2010 2015 2020 2025 2030 2010 2015 2020 2025 2030 54  8/03/2013  Source: EC (Ageing Reports)
  55. 55. Housing market Prices not (yet) cooling off, on the contrary Recent development Belgian property prices Tightening of banks’ lending standards for (2011Q1 = 100) housing loans (lending survey NBB)107 80106 Belgium (ECB-index) Change in credit conditions Belgium (FOD-index) 60 Change in mortgage loan demand105 Belgium (Eurostat-index)104 EMU (Eurostat-index) 40103102 20101100 0 99 -20 98 97 -40 96 -60 95 (*) A negative sign indicates at a strengthening of the lending criteria resp. a decline in mortgage loan demand (and vice versa)
  56. 56. Growth outlook 2013 & 2014 Evolution of consensus forecasts of Growth outlook 2013 & 2014 (in%) real GDP growth in 2013 (in %) 1,8 2013 Belgium EMU Germany 1,6 EC 0.7 0.1 0.8 OECD 0.5 -0.1 0.6 1,4 IMF 0.3 0.1 0.9 1,2 NBB -0.1 -0.9/0.3 - Consensus 0.1 -0.1 0.7 14 Belgian banks 0.3 - - 0,8 KBC 0.5 0.0 0.9 0,6 EMU 2014 Belgium EMU Germany EC 1.6 1.4 2.0 0,4 Germany OECD 1.6 1.3 1.9 Belgium 0,2 IMF 1.0 1.2 1.4 Belgium (KBC) KBC 1.5 1.4 1.9 0 -0,2 Consensus forecast made in month 56  8/03/2013  
  57. 57. Interest rates Declining credit spreads Yield 10-year government bonds (in basis points) (in %) 400 Political crisis June 2010 - 6 350 November 2011 US Germany 300 Interest differential vs.10 Y. Bunds 5 Belgium CDS 5Y Sovereign Premium 250 4 200 3 150 2 KBC outlook 10-year rates 100 End of year (in %) +6m +12m US 2.25 2.75 1 50 Germany 1.75 2.25 Belgium 2.45 2.95 0 0 57 
  58. 58. IMPACT OF THE OUTLOOK FOR INVESTORSBart Van CraeynestChief Economist, Petercam Vlerick Finance Alumni partner:
  59. 59. Institutional Asset Management Titre de la présentation Vlerick Alumni Debate Monday 4 February 201321-09-2011 59/25
  60. 60. Goldilocks is back (for now) Global growth accelerates 15 2 Global growth is picking up 10 1 5 0 Inflation remains under control 0 -1 Monetary policy remains supportive -5 -2 -10 -3 Global Industrial production (yoy) Political risks have eased Global leading indicator (rhs) -15 -4 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 6004-02-2013 | Petercam Macro Presentation | 60/25
  61. 61. Government bonds getting very expensive 16 14 12 10 8 6 4 2 US bond yield 0 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 6104-02-2013 | Petercam Macro Presentation |
  62. 62. Bonds have had a spectacular run Investment Grade credit High yield9 14 A Indu 5yr Yld UST 5yr Yld IG credit spread BB Indu 5yr Yld UST 5yr Yld HY spread8 127 1065 84 63 42 210 0Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 6204-02-2013 | Petercam Macro Presentation |
  63. 63. Bonds very expensive relative to equity 16 14 12 10 8 6 4 2 Bond yield Dividend yield 0 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 6304-02-2013 | Petercam Macro Presentation |
  64. 64. You can fool some people sometimes, but… 1400 US mutual fund flows (cumulative, bn usd) 1200 1000 800 600 400 200 0 -200 -400 Into equity Into bonds -600 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 6404-02-2013 | Petercam Macro Presentation |
  65. 65. Global economic activity is key 40 6 30 5 20 4 10 3 0 2 -10 1 -20 0 -30 -40 -1 S&P500 Global GDP Annual change in % -50 -2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 6504-02-2013 | Petercam Macro Presentation |
  66. 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 6604-02-2013 | Petercam Macro Presentation | 66/25
  67. 67. Petercam N.V. Bart Van Craeynest Sint Goedeleplein 19 Hoofdeconoom bart.vancraeynest@petercam.be 1000 Brussel Tel.: +32 (0)2 229 62 32 Tel.: +32 (0)2 229 63 11 https://insights.petercam.com Fax : +32 (0)2 229 65 98 Brussels – Frankfurt – London - Luxemburg - Madrid - Geneva 6704-02-2012 | Petercam Macro Presentation | 67/25
  68. 68. INTERACTIVE DEBATEChief Economistsand AudienceModerator: Dirk Selleslagh – News Manager, Tijd.TV Vlerick Finance Alumni partner:
  69. 69. THANK YOUYou are kindely invited to the networking reception Vlerick Finance Alumni partner:

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