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Speaker 1: Welcome to a bonus edition of the Daybreak Asia podcast.

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Speaker 1: I'm Doug Krisner. The Chinese government is set to unleash

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Speaker 1: its strongest wave of economic stimulus in years, based on

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Speaker 1: the signals from the latest POLT Bureau meeting. For a

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Speaker 1: closer look, I'm joined by Stephanie Lyung. She is the

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Speaker 1: chief investment officer at Stashaway. Stephanie joins us from our

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Speaker 1: studios in Hong Kong. It's always a pleasure, Stephanie. Thanks

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Speaker 1: for making time for us. You and I were talking

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Speaker 1: a moment ago about these stimulus measures. It seems clearly

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Speaker 1: the government is intent on doing a lot more. So

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Speaker 1: i'd like your assessment on what you've heard so far

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Speaker 1: from the POLT Bureau and whether, in your view, this

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Speaker 1: is going to be enough to kind of restore confidence

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Speaker 1: and move the needle in a major way.

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Speaker 2: Yeah. So, I think if we look at the China situation,

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Speaker 2: of course, I mean earlier in the year, there was

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Speaker 2: a lot of concern that the I mean the housing

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Speaker 2: slump would actually spread out to a much more wider

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Speaker 2: spread kind of systemic risk. There were also a lot

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Speaker 2: of people calling China an investable and then I mean

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Speaker 2: the Chinese government came up with I guess the stof

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Speaker 2: of forceful announcements. Uh that sort of restored I guess

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Speaker 2: confidence a little bit, and but more importantly, it kind

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Speaker 2: of pushes up as a prices force out a lot

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Speaker 2: of short sellers. And now that I mean, investors are

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Speaker 2: actually kind of I guess have been asking a different question,

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Speaker 2: like instead of whether China is kind of uninvestable or investable,

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Speaker 2: now like anything, investors is asking a different question of

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Speaker 2: I mean, where is the China stimulus is going to

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Speaker 2: be and is that going to lift economic growth going

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Speaker 2: for next year? I think going into the I mean

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Speaker 2: this week, there has not been a lot of kind

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Speaker 2: of high hopes that China will actually come up with

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Speaker 2: I guess the the concrete measures. I mean, this is

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Speaker 2: not traditionally the venue for them to announce some of

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Speaker 2: these concrete measures even I mean, for example, the the

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Speaker 2: I guess, the fiscal budget would traditionally not be announced

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Speaker 2: in December, but instead a lot of these measures would

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Speaker 2: be kind of hashed out in March. So I think

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Speaker 2: the market obviously rallied on day one that these announcements

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Speaker 2: were made, but gave back quite a bit of gains

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Speaker 2: as well. On the second day, I think we kind

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Speaker 2: of look at the announcement that come out this week,

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Speaker 2: I think the key takeaway is that Number one, the

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Speaker 2: government seems to be quite resolute in terms of their

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Speaker 2: will to continue to be supportive of the economy. Indeed,

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Speaker 2: if you look at their language, I mean, for the

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Speaker 2: first time in the past few years, they actually replaced

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Speaker 2: some of the more restrictive language with words like prudentially

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Speaker 2: managed monetary policy and stimulus policies, and I think that

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Speaker 2: gives the market some excitement. I mean, for us, I

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Speaker 2: think the most important word, if we have to choose

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Speaker 2: from sort of the announcement, is the mention of consumption

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Speaker 2: led stimulus, because I think in sort of the I

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Speaker 2: think traditionally or kind of from a she policy toolbox perspective,

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Speaker 2: he has been kind of more proactive in terms of

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Speaker 2: supply side similars, and he's not a particular fan of

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Speaker 2: the demand side similars. I think this announcement that just

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Speaker 2: came out shows that, I mean, at least he is

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Speaker 2: kind of making a turn in the way he views

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Speaker 2: the role of these kind of demand side and consumption stimulus,

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Speaker 2: and I think that gives us some hope that they

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Speaker 2: will come up with more concrete measures in March. In

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Speaker 2: our view, I think that's sort of what China needs

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Speaker 2: right now. China is not short of money. Actually, indeed,

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Speaker 2: there's a lot of liquidity. The problem is that there

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Speaker 2: is a lack of confidence from both a consumer level

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Speaker 2: and an investment level to actually put these money to work.

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Speaker 2: And I think that would trigger I mean, if these

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Speaker 2: money would be put to work, and of course to

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Speaker 2: be put to more productive work, then I mean that

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Speaker 2: could trigger the next wave of EARNINGX upgrades.

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Speaker 1: So I'm curious as to whether or not it encourages

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Speaker 1: you to make investments on the mainland. Is there enough

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Speaker 1: going on here to peak your interest?

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Speaker 2: So from our investment framework, we I guess we track

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Speaker 2: a lot of real time economic data to guide our decisions,

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Speaker 2: and we look at the China data for example PMI.

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Speaker 2: PMI has actually been below fifty for quite a few months.

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Speaker 2: I mean recently it's turned higher. So the November PMI

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Speaker 2: reads actually fifty point six, which is expandsionary, and we

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Speaker 2: need to see a few months of sort of the

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Speaker 2: datas turning into more expansionary before I mean, we would

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Speaker 2: take a more aggressive stance. I mean, so far this

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Speaker 2: year we've maintained a market market weight stance on China

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Speaker 2: on the basis of number one. Yes, the earnings has

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Speaker 2: been kind of sluggish, but at the same time, valuations

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Speaker 2: have been very, very low. And if we look at

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Speaker 2: valuation perspective today, I mean China MSCI China is training

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Speaker 2: at around ten point five times. This is sort of

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Speaker 2: ten percent below historical average, So we have a bit

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Speaker 2: of room to run up in valuation. But I think

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Speaker 2: still the key is whether we see a sustainable earning

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Speaker 2: growth trajectory, and I think a lot of the numbers

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Speaker 2: and the data that we look at suggest that yes,

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Speaker 2: I mean, we have seen the bottom. But for a

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Speaker 2: sustainable value to start, I mean we are not yet there.

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Speaker 2: So we need some more forceful policy that could trigger

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Speaker 2: a bit more animal spirits, that could trigger some of

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Speaker 2: these data to tart even stronger.

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Speaker 1: So as long as we're talking about data points, the

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Speaker 1: other day we learned that exports in the month of November,

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Speaker 1: I think we're up at a rate of around six

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Speaker 1: point seven percent. Many companies we were told were rushing

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Speaker 1: to get goods to market in the US before new

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Speaker 1: tariffs were to take effect if in fact that happens.

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Speaker 1: Six ' seven though was a little bit below the estimate.

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Speaker 1: And I think you and I can agree that one

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Speaker 1: of the spots for the mainland economy has been export

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Speaker 1: driven industries. What does this cause you to do when

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Speaker 1: you get a data point like that, you consider the

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Speaker 1: risk of tariffs and maybe a little bit of increased

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Speaker 1: tension between the US and China. Do you put money

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Speaker 1: to work in some of those names that are more

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Speaker 1: export driven or do you kind of avoid them at

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Speaker 1: all costs.

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Speaker 2: Yeah, I think if we think about the export sector,

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Speaker 2: it's actually in a, I guess in a structurally sort

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Speaker 2: of difficult position. I'll say it from a few points

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Speaker 2: of views. Number one is, of course, there will be

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Speaker 2: some announcement from the Trump administration on tariffs. Now we

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Speaker 2: don't know whether or not they will be substantial. I think,

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Speaker 2: at least from a rhetoric side of view, Trump will

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Speaker 2: I guess the Trump administration will make it quite pronounced,

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Speaker 2: and that could have some definite effects on the sentiment

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Speaker 2: and also on kind of both from an investors side

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Speaker 2: and also from kind of a real trade industry participant perspective. Secondly,

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Speaker 2: I think if you think about kind of take Trump

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Speaker 2: out of a picture, but think about kind of the

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Speaker 2: bigger trend of the globalization that has been happening I

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Speaker 2: guess since COVID, and I think this is a structural

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Speaker 2: trend that is very very hard to reverse, and it's

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Speaker 2: it's a very very popular opinion in the in both

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Speaker 2: US and China that both economies of both countries need

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Speaker 2: to kind of build their own ecosystems and have kind

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Speaker 2: of much more domestic, domestically supported economy. And I think

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Speaker 2: this is what the I guess the US and also

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Speaker 2: Chinese governments are aware of as well. That's why I

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Speaker 2: mean you see that Trump policy has a platform of

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Speaker 2: bringing everything sort of on shore again. I mean, US

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Speaker 2: manufacturing is going to be one big focus of his presidency.

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Speaker 2: And also from a China perspective, of course, like the

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Speaker 2: government also talks a lot about domestic consumption, and really

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Speaker 2: I think domestic consumption is the key to a kind

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Speaker 2: of revival of the Chinese economic engine because if you

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Speaker 2: think about the I guess the traditional growth engine of

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Speaker 2: China that has been export has been property has been

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Speaker 2: sort of the I guess technology from a kind of

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Speaker 2: internet growth point, of view. Now, if we think about

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Speaker 2: these three engines, property will not revert back to when

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Speaker 2: we were it used to be Internet. Arguably it's something

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Speaker 2: that the Chinese government can actually retrigger somewhat a growth.

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Speaker 2: But I think from the export side, it's also quite cyclical,

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Speaker 2: and it's it's hard to kind of form a structural

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Speaker 2: positive view given the decoupling that that we're seeing globally.

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Speaker 2: So I think, I mean, really, uh, stimulating, stimulating consumption,

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Speaker 2: stimulating kind of Internet technology advancement is the the I guess,

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Speaker 2: the main policy goal that policymakers could pursue.

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Speaker 1: One of the things that the Biden administration was successful

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Speaker 1: in doing putting these export controls in on certain high

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Speaker 1: technology components, particularly related to semiconductors. Now, I know that

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Speaker 1: you have a strong background in computer technology. Give me

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Speaker 1: a sense of where you see China right now in

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Speaker 1: the evolution of its tech industry.

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Speaker 2: Yeah, if you kind of look at I guess China

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Speaker 2: technology is actually quite broad. Right. If we talk about AI,

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Speaker 2: for example, I think China's AI technology has been lagging

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Speaker 2: behind the US, and given all these kind of I

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Speaker 2: guess restrictions on imports, it puts China two three years

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Speaker 2: like sort of behind the US, and there is some

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Speaker 2: belief in Silicon Valley that US is able to achieve

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Speaker 2: AGI and I mean that could actually put the US

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Speaker 2: years ahead of China just from a leaf frocking. From

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Speaker 2: that perspective, I think the the US is definitely trying

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Speaker 2: is very best to to try to kind of prevent

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Speaker 2: China from from advancing too quickly. But from other perspective,

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Speaker 2: for example, China is actually more on the cutting edge.

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Speaker 2: So in terms of drone technology for example, actually China

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Speaker 2: has a very very leading edge advantage in drones, and

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Speaker 2: that part that's partly because of the I mean of

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Speaker 2: the research efforts that's going on in China, but partly

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Speaker 2: because of regulations in the US. So I think perhaps

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Speaker 2: what the Trump administration we try to do is to

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Speaker 2: remove some of these red tapes and remove some of

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Speaker 2: these regulations in order to make sure that I mean

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Speaker 2: US really do not actually fall behind China in a

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Speaker 2: key kind of strategic technology areas.

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Speaker 1: Stephanie will leave it there. It's always a pleasure. Thank

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Speaker 1: you so much for making time to chat with us.

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Speaker 1: She is Stephanie Lung, the chief investment officer at Stashaway,

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Speaker 1: joining us from Hong Kong here on the Daybreak Asia podcast.

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Speaker 1: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 1: Asia Edition podcast. Each weekday, we look at the story

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Speaker 1: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 1: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 1: or anywhere else you listen. Join us again tomorrow for

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Speaker 1: insight on the market moves from Hong Kong to Singapore

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Speaker 1: and Australia. I'm Doug Chrisner, and this is Bloomberg