1 00:00:00,080 --> 00:00:02,240 Speaker 1: Let's get to our guest. Daniel Lamb joins us. He 2 00:00:02,360 --> 00:00:05,680 Speaker 1: is head of Equity Strategy at Standard Chartered Wealth Management, 3 00:00:05,760 --> 00:00:08,800 Speaker 1: joining us from our studios in Hong Kong. Daniel, thanks 4 00:00:08,840 --> 00:00:11,000 Speaker 1: for being with us. Obviously a lot of what is 5 00:00:11,080 --> 00:00:14,319 Speaker 1: driving price action today, I mean, I think it's fair 6 00:00:14,360 --> 00:00:17,360 Speaker 1: to say for many weeks now has been the anxiety 7 00:00:17,400 --> 00:00:21,400 Speaker 1: around the inflation narrative, super hot, struggle for the FED 8 00:00:21,440 --> 00:00:23,880 Speaker 1: to get it under control, and now we seem to 9 00:00:23,960 --> 00:00:25,680 Speaker 1: be seeing a little bit of a crack in the 10 00:00:25,760 --> 00:00:28,680 Speaker 1: narrative here. Would you go so far as to say 11 00:00:28,720 --> 00:00:34,720 Speaker 1: we are near peak inflation? Yes, that's basically what we 12 00:00:34,760 --> 00:00:38,760 Speaker 1: are thinking as a house because of a few factors. Okay, 13 00:00:38,800 --> 00:00:41,479 Speaker 1: so first of all, the energy and the commodities um 14 00:00:41,600 --> 00:00:44,960 Speaker 1: site they have been coming off. That's a major um 15 00:00:45,240 --> 00:00:49,159 Speaker 1: source of inflation, right. And also the other part of 16 00:00:49,200 --> 00:00:52,480 Speaker 1: the supply chain disruption is also easy. So those two 17 00:00:52,520 --> 00:00:55,520 Speaker 1: parts I think are easy. Um, of course you do 18 00:00:55,640 --> 00:00:59,640 Speaker 1: have the labor cost and also the shelter cost still 19 00:01:00,360 --> 00:01:03,680 Speaker 1: very sticky, but at least it's moving towards, you know, 20 00:01:03,880 --> 00:01:07,800 Speaker 1: a less worrying direction in terms of inflation. When it 21 00:01:07,800 --> 00:01:10,400 Speaker 1: comes to shelter cost, though, ransom and people are locking 22 00:01:10,440 --> 00:01:13,680 Speaker 1: in one two year leases at extraordinary higher levels. At 23 00:01:13,680 --> 00:01:16,000 Speaker 1: what point does this then really start to hurt the 24 00:01:16,040 --> 00:01:20,479 Speaker 1: consumer and lead to more recessionary concerns. Well, I think 25 00:01:21,120 --> 00:01:26,200 Speaker 1: one has to look at the asset prices and how 26 00:01:26,280 --> 00:01:31,240 Speaker 1: much it has been pricing this potential recessionary part in. Okay, 27 00:01:31,240 --> 00:01:33,360 Speaker 1: So at one stage, I think US equities were done 28 00:01:33,400 --> 00:01:36,520 Speaker 1: more than and on average if you look at the 29 00:01:36,560 --> 00:01:40,120 Speaker 1: past recessions, they were done at average about so people 30 00:01:40,160 --> 00:01:43,839 Speaker 1: were pricing the inn people. You know, obviously the SMP 31 00:01:44,000 --> 00:01:47,920 Speaker 1: is now back up, you know, from twelve percent up 32 00:01:47,960 --> 00:01:51,920 Speaker 1: from the from the bottom this year, and people are 33 00:01:51,920 --> 00:01:54,000 Speaker 1: getting less worried about that. Of course, you know that's 34 00:01:54,000 --> 00:01:56,120 Speaker 1: going to hurt the high rand. It's going to couse, 35 00:01:56,800 --> 00:02:01,000 Speaker 1: you know, hurt consumption a little bit. But other parts 36 00:02:01,040 --> 00:02:05,040 Speaker 1: are improving. So, like I said, energy prices coming off, Um, 37 00:02:05,080 --> 00:02:08,280 Speaker 1: that's a big part of it, right, Supply chain disruption. 38 00:02:08,320 --> 00:02:11,080 Speaker 1: You know, US early season has been has been relatively 39 00:02:11,120 --> 00:02:14,920 Speaker 1: well okay, and the concerns are not that big on 40 00:02:15,000 --> 00:02:17,560 Speaker 1: that front anymore. I don't think so. Daniel. Look at 41 00:02:17,560 --> 00:02:19,720 Speaker 1: the US Treasury curve and it makes sense of it 42 00:02:19,800 --> 00:02:23,160 Speaker 1: for me. And in about forty five seconds. What do 43 00:02:23,200 --> 00:02:26,560 Speaker 1: you glean from it? Are we going to the because 44 00:02:26,600 --> 00:02:29,320 Speaker 1: the bond market seems to be saying recession is on 45 00:02:29,360 --> 00:02:34,480 Speaker 1: the horizon. Yes, and that's the reason why we have 46 00:02:34,520 --> 00:02:37,320 Speaker 1: a Barbel approach. Right at this moment in time, you know, 47 00:02:37,360 --> 00:02:39,720 Speaker 1: there are hopes that growth is going to continue, but 48 00:02:39,760 --> 00:02:41,760 Speaker 1: then there are concerns that the fact is fat, it's 49 00:02:41,760 --> 00:02:44,639 Speaker 1: going to hike so much to choke growth. So our 50 00:02:44,680 --> 00:02:47,240 Speaker 1: recommendation is that if your US ten year goes to 51 00:02:47,280 --> 00:02:50,000 Speaker 1: about three to three from two five, one should be 52 00:02:50,080 --> 00:02:53,919 Speaker 1: rotating some of the equities gains from the rebound um 53 00:02:53,919 --> 00:02:57,360 Speaker 1: into fixed income. So you're saying shut US dollar because 54 00:02:57,360 --> 00:03:00,600 Speaker 1: inflation could be starting to come off, suggesting perhaps the 55 00:03:00,600 --> 00:03:03,120 Speaker 1: pace of the dollars gains may have paiked. Where kind 56 00:03:03,160 --> 00:03:05,799 Speaker 1: of do you see some possible opportunity in a m 57 00:03:05,880 --> 00:03:10,359 Speaker 1: on the back of that call? Well, basically I think, um, 58 00:03:10,400 --> 00:03:13,799 Speaker 1: you know, the dollar, like I said, um, inflation seems 59 00:03:13,800 --> 00:03:17,919 Speaker 1: to be you know, heaving, you know, capping out. Um. 60 00:03:18,040 --> 00:03:19,880 Speaker 1: So in terms of the fabrary hype probably going to 61 00:03:19,919 --> 00:03:23,040 Speaker 1: slow a bit. Uh. In terms of the e m 62 00:03:23,480 --> 00:03:26,200 Speaker 1: ethics space, um, you know, at the at this moment 63 00:03:26,280 --> 00:03:28,960 Speaker 1: in time, we do see you know, attractive points in 64 00:03:29,200 --> 00:03:34,160 Speaker 1: say the Korean one and also in the South Asian currencies. 65 00:03:34,560 --> 00:03:37,960 Speaker 1: Like for someone emulation ring it when you look at 66 00:03:38,040 --> 00:03:41,160 Speaker 1: China right now and you consider the risks there, and 67 00:03:41,200 --> 00:03:45,720 Speaker 1: there are many, principally two COVID zero policy that remains 68 00:03:45,760 --> 00:03:48,560 Speaker 1: in place and the struggle that the government has had 69 00:03:48,920 --> 00:03:52,480 Speaker 1: to try to self correct, maybe that's the not the 70 00:03:52,520 --> 00:03:55,880 Speaker 1: best way to put it, but certainly to wrighten the 71 00:03:55,920 --> 00:03:58,760 Speaker 1: property market, I mean, are you tempted to put money 72 00:03:58,760 --> 00:04:02,200 Speaker 1: to work in China? Okay? There are a few points 73 00:04:02,240 --> 00:04:05,880 Speaker 1: so right now, of course, global equity is getting tighter, 74 00:04:06,200 --> 00:04:08,920 Speaker 1: and you do see the phenomena of money rotating from 75 00:04:09,000 --> 00:04:12,040 Speaker 1: run region to another. So for example, hands and Index 76 00:04:12,120 --> 00:04:16,440 Speaker 1: dropped from twenty to you know below or around twenty 77 00:04:16,960 --> 00:04:19,560 Speaker 1: right now, right and meanwhile the SMP went up from 78 00:04:19,680 --> 00:04:23,640 Speaker 1: thirty seven to forty two. Okay, So money does rotate around, 79 00:04:23,720 --> 00:04:26,800 Speaker 1: and it does run ahead of the inflationary data. If 80 00:04:26,800 --> 00:04:29,800 Speaker 1: you think about it, right, US inflation data capping out 81 00:04:30,080 --> 00:04:33,480 Speaker 1: and US markets already up you know, twelve and thirteen. Meanwhile, 82 00:04:33,520 --> 00:04:36,200 Speaker 1: the other thing is happening in China, while while the 83 00:04:36,240 --> 00:04:39,039 Speaker 1: PBOC officials are getting worried about inflation. So the market 84 00:04:39,240 --> 00:04:42,359 Speaker 1: was coming off already ahead of that. So does that 85 00:04:42,480 --> 00:04:45,360 Speaker 1: mean that you know things are getting priced in before? 86 00:04:45,560 --> 00:04:48,400 Speaker 1: I do believe so. Right, So, actually it is not 87 00:04:48,440 --> 00:04:52,479 Speaker 1: a bad opportunity to be involved in Chinese equities right now. Um. 88 00:04:52,520 --> 00:04:55,320 Speaker 1: In terms of bond market, UM, there are a number 89 00:04:55,400 --> 00:05:00,360 Speaker 1: of very relatively good quality companies. UM that ones are 90 00:05:00,360 --> 00:05:04,440 Speaker 1: trading at very distressed levels. And that is talking about 91 00:05:04,440 --> 00:05:08,120 Speaker 1: like thirty or forty on on par, meaning that you know, 92 00:05:08,160 --> 00:05:09,960 Speaker 1: you get paid a hundred if they if they pay 93 00:05:09,960 --> 00:05:13,400 Speaker 1: everything back right when they mature. So that is you know, 94 00:05:13,440 --> 00:05:16,880 Speaker 1: grabbing people's attention. Um. Does that mean that they will 95 00:05:16,920 --> 00:05:19,320 Speaker 1: be able to pay? Hard to tell, but it does 96 00:05:19,400 --> 00:05:22,159 Speaker 1: mean that a lot of investors surprising a lot of 97 00:05:22,160 --> 00:05:25,880 Speaker 1: the negativity in their surprises already. I just wanted to 98 00:05:25,920 --> 00:05:27,720 Speaker 1: get back to your call on Chinese equities. Are you're 99 00:05:27,720 --> 00:05:30,000 Speaker 1: looking across all sectors? I know you're looking at that 100 00:05:30,040 --> 00:05:32,640 Speaker 1: self sufficiency. I'm guessing that the kind of green team too. 101 00:05:32,680 --> 00:05:36,400 Speaker 1: But what about when you look at say the tech players, well, 102 00:05:36,400 --> 00:05:38,599 Speaker 1: the tech players, I think you know, if anything, you 103 00:05:38,640 --> 00:05:42,800 Speaker 1: know the reason events geopolitical events is prompting the Chinese 104 00:05:42,839 --> 00:05:46,600 Speaker 1: government to accelerate on the self sufficiency drive. Right, So 105 00:05:46,680 --> 00:05:49,479 Speaker 1: if you look at what M S M I C said, 106 00:05:49,880 --> 00:05:52,719 Speaker 1: you know they're already catching up on They're already able 107 00:05:52,720 --> 00:05:56,440 Speaker 1: to produce a seven nanometer semicon and while they're still 108 00:05:56,520 --> 00:05:59,200 Speaker 1: lagging behind t SMC, it does show that, you know, 109 00:05:59,240 --> 00:06:01,599 Speaker 1: the self sufficient see is in. It's in food swing 110 00:06:01,720 --> 00:06:05,200 Speaker 1: and it's probably going to get um more momentum after 111 00:06:05,279 --> 00:06:09,360 Speaker 1: what's been happening. So self sufficiency in tech and also 112 00:06:09,480 --> 00:06:12,920 Speaker 1: in terms of self generating growth in China that would 113 00:06:12,960 --> 00:06:15,960 Speaker 1: be encouraged. It's an interesting point and it helps us 114 00:06:16,080 --> 00:06:19,880 Speaker 1: to transition to US China relations because as a part 115 00:06:19,920 --> 00:06:22,920 Speaker 1: of the Chicks Chips Act that President Biden signed this week, 116 00:06:22,960 --> 00:06:28,040 Speaker 1: there are restrictions on sharing certain technology with China. How 117 00:06:28,040 --> 00:06:30,360 Speaker 1: do you see the relationship right now between the US 118 00:06:30,440 --> 00:06:33,800 Speaker 1: and China much worse? And it couldn't get even um 119 00:06:34,000 --> 00:06:38,440 Speaker 1: worse more much worse from where we are now. WHOA, 120 00:06:38,880 --> 00:06:43,719 Speaker 1: I think that midterms is coming up, so that's a 121 00:06:43,760 --> 00:06:46,640 Speaker 1: major consideration. A lot of these is about the mid terms, 122 00:06:46,760 --> 00:06:50,880 Speaker 1: where you know, the parties cannot be seen as being 123 00:06:50,880 --> 00:06:53,800 Speaker 1: soft on China. Okay, so you will be able to 124 00:06:54,160 --> 00:06:58,000 Speaker 1: you will be listening. You will be seeing to these rhetorics, 125 00:06:58,080 --> 00:07:01,320 Speaker 1: you know, over the next few months. Um. But you know, 126 00:07:01,560 --> 00:07:03,440 Speaker 1: like I said, you know, a lot of this has 127 00:07:03,480 --> 00:07:08,240 Speaker 1: been getting priced in, and this self sufficiency theme, I 128 00:07:08,279 --> 00:07:12,200 Speaker 1: think is you know, likely to be UM Chinese government's 129 00:07:12,240 --> 00:07:15,160 Speaker 1: focus because of all these When we look at Hong 130 00:07:15,240 --> 00:07:17,800 Speaker 1: Kong where you are the Bloomberg survey suggesting that the 131 00:07:17,840 --> 00:07:21,080 Speaker 1: city's economy may not expand at all in two we're 132 00:07:21,080 --> 00:07:24,000 Speaker 1: seeing this exodus from Hong Kong under the COVID policy. 133 00:07:24,600 --> 00:07:27,720 Speaker 1: What kind of threat to Hong Kong's financial hub here 134 00:07:27,720 --> 00:07:30,040 Speaker 1: and how does that kind of adjust how you might 135 00:07:30,120 --> 00:07:34,280 Speaker 1: deploy capital to Hong Kong equities. Oh, if you look 136 00:07:34,320 --> 00:07:39,080 Speaker 1: at the um quarantine rules in Hong Kong, you know, 137 00:07:39,280 --> 00:07:43,240 Speaker 1: we you know, of course it's tighter than the than 138 00:07:43,320 --> 00:07:46,320 Speaker 1: the West, but you have seen the relaxation that has 139 00:07:46,360 --> 00:07:50,520 Speaker 1: come in from seven days of quarantine from incoming travelers 140 00:07:50,560 --> 00:07:54,840 Speaker 1: to three days in a hotel. Right, So that is 141 00:07:55,040 --> 00:07:58,960 Speaker 1: basically I think is moving you know, towards more relaxation. 142 00:07:59,160 --> 00:08:02,280 Speaker 1: And the guy you know has signaled that there's potentially 143 00:08:02,280 --> 00:08:06,000 Speaker 1: more to come. UM, So you know there are there 144 00:08:06,000 --> 00:08:10,640 Speaker 1: are moves you know that are addressing the concerns here. Right, 145 00:08:11,320 --> 00:08:14,480 Speaker 1: you use the term self sufficiency when you're talking about China, 146 00:08:14,600 --> 00:08:17,560 Speaker 1: and to go back to the U S relationship, I'm 147 00:08:17,560 --> 00:08:19,920 Speaker 1: wondering whether or not that's another way of saying that 148 00:08:19,960 --> 00:08:25,640 Speaker 1: you expect some more decoupling. Is is that a fair statement? WHOA, 149 00:08:26,920 --> 00:08:29,120 Speaker 1: It's hard to say. But then if you look at 150 00:08:29,280 --> 00:08:32,839 Speaker 1: what I was talking about in terms of financial markets, um, 151 00:08:32,920 --> 00:08:36,520 Speaker 1: we are seeing the coupling, right because you know previously, um, 152 00:08:36,800 --> 00:08:40,200 Speaker 1: say back in the mid you know of the of 153 00:08:40,200 --> 00:08:45,200 Speaker 1: of the last decade for example, right until like maybe 154 00:08:45,240 --> 00:08:49,480 Speaker 1: you do see that equities market globally they moved together, right, 155 00:08:49,520 --> 00:08:52,280 Speaker 1: they move higher, every everybody moves higher. It's just the 156 00:08:52,320 --> 00:08:55,920 Speaker 1: degree of our performance that is the difference. Right. But 157 00:08:56,440 --> 00:09:00,480 Speaker 1: clearly this year you are seeing a lot of times 158 00:09:00,800 --> 00:09:04,240 Speaker 1: when you know, US goes up, China doesn't go up, 159 00:09:04,360 --> 00:09:07,200 Speaker 1: or it goes down, or vice versa. Right. So back 160 00:09:07,240 --> 00:09:11,520 Speaker 1: in januine February, when the US was signaling inflationary fears, 161 00:09:11,840 --> 00:09:13,839 Speaker 1: the Chinese market, i'll performed, they actually went up in 162 00:09:13,880 --> 00:09:17,000 Speaker 1: absolute terms, um, and then flip around, then flip around 163 00:09:17,000 --> 00:09:21,120 Speaker 1: a few times. Right. So yeah, in terms of financial market, 164 00:09:21,160 --> 00:09:24,319 Speaker 1: we are seeing you know, this kind of decoupling, and 165 00:09:24,480 --> 00:09:27,679 Speaker 1: we will be seeing more of those as liquidity gets 166 00:09:27,679 --> 00:09:31,079 Speaker 1: tight tighter. Yeah, I wanted to get a broad kind 167 00:09:31,120 --> 00:09:33,160 Speaker 1: of macro view from you. This is something that we're 168 00:09:33,200 --> 00:09:35,560 Speaker 1: following here at Bloomberg from a lot of our guests 169 00:09:35,600 --> 00:09:37,160 Speaker 1: that we're talking to about whether or not the sixty 170 00:09:37,200 --> 00:09:39,880 Speaker 1: forty portfolio is dead and what could replace it. So 171 00:09:39,920 --> 00:09:42,720 Speaker 1: over the next six months, whether you think the correlation 172 00:09:42,760 --> 00:09:46,440 Speaker 1: between fixing common equities is going to be positive or negative? Oh, 173 00:09:46,520 --> 00:09:49,760 Speaker 1: I don't think it's that. I mean, it's that for 174 00:09:50,160 --> 00:09:52,560 Speaker 1: a short period of time, but it's not a food 175 00:09:52,600 --> 00:09:55,560 Speaker 1: death right. If you look at eighteen the data from 176 00:09:55,640 --> 00:09:59,080 Speaker 1: eighteen seventy two two, now, um, there were only four 177 00:09:59,160 --> 00:10:03,400 Speaker 1: years when stocks and bonds were both done. I mean 178 00:10:03,400 --> 00:10:07,720 Speaker 1: it's including this year, right, It's actually quite rare. And 179 00:10:08,160 --> 00:10:10,680 Speaker 1: the reason why there is so rares because you know, 180 00:10:10,720 --> 00:10:14,480 Speaker 1: there is basically a big machime shift, right with seeing 181 00:10:14,559 --> 00:10:16,760 Speaker 1: some of the biggest heights that we've seen in history 182 00:10:17,240 --> 00:10:19,880 Speaker 1: right over a very short period of time. But you know, 183 00:10:19,960 --> 00:10:23,280 Speaker 1: like we said earlier in the show, um, inflation seems 184 00:10:23,320 --> 00:10:28,439 Speaker 1: to be capping out. So things are you know, normalized 185 00:10:28,440 --> 00:10:31,480 Speaker 1: thing right in terms of the rate high cycle. We 186 00:10:31,520 --> 00:10:33,400 Speaker 1: had a story I'm sorry, Daniel, but I want to 187 00:10:33,440 --> 00:10:35,559 Speaker 1: get you in the limited time that we have left. 188 00:10:35,840 --> 00:10:37,840 Speaker 1: We had a story on the Bloomberg terminal earlier in 189 00:10:37,840 --> 00:10:40,440 Speaker 1: the week about the top auditor in China conducting a 190 00:10:40,520 --> 00:10:43,720 Speaker 1: review of the trust industry. And I think the central 191 00:10:43,800 --> 00:10:47,480 Speaker 1: theme here is on potential risk, systemic risk that the 192 00:10:47,480 --> 00:10:52,480 Speaker 1: shadow banking sector may represent to the overall financial system 193 00:10:52,679 --> 00:10:55,600 Speaker 1: in in China. Is that something that you're concerned about. 194 00:10:55,600 --> 00:10:57,840 Speaker 1: Are you keeping a close eye on what's happening with 195 00:10:57,880 --> 00:11:03,600 Speaker 1: shadow banking? Well, the like we said, in terms of 196 00:11:03,640 --> 00:11:06,960 Speaker 1: the you know, property side of things, right, which is 197 00:11:07,000 --> 00:11:10,080 Speaker 1: of course affecting the banking sector. You know, it is 198 00:11:10,120 --> 00:11:13,560 Speaker 1: not a short term you know, it can not be 199 00:11:13,600 --> 00:11:15,920 Speaker 1: so solved in the short term, right, That's why the 200 00:11:15,920 --> 00:11:19,280 Speaker 1: bonds are trading at such distress level. So if you 201 00:11:19,360 --> 00:11:21,600 Speaker 1: think about it, you know, this is you know, part 202 00:11:21,600 --> 00:11:26,280 Speaker 1: of the consequence, and the government is addressing that. You 203 00:11:26,280 --> 00:11:28,400 Speaker 1: can see that a lot of the physical stimulus has 204 00:11:28,400 --> 00:11:31,800 Speaker 1: gone to say the local government, um to make up 205 00:11:31,800 --> 00:11:35,240 Speaker 1: for the lost revenue. So we believe that the government 206 00:11:35,320 --> 00:11:37,640 Speaker 1: is probably going to be you know, supporting that sort 207 00:11:37,679 --> 00:11:40,640 Speaker 1: of things. M. Daniel. Thanks for coming into our Hong 208 00:11:40,720 --> 00:11:42,920 Speaker 1: Kong studio. Great to have your insights. Daniel Lamb is 209 00:11:42,960 --> 00:11:46,120 Speaker 1: Head of Equity Strategy at Standard Charted Wealth Management