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Speaker 1: Let's get to our guest, Jin You, whose multi asset

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Speaker 1: solutions investment specialist at JP Morgan. Jin thanks very much

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Speaker 1: for joining us. We had a couple of papers in

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Speaker 1: front page stories in China stay backed Financial News and

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Speaker 1: also the Securities Times calling for more stimulus in China.

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Speaker 1: The Financial News did say for sure that the economy

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Speaker 1: is expected to return to normal growth in the second

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Speaker 1: half of the year. I'm curious if you agree, and

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Speaker 1: if you do, why are you only neutral on Chinese

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Speaker 1: equities given the lowered valuation. Thank you for the question. UM.

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Speaker 1: Our view is quite similar to I guess that the

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Speaker 1: news story that you just quoted, where we think that

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Speaker 1: in the second half of this year, China's economy will

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Speaker 1: have a modest viccoffy UM, and we think that, UM,

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Speaker 1: you know, we will start to see that the government

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Speaker 1: um will kind of decide that there's a need to

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Speaker 1: produce more policy support. Now when it comes to as

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Speaker 1: an allocation kind of perspective, UM, yes, China view currently

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Speaker 1: within our equity relative value is a neutral position. But

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Speaker 1: if we compare that was the our overall underweight in equity,

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Speaker 1: that actually is expressing the view that we think China

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Speaker 1: is relatively more resilient than some of the other major

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Speaker 1: equity markets. Gin. There was quite an extraordinary move in

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Speaker 1: China bonds yesterday as well, the tenure yale dropping to

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Speaker 1: the lowest since May. Is that kind of give you

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Speaker 1: some kind of indication that bonds are aware you'd want

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Speaker 1: to be in China at the moment after we had

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Speaker 1: that surprise cut from the PBOC. Yeah. Um, I think

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Speaker 1: if we look at the surprise cup yesterday, UM, that's

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Speaker 1: definitely kind of is moving towards a positive direction. But

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Speaker 1: yet I think some of the market participants failed that

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Speaker 1: the scale of the cut wasn't that sufficient. Um. So

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Speaker 1: we actually think that there could potentially be positive surprise

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Speaker 1: down the road where if you know, the government decides

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Speaker 1: that they do need to, you know, do more to

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Speaker 1: stimulize the economy. Um, that there is could be a

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Speaker 1: potential kind of upside opportunities in China. How do you

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Speaker 1: do more but not do too much? That's the essence

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Speaker 1: of their dilemma. Yes, I think that's the essence of

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Speaker 1: the demo across the world facing all governments at the moment,

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Speaker 1: where it is a delicate balance that all governments need

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Speaker 1: to strike. Um. So China is no exception, UM, but

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Speaker 1: I think they are, um, you know, taking kind of

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Speaker 1: a close watch of their underlying economy boast in terms

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Speaker 1: of domestic economy, but also the external demand for their exports.

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Speaker 1: So I think it is an area that you know,

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Speaker 1: it was while close monitoring. So we are looking ahead

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Speaker 1: to the minutes from the FEDS July meeting, and the

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Speaker 1: key question here is whether or not inflation is gonna

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Speaker 1: come down gradually on its own, or whether or not

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Speaker 1: we need more aggression from the Fed. What are you

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Speaker 1: expecting in terms of their further moves? And I guess

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Speaker 1: what we'll see from these minutes, Yeah, I think I

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Speaker 1: think the minutes this week will probably give a hint

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Speaker 1: of the scale of next hike. UM. But we are

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Speaker 1: of the view that, um, there's more work for fact

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Speaker 1: to do. If you look at the core inflation number

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Speaker 1: that is still a way above their target. UM. So

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Speaker 1: there's still quite a long kind of interval before the

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Speaker 1: next EFMO SEE meeting, So there's a lot that could

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Speaker 1: happen to the data. But we are expecting probably another

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Speaker 1: fifty basis point hike for the next meeting, and then

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Speaker 1: maybe twenty five basis points for the two consequent sorry

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Speaker 1: to sequent UH meetings by the end of this year.

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Speaker 1: So the FEDS dilemma, no doubt, is, on the one hand,

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Speaker 1: they want to crush inflation. On the other hand, they

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Speaker 1: would love to engine there a soft landing. So that

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Speaker 1: would argue for a little more of a nuanced play,

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Speaker 1: and a nuanced play becomes easier if you can predict,

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Speaker 1: you know, what inflation is going to do. Doug and

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Speaker 1: I in our pre show confab, we were sort of

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Speaker 1: jaw boning about the nature of it. Would inflation fall

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Speaker 1: quickly or would it sort of slowly grind lower or

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Speaker 1: did it have the potential to peek back up again.

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Speaker 1: I think the slow grind lower might be what's you know,

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Speaker 1: considered more likely your thoughts on that, Yeah, I would

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Speaker 1: vote for that scenario as well. We think that the

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Speaker 1: inflation will um kind of stay high for a period

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Speaker 1: of time, but then slowly grind down towards the end

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Speaker 1: of next year or maybe beyond that UM, so FET

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Speaker 1: is kind of trying to navigate that UM. That's why

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Speaker 1: we think that's fit will continue to tight for a

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Speaker 1: few more months. Jin I just wanted to get back

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Speaker 1: as well as to what we're talking about with with

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Speaker 1: China bonds, and I guess it's about their divergence in

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Speaker 1: yields as well, and what that means for dollar yuan.

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Speaker 1: I mean, we're still quite a bit of weakness coming

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Speaker 1: through in the currency yesterday. What's your outlook here, Yeah, UM,

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Speaker 1: we do see there are risk for UN's further depreciation

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Speaker 1: against against Alla given this unfavorable kind of rate differentiations

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Speaker 1: between the two. Um, but we also think that before

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Speaker 1: the twenties Party Congress in the four the room for

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Speaker 1: its further depreciation is actually quite limited given the policymakers

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Speaker 1: preference for for currency stability. One of the things that

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Speaker 1: I mentioned in one of the newspaper stories today about

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Speaker 1: China doing more was that they need to boost confidence.

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Speaker 1: And it's it's quite notable that consumer confidence is pretty

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Speaker 1: low in China now. I think recent surveys have it

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Speaker 1: that the households are more pessimistic than they've ever been,

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Speaker 1: which is pretty shocking. Usually the Chinese consumers pretty upbeat

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Speaker 1: at upward mobility in that what's the key to turning

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Speaker 1: that around? I think there are a number of things

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Speaker 1: that we need to watch for. Um. Obviously, UM, you

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Speaker 1: know the COVID situation and it's related policy have a

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Speaker 1: have a quite a big impact on the kind of

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Speaker 1: the overall sentiment on the ground, UM. But also kind

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Speaker 1: of just the government's readiness to come out more policy

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Speaker 1: to support the economy would also kind of um give

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Speaker 1: a lift to the overall sentiment, UM. But then the

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Speaker 1: external demand for Chinese exports that's kind of the other

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Speaker 1: uncertainty around around this. So a number of things to

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Speaker 1: watch for, But we are still of the view that

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Speaker 1: the economy will stage in modest recovery UM, given um

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Speaker 1: that some of the recent stimulus will start to carry

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Speaker 1: through to the real economy. I guess one of the

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Speaker 1: things that some central bankers around the go about looking

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Speaker 1: for is is for the consumer to kind of braining

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Speaker 1: spending a bit to kind of help their their moves

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Speaker 1: as well. In terms of some of these aggressive hikes,

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Speaker 1: What are you expecting from the abbiance there this week, UM.

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Speaker 1: I think the market consensus are expecting fifty basis point

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Speaker 1: hike UM. But I think it would be interesting and

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Speaker 1: to look at, you know, how they're going to message

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Speaker 1: their future policy, because they are one of the earliest

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Speaker 1: bank that started the hiking and they've been quite aggressive

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Speaker 1: as well, so you know, in terms of how they

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Speaker 1: will think where they are in their in their hike cycle,

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Speaker 1: that would be quite interesting too to watch for. So

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Speaker 1: we just have time for a quickie here. How confident

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Speaker 1: are you that overall conditions will be better in six months?

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Speaker 1: I think in six months time. That's probably the other

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Speaker 1: way around, which is we think that the west of

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Speaker 1: the scenario will probably take place um early next year,

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Speaker 1: but things will start to gradually recover after that. So

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Speaker 1: we're off the view that by the end of next

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Speaker 1: year we will start to see that the economy will

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Speaker 1: recover and equity markets probably lead that by six to

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Speaker 1: nine months time. So in terms of market sentiment, um, yes,

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Speaker 1: I think in six months time we will see things

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Speaker 1: starting to turn around better. Alright, great to have you

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Speaker 1: with us. Thank you so much. Jan, multi asset solution

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Speaker 1: investment specialist at JP Morgan in our Hong Kong studio.

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Speaker 1: This is Bloomberg