1 00:00:00,040 --> 00:00:03,280 Speaker 1: Helen Jew Managing director and ce IO of nan Fung 2 00:00:03,400 --> 00:00:07,840 Speaker 1: Trinity formerly of black Rock and Goldman Sachs and m 3 00:00:07,880 --> 00:00:10,280 Speaker 1: I t So, Helen, great to have you with us 4 00:00:10,320 --> 00:00:13,200 Speaker 1: in the studio here. Let's talk a little bit about 5 00:00:13,280 --> 00:00:16,200 Speaker 1: US inflation and what it might mean for us out here. 6 00:00:17,000 --> 00:00:20,239 Speaker 1: The Fed's target is obviously two percent, but then the 7 00:00:20,320 --> 00:00:22,400 Speaker 1: chair did talk about two and after per center, so 8 00:00:22,560 --> 00:00:25,200 Speaker 1: is being around neutral and that they would then become 9 00:00:25,400 --> 00:00:28,159 Speaker 1: data dependent. Here, you've got a softening. What do we 10 00:00:28,200 --> 00:00:31,440 Speaker 1: expect out of the fit? Well, Brian, I think the 11 00:00:31,480 --> 00:00:33,920 Speaker 1: FED is trying to really make sure that people don't 12 00:00:34,000 --> 00:00:38,159 Speaker 1: take a premature view on their desire to pivot or 13 00:00:38,200 --> 00:00:40,519 Speaker 1: to start cutting rates as soon as maybe end of 14 00:00:40,560 --> 00:00:42,920 Speaker 1: this year or beginning of next year. That's what some 15 00:00:43,000 --> 00:00:45,879 Speaker 1: of the futureist curves were indicating as recently as the 16 00:00:45,920 --> 00:00:48,280 Speaker 1: middle of last week, when people thought, you know what, 17 00:00:48,400 --> 00:00:51,840 Speaker 1: they're saying that they're targeting three pote three point nine 18 00:00:51,840 --> 00:00:53,520 Speaker 1: percent by the end of this year and next year. 19 00:00:53,560 --> 00:00:56,600 Speaker 1: But in reality, the economy is going into recession. They're 20 00:00:56,600 --> 00:00:58,920 Speaker 1: actually going to pivot much much sooner. So the market 21 00:00:58,960 --> 00:01:01,520 Speaker 1: was very hopeful for that, and you know, people have 22 00:01:01,560 --> 00:01:04,480 Speaker 1: this muscle memory of end of eighteen, and we're hoping 23 00:01:04,520 --> 00:01:08,039 Speaker 1: that the pivot would mean a massive rally in the market. Um, 24 00:01:08,040 --> 00:01:10,199 Speaker 1: but I think what you saw recently is I agree 25 00:01:10,240 --> 00:01:12,679 Speaker 1: with your earlier speaker that there's a lot of lack 26 00:01:12,720 --> 00:01:16,440 Speaker 1: of visibility. Right last Friday's job numbers is absolute blow out. 27 00:01:16,480 --> 00:01:18,640 Speaker 1: People thought, oh my goodness, the economy is actually very 28 00:01:18,680 --> 00:01:21,039 Speaker 1: very hot. There's no side of recession or need to cut. 29 00:01:21,319 --> 00:01:23,920 Speaker 1: But you know, yesterday's CPI number came in a little 30 00:01:23,920 --> 00:01:26,400 Speaker 1: bit better than expected, probably because of supply issues rather 31 00:01:26,440 --> 00:01:29,240 Speaker 1: than demand side. So, UM, I think data dependent is 32 00:01:29,280 --> 00:01:31,880 Speaker 1: absolutely right. No one really knows at this moment. I 33 00:01:31,920 --> 00:01:35,039 Speaker 1: think it's too premature to make a conclusion that they're 34 00:01:35,040 --> 00:01:37,479 Speaker 1: going to pivot very soon. And what does that mean 35 00:01:37,560 --> 00:01:40,240 Speaker 1: for equity investors in do we continue to see a 36 00:01:40,240 --> 00:01:42,039 Speaker 1: bit of a rally or does that falter if you 37 00:01:42,080 --> 00:01:44,520 Speaker 1: still see the Fed continue to target full percent rates. 38 00:01:45,520 --> 00:01:47,120 Speaker 1: I think it's going to be dependent more on the 39 00:01:47,120 --> 00:01:50,560 Speaker 1: actual fundamental not necessarily just what the Fed does. Right, So, 40 00:01:50,840 --> 00:01:53,400 Speaker 1: even if the Fed pivots, if the pivot is because 41 00:01:53,480 --> 00:01:56,200 Speaker 1: the economy is actually going into recession, then the market 42 00:01:56,280 --> 00:01:58,600 Speaker 1: is not going to react positively anywhere but if the 43 00:01:58,640 --> 00:02:03,080 Speaker 1: FED is pivoting, um, because actually the you know, inflationary 44 00:02:03,080 --> 00:02:07,160 Speaker 1: pressures are after all, largely dependent on supply resumption and 45 00:02:07,200 --> 00:02:10,240 Speaker 1: not so much on demand. And let's say demand continues 46 00:02:10,240 --> 00:02:13,600 Speaker 1: to be very robust, but CPI continues come off very um, 47 00:02:13,639 --> 00:02:16,000 Speaker 1: you know, consistently over the next few months, I think 48 00:02:16,000 --> 00:02:19,120 Speaker 1: the market would receive that actually much better. Um. We 49 00:02:19,240 --> 00:02:23,280 Speaker 1: do see quite reassuring signs of supply resumption and improvement, 50 00:02:23,600 --> 00:02:26,680 Speaker 1: whether that's in terms of you know, oil price and 51 00:02:26,800 --> 00:02:30,400 Speaker 1: more importantly gasoline price right at the pump, because refined 52 00:02:30,440 --> 00:02:33,080 Speaker 1: margin is starting to normalize as well. Our food prices 53 00:02:33,120 --> 00:02:36,160 Speaker 1: have come off a bit since Ukraine resumed some shipments 54 00:02:36,280 --> 00:02:39,680 Speaker 1: um from their ports UM. And obviously semiconductors and all 55 00:02:39,720 --> 00:02:41,840 Speaker 1: these other things have started to improve to some extent 56 00:02:41,880 --> 00:02:43,600 Speaker 1: as well. So those are all helpful. So if you 57 00:02:43,639 --> 00:02:46,520 Speaker 1: look at inflation and growth, you can have a situation 58 00:02:46,520 --> 00:02:48,680 Speaker 1: whether they're both up or both down, or ones up 59 00:02:48,680 --> 00:02:52,079 Speaker 1: and the others down and flip it. The best environment 60 00:02:52,120 --> 00:02:54,600 Speaker 1: for stocks would be that growth is hanging in there, 61 00:02:54,680 --> 00:02:57,800 Speaker 1: is doing okay, and inflation is rolling over. Is that 62 00:02:57,840 --> 00:02:59,920 Speaker 1: where we are right now? And does it sort of 63 00:03:00,400 --> 00:03:04,880 Speaker 1: being a positive picture well, you're right about the goldilocks scenario. Clearly, 64 00:03:05,040 --> 00:03:07,480 Speaker 1: good growth and low inflation, which is what we had 65 00:03:07,680 --> 00:03:10,320 Speaker 1: pretty much, especially in the U S economy for most 66 00:03:10,360 --> 00:03:15,320 Speaker 1: of the UM you know, UM twenty period. UM, that's 67 00:03:15,320 --> 00:03:18,200 Speaker 1: really led what led to the tenure bowl market for 68 00:03:18,240 --> 00:03:21,440 Speaker 1: the SMP and NASAC, etcetera. Um, I would say it's 69 00:03:21,520 --> 00:03:26,240 Speaker 1: much more difficult now to achieve that that same goldilocks scenario, right, 70 00:03:26,280 --> 00:03:28,440 Speaker 1: I mean, particularly as growth is coming off such a 71 00:03:28,520 --> 00:03:31,359 Speaker 1: high base after the unrivaled stimulus that we saw during 72 00:03:31,400 --> 00:03:33,760 Speaker 1: the COVID. So we had a slightly more hawk ish 73 00:03:33,800 --> 00:03:37,880 Speaker 1: than expected PBOC Monetary Policy report for the second quarter, 74 00:03:38,000 --> 00:03:40,200 Speaker 1: and the inflation print yesterday look a lot of that 75 00:03:40,280 --> 00:03:43,119 Speaker 1: driven by pork prices. But does it change the dial 76 00:03:43,160 --> 00:03:47,440 Speaker 1: in terms of what kind of stimulus were expecting from authorities? Look, 77 00:03:47,440 --> 00:03:49,640 Speaker 1: I think in terms of the PBOC stands, I think 78 00:03:49,680 --> 00:03:52,600 Speaker 1: it's UM in a very different situation from the FED. Right, 79 00:03:52,640 --> 00:03:55,280 Speaker 1: the FED is dealing with an extremely tight labor market, 80 00:03:55,400 --> 00:03:58,640 Speaker 1: overheating economy, etcetera. The p POC is kind of like 81 00:03:58,680 --> 00:04:02,240 Speaker 1: in the opposite situation. Employment and in China has been rising. Um, 82 00:04:02,280 --> 00:04:06,360 Speaker 1: you don't really have any labor shortages to speak of. UM. 83 00:04:06,440 --> 00:04:10,600 Speaker 1: And actually China does have PPI inflation, but in many 84 00:04:10,640 --> 00:04:13,520 Speaker 1: areas it's not necessarily within China's control. You know, oil 85 00:04:13,560 --> 00:04:16,480 Speaker 1: price for example, coal price, etcetera. China's done a lot 86 00:04:16,560 --> 00:04:20,120 Speaker 1: to try to contain those prices domestically, UM, but that's 87 00:04:20,160 --> 00:04:22,039 Speaker 1: not the job of the PBOC, and China is not 88 00:04:22,120 --> 00:04:26,120 Speaker 1: the only determinant. So UM. I think they're UM focus 89 00:04:26,240 --> 00:04:28,680 Speaker 1: and priority in the next year should still be supporting 90 00:04:28,680 --> 00:04:32,360 Speaker 1: the economy rather than containing inflation or slowing down the economy. 91 00:04:32,600 --> 00:04:34,320 Speaker 1: I think the only hurdle they have to overcome is 92 00:04:34,360 --> 00:04:36,920 Speaker 1: the fact that the zero COVID policy UM is bringing 93 00:04:36,920 --> 00:04:38,760 Speaker 1: a lot of uncertainty to that. Yeah, I wanted to 94 00:04:38,760 --> 00:04:41,279 Speaker 1: talk about policy. You know, if you if you're a 95 00:04:41,320 --> 00:04:43,680 Speaker 1: long term bull on China, you pretty much had to 96 00:04:43,680 --> 00:04:45,800 Speaker 1: throw that out the window over the past eighteen months 97 00:04:45,920 --> 00:04:50,560 Speaker 1: or so because policy has just been really on steroids. UM. 98 00:04:50,600 --> 00:04:53,440 Speaker 1: But it does seem like it's calmed down a little bit. 99 00:04:53,480 --> 00:04:56,479 Speaker 1: Other than you know, this this notion of what to 100 00:04:56,520 --> 00:05:00,400 Speaker 1: do about dynamic zero on COVID. Uh, Why why should 101 00:05:00,400 --> 00:05:03,640 Speaker 1: we not worry about policy so much now? Well, I 102 00:05:03,640 --> 00:05:08,400 Speaker 1: think China's UM moved towards very tight policy earlier was 103 00:05:08,480 --> 00:05:12,560 Speaker 1: really um in view of China's own very strong exports 104 00:05:12,680 --> 00:05:16,760 Speaker 1: and economic momentum last year, and China being worried that 105 00:05:16,800 --> 00:05:18,000 Speaker 1: the rest of the world is going to have to 106 00:05:18,000 --> 00:05:20,920 Speaker 1: tighten pretty aggressively this year, which had called very right, 107 00:05:21,320 --> 00:05:24,919 Speaker 1: and so China thought, let's start countercyclically tightening our economy 108 00:05:25,160 --> 00:05:27,040 Speaker 1: ahead of the curve, so that next year, when everyone 109 00:05:27,080 --> 00:05:29,600 Speaker 1: else is tightening, we can actually you know, loosen to 110 00:05:29,640 --> 00:05:32,360 Speaker 1: some extent. Um. I think that was really the right 111 00:05:32,400 --> 00:05:35,760 Speaker 1: plan to try to maintain a stable trajectory. But the 112 00:05:35,800 --> 00:05:38,200 Speaker 1: curveball that they ran into earlier this year was one 113 00:05:38,360 --> 00:05:41,400 Speaker 1: the surge in global prices because of the Russia situation 114 00:05:41,800 --> 00:05:45,720 Speaker 1: and to the COVID outbreaks that happened out of expectation. 115 00:05:45,839 --> 00:05:48,400 Speaker 1: So I think because of that, UM, you know, they 116 00:05:48,400 --> 00:05:51,479 Speaker 1: were planning on normalizing policy this year anyways, in terms 117 00:05:51,480 --> 00:05:54,120 Speaker 1: of Internet, in terms of property and the specific areas 118 00:05:54,160 --> 00:05:57,040 Speaker 1: they were targeting. UM. But now they have to probably 119 00:05:57,360 --> 00:05:58,880 Speaker 1: rather than just take their foot off the break, they 120 00:05:58,880 --> 00:06:00,320 Speaker 1: have to actually tap on the gas of bit as 121 00:06:00,360 --> 00:06:04,960 Speaker 1: well to offset the factors from the unexpected drivers. You say, 122 00:06:05,000 --> 00:06:07,440 Speaker 1: Asian reopening players may have finally had their day. When 123 00:06:07,440 --> 00:06:09,680 Speaker 1: you look at the overall China market and you kind 124 00:06:09,680 --> 00:06:13,120 Speaker 1: of positive, there, what's sick does he looking at? Well? 125 00:06:13,160 --> 00:06:15,640 Speaker 1: I think UM Asia is definitely six and twelve months 126 00:06:15,760 --> 00:06:17,880 Speaker 1: behind the curve and reopening versus the rest of the 127 00:06:17,880 --> 00:06:21,200 Speaker 1: world China, Japan and a lot of other places. So 128 00:06:21,240 --> 00:06:23,960 Speaker 1: I think, you know, people always want to reward those 129 00:06:23,960 --> 00:06:26,800 Speaker 1: sectors in those stocks that are seeing sequential improvement, and 130 00:06:26,880 --> 00:06:29,600 Speaker 1: it's harder and harder to find stocks with sequential improvement 131 00:06:29,680 --> 00:06:34,120 Speaker 1: when things were so overly buoyant, particularly in the US. 132 00:06:34,160 --> 00:06:36,960 Speaker 1: I think in China it is a sequential improvement story 133 00:06:37,040 --> 00:06:39,440 Speaker 1: if we could move past the zero COVID policy going 134 00:06:39,440 --> 00:06:41,120 Speaker 1: into next year, and I think the market will start 135 00:06:41,160 --> 00:06:43,839 Speaker 1: to price that in not only when the policy actually loses, 136 00:06:43,920 --> 00:06:46,120 Speaker 1: but when they see signs that we're moving towards that 137 00:06:46,240 --> 00:06:47,760 Speaker 1: or any kind of like light at the end of 138 00:06:47,760 --> 00:06:51,560 Speaker 1: the tunnel. So I think from a China overall markets perspective, Uh, 139 00:06:51,640 --> 00:06:53,599 Speaker 1: certainly a lot of the Internet names have been beaten 140 00:06:53,600 --> 00:06:58,039 Speaker 1: down pretty aggressively um and I think certainly moving past 141 00:06:58,120 --> 00:07:00,600 Speaker 1: their COVID their activity level would use him to a 142 00:07:00,640 --> 00:07:03,520 Speaker 1: meaningful extent. I think some financials have gotten beaten down 143 00:07:03,600 --> 00:07:06,599 Speaker 1: some consumer discretionary that has all been under pressure. So 144 00:07:06,640 --> 00:07:08,520 Speaker 1: I think those would be some areas, but not just China, 145 00:07:08,800 --> 00:07:11,880 Speaker 1: elsewhere in Asia as well, similar situation. Okay, a hundred 146 00:07:11,920 --> 00:07:16,000 Speaker 1: pound gorilla in the room. China, Taiwan, US tensions, geo 147 00:07:16,000 --> 00:07:19,240 Speaker 1: political tensions. We just had this white paper on Taiwan. 148 00:07:19,960 --> 00:07:22,640 Speaker 1: You can read it, Yes, they want to do peaceful unification, 149 00:07:22,760 --> 00:07:26,080 Speaker 1: or you can read some of them more strong commentary 150 00:07:26,160 --> 00:07:28,320 Speaker 1: in there. Do we have to worry about this if 151 00:07:28,320 --> 00:07:31,160 Speaker 1: we're investing in stocks here in the next eighteen months. Look, 152 00:07:31,200 --> 00:07:33,240 Speaker 1: I think Joe politics is something that we always have 153 00:07:33,280 --> 00:07:35,520 Speaker 1: to worry about. Whether it's just China, Taiwan or as 154 00:07:35,560 --> 00:07:38,360 Speaker 1: we've seen recently, Um, it's actually very relevant to many 155 00:07:38,360 --> 00:07:41,240 Speaker 1: other markets as well, and unfortunately it's very difficult to 156 00:07:42,600 --> 00:07:44,760 Speaker 1: so we always have to Yes, we always have to 157 00:07:44,760 --> 00:07:47,000 Speaker 1: note it. Um, we always have to focus on that, 158 00:07:47,040 --> 00:07:49,440 Speaker 1: but it's very difficult to predict. And therefore, if you 159 00:07:49,480 --> 00:07:51,960 Speaker 1: look at the way that Joe politics move, you tend 160 00:07:52,000 --> 00:07:53,960 Speaker 1: to if you assume that World War three is not 161 00:07:53,960 --> 00:07:56,000 Speaker 1: going to start and that no one has incentives to 162 00:07:56,040 --> 00:07:59,440 Speaker 1: actually do that, you kind of try to buy into 163 00:07:59,440 --> 00:08:02,280 Speaker 1: the negative always and then sell into when periods when 164 00:08:02,280 --> 00:08:04,960 Speaker 1: people think there's no problems at all. Helen, great to 165 00:08:05,000 --> 00:08:06,720 Speaker 1: have you on. Thank you so much. Heilem Judy, Managing 166 00:08:06,720 --> 00:08:09,160 Speaker 1: director and ce IO non func Trinity on the Line