WEBVTT - Southeast Asia’s Stars Align for Growth 0:00:02.320 --> 0:00:07.080 You're listening to Asia Centric from Bloomberg Intelligence, the podcast 0:00:07.160 --> 0:00:10.240 that pulls back the curtain non global business so you 0:00:10.360 --> 0:00:14.680 can invest better across the Pacific Rim. I'm Tom Corbett 0:00:14.720 --> 0:00:15.880 in Hong Kong. 0:00:15.880 --> 0:00:19.640 And I'm John Lee. Southeast Asia's economic rise is one 0:00:19.680 --> 0:00:22.200 of the world's most underrated success stories. 0:00:22.320 --> 0:00:25.400 The nations that call this corner of the world home 0:00:25.480 --> 0:00:29.680 have become a leading growth market, powering China, the US 0:00:29.720 --> 0:00:34.560 and much of the world with trade, manufacturing, digital know how, 0:00:34.960 --> 0:00:37.440 and a wealth of natural resources. 0:00:37.680 --> 0:00:40.080 Its progress is rual, but the most exciting part of 0:00:40.120 --> 0:00:43.480 Southeast Asia's growth story is yet to come. What lies 0:00:43.479 --> 0:00:46.760 ahead and how can invest his tap into the region's potential. 0:00:47.159 --> 0:00:51.960 Let's bring in James Chio, chief investment Officer at HSBC 0:00:52.320 --> 0:00:53.440 Private Bank. 0:00:53.680 --> 0:00:56.880 I think the potential and the economic opportunities for Southeast 0:00:56.880 --> 0:01:00.480 Asia remains extremely exciting and that's why we are seeing 0:01:00.640 --> 0:01:03.520 much more interest in Southeast Asia in the years ahead. 0:01:03.800 --> 0:01:07.559 And Rina Qualk Asia's financial credit analysts with Lumberg Intelligence. 0:01:07.800 --> 0:01:10.480 The trust in the banking system is important and no 0:01:10.680 --> 0:01:12.800 bank can actually survive a bank right now. 0:01:12.840 --> 0:01:17.199 Both joining us from Singapore, James and Rena Welcome. 0:01:17.080 --> 0:01:17.920 Hi, Tom and Joan. 0:01:18.040 --> 0:01:20.679 Good to be here, pleasure to be here, James. 0:01:20.760 --> 0:01:24.000 Why are investors getting excited about Southeast Asia right now? 0:01:24.400 --> 0:01:27.280 Well, I think Southeast Asia is on the cusp of 0:01:27.480 --> 0:01:30.640 a major transformation, and clearly, I think when you look 0:01:30.640 --> 0:01:33.640 at the market performance of Southeast Asia at least over 0:01:33.680 --> 0:01:36.280 the last one and a half years, it exhibits a 0:01:36.319 --> 0:01:40.480 lot of resilience, especially in twenty twenty two. But really 0:01:40.480 --> 0:01:44.360 I think some underlying economic currents are happening. For one, 0:01:44.480 --> 0:01:47.480 the digital economy in Southeast Asia is actually growing very 0:01:47.560 --> 0:01:50.920 very fast, and of course that's aiding and helping that 0:01:51.040 --> 0:01:54.120 whole middle class consumption story that's going to be very 0:01:54.160 --> 0:01:57.040 strong in the years ahead. But also at the same time, 0:01:57.120 --> 0:02:01.040 what we are having is also a green transformation that's 0:02:01.040 --> 0:02:04.240 happening in Southeast Asia. Many parts of the economy in 0:02:04.280 --> 0:02:07.320 Southeast Asia, it's going to become much more reliant on 0:02:07.480 --> 0:02:11.640 renewable energy as well as of course electrification of its 0:02:11.639 --> 0:02:15.480 transportation system and making its cities much smarter in terms 0:02:15.480 --> 0:02:19.519 of using electricity and energy. So I think the potential 0:02:19.560 --> 0:02:23.800 and the economic opportunities for Southeast Asia remains extremely exciting, 0:02:23.840 --> 0:02:26.600 and that's why we are seeing much more interest in 0:02:26.639 --> 0:02:28.359 Southeast Asia in the years ahead. 0:02:28.720 --> 0:02:31.480 James, you discussed the digital revolution that's going on in 0:02:31.520 --> 0:02:35.200 Southeast Asia. Can you mention some names, some companies, some 0:02:35.240 --> 0:02:37.359 countries that are really benefiting from this trend? 0:02:37.680 --> 0:02:40.200 Clearly, I think what the pandemic did was to kind 0:02:40.240 --> 0:02:44.320 of digitize a lot of our activities, whether it's e commerce, 0:02:44.440 --> 0:02:48.760 whether it's travel, whether it's how we buy goods and services. 0:02:48.800 --> 0:02:53.520 And I think that digital transformation is extremely powerful, especially 0:02:53.600 --> 0:02:56.360 for Southeast Asia, and that the size of Southeast Asia's 0:02:56.360 --> 0:02:59.520 digital economy is expected to grow in an exponential rate 0:02:59.639 --> 0:03:02.640 in the ahead. So what you could expect is, of 0:03:02.680 --> 0:03:06.560 course a change in consumption patterns, and many big digital 0:03:06.600 --> 0:03:09.840 platforms have already been present in many of the Southeast 0:03:09.840 --> 0:03:10.520 Asian markets. 0:03:10.639 --> 0:03:14.400 James, I saw one statistic that Southeast Asia has nine 0:03:14.520 --> 0:03:19.480 hundred and fifteen million active mobile connections. That's about one 0:03:19.480 --> 0:03:23.840 and a half times its population. How did Southeast Asia 0:03:23.880 --> 0:03:24.840 get from there? 0:03:24.880 --> 0:03:25.320 To hear? 0:03:25.480 --> 0:03:29.240 What is it about Southeast Asia that made it such 0:03:29.400 --> 0:03:30.880 a digital growth market? 0:03:31.440 --> 0:03:34.880 Southeast Asia sort of lead from the entire evolution of 0:03:34.920 --> 0:03:38.800 salts because many of Southeast Asian consumers or households do 0:03:38.880 --> 0:03:42.840 not have desktops or even laptops, but everyone has a mobile. 0:03:43.240 --> 0:03:46.760 So in that sense, a huge adoption of mobile of 0:03:46.960 --> 0:03:50.480 technology and apps on the mobile does create that sort 0:03:50.520 --> 0:03:54.280 of mobile connections that the Southeast Asia has. Traffic jams 0:03:54.320 --> 0:03:58.080 are issue in many cities like Jakata or even Bangkok 0:03:58.200 --> 0:04:00.560 or even a Manila, but in order for people to 0:04:00.800 --> 0:04:03.800 order their food deliveries, sometimes are delivering on the app 0:04:03.800 --> 0:04:06.360 max It faster because a lot of the deliveries are 0:04:06.360 --> 0:04:08.560 on two wheelers which actually can cut through the traffic 0:04:08.920 --> 0:04:11.400 and it's all done to the app application. So I 0:04:11.480 --> 0:04:15.240 think that whole digitization of Southeast Asia became so fast 0:04:15.280 --> 0:04:18.440 and so quick really because of the use of mobile phones. 0:04:18.480 --> 0:04:20.600 There wasn't a sort of an age where people were 0:04:20.640 --> 0:04:24.680 on laptops or desktops. It's almost everyone was on mobiles immediately. 0:04:25.000 --> 0:04:28.760 And also second the ease and convenience of using it 0:04:28.760 --> 0:04:30.960 in their daily lives, which makes the rise of the 0:04:30.960 --> 0:04:33.680 digital economy much much faster than in many parts of 0:04:33.720 --> 0:04:34.040 the world. 0:04:34.760 --> 0:04:38.400 And you mentioned ride hailing apps food delivery. Are they 0:04:38.600 --> 0:04:42.320 the most popular usages of you know, the digital mobile 0:04:42.320 --> 0:04:44.240 phones and the digital revolution that's going on. 0:04:44.839 --> 0:04:47.359 Well, I think that is kind of at the margin 0:04:47.520 --> 0:04:50.520 the first the way how people transact in their day 0:04:50.560 --> 0:04:52.720 to day activity. So what you could see is that 0:04:52.839 --> 0:04:56.480 more and more of whatever transactions that were done previously 0:04:57.160 --> 0:05:00.080 on the physical level, it's being done on a digital level. 0:05:00.120 --> 0:05:03.080 So whether it's taking a cab, whether it's ordering food, 0:05:03.400 --> 0:05:07.160 whether it's to kind of purchase big items, it's been 0:05:07.200 --> 0:05:10.600 transferred in many of activities into being done on the 0:05:10.600 --> 0:05:13.840 digital economy. So I think there is a broadening of 0:05:14.080 --> 0:05:17.799 activity slowly as digital apps or even the digital economy 0:05:17.839 --> 0:05:21.359 become much more sophisticated to deal with the changing needs 0:05:21.400 --> 0:05:22.240 of the consumers. 0:05:22.800 --> 0:05:25.880 James ch Oh, You've just talked a lot about the 0:05:25.960 --> 0:05:29.159 digital economy in Southeast Asia, but let's talk a little 0:05:29.200 --> 0:05:33.560 bit about the banking side. We've seen banking failures in 0:05:33.600 --> 0:05:37.479 the US and Europe recently, what about Asia in particular 0:05:37.520 --> 0:05:41.640 in Southeast Asia and some of the liquidity challenges, Rina Quark, 0:05:41.839 --> 0:05:43.279 what do you have to add about that? 0:05:44.160 --> 0:05:46.560 Thanks for having me, Tom. Now, we actually believe for 0:05:46.720 --> 0:05:49.920 most of their substation banks, they are unlikely to actually 0:05:49.920 --> 0:05:53.080 face the deposits like scenario that actually topple of the 0:05:53.120 --> 0:05:56.200 overseas bank that we have seen recently. Given a relatively 0:05:56.279 --> 0:06:00.080 healthy liquidity profile and make the writing interest rate. For 0:06:00.200 --> 0:06:02.599 most of the lenders in Southeast Asia, they are largely 0:06:02.640 --> 0:06:06.400 funded by stable and diversified deposits locally and a lot 0:06:06.440 --> 0:06:09.360 of these deposits are actually invested in loans, with most 0:06:09.400 --> 0:06:11.880 of the lenders loans to deposit ratio well below one 0:06:11.960 --> 0:06:14.880 hundred percent, and this actually suggests that there are sufficient 0:06:15.200 --> 0:06:17.800 liquidity to meet the loans. And of course you know 0:06:17.880 --> 0:06:21.640 that regulatory liquidity ratios are also well above the minimum hurdles. 0:06:21.960 --> 0:06:24.120 But at the end of the day, more importantly, the 0:06:24.200 --> 0:06:27.160 trust in the banking system is important, and no bank 0:06:27.200 --> 0:06:28.800 can actually survive a bank run. 0:06:29.040 --> 0:06:31.599 You know, there's been banking families in the US and Europe, 0:06:31.600 --> 0:06:35.840 including Silicon Valley Bank, First Republic recently credits WISS. It 0:06:35.920 --> 0:06:39.440 hasn't impacted Asia yet, Asian banks and the ones in 0:06:39.480 --> 0:06:41.960 particular in Southeast Asia in a stronger position. 0:06:43.320 --> 0:06:44.880 Sure, I think there are a couple of areas to 0:06:44.960 --> 0:06:48.320 focus on as we look into a rising interest reate environment. 0:06:48.800 --> 0:06:51.880 I think definitely, with all the reason turmoil that we've 0:06:51.880 --> 0:06:54.479 seen in a global banking sector, what we care asset 0:06:54.600 --> 0:06:57.800 light management is key. What we call are their mismatches 0:06:57.839 --> 0:07:01.320 between the asset and libilities and interest rate management. Now, 0:07:01.360 --> 0:07:04.160 speaking of interest rate management, we have talked about, you know, 0:07:04.520 --> 0:07:07.120 unrealized losses that we have seen in some of their 0:07:07.160 --> 0:07:10.280 overseas banks and taking that closer to home where you know, 0:07:10.400 --> 0:07:13.560 West southast Asian banks are. We believe that for most 0:07:13.560 --> 0:07:17.040 of the suvis Asian banks, the extent of unrealized losses 0:07:17.240 --> 0:07:19.480 are manageable, even as interest rate rice. 0:07:19.680 --> 0:07:23.440 You're listening to Asia Centric from Bloomberg Intelligence. By the way, 0:07:23.520 --> 0:07:26.320 if you like what you hear, and we hope you do, 0:07:26.800 --> 0:07:31.640 please rate us on Apple podcasts, Spotify, Google podcasts, or 0:07:31.680 --> 0:07:34.400 wherever you may be listening to us. Of course, more 0:07:34.440 --> 0:07:38.200 stars are better. Your feedback matters, and we love hearing 0:07:38.240 --> 0:07:39.160 from our listeners. 0:07:41.000 --> 0:07:44.000 As strange as it may sound, can Southeast Asia almost 0:07:44.000 --> 0:07:45.440 be considered a safe haven? 0:07:46.760 --> 0:07:49.200 Oh? While I wouldn't go as far as to say 0:07:49.240 --> 0:07:53.240 that Southeast Asia will become a safe haven, Southeast Asia 0:07:53.480 --> 0:07:56.160 very much learned from its lessons from the past, the 0:07:56.400 --> 0:07:59.600 ninety seven ninety eight Asian financial crisis, where many banks 0:07:59.600 --> 0:08:02.119 face US problems as we're seeing now with the current 0:08:02.320 --> 0:08:05.600 banking situation in US and Europe. But because of that, 0:08:05.720 --> 0:08:09.840 many of those banks went through significant de leveraging, they 0:08:09.880 --> 0:08:13.960 went through better capital management, and of course business model 0:08:14.000 --> 0:08:17.040 had to become a much more robust especially through the cycle. 0:08:17.680 --> 0:08:21.000 Certainly from that perspective there is a sort of resilience 0:08:21.200 --> 0:08:24.240 in the banking system as a result. So these things 0:08:24.240 --> 0:08:27.200 are going very well for Southeast Asia. It is an opportunity, 0:08:27.240 --> 0:08:30.240 but clearly I wouldn't say it's a safe haven as yet, 0:08:30.320 --> 0:08:33.040 but nevertheless there will be bumps and risks down the road, 0:08:33.280 --> 0:08:35.080 just like any risk assets out there. 0:08:35.520 --> 0:08:38.920 James Chio, how much of a challenge is infrastructure investment 0:08:39.000 --> 0:08:40.040 in Southeast Asia? 0:08:40.080 --> 0:08:40.760 Would you say? 0:08:41.120 --> 0:08:43.160 And how do you see that unfolding over the next 0:08:43.160 --> 0:08:44.240 five to seven years. 0:08:45.040 --> 0:08:47.319 Well, I think infrastructure is going to be a very 0:08:47.320 --> 0:08:50.080 interesting team, and I think on various dimensions. I think 0:08:50.160 --> 0:08:53.880 one of the most important infrastructure bending that has occurred 0:08:53.920 --> 0:08:56.960 over the last few years it's really to improve on 0:08:57.280 --> 0:09:02.439 the existing roads, airports, trained connections, and I think those 0:09:02.480 --> 0:09:04.880 have been going very well, especially if you look at 0:09:04.920 --> 0:09:09.120 countries like Indonesia for example. To link up the entire country, 0:09:09.120 --> 0:09:12.040 which is an archipelago of many islands, you have to 0:09:12.080 --> 0:09:15.880 improve the ports, you have to improve the airport's train linkages, 0:09:16.280 --> 0:09:19.360 roads rails. It's a significant project, but I think on 0:09:19.520 --> 0:09:22.520 many fronts those things have improved quite a fair bit 0:09:22.800 --> 0:09:25.760 in Southeast Asia, and there is due scope for improvements 0:09:25.800 --> 0:09:27.959 in many parts of the region. But also I think 0:09:28.000 --> 0:09:32.040 there is an increasing focus on energy infrastructure in Southeast Asia, 0:09:32.160 --> 0:09:35.160 especially as the region is going to transit into much 0:09:35.200 --> 0:09:38.600 more renewable energies. And so if you think about Southeast 0:09:38.600 --> 0:09:43.280 Asia as a region, Thailand has its automotive industry, Indonesia 0:09:43.320 --> 0:09:47.359 with its nickel deposit and perhaps improved manufacturing of Lincoln batteries, 0:09:47.520 --> 0:09:49.960 And if you connect all these countries, and of course 0:09:50.040 --> 0:09:53.000 Malaysia with its manufacturing of semiconductor chips, if you can 0:09:53.000 --> 0:09:56.560 combine this region as a whole through the free trade agreement, 0:09:56.679 --> 0:10:02.439 is quite an interesting manufacturing hub all the electric vehicle ecosystem. 0:10:02.520 --> 0:10:05.239 That's going to be quite a significant in the years ahead. 0:10:05.480 --> 0:10:08.160 James, you mentioned quite a few countries there. Which countries 0:10:08.200 --> 0:10:10.319 in Southeast Asia do you think are the most appealing 0:10:10.400 --> 0:10:10.840 right now? 0:10:11.840 --> 0:10:14.959 Will? I think from a near term perspective, I think 0:10:15.120 --> 0:10:20.280 we want to look at perhaps Indonesia and Thailand, for example, because, 0:10:20.559 --> 0:10:23.320 for one, the global economy is going to be slowing 0:10:23.360 --> 0:10:26.960 down generally, and of course Indonesia has a large domestic 0:10:27.000 --> 0:10:29.800 population and a big middle class and that could buffer 0:10:30.200 --> 0:10:34.000 some of the volatility associated with slower growth. But also 0:10:34.040 --> 0:10:37.120 I think you want to play into that whole China's 0:10:37.200 --> 0:10:40.199 reopening which is ongoing, and if you look at the 0:10:40.280 --> 0:10:43.680 data as faster and expected, so as Chinese consumers buy 0:10:43.760 --> 0:10:48.400 more goods and services, particularly commodities from Indonesia as well 0:10:48.440 --> 0:10:53.040 as Thailand, whether it's agriculture produce or fossil fuel related produce, 0:10:53.440 --> 0:10:58.240 you will see Indonesia and Thailand benefiting from that China reopening. 0:10:58.720 --> 0:11:02.280 James chio Rena, We've seen some Western companies start to 0:11:02.480 --> 0:11:06.360 distance themselves a bit from China. Some are a little 0:11:06.520 --> 0:11:09.520 uneasy with a shift in tone there since the pandemic 0:11:09.679 --> 0:11:13.800 Apple is already decoupling, maybe shifting some manufacturing the India 0:11:13.880 --> 0:11:18.800 and Elswhere can Southeast Asia benefit from this new wariness 0:11:18.840 --> 0:11:22.960 about China or is the region's chariot hits too tightly 0:11:23.000 --> 0:11:23.760 the China Star. 0:11:24.320 --> 0:11:29.000 Your take, well, I think that whole trend of deglobalization, 0:11:29.200 --> 0:11:33.320 and of course it is something that many big multinational 0:11:33.440 --> 0:11:36.959 or big global companies are making. That decision. Southeast Asia 0:11:37.000 --> 0:11:40.360 clearly is a destination alongside India as well, and of 0:11:40.400 --> 0:11:43.760 course it has to be taken into account the entire 0:11:44.080 --> 0:11:47.280 kind of criterias. Of course, certain countries have lower labor 0:11:47.320 --> 0:11:50.160 costs and a labor market that's very competitive for a 0:11:50.280 --> 0:11:53.079 multinational company, of course, they want to look at where 0:11:53.200 --> 0:11:57.240 to make production lines, perhaps more resilient southeas Asia is 0:11:57.240 --> 0:12:00.360 a destination, but also don't forget that Southeast Asia it 0:12:00.559 --> 0:12:03.839 has also a large population to be consumers, so six 0:12:03.960 --> 0:12:08.000 hundred and eighty million people as consumers for smartphones, for 0:12:08.080 --> 0:12:12.280 electronic goods, for electric vehicles, So that also means that 0:12:12.360 --> 0:12:14.880 it's nearer to the customers. So I think in a way, 0:12:15.160 --> 0:12:17.600 I would say the demand for these groups are going 0:12:17.640 --> 0:12:20.080 to be very important, and I think that's why it's 0:12:20.120 --> 0:12:22.800 a key destination to look at for many of global 0:12:22.840 --> 0:12:24.840 companies looking to set up shop in the region. 0:12:25.600 --> 0:12:29.800 Rina Quank with Bloomberg Intelligence, any thoughts, Yeah, And I may. 0:12:29.760 --> 0:12:32.400 Just add to what James has mentioned. We have actually 0:12:32.440 --> 0:12:34.640 seen for some of the lenders in this region, they've 0:12:34.679 --> 0:12:37.400 actually tapped on what we call the Arsian cross border 0:12:37.440 --> 0:12:40.080 trade flots and this actually helped the banks as we 0:12:40.280 --> 0:12:42.920 you know, some of the countries actually face rising macro 0:12:42.960 --> 0:12:45.280 heat wins that could actually tampen some of the don't 0:12:45.280 --> 0:12:47.240 growth outlook that we see for some of the major 0:12:47.280 --> 0:12:51.200 banks here. And as simple banks continue to tap on 0:12:51.280 --> 0:12:53.680 the don't growth that you know, a major macro heat wins, 0:12:53.679 --> 0:12:56.240 the daversification that we see in this broader region could 0:12:56.280 --> 0:12:59.600 help the banks boster earning to momentum. As you know, 0:12:59.640 --> 0:13:01.400 we see of the macro heatments this year. 0:13:02.080 --> 0:13:06.280 Earlier this year, China's population was overtaken by India. A 0:13:06.320 --> 0:13:10.559 lot of Northeast Asian countries like China, Japan, Korea facing 0:13:10.559 --> 0:13:14.920 a demographic headwind with an aging population. How is Southeast 0:13:14.960 --> 0:13:16.640 Asia placed in this regard. 0:13:17.240 --> 0:13:19.679 It has a younger population, and of course that will 0:13:19.720 --> 0:13:22.160 be a tailwind for many parts of Southeast Asia in 0:13:22.200 --> 0:13:25.000 the next decade or so. And that's why if you 0:13:25.120 --> 0:13:28.479 think about how economics and growth is, it is primarily 0:13:28.960 --> 0:13:34.040 about population increasing labor force participation as well as productivity growth. 0:13:34.480 --> 0:13:37.000 And I think on that count in terms of growth 0:13:37.040 --> 0:13:39.120 of population, you're going to see quite a fair bit 0:13:39.160 --> 0:13:42.760 from Southeast Asia, where there's Indonesia, where there's Philippines, et cetera. 0:13:42.960 --> 0:13:46.280 So I think that's why that whole demographic division is 0:13:46.800 --> 0:13:50.120 a very powerful story, one of rising population as well 0:13:50.160 --> 0:13:52.199 as rising income for Southeast Asia. 0:13:53.000 --> 0:13:55.960 Rina there's a lot of financial pundits talking about commercial 0:13:55.960 --> 0:13:58.360 real estate loans. Some are saying that this is going 0:13:58.440 --> 0:14:00.640 to be the next shoe to drop. Is this a 0:14:00.760 --> 0:14:03.360 risk for Southeast Asia and in particular Singapore. 0:14:04.160 --> 0:14:06.160 I think that's a very good question joined as we 0:14:06.520 --> 0:14:09.040 look into what could be the possible trigger points of 0:14:09.080 --> 0:14:13.200 stress globally. I think Simple Banks commercial realistate notes could 0:14:13.200 --> 0:14:16.800 face very measurable credit losses despite the rising micro heat 0:14:16.880 --> 0:14:20.320 with and of course their annulated interest rate risk, as 0:14:20.360 --> 0:14:23.320 most of their exposures are actually two good polity companies 0:14:23.360 --> 0:14:26.440 relatively low the FAULD risk. Now, most of the Simple 0:14:26.560 --> 0:14:30.080 Banks commercial reistic exposures are in Singapore, where we do 0:14:30.200 --> 0:14:33.880 believe that SEP veristic sector could remain resilient this year 0:14:33.960 --> 0:14:37.680 given the fundamentals that are supporting the office and retail segments. 0:14:38.040 --> 0:14:41.760 And relating to this question, Singapore just raised stamp duty 0:14:41.840 --> 0:14:45.760 for foreigners buying real estate from thirty percent to sixty percent. 0:14:46.200 --> 0:14:49.040 That's by far the biggest in the world. Just how 0:14:49.080 --> 0:14:50.720 hot is the property market. 0:14:50.400 --> 0:14:53.920 Over there for the real estate sector has always been 0:14:54.280 --> 0:14:56.680 I think one of the hottest market in Nasure and 0:14:56.800 --> 0:14:59.560 I think if you see for the past many years, 0:14:59.840 --> 0:15:02.320 how housing loans has always been a dominant loan book 0:15:02.880 --> 0:15:05.000 or say path of the loan book for Simpole banks. 0:15:05.200 --> 0:15:07.160 And the next question we may have is that were 0:15:07.200 --> 0:15:10.920 that actually civilly dampened the housing loans growth that we 0:15:10.960 --> 0:15:13.200 see for the simple banks. Now, just to take a 0:15:13.240 --> 0:15:16.640 step back, firstly, this reason matches. They're impacting more of 0:15:16.680 --> 0:15:20.000 the foreigners, so for most of the housing loans and 0:15:20.080 --> 0:15:22.680 the Simpboard banks loan book that mostly for the first 0:15:22.720 --> 0:15:26.360 time buyers. So that being said, the impact could be 0:15:26.400 --> 0:15:29.120 more manageable. But of course with the rising interest rates 0:15:29.480 --> 0:15:31.920 and of course some of the new measures that kick 0:15:32.000 --> 0:15:36.160 in recently, it might actually dampened the growth a little 0:15:36.400 --> 0:15:38.640 and moderate, but it's unlikely to collapse. 0:15:38.880 --> 0:15:42.200 James Geo, you sound like a Southeast Asia ball am 0:15:42.240 --> 0:15:42.880 I right. 0:15:43.120 --> 0:15:46.800 Well, that's right. I mean from a long term perspective, definitely, 0:15:46.880 --> 0:15:49.920 because of all these criterias, and I've coined the term 0:15:50.360 --> 0:15:54.360 Southeast Asian tigers TEA for technology, I for the rising 0:15:54.400 --> 0:15:58.120 income of the middle class, G for green transformation, E 0:15:58.320 --> 0:16:00.920 for energy, infrastructure and our our sets. So if you 0:16:01.040 --> 0:16:05.040 remember Southeast Asia tigers, I think you have many reasons 0:16:05.080 --> 0:16:08.000 to kind of be bullish for Southeast Asia for the 0:16:08.000 --> 0:16:08.800 next decade. 0:16:09.200 --> 0:16:11.800 That's very clever. Now, at the risk of putting you 0:16:11.920 --> 0:16:15.240 on the spot, as investors, we like to look up 0:16:15.440 --> 0:16:20.040 and down. Where would the landmines lurk? In other words, 0:16:20.120 --> 0:16:23.720 what could go wrong? What are the investment risks in 0:16:23.800 --> 0:16:26.360 Southeast Asia and where might they be hiding. 0:16:26.960 --> 0:16:29.360 Yeah, well, I think for one, southeas Asia is not 0:16:29.520 --> 0:16:33.560 a meal to the global economy, that's very clear. And 0:16:33.600 --> 0:16:36.160 also southeas Asia is not a meal to global risk sentiment. 0:16:36.240 --> 0:16:39.080 So if you do get a pullback or a shop 0:16:39.080 --> 0:16:42.720 decline in global risk appetite, Southeast Asia can face the 0:16:42.760 --> 0:16:45.160 them pullbacks because of that. So that's kind of a 0:16:45.200 --> 0:16:49.160 near term risk. But in terms of the fundamental growth story, 0:16:49.280 --> 0:16:52.080 I think it's very much intact and it takes quite 0:16:52.080 --> 0:16:55.200 a big shock to kind of de risk it. I think, 0:16:55.240 --> 0:16:58.360 to manage and mitigate the effects of climate change from 0:16:58.480 --> 0:17:00.560 many parts of Southeast Asia, I think it's going to 0:17:00.600 --> 0:17:03.280 be both at risk as well as an opportunity. So 0:17:03.360 --> 0:17:06.600 there are big of course facing Southeast Asia, and I 0:17:06.600 --> 0:17:08.920 think these are the things that kind of one should 0:17:08.920 --> 0:17:11.000 watch out for, both for the near term as well 0:17:11.040 --> 0:17:12.159 as the longer term. 0:17:12.720 --> 0:17:17.960 James, for investors focused on ESG, how attractive is Southeast Asia, Well, 0:17:18.040 --> 0:17:18.520 I think. 0:17:18.320 --> 0:17:21.440 That there are a few ways investors could think about it. 0:17:21.560 --> 0:17:25.080 Of course, you first and foremost want to look at 0:17:25.160 --> 0:17:28.359 companies within Southeast Asia that does well on these three 0:17:28.480 --> 0:17:32.560 dimensions ESMNG and clearly I think companies that usually are 0:17:32.600 --> 0:17:35.400 the best managed or high quality companies usually have good 0:17:35.440 --> 0:17:38.640 scores on that front. But also I think another way 0:17:38.680 --> 0:17:40.560 to think about that is also the thing of it 0:17:40.600 --> 0:17:44.640 as a tematic opportunity. So whether it's the energy transition 0:17:44.840 --> 0:17:48.120 within Southeast Asia, I think that's an opportunity, whether it's 0:17:48.600 --> 0:17:52.800 companies or even corporations that are pushing ahead in the 0:17:52.800 --> 0:17:56.400 electrification of Southeast Asia's transportation system, and so I think 0:17:56.400 --> 0:17:59.800 there are many interesting kind of thematics that's going on 0:17:59.840 --> 0:18:03.280 in Southeast Asia, and I think many times investors fils 0:18:03.280 --> 0:18:06.320 who realize that these teams are actually moving in the 0:18:06.400 --> 0:18:08.040 right direction and there's quite a lot of kind of 0:18:08.080 --> 0:18:10.120 opportunities out there for this region. 0:18:11.040 --> 0:18:15.199 Our guests are James Chio, Chief Investment officer at HSBC 0:18:15.480 --> 0:18:20.199 Private Bank and Rina Quark Asia financials credit analysts with 0:18:20.240 --> 0:18:25.920 Bloomberg Intelligence. James, you just spoke at link about ESG, Environmental, 0:18:26.040 --> 0:18:29.640 Social and governance. There's been a perception that ESG has 0:18:29.640 --> 0:18:32.400 been slowly gained traction in this part of the world 0:18:32.480 --> 0:18:36.359 as opposed to the West, perhaps the UK, Europe, the 0:18:36.440 --> 0:18:39.399 United States. Is that a fair assessment and if so, 0:18:39.960 --> 0:18:41.280 why do you think that's the case? 0:18:42.160 --> 0:18:45.679 Well, I think people are recognizing the importance of that, 0:18:45.960 --> 0:18:49.760 whether it's from companies, whether it's from governments, or even 0:18:49.800 --> 0:18:53.880 from households and consumers or even general investors. And it's 0:18:53.960 --> 0:18:57.440 clear that there is no other way to in fact 0:18:57.520 --> 0:19:00.520 solve the whole climate change issue and SVIs it's a 0:19:00.520 --> 0:19:03.640 big part of this whole equation. So we have many 0:19:03.680 --> 0:19:06.760 governments in Southeast Asia coming out kind of net zero pledges. 0:19:06.840 --> 0:19:09.720 Many companies within Southeast Asia have also came out with 0:19:09.760 --> 0:19:13.200 their net zero plans as well. And also consumers generally 0:19:13.280 --> 0:19:16.960 now are becoming much more aware of how they consume 0:19:17.160 --> 0:19:19.959 and what they look out for when they buy certain products. 0:19:20.040 --> 0:19:22.600 And I can say that also for general investors as well, 0:19:22.680 --> 0:19:25.760 demanding more of companies when it comes to ESG standards 0:19:25.760 --> 0:19:28.119 and disclosures. So I think we have a sort of 0:19:28.119 --> 0:19:30.840 alignment of stars in that sense, and things are moving 0:19:30.920 --> 0:19:33.080 in the right direction. While it might not be as 0:19:33.119 --> 0:19:35.159 quick as most people hope for, but at least I 0:19:35.200 --> 0:19:37.080 think the direction is moving in the right way. 0:19:37.800 --> 0:19:41.080 James, if you're pullish on Southeast Asia as an investor, 0:19:41.240 --> 0:19:42.400 how would you play this thing? 0:19:43.160 --> 0:19:45.360 I think in the near term, some of the equity 0:19:45.440 --> 0:19:50.280 markets within Southeast Asia, such as Indonesia, Thailand looks interesting, 0:19:50.440 --> 0:19:52.960 and you want to pick the companies that could benefit 0:19:53.119 --> 0:19:56.399 from China's reopening, for example. So of course there are 0:19:56.440 --> 0:19:58.240 a few ways to play where there's to buy some 0:19:58.280 --> 0:20:01.760 of the consumer companies within these markets, some of the 0:20:01.840 --> 0:20:04.600 commodity players, or even to look at some of the 0:20:04.640 --> 0:20:07.800 well managed banks that could benefit from the whole recovery 0:20:08.000 --> 0:20:10.680 of the region. Over the longer term, you want to 0:20:10.720 --> 0:20:13.960 look for some of the longer term dynamics, whether it's technology, 0:20:14.080 --> 0:20:19.200 whether it's middle class, rising income, middle class, green transformation, energy, infrastructure, 0:20:19.640 --> 0:20:21.880 or the trade they are set the tigers that I've 0:20:21.880 --> 0:20:25.080 talked about, there are many companies that are geared towards 0:20:25.160 --> 0:20:29.120 growing that whole Asian Southeast Asian tigers stories. The longer term, 0:20:29.119 --> 0:20:31.920 I think those companies that well positioned on these big 0:20:31.960 --> 0:20:34.640 structural trends I think can do very well in the years. 0:20:34.480 --> 0:20:35.920 A hit and RAINA. 0:20:36.000 --> 0:20:39.360 What about your space here, I think in my space, 0:20:39.720 --> 0:20:43.040 I think probably one of their most recent Kinney wash 0:20:43.119 --> 0:20:45.720 upon as the AP wants. You know, are we still 0:20:46.160 --> 0:20:48.760 comfortable with the AP wants issued by most of the 0:20:48.800 --> 0:20:51.639 self Is Asian banks? I think in this rising issues 0:20:51.640 --> 0:20:54.119 spreate environment, one of the key rists to watch is 0:20:54.200 --> 0:20:57.240 what we call the potential non chor risk for the 0:20:57.320 --> 0:20:59.480 AP ones that are issue for most of the self 0:20:59.560 --> 0:21:02.280 is Asian banks. And on that front, we believe that 0:21:02.359 --> 0:21:05.320 for most of the dollar eighty ones. Now, firstly, let 0:21:05.359 --> 0:21:06.919 me just take a step back to you know, to 0:21:07.000 --> 0:21:10.320 talk about what AT wants. Now, this eighty one, this 0:21:10.440 --> 0:21:12.560 tree letter was it is a form of hybrid debt 0:21:12.600 --> 0:21:16.120 that comes to wards the bank's regulatory capital. Right. Eighty 0:21:16.200 --> 0:21:19.480 ones are actually subordinated in the bank's capital structure. 0:21:20.200 --> 0:21:23.240 Like contingent convertibles, right rina or more like a cross 0:21:23.280 --> 0:21:24.440 between a stock and a bond. 0:21:25.040 --> 0:21:27.560