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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg

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Speaker 1: Daybreak Asia podcast. I'm Doug Chrisner. US markets will be

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Speaker 1: closed Monday in observance of Martin Luther King Junior Day,

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Speaker 1: and Monday will also feature the inauguration of Donald Trump

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Speaker 1: as the forty seventh President of the United States. We

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Speaker 1: are expecting a slew of policy announcements and Asian markets

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Speaker 1: may be the first to react. In a moment. I'll

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Speaker 1: be joined by Shana Sissel of Banry On Capital Management.

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Speaker 1: We'll get her take on what the Trump administration will

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Speaker 1: mean for markets. We begin this morning in Hong Kong

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Speaker 1: to look at how China is bracing for a second

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Speaker 1: presidency of Donald Trump. I'm joined by Huao Chung, director

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Speaker 1: of Asia Credit Research at Alliance Bernstein. While joining us

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Speaker 1: from Hong Kong, Thank you so much for making time

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Speaker 1: to chat with us. Unlike the years of the first

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Speaker 1: Trump term, Check is now struggling with a weaker economy.

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Speaker 1: I think it's fair to say, and given very weak

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Speaker 1: domestic demand, the economy we have seen has become a

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Speaker 1: lot more reliant on exports than it was during the

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Speaker 1: first Trump trade war. Are you concerned about the negative

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Speaker 1: impact that tariffs might have on the overall economy in China.

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Speaker 2: As you rarely pointed out US, China religion has always

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Speaker 2: been a very important watch point for US has always

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Speaker 2: been a very important driver of how investors view this region. Right,

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Speaker 2: view Asia, and what we're seeing is that you know,

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Speaker 2: China's economic roles, it is indeed decelerating. But we do

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Speaker 2: want to point out that, you know, we really had

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Speaker 2: a policy pivot in September last year that shows that

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Speaker 2: China is really aware of the slowdown and will take

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Speaker 2: more forceful measures to address the slowdown. And also when

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Speaker 2: it comes to external pressures, right, I think with the

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Speaker 2: new administration in the US, what we are going to

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Speaker 2: have is an isialation of tree tension i e. A

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Speaker 2: trade war in the form of higher terrorism for the region.

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Speaker 2: So the impact of US tariff will be greater on

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Speaker 2: China than to you know, other Asian economies. So that

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Speaker 2: is something we're going to be watching very very closely.

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Speaker 2: But you know, if you simply look at the number, right,

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Speaker 2: I think China actually successfully reduced the reliance on US

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Speaker 2: export over the past over the past years, at least

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Speaker 2: you know, from one point zero.

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Speaker 1: That is very true. But if you go back to

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Speaker 1: what we learned last week, GDP for all of twenty

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Speaker 1: twenty four was five percent. But what was really striking

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Speaker 1: about economic growth in China at the end of last

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Speaker 1: year during the fourth quarter, I think the number was

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Speaker 1: five point four percent growth. So clearly many companies were

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Speaker 1: concerned about how tariffs might impact their business and they

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Speaker 1: were trying to get product out of China sooner rather

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Speaker 1: than later. Do you expect economic growth to hold up

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Speaker 1: now that basically that event has subsided, We think it's.

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Speaker 2: Very important to engage with the companies to understand what

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Speaker 2: they are doing in order to assess the impact. First

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Speaker 2: of all, you know, you know, I think given the

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Speaker 2: fundamental headwinds the China economy to Chinese corporates, we don't

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Speaker 2: want to be too pessimistic, right. I think it's important

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Speaker 2: for us to have a very balanced view. As you said,

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Speaker 2: you know, the economic roles, it is slowing down and

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Speaker 2: you know, higher US tariff. It is the fundamental headwinds.

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Speaker 2: But a very important point we want to make, we

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Speaker 2: want the audience to know is, you know, hire US

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Speaker 2: tariff does not really necessarily translate into the worstening of

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Speaker 2: corporate credit fundamentals. Because if you look at most of

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Speaker 2: the Asian corporates, most of the Chinese corporates, we look

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Speaker 2: at A very important point I want to make is

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Speaker 2: that they are more driven by domestic demand, right or

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Speaker 2: they have very little reliance on US or supply. We

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Speaker 2: may have a rollback of US climate related policies under

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Speaker 2: the Trauma administration, and that might dampen the demand for

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Speaker 2: electric vehicles and new energy, you know, affecting the companies

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Speaker 2: in these two sectors. But do remember that China has

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Speaker 2: reduced its reliance on the US, you know, both from

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Speaker 2: a demand perspective as well as from a supplied perspective.

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Speaker 2: So are we really going to see, you know, with

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Speaker 2: the higher tariff impost on China, are we really going

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Speaker 2: to see a transformation or a significant change of the

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Speaker 2: profiles or the fundamentals of Chinese corporates. We'll see. But

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Speaker 2: our answer is, you know, is it.

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Speaker 1: Is not like to your point about how China has

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Speaker 1: been able to diversify its export markets. I think exports

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Speaker 1: to Vietnam soared to a record last year. Yes, it's

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Speaker 1: a very small market, but it helps to illustrate the

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Speaker 1: point that you're making. While when you look at the

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Speaker 1: various industries, I know you're talking about the credit space

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Speaker 1: in China. Are there certain industries right now that have

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Speaker 1: been doing well enough where the opportunity in credit for

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Speaker 1: those industries is compelling.

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Speaker 2: We still like the auto industry, right, the tech hardware

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Speaker 2: and internet companies. Yes, there will be external pressure in

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Speaker 2: the form of you hire US Terra as we just

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Speaker 2: discussed about. But again, as you said, these companies there

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Speaker 2: are not without mitigans right as we discuss right, it

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Speaker 2: remains a solution for them to move at least part

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Speaker 2: of the production out of China to other countries to

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Speaker 2: really diversify their supply chain. They can sell more products

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Speaker 2: to a non US or other Asian economies. And you know,

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Speaker 2: if things really you know, it's getting worse. For example,

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Speaker 2: we're gonna have like reduced volume and more price cuts

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Speaker 2: as a result of US tariffs. Right, We're gonna have

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Speaker 2: industry consolidation, and out of that there will be winners

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Speaker 2: emerging from that consolidation process, and that is important for

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Speaker 2: us to identify the winners as stay invested. So back

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Speaker 2: to your question, we do believe that there are sweet

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Speaker 2: spots in Chinese corporate credits like the auto industry, the

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Speaker 2: Cause sovereign, the state owned companies, the hard tech work companies,

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Speaker 2: and the internet companies. Remember this company, they have very

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Speaker 2: strong market positions there are primarily domestically focused. They have

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Speaker 2: a very strong balance sheet that help them navigate any

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Speaker 2: any any volatilities. So we want to stay constructive here.

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Speaker 1: What are your expectations for additional stimulus from the government

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Speaker 1: in the year ahead.

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Speaker 2: That's a that's a very good question. I guess the

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Speaker 2: good news we have so far is that we really

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Speaker 2: had a policy pivot in September last year, right, you know,

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Speaker 2: it gives a lot of comfort to investors. That shows

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Speaker 2: that China is is really you know, acknowledging, acknowledging that

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Speaker 2: the economy is slowing down, so we have to do

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Speaker 2: something about it. But what we hope to see more

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Speaker 2: is you know, more monetary policy support and more physical

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Speaker 2: policy support more importantly, so these are really needed uh

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Speaker 2: to support the economy, to stabilize the economy. So what

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Speaker 2: we will pay close attention to is whether there will

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Speaker 2: be supportive and more importantly forceful measures to support first

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Speaker 2: the property sector that is still struggling and domestic assumption.

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Speaker 1: Is it possible to stimulate on the monetary side and

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Speaker 1: the fiscal side at the same time and still create

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Speaker 1: a scenario where the currency remains strong, or is the

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Speaker 1: risk in that the un would would weaken a bit further.

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Speaker 2: That's a very hard question. I believe that's more of

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Speaker 2: a you know, if you look at China central bank, right,

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Speaker 2: they are in a dilemma, uh to sort of strict

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Speaker 2: a balance between lowering the falling costs for the economy

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Speaker 2: by cutting rates versus you know, stabilizing the economy as

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Speaker 2: well as they stabilize the foreign currency. Right. Eventually, I

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Speaker 2: think it's really you know, we have to figure out

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Speaker 2: what really matters to them. But we do acknowledge that,

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Speaker 2: you know, if the central bank further cust interest rate

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Speaker 2: is really gonna put downward pressure on banks profitability, because

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Speaker 2: whenever there's a rate cut, it is going to hurt

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Speaker 2: banks profitability. And we need Chinese banks to be able

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Speaker 2: to grow at a reasonable pace in order to provide

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Speaker 2: enough credit to the economy to support the world. So

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Speaker 2: it is a dilemma to China.

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Speaker 1: I'm curious to get your take on whether there are

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Speaker 1: opportunities in the credit space in other jurisdictions in Asia

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Speaker 1: right now, what are you seeing, uh?

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Speaker 2: If you look at other jurisdictions. First of all, you know,

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Speaker 2: higher US tariff again under the new administration, it is

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Speaker 2: going to be a headwind not only for China but

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Speaker 2: for the for the entire Asian region. Right nobody is

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Speaker 2: really immune. So as a result of that, I think

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Speaker 2: I think it's fair to argue that world is going

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Speaker 2: to be it's gonna tilt, it it's gonna to towards

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Speaker 2: the downside as a result of the higher US tariff

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Speaker 2: for the whole region. So if you look at the

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Speaker 2: external environment, it is it is less certain than before,

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Speaker 2: but the impact will be greater to export driven economies

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Speaker 2: in Asia UH than to the rest. So you know,

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Speaker 2: what we'll be watching very closely is if there's a

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Speaker 2: stronger physical policy UH that can be implemented to mitigate

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Speaker 2: the wind for those countries. So outside of China, you know,

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Speaker 2: overall speaking, we're still constructive because we do expect you know,

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Speaker 2: most Asian copris UH to report stable fundamentals in twenty

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Speaker 2: twenty five in the form of you know, still decent

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Speaker 2: growth of revenue and still stable credit matrics. In the

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Speaker 2: form of larvage and margins right, and out of that,

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Speaker 2: I think if you really access to pick up the

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Speaker 2: sweet spot, we still like Indian renewables right. This sector

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Speaker 2: receives a lot of policy support and reports and will

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Speaker 2: continue to report credit fundamentals. Uh, but just you know,

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Speaker 2: a lot of the positive is already in the price.

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Speaker 2: And other than that, I think there are certain certain

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Speaker 2: pockets of opportunities in Asian credits, like you know, South

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Speaker 2: East Asians sell processed sovereign bond issuers or even some

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Speaker 2: copies from Korea. Again, security selection is key.

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Speaker 1: We'll leave it there. Qua, Thank you so much for

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Speaker 1: being with us. While Chung is director of Asia Credit

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Speaker 1: Research at Alliance Bernstein. Joining us from Hong Kong here

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Speaker 1: on the Daybreak Asia podcast. Welcome back to the Daybreak

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Speaker 1: Asia Podcast. I'm Doug Prisner. US markets will be closed

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Speaker 1: Monday in observance of Martin Luther King Junior Day and

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Speaker 1: in Washington, the forecast is for extremely cold weather and

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Speaker 1: this has forced the inauguration of Donald Trump indoors and

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Speaker 1: then after the festivities, Trump is expected to sign executive

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Speaker 1: orders from major changes to things like immigration, energy, and

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Speaker 1: government hiring. Policies. Joining me now is Shane A.

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Speaker 2: Sissel.

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Speaker 1: She is the president and CEO of Banryon Capital Management,

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Speaker 1: joining from Chicago here on the Daybreak Asia podcast. Shana,

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Speaker 1: thank you for making time. It's always a pleasure. So

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Speaker 1: if we can look back to the initial rally of

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Speaker 1: the equity market after the election, I think we can

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Speaker 1: agree that some of those gains have evaporated. I'm thinking

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Speaker 1: small caps, some of the banks, even energy stocks have

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Speaker 1: lost momentum. What is the market on the equity side

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Speaker 1: telling you right now?

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Speaker 3: So I think the initial rally was sort of a

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Speaker 3: relief rally. There was this real concern about the political

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Speaker 3: policies of each candidate, some more favorable to the markets

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Speaker 3: and some not, and so the market in general not

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Speaker 3: a political point, but in general felt that a Trump

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Speaker 3: win was more positive for stocks. And that's why we

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Speaker 3: saw that rally because in the market also like certainty.

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Speaker 3: So once it kind of knew where we were going,

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Speaker 3: it took a breath. But now we know who is

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Speaker 3: in charge. But then becomes the question of what does

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Speaker 3: that mean for policy. I know it's mostly favorable for equities,

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Speaker 3: but there's concerns about tariffs and tax policy. And all

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Speaker 3: kinds of other things that people are concerned with, how

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Speaker 3: that will impact the overall economy and how that in

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Speaker 3: turn will impact stocks.

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Speaker 1: What about the inflation story? Is a part of the

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Speaker 1: economic policies that we're learning about. You mentioned tariff's tax

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Speaker 1: cuts a part of that story as well. Is there

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Speaker 1: the recipe here for much more in terms of a

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Speaker 1: pickup of inflation?

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Speaker 3: There could be, But if we look back on the

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Speaker 3: first Trump administration, where there was tariff policy and there

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Speaker 3: was discussions of tariffs things of that nature, we didn't

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Speaker 3: see an uptick in inflation. Now, we're obviously not in

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Speaker 3: the same place we were then, where interest rates were different,

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Speaker 3: inflation was different. We're coming off elevated inflation rates, and

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Speaker 3: so there's obviously things can impact inflation at these levels

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Speaker 3: differently than it might have been in the past. But

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Speaker 3: I do saying that they're worth a discussion. The debate

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Speaker 3: really is how much of an impact it'll have on inflation.

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Speaker 3: And I think that there are people on both sides

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Speaker 3: that make good arguments enough so that I don't feel

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Speaker 3: comfortable saying, well, yeah, terroris definitely raise inflation. I mean,

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Speaker 3: in theory they should, but there's a lot of nuance

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Speaker 3: to these things, and so I think that what we're seeing, though,

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Speaker 3: is the market's concerned about the nuance because nobody really understands.

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Speaker 1: And yet, after the Fed's December meeting, Chair J. Powell

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Speaker 1: seemed to suggest some members of the committee were a

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Speaker 1: little concerned about the risk of higher inflation as a

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Speaker 1: result of some of these unknown policies. So that, I

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Speaker 1: guess takes us to the FED, what are your expectations

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Speaker 1: in terms of the amount of easing we're going to

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Speaker 1: see this year or is it simply too soon to say?

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Speaker 3: Well, I think that the most recent inflation number that

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Speaker 3: just came out was, you know, supportive of the FED

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Speaker 3: continuing to have to ease. But one data point does

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Speaker 3: not make a trend. So I think the FED is

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Speaker 3: right to be concerned about policy changes impacting inflation. I

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Speaker 3: think the FED was right and mentioning that. I think

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Speaker 3: the folks on the committee that raised their concerns have

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Speaker 3: raised good concerns. I think cutting was not what I

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Speaker 3: would have thought they would have done. I would have

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Speaker 3: thought they would held off to see what the policies

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Speaker 3: were going to be before making that decision, especially when

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Speaker 3: there was no economic reason. There wasn't any data that

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Speaker 3: came out that suggested that there was something to be

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Speaker 3: concerned about. That said, I don't expect the FED to cut,

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Speaker 3: you know, I think a year ago it was six cuts,

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Speaker 3: and then it was four. Now it's looking more like two.

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Speaker 3: I think that's a realistic probability. There's also an equally

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Speaker 3: realistic probability that they cut not at all, especially if

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Speaker 3: the economy remains robust, inflation seems to be somewhat under control,

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Speaker 3: And then you have to think about, you know, if

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Speaker 3: you have a robust, growing economy, how much do you

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Speaker 3: want to bring rates down, especially if you're consider historically

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Speaker 3: rates aren't particularly high. Just because we had a period

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Speaker 3: where they were basically zero doesn't mean that that's the

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Speaker 3: right policy either.

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Speaker 1: So, given everything you're saying, how does an investment strategy

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Speaker 1: change in twenty twenty five versus what seemed to work

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Speaker 1: last year?

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Speaker 3: Well, I think the greatest risk as an investment is

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Speaker 3: anything related to interest rate policy. That's the most uncertain

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Speaker 3: aspect of what we're facing in twenty twenty five inflation,

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Speaker 3: interest rate policy, and FED decisions, And for me, because

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Speaker 3: of that, I'm going to stay away and find ways

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Speaker 3: to get diversification in my portfolio outside potentially a fixed

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Speaker 3: income traditional fixed income, because that's going to be the

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Speaker 3: most volatile. Now, I could be completely wrong. I'm wrong

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Speaker 3: from time to time. We all are. But I do

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Speaker 3: think that for me, I'm positioning portfolio being a bit

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Speaker 3: more constructive for things like alternatives and equities and a

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Speaker 3: little more negative on fixed income as an asset class

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Speaker 3: at the moment, given the uncertainty and the rate environment.

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Speaker 1: So within the equity market, are there themes that we

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Speaker 1: can tease out? Is artificial intelligence still one of the

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Speaker 1: trends that you favor right now?

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Speaker 2: Yeah?

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Speaker 3: I mean AI is a long term trend that has

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Speaker 3: a lot of potential ways that it can impact the

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Speaker 3: economy above and beyond technology. I mean we get so

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Speaker 3: caught up on AI and the tech giants that we

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Speaker 3: don't think about how AI can impact other aspects of

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Speaker 3: the economy as well, and every sector is impacted by it.

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Speaker 3: I think if we think about policy under the new administration,

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Speaker 3: I think energy companies could do better. So maybe we

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Speaker 3: take other looks at energy and materials things of that nature,

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Speaker 3: which could do better in an environment where there's an

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Speaker 3: administration that is not necessarily anti like oil, anti gas,

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Speaker 3: things of that nature. So these are the things you

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Speaker 3: need to worry about. Healthcare is a place that I

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Speaker 3: would be paying a lot of attention to. I don't

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Speaker 3: know good or bad, but it's a sector that I

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Speaker 3: really want to pay attention to because since that's such

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Speaker 3: a hot button right now as we think about the

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Speaker 3: major changes that continue to be considered in our healthcare

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Speaker 3: system and the issues that stand there. So those are

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Speaker 3: kind of some of the places that I think I

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Speaker 3: would personally be looking.

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Speaker 1: I don't recall whether in the past when you and

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Speaker 1: I have spoken, you've addressed the crypto space. Does that

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Speaker 1: seem interesting to you right now?

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Speaker 3: I've always been interested in crypto since I sort of

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Speaker 3: had my eyes opened by Matt Hogan of bit wise

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Speaker 3: back in twenty eighteen. You know, I, like many folks

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Speaker 3: who didn't understand the space, had a level of skepticism

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Speaker 3: that he took the time to teach and I learned.

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Speaker 3: I think that crypto as a whole, there's like the

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Speaker 3: speculative crypto, which is like any kind of coin that

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Speaker 3: has nothing behind it in blockchain that's really speculative, like

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Speaker 3: the Trump coin and doge coin and things of that nature.

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Speaker 3: And then there's the ones that actually have practical application,

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Speaker 3: like Bitcoin and Ether and Solana and things of that nature.

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Speaker 3: Those ones I'm more interested in because at the end

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Speaker 3: of the day, as far as I'm concerned, it's not

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Speaker 3: the crypto asset like bitcoin or ether that has the value,

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Speaker 3: it's the blockchain it sits on. So the evaluation for

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Speaker 3: me becomes about the use's case for those blockchains and

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Speaker 3: how that grows and how it can be practically applied.

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Speaker 3: So that's where I pay attention. But I'm very bullish

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Speaker 3: on crypto.

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Speaker 1: You were talking a moment ago about the need to

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Speaker 1: become maybe a little bit more diversified this year, and

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Speaker 1: I'm wondering whether that would include going offshore.

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Speaker 3: It could, you know, you have to think about some

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Speaker 3: of the especially in Europe there's limitations to growth. But

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Speaker 3: in Asia there's some really interesting opportunities. You know, China

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Speaker 3: has been really beat up. I'm not typically achinable for

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Speaker 3: a number of reasons, but it's hard not to, you know,

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Speaker 3: recognize the fact the valuations are very attractive China, and

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Speaker 3: then some of the other Asian economies are very interesting

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Speaker 3: as well. South Korea, if you think about India, which

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Speaker 3: is in Asia, those are areas that are interesting and

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Speaker 3: I think for a long time we've really been so

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Speaker 3: US focused. These are super cycles you tend to have

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Speaker 3: many decades where one outperforms the other. But you know,

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Speaker 3: as we look to go into twenty twenty five, I

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Speaker 3: don't think it would be wise to ignore the opportunities

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Speaker 3: that you can find in the international markets and the

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Speaker 3: opportunities that sit there.

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Speaker 1: Shaney, good stuff. Thank you so much for making time

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Speaker 1: for Shane and Sissel there. She is the president and

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Speaker 1: CEO at Bannery On Capital Management. Joining us from Chicago

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Speaker 1: here on the Daybreak Asia Podcast. Thanks for listening to

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Speaker 1: today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

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Speaker 1: we look at the story shaping markets, finance, and geopolitics

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Speaker 1: in the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 1: THEMBERG podcast YouTube channel, or anywhere else you listen. Join

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Speaker 1: us again tomorrow for insight on the market moves from

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Speaker 1: Hong Kong to Singapore and Australia. I'm Doug Prisoner and

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Speaker 1: this is Bloomberg