1 00:00:00,080 --> 00:00:01,760 Speaker 1: We're going to take a look at market action now 2 00:00:01,760 --> 00:00:04,040 Speaker 1: with our guest Eddie Low. He is the c i 3 00:00:04,160 --> 00:00:06,920 Speaker 1: O of may Bank Group Wealth Management, on the line 4 00:00:06,920 --> 00:00:09,760 Speaker 1: from Singapore. Eddie, thanks for being with us. A lot 5 00:00:09,800 --> 00:00:12,600 Speaker 1: of the focus here is on how aggressive the FED 6 00:00:12,720 --> 00:00:17,120 Speaker 1: has been of late, both in actual changes to policy 7 00:00:17,320 --> 00:00:21,000 Speaker 1: and in rhetoric, and we're looking at elevated yields across 8 00:00:21,040 --> 00:00:25,600 Speaker 1: the curve today. Do you think that Chicago's Charlie Evans 9 00:00:25,680 --> 00:00:28,400 Speaker 1: has it right when he's saying FED funds maybe needs 10 00:00:28,400 --> 00:00:29,840 Speaker 1: to be in a range of four and a half 11 00:00:29,880 --> 00:00:32,120 Speaker 1: to four and three quarters by next spring. And I'm 12 00:00:32,120 --> 00:00:34,840 Speaker 1: wondering whether or not the caveat needs to be put 13 00:00:34,880 --> 00:00:37,640 Speaker 1: in place here is Yeah, we could go there unless 14 00:00:37,720 --> 00:00:40,640 Speaker 1: something breaks first. Do you think that's that's likely? How 15 00:00:40,680 --> 00:00:44,880 Speaker 1: are you mapping this out right? Then? M evans remark 16 00:00:45,040 --> 00:00:48,360 Speaker 1: was actually interesting because I think about just slightly a 17 00:00:48,400 --> 00:00:51,199 Speaker 1: week a girl, he was actually expressing concerns that I felt, 18 00:00:51,200 --> 00:00:53,319 Speaker 1: it's going to funds with foster tits, and now he's 19 00:00:53,320 --> 00:00:57,040 Speaker 1: talking about you don't need to remain restrictive, so and 20 00:00:57,120 --> 00:01:02,400 Speaker 1: I think that caucus stunds. It's probably more consistent with 21 00:01:02,680 --> 00:01:07,399 Speaker 1: his other fat colleagues, So I think overall fat will definitely. 22 00:01:07,480 --> 00:01:09,920 Speaker 1: I think one to make in the Hawk is stunts 23 00:01:10,080 --> 00:01:14,160 Speaker 1: unless you know the inflation were to moderate faster than expected. 24 00:01:14,720 --> 00:01:18,080 Speaker 1: So what we're looking at is really very likely seenting 25 00:01:18,120 --> 00:01:21,240 Speaker 1: five basis point high in November, and I think we 26 00:01:21,319 --> 00:01:24,120 Speaker 1: talked about terminal rate of between four point five to 27 00:01:24,200 --> 00:01:26,640 Speaker 1: four points and five percent, which event also pointed out. 28 00:01:26,800 --> 00:01:30,119 Speaker 1: I think that is probably a good likelihood as well. 29 00:01:30,920 --> 00:01:34,319 Speaker 1: When do you foresee inflation starting to moderate? The fields 30 00:01:34,360 --> 00:01:37,120 Speaker 1: a long way off. Now, what's going to happen first 31 00:01:37,160 --> 00:01:40,760 Speaker 1: that or recision? Well, I think if you look at 32 00:01:40,760 --> 00:01:45,000 Speaker 1: the headline inflation, it is indeed starting to roll over. 33 00:01:45,200 --> 00:01:47,880 Speaker 1: I mean we started or you know, the last month's 34 00:01:48,000 --> 00:01:51,920 Speaker 1: data was slightly eight point five to eight point three percent, 35 00:01:52,560 --> 00:01:54,600 Speaker 1: and then if you look at the Cleveland Fed now 36 00:01:54,680 --> 00:01:57,560 Speaker 1: cast is actually projecting September CPI to act lower to 37 00:01:57,640 --> 00:02:01,120 Speaker 1: eight point two percent. But I think what is of 38 00:02:01,240 --> 00:02:04,480 Speaker 1: concern is really on the core CPI, which is actually 39 00:02:04,480 --> 00:02:08,160 Speaker 1: still trending higher, and that is really propelled by the 40 00:02:08,240 --> 00:02:13,280 Speaker 1: very stickies UH services inflation. So I think an upcoming 41 00:02:13,520 --> 00:02:17,000 Speaker 1: jobs data investors would be very much focused on not 42 00:02:17,040 --> 00:02:19,920 Speaker 1: just how many jobs are being added, but really on 43 00:02:20,240 --> 00:02:24,280 Speaker 1: unemployment and which pressure and ironically you need a bad 44 00:02:24,280 --> 00:02:28,320 Speaker 1: set of numbers. Uh. Maybe that would be that would 45 00:02:28,400 --> 00:02:31,359 Speaker 1: be safe positively by investors, because then it would suggest that, 46 00:02:31,720 --> 00:02:35,120 Speaker 1: you know, softening wage pressure and softening inflation im pressure. 47 00:02:35,160 --> 00:02:36,680 Speaker 1: But lady, I want to get back to this point 48 00:02:36,680 --> 00:02:38,480 Speaker 1: that I was trying to get at earlier. What if 49 00:02:38,480 --> 00:02:41,640 Speaker 1: something breaks? Scott Minored from Guidenheim was saying that he 50 00:02:41,680 --> 00:02:45,639 Speaker 1: sees cracks forming in the financial system right now? Right, 51 00:02:45,919 --> 00:02:47,840 Speaker 1: I think yes, I think you point to n and 52 00:02:47,919 --> 00:02:51,160 Speaker 1: I sort of like read an article recently to say that, hey, 53 00:02:51,160 --> 00:02:55,520 Speaker 1: financial conditions are indeed titaness and accidents couldn't have could happen. 54 00:02:55,600 --> 00:02:58,080 Speaker 1: And we did see a mani example of that in 55 00:02:58,120 --> 00:03:02,240 Speaker 1: the UK recently where the government actually I think surprised 56 00:03:03,000 --> 00:03:07,359 Speaker 1: the market with this tax cut measures and then led 57 00:03:07,440 --> 00:03:10,320 Speaker 1: to storring u K guilts uh and the b o 58 00:03:10,440 --> 00:03:13,359 Speaker 1: E had to reverse yeah a little bit and did 59 00:03:13,440 --> 00:03:16,440 Speaker 1: uh and they did a temporary q E. So so 60 00:03:16,440 --> 00:03:19,400 Speaker 1: so I wouldn't be surprised if you know, if we 61 00:03:19,440 --> 00:03:22,560 Speaker 1: do get the financial shocks that the global central banks 62 00:03:22,560 --> 00:03:25,160 Speaker 1: and the FED were to reverse gear. But I think 63 00:03:25,160 --> 00:03:27,600 Speaker 1: that it's not the base case in the roof for now. Ay, 64 00:03:27,680 --> 00:03:30,320 Speaker 1: we've been speaking a lot about the macro environment, and 65 00:03:30,360 --> 00:03:33,040 Speaker 1: just with that in mind, how is your risk appetite 66 00:03:33,080 --> 00:03:37,120 Speaker 1: at the moment right? We have actually turned more causes 67 00:03:37,200 --> 00:03:40,680 Speaker 1: on risks assets since the second quarter, admit, you know, 68 00:03:40,920 --> 00:03:46,120 Speaker 1: inflation and central bank tightening concerns and or while we 69 00:03:46,160 --> 00:03:49,320 Speaker 1: are trying to look for opportunities to turn more constructive. 70 00:03:49,360 --> 00:03:51,120 Speaker 1: But I think we are still not there yet. And 71 00:03:51,160 --> 00:03:53,240 Speaker 1: one of the reasons here is because I think earnings 72 00:03:53,360 --> 00:03:56,400 Speaker 1: risk has not been priced in. We still believe that 73 00:03:56,480 --> 00:03:59,240 Speaker 1: corporate earnings as donates, especially in the development bekets are 74 00:03:59,280 --> 00:04:02,320 Speaker 1: still only up on my stick. And one point I 75 00:04:02,360 --> 00:04:05,120 Speaker 1: wanted to highlight is in terms of volatility, if you 76 00:04:05,200 --> 00:04:08,680 Speaker 1: look at the bond market and equity market volatility, the 77 00:04:08,720 --> 00:04:13,640 Speaker 1: bond market volatility has actually is approaching the COVID crisis high, 78 00:04:13,760 --> 00:04:17,120 Speaker 1: but equity market volatility is training higher but not there yet, 79 00:04:17,120 --> 00:04:19,240 Speaker 1: so it could play some catch up. So we are 80 00:04:19,360 --> 00:04:22,919 Speaker 1: racing actually for a choppy October and advising our clients 81 00:04:23,160 --> 00:04:26,719 Speaker 1: to really protect that portfolio against the downside risk. So 82 00:04:26,760 --> 00:04:29,480 Speaker 1: when you talk downside risk, are there themes here or 83 00:04:29,600 --> 00:04:33,880 Speaker 1: industry groups that you believe represent the greater downside risk. 84 00:04:33,920 --> 00:04:38,320 Speaker 1: I'm thinking maybe materials, technology and stuff like that. Well, 85 00:04:38,440 --> 00:04:40,200 Speaker 1: I think in terms of downside vices when you look 86 00:04:40,200 --> 00:04:42,880 Speaker 1: at markets, I think, let's first talk about markets. We 87 00:04:42,960 --> 00:04:48,479 Speaker 1: are actually underweighted UH Europe, and I think for obvious reasons, 88 00:04:48,760 --> 00:04:53,760 Speaker 1: apart from um moderating economic activities. UM, I think the 89 00:04:53,760 --> 00:04:58,760 Speaker 1: region is still most vulnerable to the ongoing geopolitical uncertainty 90 00:04:58,760 --> 00:05:02,120 Speaker 1: is related to Russian and you clean war. But within sectors, 91 00:05:02,160 --> 00:05:05,560 Speaker 1: I think UM we are actually seeking shelter in more 92 00:05:05,600 --> 00:05:10,480 Speaker 1: defensive sectors such as consumer staples and healthcare because these 93 00:05:10,560 --> 00:05:14,040 Speaker 1: the demand for such companies tend to be more resilient, 94 00:05:14,839 --> 00:05:17,080 Speaker 1: even in the downtown. And actually, if you look at 95 00:05:17,080 --> 00:05:21,040 Speaker 1: the recent sector performance, they have actually outperformed. Now you're 96 00:05:21,040 --> 00:05:23,599 Speaker 1: a neutral and oil as well. This is despite the 97 00:05:23,960 --> 00:05:26,840 Speaker 1: opeque plus album that we've seen recently. Why why is 98 00:05:26,880 --> 00:05:30,400 Speaker 1: that part of the factors you're balancing here? Well, in 99 00:05:30,480 --> 00:05:33,680 Speaker 1: fact that we have earlier in the I think a 100 00:05:33,720 --> 00:05:36,880 Speaker 1: couple of months ago, we talked about trimming some exposure 101 00:05:37,400 --> 00:05:39,359 Speaker 1: in the energy sector because if you look at the 102 00:05:39,440 --> 00:05:42,600 Speaker 1: energy sector, it is actually here to date, one of 103 00:05:42,640 --> 00:05:48,479 Speaker 1: the best performing sectors in the positive returns um that's 104 00:05:48,480 --> 00:05:51,080 Speaker 1: not surprising because of the sorry oil prices that we've seen. 105 00:05:51,720 --> 00:05:55,680 Speaker 1: But if you look at you talked about slowing growth, 106 00:05:55,839 --> 00:05:58,560 Speaker 1: that's gonna hurt de Mond ultimately, right. So and that 107 00:05:58,720 --> 00:06:01,320 Speaker 1: is why we thought that, hey, it's time to take 108 00:06:01,360 --> 00:06:06,080 Speaker 1: some money off the table, because if markets with the countdown, 109 00:06:06,120 --> 00:06:08,520 Speaker 1: investor will look around to say, okay, which one can 110 00:06:08,560 --> 00:06:10,960 Speaker 1: I take profit off the table? And and energy stocks 111 00:06:10,960 --> 00:06:14,120 Speaker 1: will be the prime candidate. Now having said that, a 112 00:06:14,120 --> 00:06:17,760 Speaker 1: couple of days ago, prime OPAC class I decided to 113 00:06:17,760 --> 00:06:21,640 Speaker 1: cut production by tumblin. So that's I think that's going 114 00:06:21,680 --> 00:06:25,159 Speaker 1: to lend some support UH to ODE prices, putting a floor. 115 00:06:25,560 --> 00:06:27,680 Speaker 1: But I don't think the intent of the OPEC class 116 00:06:27,800 --> 00:06:32,320 Speaker 1: is to to push ODE prices back to say Hyman 117 00:06:32,360 --> 00:06:35,279 Speaker 1: twenty or beyond, because if that were to be so, 118 00:06:35,360 --> 00:06:38,320 Speaker 1: then it will only exacerbate the inclation issues and and 119 00:06:38,320 --> 00:06:41,480 Speaker 1: and obviously the economy will be in a worst shape 120 00:06:41,520 --> 00:06:44,000 Speaker 1: after that. During the U S session, we heard from 121 00:06:44,040 --> 00:06:46,320 Speaker 1: the guys over at Global x Management. They were saying 122 00:06:46,360 --> 00:06:48,960 Speaker 1: that China may add a meaningful amount of demand for 123 00:06:49,000 --> 00:06:51,960 Speaker 1: crude oil. Expectations here as we're gonna see some type 124 00:06:51,960 --> 00:06:55,320 Speaker 1: of recovery in the China economy. Now the market has 125 00:06:55,360 --> 00:06:58,359 Speaker 1: been on holiday for the week. You will get trading 126 00:06:58,400 --> 00:07:02,360 Speaker 1: underway next Monday. Um, would you be along China right now? 127 00:07:02,400 --> 00:07:06,919 Speaker 1: Given everything that we've been describing, we we wanted to 128 00:07:07,960 --> 00:07:12,040 Speaker 1: because the valuation looks so you know, attractive, But I 129 00:07:12,120 --> 00:07:17,280 Speaker 1: think the very stringent zero COVID policies keeping us from 130 00:07:17,400 --> 00:07:20,840 Speaker 1: turning over the bullish and if you look at recent 131 00:07:21,440 --> 00:07:25,200 Speaker 1: data cases us writing again because of the Golden Wig holidays, 132 00:07:25,600 --> 00:07:29,040 Speaker 1: and we do see renewed the lockdown restrictions. Now there 133 00:07:29,080 --> 00:07:31,680 Speaker 1: are some speculations that there could be more opening up 134 00:07:31,680 --> 00:07:35,280 Speaker 1: of the economy after the Party Congress, but we suspect 135 00:07:35,680 --> 00:07:40,520 Speaker 1: any opening up would be gradual rather than a big book. 136 00:07:41,720 --> 00:07:44,160 Speaker 1: All right, Eddie Low, we will leave it there, Thanks 137 00:07:44,200 --> 00:07:47,040 Speaker 1: so much for joining us today on Bloomberg Daybreak Asia. 138 00:07:47,400 --> 00:07:51,200 Speaker 1: Eddie Low is ce IO of may Bank Group Wealth Management, 139 00:07:51,280 --> 00:07:53,120 Speaker 1: joining us from Singapore, where there seems to be some 140 00:07:53,160 --> 00:07:55,360 Speaker 1: fairly active bird life in the background as well.