Presentation from our 6th Chief Economist Debate Event

1. Vlerick Chief
Economists Debate
2015
6th edition

2. 2
Why Start from Scratch?
Buy Your Own Company

3. © Vlerick Business School
BUY YOUR OWN COMPANY
CONFERENCE - 26 February 2015
Learn from successful buyout and
buy-in entrepreneurs:
• Dieter Penninckx (FNG Group: Fred & Ginger, Van Hassels,…)
• Jo Van Steenvoort (Medio)
• Harry Christiaens (Pharmavize)
• Wiet Van de Velde (Palletkraft, RED,…) and many more
Get academic background from
• Prof Hans Crijns (Growth Management)
• Prof Gino Van Ossel (Retail Management)
• Prof Mike Wright (Entrepreneurship) and others
KEYNOTE ON NEGOTIATING POWER
by PROF KATIA TIELEMAN
SCHEDULE PRIVATE
MEET-UPS
ING, VD&P Corporate Finance,
SDM-Valorum, Winx,
Fibizpartners, Finactor, MNA,
Vista Capital, Common
Grounds, Sherpad, Sequensis,
KBC, Belfius, Greenpark
Investment Partners, PMV,
Capital@Rent, Down2Earth,
Buysse & Partners, KeBek,
QAT, Think2Act, O.B.A., Vectis
Participaties

4. © Vlerick Business School
THE GOLDEN TICKETS FOR THE
BUYOUT CONFERENCE

5. Keynote Speakers
Chief Economists Debate
Speaker Function and Company
Mr. Edwin De Boeck Chief Economist, KBC Bank
Mr. Peter De Keyzer Chief Economist, BNP Paribas Fortis
Mr. Geert Gielens Chief Economist, Belfius
Mr. Peter Vanden Houte Chief Economist, ING
Mr. Prof. Dr. Koen Schoors Moderator

6. How unsustainable is Greek debt?
Source: Bruegel
6

7. ING BELGIUM
Direct impact of a Grexit should be smaller
Banks’ exposure to Greece much lowerOfficial sector has biggest exposure to Greek public debt
Foreign banking claims on GreeceComposition of central government debt has changed dramatically
But contagion effects would still be huge as euro would prove not to be “irreversible”
0
20
40
60
80
100
120
140
160
180
200
Q1-2011 Q2-2014
On the Greek non-bank private sector On the Greek public sector
On Greek banks
USD bn
0
50
100
150
200
250
300
350
400
Q1-2011 Q3-2014
Bonds Notes Loans
EUR bn
7

8. Divergence in money growth between US and
Eurozone
8

9. 5yr 5yr forward break-even inflation rate
9/24/11 9

10. ING BELGIUM
ECB QE programme
• Open-ended plan: €60 Bln per month until
September 2016 and at least until there is a
sustained adjustment in the path of inflation which
is consistent with the aim of achieving inflation
rates below, but close to, 2% over the medium
term.
• Risk sharing: 20% mutualised (mostly supra-
nationale bonds) and 80% non-mutualised
10

11. ING BELGIUM
ECB bond buying targets
>100%
25% issue limit
148.5
29.9
23.7
14.0
171.1
106.7
48.3
0.8
217.1
15.2
21.0
4.2
1.8
9.3
24.5
2.4
5.0
3.4
2.3
0 25 50 75 100 125 150 175 200 225
Italy
Belgium
Austria
Ireland
France
Spain
Netherlands
Malta
Germany
Finland
Portugal
Slovenia
Cyprus
Slovakia
Greece
Luxembourg
Lithuania
Latvia
Estonia
Allocation of €850bn worth of sovereign bond purchases based on ECB capital keys
9.0%
9.4%
11.0%
12.0%
12.8%
14.7%
14.7%
15.9%
18.2%
19.0%
19.1%
22.5%
28.8%
28.6%
36.8%
38.6%
48%
89.6%
0.0% 25.0% 50.0% 75.0%
Italy
Belgium
Austria
Ireland
France
Spain
Netherlands
Malta
Germany
Finland
Portugal
Slovenia
Cyprus
Slovakia
Greece
Luxembourg
Lithuania
Latvia
Estonia
Central government bonds to be purchased by country (EUR bn) Target amount as a share of current outstandings (%)
11

12. Chief Economists Debate
Europe & ECB policy
Geert Gielens, Chief Economist
January 2015
12

13. ECB Bazooka: fighting deflation/stagnation.
The ECB used its QE bazooka and it is a big one
 ECB meeting of January, 22
 QE: purchases of €600 bln of government bonds and ABS/Covered bonds
between march 2015 and sept 2016 (open ended!)
 Maturities between 2Y and 30Y (linkers and FRN incl.)
 In the secondary market
Bron : Belfius Capital Markets / ECB 13

14. ECB Bazooka: fighting deflation/stagnation.
The ECB used its QE bazooka and it is a big one
Bron : Belfius Capital Markets / ECB 14

15. Asset inflation.
The fed balance sheet is the driver behind the price increase of stocks
Bron : FACTSET
15

16. Low rates do not equate high growth.
Low rates: a necessary, not a sufficient condition
Bron : FACTSET
I (t)= 0,46 profit (t-1) + 30080 capacity utilisation (t-1)
(8,37) (12,36)
16

17. Financing: not “the” pressing problem in Belgium.
Demand is lacking, not supply
Source: ECB; SAFE
H2 2011 H2 2012 H2 2013 H12014
competent staff 25% 15% 14% 21%
finding
customers
17% 16% 19% 18%
production- &
labourcost
24% 24% 22% 18%
regulation 7% 16% 16% 13%
competition 13% 13% 14% 12%
financing 10% 10% 9% 11%
other 5% 6% 7% 7%
total 100% 100% 100% 100%
17

18. Lower oil prices
A boost to global growth in 2015?
February 2015
Edwin De Boeck
Chief Economist KBC Group

19. 19
Oil- and commodity prices
Going down…
Oil price falling more in USD than in EUR
(price per barrel Brent)

20. 20
China- Real GDP
(y.o.y.-change, in %)
Lower oil- and commodity prices
…reflecting some weakness of (a.o. Chinese) demand…

21. 21
Demand & supply on the oil market
(mln. barrels per day)
Source: International Energy Agency
Lower oil prices
…but mainly a positive supply shock
0
2
4
6
8
10
12
US oil production
(mln. barrels per day)
Tight oil production
Crude oil production (excl. tight oil)

22. 22
Demand & supply on the oil market
(mln. barrels per day)
Source: International Energy Agency
Lower oil prices
…but mainly a positive supply shock

23. 23
 A ‘permanent’ or ‘temporary’ shock?
- What is the price elasticity of oil
supply?
 Global macro-economic impact?
- What is the net impact of an income
transfer from oil producers to oil
consumers?
- What is the impact on inflation
(expectations) and monetary policy?
Lower oil prices
Global macro-economic impact

24. 24
Impact of a 20% oil price decrease after
one year on real GDP (in %-points)
Lower oil prices
Global macro-economic impact
 A ‘permanent’ or ‘temporary’ shock?
- What is the price elasticity of oil
supply?
 Global macro-economic impact?
- What is the net impact of an income
transfer from oil producers to oil
consumers?
- What is the impact on inflation
(expectations) and monetary policy?

25. 25 Source: ECB staff
Cumulative impact of 10% oil price decrease
after 3 years on real GDP
(in %-points)
Lower oil prices
Impact on growth in Eurozone countries (ECB-estimates)
Oil consumption - Belgium vs. Eurozone
(1980 = 100)

26. 26
Lower oil prices
Adding to deflationary pressure?
 A ‘permanent’ or ‘temporary’ shock?
- What is the price elasticity of oil
supply?
 Global macro-economic impact?
- What is the net impact of an income
transfer from oil producers to oil
consumers?
- What is the impact on inflation
(expectations) and monetary policy?

27. 27
Investment themes 2015 ?
 Buy
 US-dollar
 European stocks: large cap cyclicals that benefit most from lower oil prices
and/or USD-appreciation
 Emerging Asia
 technology stocks
 high dividend stocks
 Underweight financials, basic materials and energy
 Underweight US-stocks
 Short duration

28. 3/2/2015 |Economic Research 28

29. 3/2/2015 |Economic Research
Slow recovery…
29

30. 3/2/2015 |Economic Research
…one of a kind recession
30
GDP levels - Q1 2008 = 100

31. 3/2/2015 |Economic Research
Low growth, low inflation
31

32. 3/2/2015 |Economic Research
Important source of growth on its way back…
32

33. 3/2/2015 |Economic Research
…and productivity growth lower
33

34. 3/2/2015 |Economic Research
Not a lot of room for more public spending…
34

35. 3/2/2015 |Economic Research
…but lot of room for more innovation
35

36. 3/2/2015 |Economic Research
Conclusion
• Weak growth in Europe…
• …for some time to come
• Negative demographic backdrop…
• …and not a lot of fiscal space
• Growth will come from innovation and competition
36

37. Q&A
Finance Alumni, Your Financial Network

38. Thank you
Finance Alumni, Your Financial Network

39. Networking Drink
&
Upcoming events
Finance Alumni, Your Financial Network
Events Organizer Date
Chief Economists Debate Finance Alumni 03 Feb 2015
Meet the industry: Pharma Finance Alumni 05 Feb 2015
Burn-out door TE VRIENDELIJK MGM Alumni 09 Feb 2015
Company visit Tesla Belgium MGM Alumni 17 Feb 2015
Buying your own company Vlerick Business School & Vlerick
Finance Alumni
26 Feb 2015
Vlerick Grand Ball Vlerick students 07 Mar 2015
Meet the CEO MGM Alumni 18 Mar 2015