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Speaker 1: Let's get to our guests. Charo Chanana is with us.

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Speaker 1: She is the market strategist at sax So Capital Markets.

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Speaker 1: On the line from Singapore, Charoo, thank you for being

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Speaker 1: with us. Do you trust this rally that we saw

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Speaker 1: today in the US? I mean, there was a fair

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Speaker 1: amount of short covering, I'm sure, but I'm wondering whether

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Speaker 1: or not maybe we've reached some kind of inflection point

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Speaker 1: if you buy into the idea that perhaps we're beginning

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Speaker 1: to see a peek if we haven't already in inflation

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Speaker 1: in the US, and now the FED has got some

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Speaker 1: room to begin to maybe ease its aggression. Hi, good morning,

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Speaker 1: Thank you for having me so great question. Yeah, I mean,

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Speaker 1: does the rally have legs? I mean, no seven percent

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Speaker 1: kind of rally nastac would ever have legs, I think,

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Speaker 1: But of course not at this stage when um certainly

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Speaker 1: there seems to be some disinflationary forces in play at

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Speaker 1: the moment, but the US inflation is still very high,

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Speaker 1: and I think this is not a time for the

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Speaker 1: FED to take comfort in one and right. So I

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Speaker 1: do think the market reaction has been a little bit exaggerated, uh,

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Speaker 1: in terms of the FED path from here. They have

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Speaker 1: already communicated that downshift to smaller rate types from the

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Speaker 1: from the December meeting onwards. So again, this meeting, this

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Speaker 1: CPI print doesn't really change anything. You know, we it

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Speaker 1: was expected that we are we are going to get

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Speaker 1: a fifty basis points in December or with a small

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Speaker 1: probability of a semently five basis points, and it likely

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Speaker 1: remains to be the case. There's been obviously some townshift

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Speaker 1: in the terminal rate pricing, which, of course again I

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Speaker 1: think there will be a lot of pushbacks from the

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Speaker 1: FED members in the coming days. We've already seen some

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Speaker 1: last night, but I think some more to come because

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Speaker 1: there's easing of financial conditions. There's some certainly not something

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Speaker 1: the FED wants at this stage. Sure, if the market

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Speaker 1: reaction was, as you say, exaggerated, then what happens next

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Speaker 1: if we are pressing in more highs, but of course

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Speaker 1: expecting that inflation will continue to cool somewhat because there

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Speaker 1: is still a lot of paper out there that don't

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Speaker 1: want to miss out. So it's a it's a bit

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Speaker 1: of a firmer rally heading into the end of the

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Speaker 1: year too well. I do think that this interest rates

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Speaker 1: story in the inflation story is pretty much in the

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Speaker 1: markets now. I think from year on, especially for the

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Speaker 1: equity markets, the focus has to move a lot more

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Speaker 1: towards those recession concerns, towards uh, you know, the earnings concerns.

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Speaker 1: We've already seen a big margin compression in this qute

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Speaker 1: three earning season and that likely looks like we'll get

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Speaker 1: worse from here. And of course, the second biggest risk

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Speaker 1: that we faced that this week is the liquidity risk

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Speaker 1: that is right now being seen in the crypto market,

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Speaker 1: but will likely have spillovers to the other financial markets

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Speaker 1: as well, and there could be these pockets of risk

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Speaker 1: I think in again other parts of the markets as well.

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Speaker 1: So I think these are some of the things that

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Speaker 1: will be more important for the equity markets from here on.

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Speaker 1: We had a big collapse and yields across you as

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Speaker 1: treasury ocur today and with that big drop in the dollar,

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Speaker 1: I can give you around thirty seconds in this augment,

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Speaker 1: cha rue, Have we seen the best of the dollar

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Speaker 1: in terms of its strength against the major's right now?

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Speaker 1: Is the is the path forward weaker? Um? I have

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Speaker 1: a tough time calling it a top in the US dollar.

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Speaker 1: You know, I mean I would say, yes, a little

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Speaker 1: bit more top here, it would be as a straight

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Speaker 1: line up as we've seen in this year throughout. Uh.

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Speaker 1: You know, the FED is certainly still more hawkish than

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Speaker 1: some of the other major central banks. And if you

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Speaker 1: see recession concerns picking up, we have safe paven flows

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Speaker 1: to the dollar. If you see liquidity concerns picking up again,

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Speaker 1: we have you know, the liquidity can be found in

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Speaker 1: the U S dollar, in the U S trjuries. It

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Speaker 1: was telling us with Beijing reporting the most new COVID

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Speaker 1: cases in more than a year. But at the same

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Speaker 1: time the new Politburo Standing Committee reiterating that general guideline

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Speaker 1: of COVID zero and stressing a more precise approach, perhaps

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Speaker 1: seeing light at the end of the COVID zero tunnel.

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Speaker 1: When do we see that and when do we then

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Speaker 1: see a big rally and assets run Juliette, So, yeah,

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Speaker 1: I think that is the big question China zero COVID policy, right,

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Speaker 1: how soon do we see it and how fast that

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Speaker 1: unwinding of those policies will be. But at this stage

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Speaker 1: it looks like the reopening is being very cautious. And

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Speaker 1: I think you know this jargon that we have dynamic

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Speaker 1: zero COVID. I think that is likely to stay. They

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Speaker 1: are probably going to add more flexibility around it with

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Speaker 1: respect to you know, quarantine days or PCR testing requirements.

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Speaker 1: Because of course, consumption is becoming a big focus. We

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Speaker 1: saw October exports slipping into the negative territory for China,

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Speaker 1: so certainly they need more support to growth, more drivers

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Speaker 1: of growth in the economy, and that has to come

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Speaker 1: from consumption. Uh So, I think that will remain a

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Speaker 1: big focus and we will see more flexibility. But I

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Speaker 1: don't see uh, you know, these restrictions or lockdowns going anywhere.

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Speaker 1: So a little bit of uncertainty. Then would you be

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Speaker 1: willing to put money to work in the equity market

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Speaker 1: in China right now? I think the positive side here

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Speaker 1: is that the positioning has been so weak, right that

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Speaker 1: there is still some potential uh if you do see

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Speaker 1: uh you know, even those small measures and that intent

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Speaker 1: of reopening at some point in twenty twenty three at least.

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Speaker 1: Uh So, I think, yeah, I mean, I would you know,

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Speaker 1: probably consider some targeted uh you know investments there and

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Speaker 1: some of the targeted investments outside China. And when you

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Speaker 1: look at the reopening story, particularly as we know, as

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Speaker 1: soon as the board is open and you get the

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Speaker 1: Chinese to respect, that is very big news for a

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Speaker 1: lot of the Southeast Asian countries. You're looking at Indonesia

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Speaker 1: and Vietnam as well for some upside tell us why

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Speaker 1: uh so, Yeah, I think the reopening story will particularly

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Speaker 1: be beneficial to maybe you know, Japan or Thailand. But yeah,

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Speaker 1: for me, I think Indonesia and Vietnam have been very interesting. Uh.

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Speaker 1: Indonesia particularly because if it's uh, you know, commodities exposure,

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Speaker 1: and we've seen the run up in commodities this year.

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Speaker 1: I think that is likely to continue to you know

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Speaker 1: benefit Indonesian especially because they also have a lot of

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Speaker 1: these green metals you know, nickel and lithium and stuff,

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Speaker 1: which will be required for the green transformation story going

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Speaker 1: forward as well. So I think that's very interesting for me.

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Speaker 1: But also at the same time, Vietnam, I think that

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Speaker 1: obviously has been the biggest beneficiary of manufacturing moving out

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Speaker 1: of China over the last seven years, and you know,

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Speaker 1: as that continues to play out them and I think

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Speaker 1: those policies in Vietnam that continue to attract you know,

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Speaker 1: manufacturing as well as support consumption in a big way.

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Speaker 1: I think it's like fighting on all cylinders. So, I mean,

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Speaker 1: I do see these two being placed really well going

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Speaker 1: into next days. But we were talking earlier, Charu about

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Speaker 1: the collapse in the dollar today as a function of

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Speaker 1: these lower treasury yields across the curve, and the flip

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Speaker 1: side of that, obviously is a much much stronger year

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Speaker 1: seventy thereabouts. It's hard to believe less than a month

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Speaker 1: ago we were talking about intervention. Right with a yen

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Speaker 1: we can impair asked one fifty against the green bag.

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Speaker 1: So talk to me about what you see happening in

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Speaker 1: the Japanese currency and whether or not it gives you,

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Speaker 1: um the appetite for Japanese risk assets right now? Uh So,

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Speaker 1: I mean I would start it will may be a

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Speaker 1: slightly different place here. Talk about the US yields. Would

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Speaker 1: you think that the you know, tenure yields have beaked uh?

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Speaker 1: In my stance, uh Like I said earlier as well,

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Speaker 1: I do think that the interest rate story has been

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Speaker 1: pretty much priced in by the market. Uh So. I

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Speaker 1: do see those um, you know, equity and bond correlations

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Speaker 1: turning negative once again again going into three uh And

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Speaker 1: when that yield story starts to top out, I do

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Speaker 1: think that the pressure on the end will particularly ease,

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Speaker 1: right because it was the divergence between the US yields

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Speaker 1: and the Japanese yields that was actually causing all of

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Speaker 1: that pressure. And secondly, I think the kind of intervention

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Speaker 1: that we have already seen from the Japanese authorities has

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Speaker 1: obviously take now some of that speculative froth from the

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Speaker 1: gain market. So I think that's also very important. So

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Speaker 1: while I mean for for the next several weeks, I

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Speaker 1: would still continue to see pressure. Like I said, there's

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Speaker 1: a possibility of beds hockey commentary. Alright, Chery, we're gonna

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Speaker 1: have to live it. There, have a great weekend. Chary

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Speaker 1: chanaa market strategist at Saxo Capital Markets, on the line

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Speaker 1: from Singapore for US here on Bloomberg Daybreak Asia