Monday 18 November 2013
Brussels
I discuss with our team in Hong Kong the implications of last Friday’s announcements of the Chinese reform programme over the coming years. The view is unambiguously positive, though it will take time to put in place and have an impact. Nevertheless, the measures should propel the rebalancing of the economy as it shifts from being driven by fixed asset investments to household demand.
Tuesday 19 November 2013
Switzerland
I’m travelling to Switzerland for client meetings. I get up very early, drive to Brussels airport, where having arrived at the gate, I’m informed that the flight is cancelled due to a strike. It’s 6.00 AM, so that leaves plenty of time for the day. Fortunately, I can take a later flight and after arriving in Geneva, I take the train. As on previous visits, I’m struck by the reliability of the trains and also by how expensive everything is. This tells us something about the CHF (and our currency specialists think it will weaken). Before my client meeting, I read a speech by Jean-Pierre Danthine, vice-chairman of the Swiss National Bank, on the causes and consequences of low interest rates (http://www.bis.org/review/r131115a.pdf?frames=0). Especially the part on the consequences is recommended reading. Safe-haven flows into CHF have pushed down interest rates even more than in other countries, causing the franc to appreciate strongly, but despite its disinflationary impact, apartment prices have been on a strong uptrend. The quest for yield has unleashed a hunt for rental income.
Wednesday 20 November 2013
Amsterdam
I’m speaking at our annual client event on the outlook for next year. We always start by looking back and assessing where we got it right or wrong. One year ago, we were right in being cautious on company earnings (they have basically stagnated), but we underestimated the power of central bank policy to support the prices of risky assets. Since QE3 started, the US S&P index has returned annualised 22.6%. The question is whether this is simply ‘correlation’ or ‘causality’. Looking at the ‘tapering tremors’ since late spring this year, one would tend to call it causality: QE has boosted the risk appetite of investors on the back of reduced downside risk for the market.
Thursday 21 November 2013
Belgium
Central banks continue to grab the attention. James Bullard, president of the St Louis Fed, insists that QE tapering is still possible in December. The yes/no/yes/no debate continues. European PMI numbers disappoint slightly. Despite the rising trend in recent months, their current level only corresponds with 0.2% GDP growth. We need more than that.
Friday 22 November 2013
Brussels
In a conference call with French clients, I discuss the outlook for the remainder of the year. With the ECB still biased towards easing and Fed tapering only expected in March, the environment is still supportive of equities.
William De Vijlder
Vice – Chairman of BNP Paribas Investment Partners
