Speaker 1: Let's get to George bob Boras, executive director and head
Speaker 1: of Research at K two Asset Management in our Singapore studio. George,
Speaker 1: great to have you with us. Um. So we've been
Speaker 1: posing on the Market's live blog. You know if there
Speaker 1: are any alternatives to the dollar, well, this morning there
Speaker 1: appeared to be and it it brings us to the
Speaker 1: story of the advanced by the Ukraine military. You can't
Speaker 1: read too much into it, but my gosh, if this
Speaker 1: led to some sort of settlement talks between Russia and Ukraine,
Speaker 1: that could bode well for the future. I'm getting excited
Speaker 1: at the thought your thoughts. Yes, Um, I'm looking at
Speaker 1: the same headlines as you, as you sort of highlighted,
Speaker 1: and that is a left field Jai political to win
Speaker 1: without a doubt, um, But but front and center the
Speaker 1: US dollar strength is I think even those paper that
Speaker 1: didn't believe it last year, I can say it notwithstanding
Speaker 1: what you've just said on the Jai political that it's
Speaker 1: got so much certainty and predictability related to other regents
Speaker 1: the world right across the capital structure. When you're investing
Speaker 1: that while the strength won't continue at this rate, you'd
Speaker 1: suspect it to stay to these levels for a little
Speaker 1: bit longer. But notwithstanding again what you've just said that
Speaker 1: that would be very big positive ta win for Europe.
Speaker 1: That's in the world of pain so strong a dollar.
Speaker 1: What about in terms of what other kind of moves
Speaker 1: we're going to see in risk oursets this week as
Speaker 1: we await the key inflation print. Yeah, so you know,
Speaker 1: like most people will put my head up, Juliete and say,
Speaker 1: it would be a reasonable statement to say that we
Speaker 1: are peak inflation in the US, and that's tug and cheek.
Speaker 1: Of course we are, but it's about the way the
Speaker 1: unit costs feed into the core inflation measures. Can't see
Speaker 1: it getting down to that two or three band anytime
Speaker 1: soon unfortunately. Um, But it will be positive news. And
Speaker 1: the headline sentiment is waning, particularly on the retail investor side,
Speaker 1: sentiment on the institutional side, it's a bit more proactive. Um,
Speaker 1: But it would be a positive news event this week.
Speaker 1: Notwithstanding again, I'm using that word a lot. Seventy five
Speaker 1: basis point is a lot for this month, and those
Speaker 1: people that are trying to create a narrative that that's
Speaker 1: not going to happen, I don't think that's quite right.
Speaker 1: They've got plenty of opportunity just to deliver the seventy
Speaker 1: five and do a fifty and then twenty five going
Speaker 1: to that order, and I think that that that's available
Speaker 1: and they should go down that pathway, and that gets
Speaker 1: you right up to four percent on the Fed funds rate.
Speaker 1: And we don't have to see inflation at two to
Speaker 1: three percent from markets to to really stand up and
Speaker 1: pay attention, right, George, I mean, if you start to
Speaker 1: see inflation coming down and investors sense that, you know this,
Speaker 1: this will take some time, but it's happening at a
Speaker 1: time when the Fed is probably maxed out up around
Speaker 1: four percenters, so markets might rally spot on, and that's
Speaker 1: it rallying and restrictive, knowing that it's increasing at a
Speaker 1: decreasing rate. Again back to basics. Next rate move, we're
Speaker 1: going to official type monetary restrictive levels, and then a
Speaker 1: couple more moved to get to that four four handle.
Speaker 1: And in that narrative that you said, you know, with
Speaker 1: minimal rate rises in twenty three, just holding that's a
Speaker 1: good rally. Multiples are reasonable, they're not cheap, they're not expensive,
Speaker 1: they're reasonable. High yield is in higher demand in the
Speaker 1: short duration. But those two asset class are just naming
Speaker 1: two of many would would rarely quite strongly on that narrative.
Speaker 1: What's your outlook for Asia when we're starting to see
Speaker 1: the latter part of the year coming in. And of
Speaker 1: course that dollar strength also complicates things here too. Yeah, BlimE,
Speaker 1: it does complicate things, and it's complicated things again, we
Speaker 1: don't tend to use March twenty one has been so
Speaker 1: difficult because what's going on in China and it's just
Speaker 1: continues to have more pain delivered to itself. And so
Speaker 1: therefore we just look at the other side of the
Speaker 1: Congress and we believe bitter clarity. For five years they've
Speaker 1: been much more coordinated, innovative fiscal stimulus that can actually
Speaker 1: work with the p BOC, but not good news coming
Speaker 1: out of their Hence, evaluations are very very cheap. Nevertheless,
Speaker 1: we still underweight that area where we traditionally would be overweight.
Speaker 1: But you know, Alie Barb and JD are just too
Speaker 1: that we would have picked up in that late June
Speaker 1: quarter sell off. But a world of pain still to
Speaker 1: be delivered. Let's just get the other side of this
Speaker 1: party Congress and try and get some certainty and to
Speaker 1: see what they're what they're going to do for the
Speaker 1: years ahead to deal with this economic destruction of that
Speaker 1: that's been delivered through that economy. Let's pick up on
Speaker 1: what you were talking about with the China COVID zero
Speaker 1: policy or dynamic zero. We're looking ahead at the Party
Speaker 1: Congress to see whether or not that is dropped or not.
Speaker 1: If it is, do things change materially from there? And
Speaker 1: I guess what our sets would you be looking in
Speaker 1: China that are potentially undervalued at the moment. Yeah, a
Speaker 1: million dollar question, Juliet, but quite clearly post the Congress,
Speaker 1: expectation for more certainty from a low base, that's pretty
Speaker 1: reasonable statement. And then basically cross across the board and
Speaker 1: everything is discounted in China again because of Beijing's policy
Speaker 1: pivot in March twenty one. That's really confused the West
Speaker 1: in trying to acquire and buy future earnings. So there's
Speaker 1: so many, so many opportunities in mainland China, but obviously
Speaker 1: the domestic demand that they're more consumption expectation for the
Speaker 1: decade ahead, there's just so much upside. But right across
Speaker 1: the board earlier there's just discounts for what's been going
Speaker 1: on and the disappointment. So obviously, you know the five
Speaker 1: and a half were never going to happen from a
Speaker 1: year ago, but obviously now we're getting that three and
Speaker 1: a half possibly a two handle. So they're really got
Speaker 1: to turn it around for this calendar year and get
Speaker 1: those upgrades for twenty three and then twenty four and beyond.
Speaker 1: But again, the certainty from Party Congress creates opportunity. The
Speaker 1: more opportunity and certainty they can create for investors, they
Speaker 1: need capital, it is finite. Still, there's there's opportunities right
Speaker 1: across the bord to mainland China staying away from property
Speaker 1: still as they did as that destruction. It's working through
Speaker 1: the system to the p BOC come up with some
Speaker 1: top of broad based solution. But a bad bank perhaps
Speaker 1: can be part of that narrative. But but yeah, it's
Speaker 1: discounted through out for many many reasons. You can you
Speaker 1: can flip a switch on on dynamic zero, but you
Speaker 1: can't flip a switch on the on the Chinese property crisis.
Speaker 1: Is that something that they are going to be suffering
Speaker 1: the consequences from that for years to come. Spot on
Speaker 1: and really looking for a new quote Mario drag Pboc
Speaker 1: Beijing narrative, like something big has to happen to solve
Speaker 1: what is significant. This is the biggest property impairment the
Speaker 1: world's ever seen, and it has to be addressed some way.
Speaker 1: But having said all of that, the again, it's all
Speaker 1: about that certain team policy. They need to start from
Speaker 1: a low base and create that. And then with the
Speaker 1: opening up of mainland China, let's look at the template
Speaker 1: coming out of Japan. Much smaller, completely different economy for
Speaker 1: obvious reasons. But the opening up of Japan is a
Speaker 1: is a smaller template of what will be happening in
Speaker 1: mainland China when they do decide to really open up
Speaker 1: sometime next year. How attractive is Japan. I've also got
Speaker 1: that incredibly weakend. Yeah, it's it's it's always attractive. It's
Speaker 1: just it's generally a safe haven to not go to underweight, Julian,
Speaker 1: let it go to overweight. But nevertheless, Japan is attractive
Speaker 1: in the reopening narrative that particularly from October November this year,
Speaker 1: it is an attractive place to be and a lot
Speaker 1: of a lot of funds that have been investing in
Speaker 1: Asia I've been using more and more Japan and at
Speaker 1: the bottom end Australian New Zealand for the dividend to
Speaker 1: compensate for what's been going on in China and those
Speaker 1: linked to China earnings. I take it you raised some
Speaker 1: cash over the past a couple of months looking for
Speaker 1: the right opportunity where where will you deploy them with
Speaker 1: the most feverish aggression. Yes, so the cash was quite
Speaker 1: high in this in the in the June quarter and
Speaker 1: about ten. It has been deployed in July and August
Speaker 1: and so far so far in September, but that's been
Speaker 1: deployed coming out of that sell off into energy. So
Speaker 1: even at global portfolio, so woodside because of the Woodside
Speaker 1: global portfolio as few depresent l n G. So we're
Speaker 1: looking maintaining that overweight. Looking at global financial with US
Speaker 1: dollar base, so you get JP Morgan's in there. We
Speaker 1: put mcquarie Bank in that bucket for what it's worth
Speaker 1: because of the diversification of earnings were across their business units,
Speaker 1: and the and the compelling valuations across some of Corey
Speaker 1: business units UH and then UM and anything. Looking for
Speaker 1: m and an opportunity with the big cash flow, so
Speaker 1: that that puts b hp rio into that into that
Speaker 1: basket an opportunity there. But but but basically that l
Speaker 1: m G play has been a bigger contributor at some
Speaker 1: diverse five financials U S dollar base. There's still like
Speaker 1: the U S dollar narrative and for the two cents
Speaker 1: worth for those out there. We look at the SMP
Speaker 1: five hundred ranges for the year ahead as a forty
Speaker 1: four hundred thirty nine hundred, so we're towards that bottom
Speaker 1: end of that range. Again, there's some head winds there,
Speaker 1: but they're more predictability for those earnings in the year ahead,
Speaker 1: not despote some risks. We think it's on balanced, quite reasonable. George,
Speaker 1: thank you and enjoy Singapore. George bboris executive director, head
Speaker 1: of Research a care to Asset Management with us in
Speaker 1: our Singapore studio