Capital Markets How are investors reacting to the crisis? What tto expect tin the coming years? José Ramón Valente March, 2009

Transcription

1 Capital Markets How are investors reacting to the crisis? What tto expect tin the coming years? José Ramón Valente March, 2009

2 World growth over its historical rate World GDP (Real annual % grow th) Average : 4.7 Average : Source: IMF

3 Historical world growth rate US GDP JAPAN GDP CHINA GDP (Annual real % grow th) (Annual real % grow th) (Annual real % grow th) Average Average 2008: : Average : Source: Maddison, Bloomberg and measuringworth.org

4 Risk 1800 EMBI+ Spread b.p. 350 AAA spreads b.p Average : 651 Average : Average : 112 A verage : Source: JPMorgan and

5 Interest rates went permanently lower 10.0 Real Interest Rates (annual %) Average : 3.3 Average : Average : 2.2 Average : FED T10y -4.0 J.80 J.82 J.84 J.86 J.88 J.90 J.92 J.94 J.96 J.98 J.00 J.02 J.04 J.06 J.08 5 Source: FED and Bloomberg

6 What is the effect in stock prices? Assumptions P x = F. r - g Increase in GDP growth (g): 1.5% Drop in risk premium: 200 b.p. Decline in risk free interest rate (R f ): 100 b.p. Then stock prices should have increased 140.6% 6

7 What happened in the markets? 450 World MSCI (Index in USD) 400 Δ- 56.2% 350 Δ % Source: Morgan Stanley

8 What happened in the markets? 1600 S&P 500 (Index in USD) 1500 Δ- 52.6% Δ+ 90.0% Source: Bloomberg

9 Value creation Index 2000= World US Source: IMF

10 What to expect for the future? According to historical data ( ) R f = 2.2% R(m) R f = 5.9% β m = R k = 8.1% According to Fama R f = 2.2% R(m) R f = 3.5% β m = 1.0 R k = 5.7% 10

11 What to expect for the future? 70 S&P Total Return (Real annual %) % Source: Bloomberg

12 What about the asset allocation? 60.0 Annual Real Return (%) 30.0 Rolling 5 Years Annual Real Return (%) Large Stocks US T-bills Large Stocks US T-bills Probability of Negative Return Stocks US T Bills Probability of Negative Return Stocks US T Bills Before % 36.6% After % 37.3% Change in probability 0.8% 0.8% Before % 33.8% After % 33.3% Change in probability 1.0% -0.4% 12 Source: Ibbotson and Econsult

13 What about the asset allocation? 20.0 Rolling 10 Years Annual Real Return (%) 16.0 Rolling 20 Years Annual Real Return (%) Large Stocks -2.0 Large Stocks US T-bills US T-bills Probability of Negative Return Stocks US T Bills Before % 37.5% After % 37.0% Change in probability 1.2% -0.5% Probability of Negative Return Stocks US T Bills Before % 32.3% After % 31.7% Change in probability 0.0% -0.5% 13 Source: Ibbotson and Econsult

14 Effects on asset allocation Permanent increase on fixed income weight on portfolios Permanent reduction on high yield and emerging market debt Permanent reduction on hedge funds 14

15 Effects on asset allocation World Capital Market December 2007 US$109.6 tr. All Other Stocks 22% Emerging Market Stocks 3% U.S. Stocks 18% Private Capital 1% Cash Equivalents 4% Real State 6% EM Market Debt 3% Non- U.S. Bonds 19% High Yield Bonds 1% U.S. Bonds 23% 15 Source: Ennis Knupp

16 Effects on asset allocation World Capital Market December December 2008 Due to Valuation All Other Stocks U.S. Stocks Real State Emerging Market Stocks High Yield Bonds Private Capital -6.8% -4.1% -1.7% -0.9% -0.1% -0.1% Emerging Market Debt Cash Equivalents 0.3% 09% 0.9% Non- U.S. Bonds U.S. Bonds 5.7% 6.6% 16 Source: Ennis Knupp and Econsult

17 Chilean Pension Funds Dec Jan.2009 Variation Fund A 23.7% 15.8% -7.9% Fund B 22.8% 18.7% -4.1% Fund C 42.0% 44.0% 2.0% Fund D 10.1% 13.3% 3.2% Fund E 1.4% 8.2% 6.8% Total 100.0% 0% 100.0% 0% 17 Source: SAFP

18 Chilean Pension Funds Chilean AFPs Asset Allocation (January 2009) Chilean Money Market 14.70% Other 3.70% Foreign Fixed Income 2.60% Foreign Equity 14.50% Chilean Equity 12.90% Chilean Fixed Income 30.60% 18 Source: SAFP

19 Bond issues vs. IPOs Chilean Bond Issues 3,500 ($MM) 2008 MM 3,000 2,500 2,000 1,500 1, Expected in March Arauco UF 1.00 Arauco UF 5.00 Cementos Bio Bio UF 1.50 Endesa UF Saesa UF MM Masisa UF 3.00 SQM UF SQM UF 21,000 Enap UF 9.75 Sodimac UF 32,170 Indura UF 0.50 Indura UF 3.00 Cencosud UF 3.00 Esval UF 0.50 Esval UF Source: BCS

20 Bond issues vs. IPOs Chilean IPOs USD MM 500 Nº of IPOs Source: BCS

21 What to expect in the coming years?

22 Economic policies for the future Chile faces a presidential election at the end of this year What to expect? The difference between candidates will be the way in which they approach much needed long term reforms Education quality 22

23 Education quality Máximo 605 Matemáticas Ciencias Máximo 578 Promedio Internacional 467 Promedio Internacional 474 Chile 387 Chile Source: TIMMS

24 Economic policies for the future Chile faces a presidential election at the end of this year What to expect? The difference between candidates will be the way in which they approach much needed long term reforms Education quality Entrepreneurship 24

25 Difficulties to start and close a business Rankings Doing Business 2009 Ease of Doing Business Starting a Business Closing a Business Singapore New Zealand United States Hong Kong Denmark United Kingdom Ireland Canada Australia Norw ay Iceland Japan Thailand Finland Chile Colombia Mexico Peru El Salvador Source: World Bank

26 Economic policies for the future Chile faces a presidential election at the end of this year What to expect? The difference between candidates will be the way in which they approach much needed long term reforms Education quality Entrepreneurship State Reform Bureaucracy (enviromental impact, etc.) Project evaluation (Ferrocarriles del Estado) Corporate governance (Enap) 26

27 Economic policies for the future The difference is on the GDP potential growth rate, not in the annual growth The government term is inconvenient for this objective. You need to seed during several years to harvest later GDP (Real % annual grow th) Average : 7.9% Average : 3.7% Source: Central Bank of Chile

28 Economic policies for the future The difference is on the GDP potential growth rate, not in the annual growth The government term is inconvenient for this objective. You need to seed during several years to harvest later. Grow th Sources (Real annual %) 7.9 TFP Capital Labor Source: Central Bank of Chile and Econsult

29 EL GOLF 99, OF LAS CONDES, SANTIAGO CHILE TELÉFONO: (562) FAX: (562)