Monday 24 March 2014 

London 

At Canary Wharf in the morning for a broad ranging interview with Reuters on the market outlook. In the afternoon, we have our weekly asset allocation meeting. There is an in-depth discussion on the outlook for European high-yield bonds. The asset class has been doing very well and the good performance of ‘peripheral’ bond markets has helped by making attractive yields ever scarcer. We stick to our positive stance. Later in the afternoon, I have a good discussion with a colleague of many years on whether Wall Street is getting overheated. Sections of the IT industry have become very hot, but they are now correcting. However, this is triggering a style rotation towards value rather than a move away from equities as a whole. Such a rotation is comforting. In the evening, I have dinner in my hotel. The waitress brings me the menu and The Daily Telegraph. Boris Johnson, the mayor of London, has written an article on “Lamborghini and pension pots”. This follows the announcement by the British pensions minister that people will be allowed to ask for their pension reserves (‘pot’) in cash rather than being forced to buy an annuity. On that occasion, he had added that if they wanted to buy a Lamborghini with the money, that would be fine for him.

Tuesday 25 March 2014 

London / Paris 

Morning meeting with a big institutional investor on absolute-return investing (where there is a need for different, de-correlated performance drivers, e.g. combining skill-based, quantitative and momentum strategies) and on income investing. Dividend yields compare well with bond yields and should track inflation better than nominal bond yields, so for income investors, equities have a clear merit … provided you are confident that you do not have to sell part of your equity holdings over the next few years. 

In the evening in Paris, I speak at the Pompidou Centre on the occasion of a large Parvest client event. Parvest is our glagship fund range. 

Wednesday 26 March 2014 

Brussels/London 

In the morning, I have a client conference call together with our China strategist, our China equity manager and our head of Asian fixed income on the topic of “What’s happening in China?”. We believe China will be able to realise its growth objective (roughly 7.5% GDP growth) and that, if need be, stimulus will be provided. Admittedly, the liberalisation of financial markets, the clean-up in shadow banking as well as corporate defaults are creating a stressful environment. On the other hand, the reform agenda, which places a big emphasis on the environment (reducing pollution) among other things, is the most ambitious we’ve seen in many, many years, so this bodes well for the longer term. On the back of hopes of a policy initiative, the stock market didn’t suffer too much as a result of recent poor macroeconomic data. On the currency side, the recent weakening has not changed the long-term trend and this makes offshore RMB bonds an interesting opportunity. In summary, there were three messages that emerged from this call: 

1. Offshore RMB bonds are an attractive asset class from a EUR or USD investor-based perspective

2. Actively managed Chinese equities are attractive from a longer-term perspective, in particular based on a PE multiple that is low in absolute terms and when compared with expected earnings growth, in an economy where inflation is under control and unpleasant monetary surprises thus look unlikely

3. Chinese environment-related stocks are particularly attractive with even lower PEG (price earnings divided by earnings growth) ratios than the market as a whole. 

On the Eurostar to London, I read about yesterday’s important statements by Bundesbank president Jens Weidmann. He mentions QE and negative deposit rates as a possibility. Reading between the lines: if the euro rises too much and/or inflation declines much further, the ECB would take action. In the afternoon, I chair a session at the EDHEC conference on dynamic asset-liability management for pension funds. The research conducted by EDHEC academics in the context of the BNPP IP research chair emphasises an approach based on five pillars: diversification, liability hedging, smart rebalancing (based on mean reversion), risk overlay and smart beta. 

Thursday 27 March 2014 

Brussels 

I prepare my presentation for next Saturday’s panel discussion at a conference in Deauville (France). The topic is whether markets are in bubble territory again. The short answer is that many asset classes are trading at expensive valuations, but this does not necessarily mean they’re in a bubble. The long answer is the topic of an upcoming blog, so stay tuned. 

Friday 28 March 2014 

Brussels 

I have my monthly call with our CIO of Asean equities. Indonesian equities have been surprisingly strong on the back of better macroeconomic data (trade balance surplus) and the hope of economic reform after the elections. He also mentions he likes the equity markets in Thailand and the Philippines. 

I publish my first post as a Linkedin influencer. The title is “I’ll be watching you” and it discusses the mutual influence of markets and central banks in the context of inflation expectations (Click here http://linkd.in/1rJUrU6).

Saturday 29 March 2014 

Deauville 

I start my presentation on “Are financial markets in a bubble?” by saying that in the very same hotel in March 2000, at the same conference, I spoke on what was then called “The New Economy”, adding “And we all know how that ended”. A good way of grabbing attention on a sunny Saturday morning. Afterwards, I walk along the decking on the beach. The sun is shining, the sky is blue and the beach cabins are named after movie actors. However, I can’t resist thinking of that picture of chancellor Merkel and president Sarkozy walking at the very same spot at the height of the eurozone crisis. Since then, a lot has changed.

 

William De Vijlder

Vice – Chairman of BNP Paribas Investment Partners