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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Doug Prisner.

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Speaker 2: You can join Brian Curtis and myself for the stories,

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Speaker 2: making news and moving markets in the APAC region. You

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Speaker 2: can subscribe to the show anywhere you get your podcast

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Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the

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Speaker 2: Bloomberg Business app.

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Speaker 3: Joining us now on the program is Ryan Wong, us

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Speaker 3: economist at HSBC. So, Ryan, thank you for taking out

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Speaker 3: some time to be with us. So we had core

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Speaker 3: goods prices increasing zero point two percent month on month

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Speaker 3: in the latest CPI report, and it had investors a

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Speaker 3: little bit nervous. In fact, though core goods prices, as

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Speaker 3: you point out, I've risen in only two of the

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Speaker 3: past sixteen months, and we got the PPI that was flat.

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Speaker 3: So can we set aside inflation for the moment or

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Speaker 3: still have to be right on top of it?

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Speaker 4: Well, thanks for havingeing me. That's right.

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Speaker 5: The CPI data coming out of the United States, Actually

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Speaker 5: the most recent figures are a little bit the opposite

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Speaker 5: of what we had seen in previous months. So I

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Speaker 5: think a lot of the progress on disinflation this year

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Speaker 5: has been related to goods prices. Actually, goods prices have

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Speaker 5: actually been falling for most of the past year, and

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Speaker 5: it's the services side that has been stickier, has been

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Speaker 5: more elevated, both in terms of housing inflation and also

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Speaker 5: non housing services. But as I said, the latest set

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Speaker 5: of numbers were a little bit the opposite, goods prices

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Speaker 5: rising a little bit. I wouldn't read too much into

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Speaker 5: that single reading. We'll have to watch it in the

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Speaker 5: months ahead. But it was actually services inflation as well,

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Speaker 5: that is still overall I think, holding up inflation at

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Speaker 5: a higher level. So I mean to answer your question,

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Speaker 5: the bottom line is that core inflation, especially if you

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Speaker 5: look at the measure of the FED focuses on the

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Speaker 5: most so called core PCE inflation, it slowed from over

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Speaker 5: five percent two years ago to less than three percent today.

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Speaker 4: I expect it all actually.

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Speaker 5: Just bounce around where it is for the rest of

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Speaker 5: this year, maybe this two point six to two point

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Speaker 5: eight percent range, just below that three percent level.

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Speaker 2: So also last Friday, we learned from the University of

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Speaker 2: Michigan the consumer centiment unexpectedly fell for the first time

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Speaker 2: in three months. Maybe you don't believe a lot in

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Speaker 2: the University of Michigan data. But I think perhaps what's

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Speaker 2: going to be more important for markets in the week

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Speaker 2: ahead is the New York Fed survey on consumer expectations

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Speaker 2: for the month of September. How are you understanding the

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Speaker 2: American consumer right now?

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Speaker 4: Yeah, it's very interesting how you point that out.

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Speaker 5: I mean, look, I think all of the consumer surveys

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Speaker 5: do tell us something, right. I think it's a little

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Speaker 5: bit too to just looking at the surface to say

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Speaker 5: we just throw out this number because it doesn't make sense.

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Speaker 4: I think the one commonality.

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Speaker 5: Across all the consumer surveys is that, indeed the high

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Speaker 5: inflation of recent years has weighed heavily on sentiment. And

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Speaker 5: of course many have said it, but it's certainly the

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Speaker 5: case that even though inflation rates have declined, the high

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Speaker 5: prices continue to strain household budgets, and understandably, you know,

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Speaker 5: it may take more years to come before consumers truly

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Speaker 5: feel comfortable with just how high price levels have risen

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Speaker 5: over recent years. So I think that's really, on the

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Speaker 5: one hand, something you can't really get passed. On the

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Speaker 5: other hand, for a federal reserve that's trying to control

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Speaker 5: future inflation, not necessarily trying to get prices to fall

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Speaker 5: back to where they were prior to the pandemic. Well,

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Speaker 5: as you say, those inflation expectations measures do matter a lot,

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Speaker 5: and on that basis, actually the Michigan survey still shows

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Speaker 5: relatively stable inflation expectations, whether on kind of a one

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Speaker 5: year horizon or even on a longer five to ten

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Speaker 5: year horizon.

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Speaker 3: Growth is pretty firm. The now casts from Atlanta, the

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Speaker 3: Atlanta FED three point two to one percent. The last

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Speaker 3: couple of quarters have been around three percent. And so

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Speaker 3: that stimulus that's still coming into the economy, and that

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Speaker 3: means that you know, employment could get better from here,

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Speaker 3: not not worse from here. So you've got a pretty

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Speaker 3: strong economy. Do you see the economy as actually improving

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Speaker 3: here or weakening? And then I guess you know, part

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Speaker 3: of that question is what's the impact on inflation?

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Speaker 4: Yeah, well that's absolutely right.

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Speaker 5: So, I mean for the last few years and really

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Speaker 5: continuing through this year, the GDP part of the economic

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Speaker 5: data has continued to surprise. The upside in the United

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Speaker 5: States over on a year of a year basis real

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Speaker 5: GDP growth.

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Speaker 4: Of over three percent.

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Speaker 5: As you point out, the Atlanta Fed now cast doesn't

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Speaker 5: look like there's going to be too much of a

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Speaker 5: slowdown in the third quarter, and so that raised some

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Speaker 5: questions about, well, how does the strong GDP relate to

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Speaker 5: some of the new concerns about the job market with

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Speaker 5: slower jobs growth, the drift hire and the unemployment rate

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Speaker 5: over the past year. But then you look at the

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Speaker 5: most recent monthly jobs report and it contradicted some of

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Speaker 5: those fears. The unemployment rate has actually fallen for the

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Speaker 5: last two months, and so you know, I think markets

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Speaker 5: are concerned that if you look into the future, you

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Speaker 5: could have this self reinforcing downturn, let's say, slower jobs growth,

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Speaker 5: slower age growth, leading to less.

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Speaker 4: Spending down the road.

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Speaker 5: But then every few months we seem to get some

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Speaker 5: data that actually contradicts that type of fear and instead suggests, well,

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Speaker 5: actually incomes are still growing, maybe not quite as quickly

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Speaker 5: as they were two years ago, but still presumably strong

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Speaker 5: enough to keep spending going for a while longer. So

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Speaker 5: I don't think it's actually going to get any easier

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Speaker 5: to analyze the situation. Obviously, when we look forward to

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Speaker 5: the next job's report, we're going to have to be

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Speaker 5: dealing with how to interpret weather effects.

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Speaker 4: But you know, I think you continue.

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Speaker 5: To get a pretty interesting economic picture, and not necessarily

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Speaker 5: one that signals extreme weakness ahead.

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Speaker 2: So where does that leave the FED between Now, let's say,

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Speaker 2: in the end of the year, is it right to

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Speaker 2: assume that we're going to get another fifty basis points

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Speaker 2: in total rate cuts.

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Speaker 4: I think that is the most likely.

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Speaker 5: Our own forecast is that the FED will cut its

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Speaker 5: policy rate by twenty five basis points at each of

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Speaker 5: the next six policy meetings. So that's the two remaining

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Speaker 5: this year to your point in November December, the first

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Speaker 5: four meetings of twenty twenty five. And in a way,

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Speaker 5: as I alluded to, I do think the economic data

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Speaker 5: in the US will be confusing over the month ahead.

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Speaker 4: Obviously, we have a little over three weeks to go

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Speaker 4: to the US.

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Speaker 5: Election, and I think it does tend to mean that

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Speaker 5: most likely the FED will follow through with its kind

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Speaker 5: of baseline expectation. At least that's what VET chair Palell

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Speaker 5: told us a couple of weeks ago in terms of

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Speaker 5: twenty five base point moves at upcoming meetings. You know,

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Speaker 5: if the economic data broadly come in as anticipated.

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Speaker 3: We had the inflation deflation numbers in China kind of disappointing,

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Speaker 3: particularly PPI minus two point eight percent, worse than the

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Speaker 3: estimate of two six And so you wonder whether China,

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Speaker 3: at least at the moment, is still exporting deflation to

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Speaker 3: a place like the United States. So interested to get

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Speaker 3: your thoughts on that. And then you know, usually stimulus

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Speaker 3: does work at some point. So are we going to

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Speaker 3: be seeing that change with China's impact on the US

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Speaker 3: citnytime soon?

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Speaker 5: Well, I think at a broad level, like to your point,

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Speaker 5: it does matter greatly. Some economies are looking for inflation

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Speaker 5: to come down and other economies looking for inflation to

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Speaker 5: pick up. So it does highlight divergences across global trends.

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Speaker 5: I mean, I think in the broad sense, and to

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Speaker 5: the point that we were talking about earlier, goods price

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Speaker 5: inflation in the United States has declined significantly. I wouldn't

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Speaker 5: attribute that, you know, fully to the effects specifically of

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Speaker 5: let's say, output from China, but I think in the

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Speaker 5: global context that's definitely part of the story. Also, we

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Speaker 5: have to consider foreign exchange effects in the United States.

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Speaker 5: Of course, you know, a wide variety of exchange rates

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Speaker 5: matter for import costs and the bottom line, as all

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Speaker 5: of those have been relatively contained over the past year,

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Speaker 5: and so you know, you basically you saw goods prices

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Speaker 5: surge to extraordinarily high levels a couple of years ago,

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Speaker 5: with auto prices surging, household goods prices surging, and all

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Speaker 5: of that really has retreated over the past year, notwithstanding

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Speaker 5: the most recent monthly data.

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Speaker 2: So Ryan, in the week ahead, we've got some Fed speak.

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Speaker 2: Chris Waller is speaking along with Neil Keshkari and Mary Daily,

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Speaker 2: I think is on that list very quickly thirty seconds.

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Speaker 2: How does the FED go about managing market expectations right now?

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Speaker 4: Look, I think markets are in a pretty good place.

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Speaker 5: They are mostly pricing in that twenty five base point

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Speaker 5: rate cut that we're anticipating for November. I do think

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Speaker 5: a lot of the rhetoric is going to be shifting

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Speaker 5: to how to interpret the jobs data to come over

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Speaker 5: the weeks ahead, not to overreact to information that will

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Speaker 5: certainly be impacted by weather effects. And so I think

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Speaker 5: it's going to be an attempt to be reassuring the markets,

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Speaker 5: to basically try to send the signal of not overreacting

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Speaker 5: to one number over the week's ahead.

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Speaker 3: Thank you so much, Ryan, very clear, very good picture

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Speaker 3: of understanding coming from you. Bryan Loong, us economist HSBC.

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Speaker 3: Joining us now in our studios in Hong Kong is

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Speaker 3: mid min Low Bloomberg TV.

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Speaker 6: China correspondent who.

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Speaker 3: Takes a close look at the weekend developments at the

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Speaker 3: Ministry of Finance. So bottom line, mid men, is we

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Speaker 3: didn't get the two trillion you on, the two hundred

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Speaker 3: and eighty three billion dollars that had been expected somewhere

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Speaker 3: actually even thinking we might get more. So it's pretty

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Speaker 3: clear policymakers are showing continued reticence here over any kind

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Speaker 3: of shock at all, and they're just kind of tinkering

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Speaker 3: at it. But you know, it may be too much

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Speaker 3: to say that there would be vast disappointment.

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Speaker 7: Your thoughts, well, I would say that two trillion un

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Speaker 7: and fiscal stimulus is still on the table because remember

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Speaker 7: the last time we chatted, I told you that any

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Speaker 7: revision to the bus school budget deficit, as well as

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Speaker 7: any new additional new bonds above this year's quarter will

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Speaker 7: have to be approved by the legislature. So the legislature

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Speaker 7: is going to meet likely in late October. The NPC

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Speaker 7: standing Committee meeting, that's when we may be able to

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Speaker 7: hear at actual number. So this time we just heard

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Speaker 7: kind of hints of measures to come without a number

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Speaker 7: on it. But it's still, I guess, in some ways

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Speaker 7: in line with market expectations. I think in terms of

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Speaker 7: the details, we have to wait a little bit longer.

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Speaker 2: So you don't think there's a gap between what the

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Speaker 2: market is expecting and what the government is saying right now, I.

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Speaker 7: Think there is. There are some mixed reactions. I think

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Speaker 7: the biggest gap is the fact that the m ORF

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Speaker 7: briefing really disappointed in terms of lack of any stimulus

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Speaker 7: on the demand side, because the only cash handout that

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Speaker 7: they mentioned was doubling the quarta of scholarships for college

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Speaker 7: students and increasing financial aid to them, and this is

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Speaker 7: nothing to the extent of the scale that markets had

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Speaker 7: been expecting. A lot of the measures were targeted at

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Speaker 7: the property sector and at tackling local government debt, so

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Speaker 7: that demand side stimulus is what's missing here.

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Speaker 3: Yeah, I know there appears to be consensus on this

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Speaker 3: that there hasn't been enough to boost consumption, but actually, mean, men,

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Speaker 3: if you think about it and you look back over

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Speaker 3: the past twenty odd years, Domestic consumption has not been

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Speaker 3: a big driver in China's economic growth.

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Speaker 6: It's been a driver, but not the biggest. Investment and

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Speaker 6: trade has been, So I.

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Speaker 3: Wonder whether we should kind of rethink a little bit

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Speaker 3: about where they're targeting fresh money.

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Speaker 7: Yeah, it is not a big driver, but I guess

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Speaker 7: if you compare to pre pandemic times in terms of

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Speaker 7: the act activity data when it comes to retail sales,

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Speaker 7: the numbers that we are seeing now is still very weak.

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Speaker 7: And if you look at the GDP deflator, that's down

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Speaker 7: in negative territory for five straight months now. We had

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Speaker 7: the CPAI data that came out over the weekend, all

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Speaker 7: missed expectations, whether you're talking about consumer prices or producers prices,

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Speaker 7: and call inflation is now just zero point one. It's

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Speaker 7: the weakest since February twenty twenty one. So I think

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Speaker 7: there is still an argument for the weakness and domestic consumption.

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Speaker 6: That stential loss is really rather than like superstimulus.

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Speaker 7: Right.

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Speaker 2: Yeah, but if you have a protracted cycle of deflation

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Speaker 2: in China, which is clearly at work right now, I mean,

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Speaker 2: spending could only be driven further to lower levels and investment.

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Speaker 7: Also, Yeah, that's right, and right now, I just want

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Speaker 7: to draw your attention back to some of the other

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Speaker 7: measures they're talking about in terms of the spending by

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Speaker 7: local governments, because one of the big dregs on the

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Speaker 7: economy as well aside from consumption, is also the fact

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Speaker 7: that fiscal spending was very low this year. It has

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Speaker 7: shrunk by three percent in the first eight months of

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Speaker 7: this year. And even though we're not hearing additional sizes

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Speaker 7: of additional new bonds, but some analysts like Stanchart Thing

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Speaker 7: Shunk from Stanchart is saying that it's still quite significant

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Speaker 7: that they're widening the usage of local government bonds to

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Speaker 7: allow those funds to be used for buying up houses

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Speaker 7: because one of the reasons for the lag in fiscal

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Speaker 7: spending is also because there's been a lack of suitable projects.

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Speaker 7: Infrastructure has been so saturated that there are a lot

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Speaker 7: of idle funds sitting around that are not being spent.

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Speaker 7: So Stanchat is saying that this could unleash about one

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Speaker 7: trillion yen of idle funds if they widen the usage

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Speaker 7: of these local.

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Speaker 3: Government and that would be good for the developers because

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Speaker 3: we're talking about these local special bonds would enable the

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Speaker 3: local governments to buy unsold homes, homes around the market

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Speaker 3: that are empty, and so this would eventually get turned

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Speaker 3: into subsidized housing, right, and that's in need as well.

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Speaker 7: Yeah, so this is a little bit complicated. So some

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Speaker 7: editorsts are saying that yes, it's a good thing because

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Speaker 7: it could speed up that housing buyback programmed. But although

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Speaker 7: it provides fresh funding, it doesn't solve the lack of

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Speaker 7: profit incentives because in some cases, the yield that you

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Speaker 7: get from these subsidized rental housing sometimes is lower than

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Speaker 7: the funding cost for you know, for the loans that

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Speaker 7: you are taking out to buy these STU drag. Yeah,

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Speaker 7: so that's the reason why the take up rate has

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Speaker 7: been very low so far.

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Speaker 2: Well, I was just looking for any help that the

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Speaker 2: PBOC might be able to apply at this point or

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Speaker 2: is that pretty much off the table right now? It's

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Speaker 2: all on the part of the government and fiscal spending.

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Speaker 4: Yeah.

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Speaker 7: I think right now it is going to come down

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Speaker 7: to implementation of whatever PBOC has announced and fiscal spending.

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Speaker 7: I think we'll have to wait until late October when

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Speaker 7: the National People's Congress Standing Committee meets. They might give

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Speaker 7: us the size of that fiscal stimulus at that point.

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Speaker 7: And also remember we have the forward guidance for next

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Speaker 7: year the Ministry of Finance it there is still relatively

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Speaker 7: large room to raise fiscal deficit. I think that's also

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Speaker 7: very key.

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Speaker 3: Yeah, all right, mim men, thank you. Mimn Low Bloomberg

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Speaker 3: TV China correspondent Carlos Casanova joins US senior Asia economist

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Speaker 3: for UBP for discussion about global economics and markets.

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Speaker 6: Carlos, thanks very much for coming.

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Speaker 3: In no doubt you've had some time to go through

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Speaker 3: the Ministry of Finance briefing on Saturday, and the number

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Speaker 3: is on inflation and deflation that we got yesterday from China.

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Speaker 6: What's your take on where we're at at the moment.

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Speaker 1: Well, we are setting certainly witnessing a deceleration in economic

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Speaker 1: activity and we are likely going to see that reflect

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Speaker 1: in the Q three numbers later this week. Not surprisingly,

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Speaker 1: as a result of that, we have seen a much

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Speaker 1: more proactive government in terms of that policy stimulus, with

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Speaker 1: the focus still being on those monetary policy measures that

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Speaker 1: were announced at the end of September. There was a

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Speaker 1: lot of I guess, hype and buzz around the monetary

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Speaker 1: policy measures, and investors were sort of hoping that that

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Speaker 1: would mean that fiscal would would follow suit, making this

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Speaker 1: somewhat of you know, whatever it takes moment for China. Unfortunately,

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Speaker 1: we don't think that we are headed in that direction.

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Speaker 1: It was never we never expected the Ministry of Finance

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Speaker 1: to deliver the specific details during the weekend. The reason

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Speaker 1: for that is, of course Congress needs to approve any

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Speaker 1: additional spending. We do think that additional you know, new

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Speaker 1: money will will come. But given that the Ministry of

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Speaker 1: Finance highlighted the main policy tools and the main themes

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Speaker 1: that they're going to focus on. So they're going to

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Speaker 1: do bond issuance and special bondishanes to cover things like

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Speaker 1: a dead swapped for local governments, you know, finance some

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Speaker 1: of that, you know, the stocking of housing inventory, and

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Speaker 1: also recapitalize the bank so that they can lend more.

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Speaker 1: That really suggests to me that we are looking at

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Speaker 1: an ongoing effort at an ongoing reflation targeting some of

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Speaker 1: the bigger structural elements, hoping to sort of slow down

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Speaker 1: that pace of deceleration that we are going to see

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Speaker 1: this week. More than sort of whatever it takes moment

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Speaker 1: and China sort of making a U turn in terms

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Speaker 1: of where its priorities lie. So I think market still

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Speaker 1: needs to digest that a little bit and we're going

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Speaker 1: to see very volatile performance this week as a result.

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Speaker 2: So we had the inflation data over the weekend, PPI

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Speaker 2: down for a twenty fourth straight month. I mean, the

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Speaker 2: writing has been on the wall for some time. The

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Speaker 2: question is whether or not authorities in Beijing have delayed,

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Speaker 2: and whether that's going to make this situation so much worse.

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Speaker 1: My sort of reading on the inflation numbers, of course,

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Speaker 1: CPI was extremely flat, and that's in spite of a

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Speaker 1: pickup in vegetable prices due to adverse weather. But more

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Speaker 1: worrying than that open one percent CPI number is the

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Speaker 1: fact that PPI deflation worsened to minus two point eight percent.

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Speaker 1: Not only is it twenty four straight months of contraction,

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Speaker 1: but also the pace of contraction accelerated, whereas it should

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Speaker 1: have been gradually recovering, So deflationary pressures continue to persist.

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Speaker 1: I think the government, you know, has been very slow

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Speaker 1: to react. Our expectation is that they will deliver some

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Speaker 1: figures around the end of the month when the National

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Speaker 1: People's Congress Standing Committee meets.

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Speaker 8: Because they have to approve it. But we will have

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Speaker 8: to end.

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Speaker 1: We will have to wait until March next year, you know,

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Speaker 1: for the Congress to ratify the targets for twenty twenty five,

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Speaker 1: and so it's going to take longer than expected.

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Speaker 3: Most of the data that we saw in terms of

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Speaker 3: deflation and inflation was for the month of September, and

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Speaker 3: we didn't get the announcement from the Central Bank and

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Speaker 3: other broad package of measures until September rout around September

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Speaker 3: twenty second, twenty third, and since since that time, the

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Speaker 3: CSI three hundred has gained twenty one percent from the

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Speaker 3: close on September twenty third, So it's even though we

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Speaker 3: lost three point three percent last week, it's still higher.

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Speaker 3: So it seems like you're a little disappointed in the

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Speaker 3: slow approach, but maybe from the policymakers standpoint, they feel

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Speaker 3: like this is this is a measured move and the

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Speaker 3: wise one correct.

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Speaker 1: So the first of all, I don't think policy makers

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Speaker 1: really pay that much attention to the stock market. I

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Speaker 1: think that the stock market rally will also have a

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Speaker 1: relatively muted impact on consumers in China because Chinese households

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Speaker 1: are not exposed to equities in the same way that

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Speaker 1: US households are. About sixty or seventy percent of household

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Speaker 1: wealth in China's linked to real estate investments, so they're

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Speaker 1: stabilizing the real estate market. I think it is a

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Speaker 1: priority over stabilizing the stock market, but they don't completely

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Speaker 1: ignore it, and they are not looking to engineer a.

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Speaker 8: Massive, you know, bubble.

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Speaker 1: They would prefer something similar to what we saw last year,

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Speaker 1: which was a gradual pickup inequities over the span of

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Speaker 1: three or four months, sort of helping to boost sentiment overall,

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Speaker 1: rather than a situation like what we saw where you know,

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Speaker 1: equity is rally forty percent in two weeks, still best

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Speaker 1: performers in Asia year to date, but then the pullback

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Speaker 1: is much more severe as a result of the policies

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Speaker 1: being incremental.

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Speaker 2: Are we understating the risks here? If Paijing doesn't get

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Speaker 2: this right now, the dire situation that the overall Chinese

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Speaker 2: economy could fall into.

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Speaker 1: I think it's a delicate equilibrium. So Paijing wants to

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Speaker 1: have enough growth to facilitate structural reforms, but they are

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Speaker 1: not looking to go back to you know, the roar

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Speaker 1: in two thousands with nominal GDP growth around ten percent,

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Speaker 1: And I think that's something that the market doesn't really understand.

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Speaker 1: So what would it take for China to go back

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Speaker 1: to those numbers?

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Speaker 7: What?

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Speaker 8: You know, what does it take for that moment? In China?

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Speaker 1: The local government financing vehicle debt alone is worth moti

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Speaker 1: like many trillion un more than the stimulus packages that

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Speaker 1: have been floated around one to three trillion UN or

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Speaker 1: around one point five to maximum two percent of GDP.

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Speaker 1: In order for them to sort of deliver, they would

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Speaker 1: have to do upwards of five percent, maybe ten percent

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Speaker 1: of DP worth of fiscal stimulus. That is not going

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Speaker 1: to happen. And so I think one thing the market

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Speaker 1: needs to sort of wrap it get its head around

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Speaker 1: is the fact that we are not returning to high

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Speaker 1: nominal GDP growth rates. This is only facilitating enough growth

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Speaker 1: for that structural reform process to pan out. We still

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Speaker 1: need to see restructuring in the banking sector, and we

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Speaker 1: still need to see restructuring in the real estate sector.

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Speaker 3: Yeah, a lot of work to do. Let's switch to

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Speaker 3: Singapore for a moment. We heard from the Monetary Authority

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Speaker 3: of Singapore they would maintain the slope with and center

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Speaker 3: of the currency band, so as keeping monetary policy steady.

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Speaker 3: We also had economic growth accelerating in the third quarter.

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Speaker 3: It was a pretty healthy number, up four point one

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Speaker 3: percent year on year and advancing two point one percent

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Speaker 3: in the three months through September. So Southeast Asia has

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Speaker 3: been pretty solid here of late. How does it stack

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Speaker 3: up in terms of growth in the region.

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Speaker 1: I think we are still observing high growth rates around

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Speaker 1: as in in general. You know, low inflation environment and

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Speaker 1: expectations of policy rate cuts definitely help with a macro outlook.

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Speaker 8: For the region.

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Speaker 1: Specifically with Singapore, I think we will witness deceleration and activity.

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Speaker 1: Singapore is a small export oriented economy and so that

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Speaker 1: narrative around soft landing in the US should translate into

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Speaker 1: weaker export performance over the coming months. The GDP data

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Speaker 1: is backward looking, so we definitely did not see weak

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Speaker 1: exports over the third quarter period, maybe towards the end,

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Speaker 1: but certainly not at the beginning, so that narrative hasn't

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Speaker 1: fully materialized. But we do expect that the external side

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Speaker 1: will be more of a drag on Singapore. But it's

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Speaker 1: possibly a good sign for domestic consumption in twenty twenty five.

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Speaker 1: If it entails a policy shift by the Monetary Authority

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Speaker 1: of Singapore current environment, they probably have to wait a

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Speaker 1: little bit, but we do expect that it's going to

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Speaker 1: come in twenty twenty five.

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Speaker 2: I was talking to a friend over the weekend with

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Speaker 2: a condominium outside of Soul. Dramatic come cliin in the

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Speaker 2: value of the property. So I guess the real estate

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Speaker 2: market in South Korea is starting to soften to the

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Speaker 2: degree to which the Bank of Korea was confident in

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Speaker 2: lowering interest rates right.

442
00:23:11,280 --> 00:23:12,800
Speaker 8: Correct, correct. South Korea was.

443
00:23:14,280 --> 00:23:17,479
Speaker 1: The latest central bank in Asia to join the easing cycle,

444
00:23:17,760 --> 00:23:20,560
Speaker 1: albeit very cautiously, with a twenty five basis point way cut.

445
00:23:20,760 --> 00:23:23,160
Speaker 1: Main reason for that is, you know, inflation below target

446
00:23:23,520 --> 00:23:24,680
Speaker 1: at one point nine percent.

447
00:23:24,800 --> 00:23:25,359
Speaker 8: I think it was.

448
00:23:26,240 --> 00:23:28,359
Speaker 1: But of course in South Korea the debate continues to

449
00:23:28,400 --> 00:23:31,959
Speaker 1: be around that speculation in the real estate market, and

450
00:23:32,000 --> 00:23:35,679
Speaker 1: we have seen a marked correction in that area. So

451
00:23:35,800 --> 00:23:38,960
Speaker 1: Bank of Korea should feel comfortable to continue easing.

452
00:23:39,040 --> 00:23:41,400
Speaker 3: We've got the policy address coming up here in Hong Kong.

453
00:23:42,200 --> 00:23:45,840
Speaker 3: The Chief executive wants to make this a hub going forward.

454
00:23:46,760 --> 00:23:48,840
Speaker 6: What are your thoughts on Hong Kong In short, term.

455
00:23:49,520 --> 00:23:52,879
Speaker 1: I think Hong Kong is exposed to know the business

456
00:23:52,880 --> 00:23:54,800
Speaker 1: cycle in China, so things will be a little bit

457
00:23:54,840 --> 00:23:58,520
Speaker 1: more sluggish. In Hong Kong. We do see a lot

458
00:23:58,520 --> 00:24:03,680
Speaker 1: of exposure to so the recent rally probably might help

459
00:24:03,720 --> 00:24:05,879
Speaker 1: with some sentiment in the fourth quota, but going forward,

460
00:24:05,880 --> 00:24:07,879
Speaker 1: we need to really see what happens with the economy

461
00:24:07,880 --> 00:24:10,840
Speaker 1: in mainland China, as that's going to drive flows into

462
00:24:10,880 --> 00:24:11,280
Speaker 1: the region.

463
00:24:11,600 --> 00:24:14,520
Speaker 3: Carlos, thank you for joining us in studio in Hong Kong.

464
00:24:14,560 --> 00:24:25,680
Speaker 3: Carlos Casanova, Senior Asia Economists at UVP. Joining us now

465
00:24:25,720 --> 00:24:30,359
Speaker 3: is Shena Sissel, CEO of Bandary and Capital Management, Shana.

466
00:24:30,400 --> 00:24:32,920
Speaker 3: When I look at my big board here in markets,

467
00:24:33,480 --> 00:24:36,080
Speaker 3: I see obviously a lot of green on the screens,

468
00:24:36,160 --> 00:24:39,439
Speaker 3: and you've got the vics up over twenty. So it

469
00:24:39,520 --> 00:24:42,679
Speaker 3: is safe to say that most investors arelong but hedged.

470
00:24:44,280 --> 00:24:47,080
Speaker 9: Yeah, I guess it's pretty safe to say that it

471
00:24:47,160 --> 00:24:51,399
Speaker 9: hasn't been advantageous to not belong, So I think people

472
00:24:51,440 --> 00:24:54,920
Speaker 9: have kind of come to that conclusion over the last

473
00:24:54,960 --> 00:24:58,840
Speaker 9: few months and more money has flown into equity markets.

474
00:24:59,320 --> 00:25:01,360
Speaker 2: So when we look at the inflation story, I think

475
00:25:01,359 --> 00:25:04,159
Speaker 2: we can agree that things are a lot less severe

476
00:25:04,160 --> 00:25:06,399
Speaker 2: than they were even twelve months ago. We had a

477
00:25:06,440 --> 00:25:10,680
Speaker 2: flat reading on producer prices. Last month's reading on consumer

478
00:25:10,760 --> 00:25:12,959
Speaker 2: level inflation was a little hotter than the market had

479
00:25:13,040 --> 00:25:16,199
Speaker 2: been prepared for. Do you think this is going to

480
00:25:16,280 --> 00:25:19,520
Speaker 2: change the Fed's view on how to manage monetary policy

481
00:25:19,680 --> 00:25:22,480
Speaker 2: in the short term.

482
00:25:22,600 --> 00:25:27,240
Speaker 9: I don't know, honestly. I think the job report here

483
00:25:27,359 --> 00:25:32,840
Speaker 9: in the US, the most recent one, was surprisingly good

484
00:25:33,040 --> 00:25:36,720
Speaker 9: and even better than anybody expected, which I think the

485
00:25:36,760 --> 00:25:40,399
Speaker 9: FED is paying attention to those numbers. Inflation appears to

486
00:25:40,400 --> 00:25:43,280
Speaker 9: be under control, but it's still not at the Fed's target.

487
00:25:43,480 --> 00:25:47,320
Speaker 9: So I think any kind of economic upside, especially as

488
00:25:47,359 --> 00:25:49,479
Speaker 9: it relates to the job market, or even you know,

489
00:25:49,760 --> 00:25:52,920
Speaker 9: an inflation reading that seems tame on the surface but

490
00:25:52,960 --> 00:25:56,320
Speaker 9: that underneath has some pockets that are a little hot,

491
00:25:56,720 --> 00:26:01,359
Speaker 9: will make the FED, you know, consider their policy decisions,

492
00:26:02,520 --> 00:26:05,080
Speaker 9: potentially make it so that they are going to be

493
00:26:05,800 --> 00:26:08,600
Speaker 9: cutting at a slower rate than I think the market

494
00:26:08,640 --> 00:26:09,640
Speaker 9: has been anticipating.

495
00:26:10,200 --> 00:26:13,199
Speaker 3: So we always ask our guests about targets in this

496
00:26:13,359 --> 00:26:17,680
Speaker 3: environment here where you've got US equity valuations pretty high.

497
00:26:17,720 --> 00:26:22,520
Speaker 3: It's been another great year, given that central banks are

498
00:26:22,520 --> 00:26:25,320
Speaker 3: cutting and that at least growth in the United States

499
00:26:25,359 --> 00:26:28,600
Speaker 3: is looking pretty solid. Would it paid to go outside

500
00:26:28,680 --> 00:26:31,359
Speaker 3: the US for equity markets like maybe some of the

501
00:26:31,720 --> 00:26:34,560
Speaker 3: less attended to develop markets and even emerging markets.

502
00:26:35,760 --> 00:26:40,560
Speaker 9: I think the economic condition especially in Europe in particular,

503
00:26:40,640 --> 00:26:43,680
Speaker 9: aren't quite as strong as here in the US, and

504
00:26:45,400 --> 00:26:49,359
Speaker 9: that is potentially an opportunity. But it's not someplace that

505
00:26:49,440 --> 00:26:55,280
Speaker 9: I would run into completely open arms. I would be selective,

506
00:26:55,720 --> 00:26:59,360
Speaker 9: but there's certainly potential for opportunities to start to think

507
00:26:59,359 --> 00:27:02,440
Speaker 9: about way in which you can look at your portfolio

508
00:27:02,640 --> 00:27:05,240
Speaker 9: and kind of diversify some of the risks. The US

509
00:27:05,320 --> 00:27:08,560
Speaker 9: can't lead forever. The problem is it's really hard to

510
00:27:08,600 --> 00:27:10,840
Speaker 9: figure out the timing of these things, and I don't

511
00:27:10,880 --> 00:27:15,760
Speaker 9: see any indications, particularly in Europe, that would suggest me

512
00:27:17,200 --> 00:27:21,680
Speaker 9: that now is the time to jump in. But it's

513
00:27:21,760 --> 00:27:24,439
Speaker 9: certainly something that I would keep an eye on as

514
00:27:24,480 --> 00:27:28,920
Speaker 9: you think about how they're a European monetary policy, UK

515
00:27:29,080 --> 00:27:33,320
Speaker 9: monetary policy and things of that nature start to reflect

516
00:27:33,440 --> 00:27:36,480
Speaker 9: in the economic conditions in those those countries.

517
00:27:36,640 --> 00:27:39,960
Speaker 2: I appreciate you sharing your thoughts in advance. The notes

518
00:27:40,000 --> 00:27:42,920
Speaker 2: that you provided indicate that you're a little defensive here

519
00:27:42,920 --> 00:27:45,480
Speaker 2: in some of your positioning. To what extent is that

520
00:27:45,560 --> 00:27:47,880
Speaker 2: tied to the impending election.

521
00:27:49,600 --> 00:27:54,040
Speaker 9: It's not necessarily tied to the pending election. It's more

522
00:27:54,440 --> 00:27:58,679
Speaker 9: tied to the fact that I think it's really hard

523
00:27:59,280 --> 00:28:02,760
Speaker 9: to have a perfect soft landing. I think it's really

524
00:28:02,800 --> 00:28:06,000
Speaker 9: hard for the FED to be right and to not

525
00:28:06,680 --> 00:28:11,280
Speaker 9: have unintended consequences of their policy. More importantly, I think

526
00:28:11,320 --> 00:28:16,600
Speaker 9: that the FED potentially cutting too quickly is a negative.

527
00:28:17,280 --> 00:28:21,040
Speaker 9: I think the economy is doing just fine in the

528
00:28:21,200 --> 00:28:25,040
Speaker 9: GDP numbers keep being revised upward, so I am a

529
00:28:25,080 --> 00:28:29,600
Speaker 9: little concerned that they will loosen too quickly and that

530
00:28:29,680 --> 00:28:32,880
Speaker 9: has unintended consequences. That's why I'm defensive. But I'm also

531
00:28:32,920 --> 00:28:35,440
Speaker 9: concerned of how the fixed income markets are kind of positioned,

532
00:28:35,480 --> 00:28:39,440
Speaker 9: so I have alt exposure instead of bond exposure kind

533
00:28:39,440 --> 00:28:40,760
Speaker 9: of as a reflection of that.

534
00:28:41,840 --> 00:28:45,560
Speaker 3: So if we see China kick in because of the stimulus,

535
00:28:46,240 --> 00:28:48,800
Speaker 3: and it's true, it's a little disappointing over the weekend,

536
00:28:48,600 --> 00:28:50,760
Speaker 3: but not really that disappointing.

537
00:28:51,200 --> 00:28:53,840
Speaker 6: It just means the numbers are coming a little bit later.

538
00:28:53,960 --> 00:28:58,280
Speaker 3: But anyway, if China does well, X number of companies

539
00:28:58,280 --> 00:29:00,840
Speaker 3: in Asia will do well, maybe not all the equity

540
00:29:00,880 --> 00:29:03,920
Speaker 3: benchmarks because some money may get sucked into China, but

541
00:29:04,400 --> 00:29:07,120
Speaker 3: companies that are leveraged to China should do well. Are

542
00:29:07,120 --> 00:29:09,440
Speaker 3: you looking at that? Do you have any any gems

543
00:29:09,480 --> 00:29:10,239
Speaker 3: you can share with us?

544
00:29:10,800 --> 00:29:15,440
Speaker 9: Absolutely definitely looking at that. Do I have any gems?

545
00:29:15,440 --> 00:29:17,440
Speaker 9: I can't say that I do a lot of investing

546
00:29:17,560 --> 00:29:19,720
Speaker 9: outside of the US, so I can't say that I've

547
00:29:19,720 --> 00:29:23,480
Speaker 9: paid particular attention to anything specifically, but I can't say

548
00:29:23,520 --> 00:29:28,360
Speaker 9: broadly speaking, you know a lot of Chinese companies, particularly

549
00:29:28,360 --> 00:29:31,160
Speaker 9: tech companies and things of that nature, really beaten up

550
00:29:31,600 --> 00:29:37,120
Speaker 9: at interesting valuations. Some of the secondary, second derivative kind

551
00:29:37,160 --> 00:29:40,280
Speaker 9: of opportunities, especially in energy and things of that nature,

552
00:29:40,400 --> 00:29:45,240
Speaker 9: I think are interesting outside of the US. And any

553
00:29:45,280 --> 00:29:51,400
Speaker 9: sort of multinational, multi international companies that have a lot

554
00:29:51,440 --> 00:29:58,760
Speaker 9: of potential opportunity to increase growth and exposure in China

555
00:29:58,920 --> 00:30:01,840
Speaker 9: is a good thing. China not done well recently, so

556
00:30:01,920 --> 00:30:04,280
Speaker 9: having that expressure has been a negative. But if you

557
00:30:04,280 --> 00:30:07,240
Speaker 9: look at anybody who might be leveraged to the Chinese market,

558
00:30:07,400 --> 00:30:09,840
Speaker 9: even in the multinationals here in the US, that that

559
00:30:09,880 --> 00:30:10,720
Speaker 9: could be a positive.

560
00:30:11,000 --> 00:30:14,120
Speaker 2: So I'm curious in the US equity space, is there

561
00:30:14,160 --> 00:30:16,360
Speaker 2: a theme or a few themes that you like right

562
00:30:16,360 --> 00:30:19,360
Speaker 2: now that you think will deliver in the next six

563
00:30:19,400 --> 00:30:21,160
Speaker 2: to nine months.

564
00:30:21,960 --> 00:30:24,520
Speaker 9: I think that if you go down cap that there's

565
00:30:24,520 --> 00:30:28,080
Speaker 9: some opportunities. I'm not necessarily saying small caps per se,

566
00:30:29,360 --> 00:30:33,680
Speaker 9: but if you think about kind of a FED loosening

567
00:30:34,240 --> 00:30:36,920
Speaker 9: and cutting of rates, that tends to be better down cap.

568
00:30:37,880 --> 00:30:40,040
Speaker 9: So looking at mid caps and small caps I think

569
00:30:40,120 --> 00:30:43,880
Speaker 9: are interesting here. I also think moving outside of the

570
00:30:43,920 --> 00:30:49,360
Speaker 9: mag seven and looking at I think industrials are really interesting,

571
00:30:51,680 --> 00:30:54,560
Speaker 9: and healthcare is really interesting to me. Those are areas

572
00:30:54,600 --> 00:30:57,280
Speaker 9: that I would be paying attention to as we have

573
00:30:57,400 --> 00:30:59,800
Speaker 9: greater breath in the market.

574
00:31:00,120 --> 00:31:04,720
Speaker 3: I hear from policy are from commentators that small caps

575
00:31:05,280 --> 00:31:07,200
Speaker 3: as a group are not very good, so you have

576
00:31:07,240 --> 00:31:10,440
Speaker 3: to be a good stock picker. But then you would

577
00:31:10,480 --> 00:31:13,320
Speaker 3: think that the best companies in there, if if they

578
00:31:13,320 --> 00:31:15,600
Speaker 3: did well, that perhaps they'd have the same sort of

579
00:31:15,600 --> 00:31:18,040
Speaker 3: impact that the best companies the S and P five

580
00:31:18,120 --> 00:31:21,800
Speaker 3: hundred dominate and lift the whole the whole complex. How

581
00:31:21,840 --> 00:31:24,440
Speaker 3: do you actually approach looking for mid caps and small caps?

582
00:31:24,960 --> 00:31:28,920
Speaker 9: Well, that's actually the problem. Companies that do well in

583
00:31:29,000 --> 00:31:35,000
Speaker 9: the lower cap indices graduate leave, they leave. Super micro

584
00:31:35,080 --> 00:31:37,920
Speaker 9: Computer is a perfect example of that it was one

585
00:31:38,000 --> 00:31:40,480
Speaker 9: stock that drove a lot of their turns in the

586
00:31:40,560 --> 00:31:42,320
Speaker 9: Russell two thousand for a long time, and then it

587
00:31:42,360 --> 00:31:46,720
Speaker 9: graduated and it didn't matter anymore. So, uh, that's why

588
00:31:46,760 --> 00:31:48,720
Speaker 9: you have to be very particular and you really have

589
00:31:48,800 --> 00:31:50,239
Speaker 9: to be a stock picker when you look at these

590
00:31:50,280 --> 00:31:54,480
Speaker 9: industries because there's you know, rising stars and falling angels, right,

591
00:31:55,320 --> 00:31:57,440
Speaker 9: you got to you gotta know which is which, right,

592
00:31:57,480 --> 00:31:59,080
Speaker 9: because things fall.

593
00:31:59,160 --> 00:32:01,480
Speaker 6: That's why we have you rise.

594
00:32:01,280 --> 00:32:04,240
Speaker 9: Into out of it. So yeah, you just really have

595
00:32:04,320 --> 00:32:07,520
Speaker 9: to look at the momentum, some of the earnings and

596
00:32:07,560 --> 00:32:11,280
Speaker 9: the businesses there and figure out what really are That's

597
00:32:11,280 --> 00:32:15,680
Speaker 9: why small cap active managers have traditionally been able to

598
00:32:15,680 --> 00:32:19,560
Speaker 9: outperform in a way that is not seen in the

599
00:32:19,880 --> 00:32:21,320
Speaker 9: mega and large cap names.

600
00:32:23,080 --> 00:32:25,600
Speaker 3: Well, I guess that's it for today. Unfortunately out of time.

601
00:32:25,640 --> 00:32:27,200
Speaker 3: It's always fun to talk with you, and I know

602
00:32:27,200 --> 00:32:29,400
Speaker 3: you always come on on a Sunday, which is very

603
00:32:29,480 --> 00:32:32,760
Speaker 3: kind of you. SHANEA thank you for joining us. Shane Sissel, there,

604
00:32:32,920 --> 00:32:35,120
Speaker 3: CEO of Boundery and Capital Management.

605
00:32:38,160 --> 00:32:41,080
Speaker 2: This has been the Bloomberg Daybreak Asia podcast, bringing you

606
00:32:41,160 --> 00:32:44,240
Speaker 2: the stories making news and moving markets in the Asia Pacific.

607
00:32:44,760 --> 00:32:47,880
Speaker 2: Visit the Bloomberg Podcast channel on YouTube. To get more

608
00:32:47,920 --> 00:32:51,520
Speaker 2: episodes of this and other shows from Bloomberg, subscribe to

609
00:32:51,560 --> 00:32:55,320
Speaker 2: the podcast on Apple, Spotify, or anywhere else you listen,

610
00:32:55,440 --> 00:32:58,560
Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the

611
00:32:58,560 --> 00:33:01,320
Speaker 2: Bloomberg Business app.

612
00:33:01,120 --> 00:33:01,640
Speaker 6: Hey