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Speaker 1: Let's get to our guest, Cameron Brandt, Director of Research

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Speaker 1: d E p f R, to take a look at markets. Cameron,

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Speaker 1: earlier this year, I found myself asking the question too

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Speaker 1: many guests. Boy, once we get the China reopening and

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Speaker 1: once we get the FED to kind of peak in

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Speaker 1: terms of hawkishness, Um, you know, how do you like

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Speaker 1: how do you like the notion of a big rebound?

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Speaker 1: And we've we've got sort of both of those things

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Speaker 1: in the back pocket now and somehow we're not uncorking

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Speaker 1: the champagne. Why well, Um, I think in both cases

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Speaker 1: there's a big asterict um. You know, China has uh

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Speaker 1: effectively abandoned zero COVID, but now we have to get

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Speaker 1: through the COVID that's been unleashed before the the presence

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Speaker 1: under the tree can be opened. But money is still

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Speaker 1: chasing that rebound. Uh. In the case of the US, UM,

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Speaker 1: you know, the FED has not unequivocally said that the

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Speaker 1: pivot is close. It's still i think, trying to keep

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Speaker 1: its options open in case inflation proved stickier. So you know,

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Speaker 1: there really isn't a reason to open the champagne on

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Speaker 1: on the US interest rate side just yet. Carmon just

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Speaker 1: to full up in China. How much of this China

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Speaker 1: risk has been fected in by markets? Could China use

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Speaker 1: drive assets even lower now in oh? I I think so.

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Speaker 1: I think, UM. You know, it's very hard to gauge

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Speaker 1: risk in China. You know, official data is fairly I think,

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Speaker 1: carefully curated. UM. And we really don't know quite how

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Speaker 1: the sort of uh post restriction COVID wave will run. UM.

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Speaker 1: It does seem that the Chinese leadership has has some

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Speaker 1: realized that, you know, there are consequences to some of

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Speaker 1: the actions they taken, and we are seeing modest relaxations

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Speaker 1: of restrictions that have hobbled the tech and property sectors. UM.

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Speaker 1: But I think we all know that the authorities there

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Speaker 1: will react pretty strongly if the uncertainty and slowing economic

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Speaker 1: growth causes any kind of social issues. Well, there's so

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Speaker 1: much negativity. I find myself wanting to push back on

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Speaker 1: it a little bit. Uh I, I think we're overthinking

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Speaker 1: it if we're trying to turn the China reopening into

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Speaker 1: a negative. Yes, it's possible that the virus will be spread,

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Speaker 1: but then the virus has has more or less weakened

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Speaker 1: over the past three years, which is kind of what

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Speaker 1: happens with these viruses and the mutate to save themselves

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Speaker 1: and they get weaker in the process. Um. Can you

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Speaker 1: can you not at least realize that people, once given freedom,

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Speaker 1: they'll get out there and spend It just takes me

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Speaker 1: might take a little while. Well, it's certainly. Uh. You

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Speaker 1: know a lot of the investors we track and we

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Speaker 1: do it through the mutual fund lends. Uh. They they've

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Speaker 1: been in your camp more or less consistently, certainly since

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Speaker 1: the middle of this year. Um, we're looking at yet

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Speaker 1: another inflow into dedicated China funds. Is we so? Um?

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Speaker 1: You know the rebound may not come quite as quickly,

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Speaker 1: but you know we're seeing a very solid consensus that

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Speaker 1: it will come. I think the biggest thing for me

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Speaker 1: has let me just follow that up really quickly. The

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Speaker 1: biggest thing for me I felt myself, even as a

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Speaker 1: as a journalist and not as an advisor on investing,

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Speaker 1: very negative on China when uh the common prosperity was

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Speaker 1: you know, Job one and the tough regulation and the

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Speaker 1: anti private sector policymaking from Chinese officials, coupled with the

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Speaker 1: COVID lockdowns. It was very easy to be negative. But

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Speaker 1: now almost all of that has changed, and we don't

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Speaker 1: know if it's sustainable, but it seems like that is

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Speaker 1: moved in a different direction. Hence the positivity. Yes, no,

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Speaker 1: and certainly in in a short time frame. I think

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Speaker 1: you're right, Um, in the longer term, you know, what

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Speaker 1: has happened in China between the regulatory action against various

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Speaker 1: areas in the private sector and the COVID lockdown is

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Speaker 1: a very strong signal that, you know, the interests of

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Speaker 1: foreign investors and indeed domestic investors are almost completely secondary

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Speaker 1: to the perceived needs of the state. And I think,

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Speaker 1: you know, I think people will remember that for a

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Speaker 1: while m hm Cameron. People will also remember that is

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Speaker 1: a year of tightening, will likely be the year of

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Speaker 1: living with the tightening. How much pain will this cause

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Speaker 1: you think? I think there's definitely some more pain to come.

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Speaker 1: We understandably tend to focus on interest rates because uh,

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Speaker 1: those cross both the policy and the day to day

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Speaker 1: living continuum. Um, But you know, I still think that

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Speaker 1: the balance sheet reduction hasn't gotten the attention it might deserve.

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Speaker 1: It does seem to me that a lot of sources

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Speaker 1: of demand for US treasuries UM are sort of on

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Speaker 1: the wane, which could send another shock through the market.

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Speaker 1: And if the CD sticks to what it said after

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Speaker 1: its last policy meeting that it will start running down

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Speaker 1: it's valance sheet, uh starting in March. You know, I

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Speaker 1: can easily see something in the first half of next

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Speaker 1: year quite a bit more pain. Right. So Cameron having

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Speaker 1: said that what will father QT mean for risk assets

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Speaker 1: for liquidity? How will this play out? Sorry I didn't

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Speaker 1: hear the first bit of that. What will father QT

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Speaker 1: mean for risk assets and liquidity? Um? It will it

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Speaker 1: will mean a serious repricing. Um. You know, they they're

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Speaker 1: taking away the punch bowl, you know, and then that

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Speaker 1: sort of brings Italy and other heavily indebted European nations

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Speaker 1: back into play. Um. The I yield universe of the

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Speaker 1: US has been pretty richly valued for some time, so um.

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Speaker 1: But again, there is definitely an underlying assumption that once

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Speaker 1: the pain reaches a certain point, central banks will back off. Okay,

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Speaker 1: So let's set aside China and and the FED because

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Speaker 1: those have been the two major negatives for equity prices.

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Speaker 1: Are there some countries in Southeast Asia for instance, that

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Speaker 1: would be beneficiaries of the China story that you like, well,

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Speaker 1: I'll be interested to see if there's a pivot there

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Speaker 1: that there's the countries in Southeast Asia that have been

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Speaker 1: getting the most attention recently our intention in terms of

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Speaker 1: positive flows to funds dedicated to them, um, are Vietnam

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Speaker 1: and the Philippines, and they're very much supply chain relocation

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Speaker 1: out of China's stories. I'm going to keep a close

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Speaker 1: eye on Thailand because it's obviously suffered considerably with the

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Speaker 1: almost complete drying up of the Chinese tourist trade. UM.

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Speaker 1: And I think when people uh develop a conviction that

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Speaker 1: the rebound we started this conversation with is underway, that

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Speaker 1: Thailand will be one of the markets said that will

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Speaker 1: really benefit Cameron, we had to live it there, Cameron

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Speaker 1: Brandtor just gonna. I was gonna ask him in fifteen

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Speaker 1: seconds what his number one conviction is. Just give us

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Speaker 1: your number one pick at the moment. Well, in the

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Speaker 1: in the short term, I'm finally enough, the number one

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Speaker 1: pick is Turkey. Um. Everyone is piling into that. Okay,

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Speaker 1: Well saved the discussion on why for another time, camera

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Speaker 1: at a time. Unfortunately, Cameron brand director of research at

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Speaker 1: epf art