1
00:00:00,040 --> 00:00:02,160
Speaker 1: So let's get over to our guests this half hour.

2
00:00:02,240 --> 00:00:05,760
Speaker 1: Carlos casan over, a senior Asia economist at eb P,

3
00:00:06,519 --> 00:00:09,319
Speaker 1: and Carlos, I want to start in China. We just

4
00:00:09,600 --> 00:00:12,080
Speaker 1: had their updatus on the latest case numbers out of

5
00:00:12,119 --> 00:00:15,880
Speaker 1: China twenty nine thousand UKSES reported on Sunday. But the

6
00:00:15,920 --> 00:00:21,319
Speaker 1: reopening narrative now firmly cemented, how significant is this for

7
00:00:21,400 --> 00:00:24,239
Speaker 1: the global economy and it's not going to be smooth sailing?

8
00:00:24,320 --> 00:00:28,040
Speaker 1: Is it? Good morning? Well, it's certainly very important for

9
00:00:28,120 --> 00:00:30,479
Speaker 1: the global economy, but we are still in the cautious

10
00:00:30,560 --> 00:00:33,640
Speaker 1: camp in thinking that UM, there will be starts and

11
00:00:33,680 --> 00:00:37,000
Speaker 1: stops and it won't be smooth sailing going forwards. UM

12
00:00:37,040 --> 00:00:40,160
Speaker 1: to the number of cases over the weekend on Sunday

13
00:00:40,200 --> 00:00:42,519
Speaker 1: was twenty eight thousand. That is encouraging as it is

14
00:00:42,880 --> 00:00:45,760
Speaker 1: a decline from forty thousand on Friday. So we are

15
00:00:45,800 --> 00:00:49,920
Speaker 1: seeing UM that despite these partial reopening measures in city

16
00:00:49,960 --> 00:00:53,280
Speaker 1: stake Shanghai and and Hang Joe UM, the cases haven't

17
00:00:53,320 --> 00:00:56,080
Speaker 1: spiraled out of controlling. They might still increase, but they

18
00:00:56,080 --> 00:00:58,440
Speaker 1: have inspired all out of control UM and that is

19
00:00:58,880 --> 00:01:03,120
Speaker 1: absolutely going to few will UM. The the positive narrative

20
00:01:03,120 --> 00:01:06,839
Speaker 1: around equities this week. UM. We are a little bit concerned, however,

21
00:01:06,920 --> 00:01:10,120
Speaker 1: about vaccination rates. UM So, the vaccination rate for the

22
00:01:10,160 --> 00:01:14,720
Speaker 1: elderly remains very low at sixty six, with only of

23
00:01:14,800 --> 00:01:18,040
Speaker 1: those aged sixty and above having received the booster shot.

24
00:01:18,400 --> 00:01:21,360
Speaker 1: Now we estimate that in order for vaccination levels to

25
00:01:21,440 --> 00:01:24,679
Speaker 1: reach more, to reach around eighty percent, which is a

26
00:01:24,720 --> 00:01:28,240
Speaker 1: more safe, um you know level for reopening. UM, that

27
00:01:28,319 --> 00:01:30,720
Speaker 1: will still take between three to six months. Given that

28
00:01:31,640 --> 00:01:33,840
Speaker 1: we are at a low starting point and there is

29
00:01:33,880 --> 00:01:37,120
Speaker 1: a three month period of weight that you have to

30
00:01:37,160 --> 00:01:41,120
Speaker 1: wait between jabs in China. UM so, that suggests to

31
00:01:41,240 --> 00:01:43,440
Speaker 1: us that we are not going to see full reopening.

32
00:01:43,440 --> 00:01:45,880
Speaker 1: We're going to see a partial reopening adhering to these

33
00:01:45,880 --> 00:01:48,560
Speaker 1: twenty measures aimed at reducing the impact of COVID zero

34
00:01:48,600 --> 00:01:51,360
Speaker 1: on the economy that we're announced in mid November. But

35
00:01:51,400 --> 00:01:53,880
Speaker 1: this full reopening will not happen until that level is

36
00:01:53,960 --> 00:01:56,840
Speaker 1: hit UM and that will we have to wait until

37
00:01:56,840 --> 00:01:59,360
Speaker 1: around April for that to take place. I'm gonna poloise

38
00:01:59,400 --> 00:02:01,840
Speaker 1: your difficult alander, now, can you pick a growth number

39
00:02:01,840 --> 00:02:05,520
Speaker 1: for me? If a trying three. That's a very interesting

40
00:02:05,600 --> 00:02:08,920
Speaker 1: question given that there is a conversation now around whether

41
00:02:09,040 --> 00:02:11,040
Speaker 1: or not China should set a growth target for next

42
00:02:11,120 --> 00:02:13,960
Speaker 1: year UM. So, as we all know, Shed Pink would

43
00:02:14,160 --> 00:02:16,520
Speaker 1: would gladly get rid of that GDP growth target. He

44
00:02:17,040 --> 00:02:19,200
Speaker 1: UM has a growth floor, of course, if he wants

45
00:02:19,200 --> 00:02:22,440
Speaker 1: to hit his common prosperity goal of becoming high UM

46
00:02:22,639 --> 00:02:25,320
Speaker 1: high income country by twenty five that in our opinion,

47
00:02:25,360 --> 00:02:27,360
Speaker 1: is around four percent, but he doesn't want to have

48
00:02:27,400 --> 00:02:31,799
Speaker 1: an overarching GDP target that will limit his policy choices. UM. However,

49
00:02:31,919 --> 00:02:35,560
Speaker 1: given that UM we do expect the reopening to happen

50
00:02:35,639 --> 00:02:38,760
Speaker 1: next year UH, and that COVID zero costs between three

51
00:02:38,760 --> 00:02:41,760
Speaker 1: to five percentage points of GDP this year, UM, setting

52
00:02:41,760 --> 00:02:43,640
Speaker 1: a target next year could be fairly easy in the

53
00:02:43,680 --> 00:02:46,639
Speaker 1: sense that they would have to mess up tremendously in

54
00:02:46,720 --> 00:02:48,760
Speaker 1: order to miss that growth target. So it is possible

55
00:02:48,800 --> 00:02:52,480
Speaker 1: that we will see that take place. Most likely we

56
00:02:52,560 --> 00:02:54,880
Speaker 1: will not know until March, but we are entering the

57
00:02:54,919 --> 00:02:57,120
Speaker 1: December prenum, and one day after the prenum is a

58
00:02:57,120 --> 00:03:00,760
Speaker 1: Central Economic Work Conference, and all of these topics will

59
00:03:00,800 --> 00:03:03,320
Speaker 1: be discussed during those meetings. So over the next few

60
00:03:03,320 --> 00:03:04,880
Speaker 1: weeks we will have a good idea of whether or

61
00:03:04,880 --> 00:03:07,120
Speaker 1: not China we'll plan to in the target or not.

62
00:03:07,280 --> 00:03:09,320
Speaker 1: If they do, it's it's a positive sign for sure.

63
00:03:10,240 --> 00:03:12,959
Speaker 1: Just very quickly, Carlos, twenty seconds. We've got the yoan

64
00:03:13,120 --> 00:03:16,760
Speaker 1: strengthening now against the green back. What's your short term

65
00:03:16,760 --> 00:03:21,519
Speaker 1: outlook here? We um, We do expect that this US

66
00:03:21,560 --> 00:03:24,440
Speaker 1: dollar strength narrative is starting to peak, so the US

67
00:03:24,440 --> 00:03:27,240
Speaker 1: dollar valley is starting to peak. We've seen strength across

68
00:03:27,240 --> 00:03:30,400
Speaker 1: the region, so all Asian effects appreciated against the dollar

69
00:03:30,440 --> 00:03:33,120
Speaker 1: in November. UM. So that is something that will continue

70
00:03:33,120 --> 00:03:36,160
Speaker 1: in the months to come. But again, like everything, they'll

71
00:03:36,200 --> 00:03:38,400
Speaker 1: be ups and downs, and so we can't exclude some

72
00:03:38,440 --> 00:03:41,240
Speaker 1: depreciatory pressures heading into next year as well. Carlos, A

73
00:03:41,240 --> 00:03:44,840
Speaker 1: couple of big central bank decisions in Asia this week.

74
00:03:44,880 --> 00:03:47,200
Speaker 1: I want to start here in Australia. So if I

75
00:03:47,280 --> 00:03:51,760
Speaker 1: can expecting another twenty five basis point hike this month,

76
00:03:52,000 --> 00:03:54,160
Speaker 1: then the country goes to the beach in January, there

77
00:03:54,160 --> 00:03:57,400
Speaker 1: will be no decision, and then Blueberg Economics is forecasting

78
00:03:57,440 --> 00:04:00,840
Speaker 1: a smaller one in February, and that's it. That would

79
00:04:00,840 --> 00:04:02,840
Speaker 1: pack the cash right at three and a quarter percent.

80
00:04:03,000 --> 00:04:04,440
Speaker 1: Do you have a sense the r b A is

81
00:04:04,480 --> 00:04:09,120
Speaker 1: relaxing its grip on inflation a little bit too soon. UM.

82
00:04:09,160 --> 00:04:13,560
Speaker 1: I think the the conversation around r B A stopping

83
00:04:13,600 --> 00:04:15,960
Speaker 1: as soon as December is it's a little bit too

84
00:04:15,960 --> 00:04:18,240
Speaker 1: soon to say that, UM. But we are seeing an

85
00:04:18,240 --> 00:04:22,280
Speaker 1: inflection in terms of monetary police policies around Asia UM,

86
00:04:22,320 --> 00:04:25,200
Speaker 1: you know, led by Bank of Career already last month. UM.

87
00:04:25,240 --> 00:04:27,640
Speaker 1: So we do expect that going forward any interest rate

88
00:04:27,760 --> 00:04:30,279
Speaker 1: hikes by the RBA will be smaller. This week we

89
00:04:30,360 --> 00:04:32,560
Speaker 1: have twenty five basis points priced in as well, but

90
00:04:32,600 --> 00:04:35,039
Speaker 1: it could be lower, it could be fifteen UM. And

91
00:04:35,080 --> 00:04:37,960
Speaker 1: then we do expect that given UM that inflation remains

92
00:04:38,000 --> 00:04:40,480
Speaker 1: quite high and neighbor conditions are very tight. We can

93
00:04:40,560 --> 00:04:43,120
Speaker 1: discuss about a little bit more on that as well

94
00:04:43,160 --> 00:04:45,719
Speaker 1: if if you want to. But we do think that

95
00:04:45,920 --> 00:04:48,960
Speaker 1: UM terminal rates will have to continue increasing throughout the

96
00:04:48,960 --> 00:04:51,560
Speaker 1: first quarter until they reach three point fift. So that's

97
00:04:51,560 --> 00:04:55,080
Speaker 1: slightly above consensus UM, but it does point to this

98
00:04:55,160 --> 00:04:59,119
Speaker 1: pivot UM in Q one UM as well. Yeah, wage

99
00:04:59,120 --> 00:05:02,800
Speaker 1: pressures and all Australia are a thing, although not as

100
00:05:02,800 --> 00:05:08,320
Speaker 1: acute as what's being experienced elsewhere. Right well, labor conditions

101
00:05:08,320 --> 00:05:10,400
Speaker 1: are tight, so we do we do have a record

102
00:05:10,480 --> 00:05:13,159
Speaker 1: a low unemployment rate of three point four percent. UM.

103
00:05:13,279 --> 00:05:16,560
Speaker 1: Wage price growth increased three point one percent, so real

104
00:05:16,600 --> 00:05:20,720
Speaker 1: wages are still lagging inflation. Of course. UM. We don't

105
00:05:20,760 --> 00:05:23,239
Speaker 1: see as much pressures as in other parts of the world,

106
00:05:23,520 --> 00:05:26,320
Speaker 1: but there is a structural labor shortage UM that might

107
00:05:26,480 --> 00:05:28,920
Speaker 1: still take a few months to correct. UM. I mean

108
00:05:28,960 --> 00:05:33,640
Speaker 1: the immigration numbers in two are positive single in my opinion,

109
00:05:33,720 --> 00:05:36,640
Speaker 1: because they can help to reduce some of those pressures. UM.

110
00:05:36,680 --> 00:05:39,640
Speaker 1: But it means that you know, at least in so

111
00:05:39,760 --> 00:05:44,360
Speaker 1: far as the RBA is concerned, UM, the structural issue

112
00:05:44,360 --> 00:05:47,240
Speaker 1: with employment will continue to drive inflation in the in

113
00:05:47,360 --> 00:05:49,440
Speaker 1: the months ahead, So we do expect them they will

114
00:05:49,520 --> 00:05:52,280
Speaker 1: have to be a little bit patient with that pivot

115
00:05:52,320 --> 00:05:55,280
Speaker 1: after they come back from the beach. Yeah, we're anticipating

116
00:05:55,279 --> 00:05:58,200
Speaker 1: a smaller than expected right increase from the Reserve Bank

117
00:05:58,240 --> 00:06:01,039
Speaker 1: of India as well. What's your read of the inflation

118
00:06:01,080 --> 00:06:04,680
Speaker 1: fight there? Correct, So we are expecting twenty five to

119
00:06:04,839 --> 00:06:07,640
Speaker 1: thirty five basis point rate hike UM, and that is

120
00:06:07,960 --> 00:06:10,720
Speaker 1: coming after three back to back fifty basis point rate

121
00:06:10,760 --> 00:06:13,799
Speaker 1: hikes by the r B. I UM inflation remains above

122
00:06:13,839 --> 00:06:16,599
Speaker 1: the RBI is a tolerance band of two to six

123
00:06:16,600 --> 00:06:19,200
Speaker 1: point cent to to six percent. It was six point

124
00:06:19,240 --> 00:06:22,360
Speaker 1: seven three in October UM and that is down slightly

125
00:06:22,360 --> 00:06:25,039
Speaker 1: from seven point four one percent in September, so we

126
00:06:25,120 --> 00:06:27,640
Speaker 1: are seeing some signs that inflation is cooling. Of course,

127
00:06:27,920 --> 00:06:30,840
Speaker 1: in India, the unemployment rate remains higher than it was

128
00:06:31,200 --> 00:06:34,480
Speaker 1: before COVID, so there is no structural issue like in Australia.

129
00:06:34,839 --> 00:06:37,800
Speaker 1: But we've seen the depreciatory pressures on the rupee and

130
00:06:37,839 --> 00:06:41,960
Speaker 1: also high commodity prices driving important inflation. The Bank does

131
00:06:42,040 --> 00:06:44,039
Speaker 1: expect that that will start to cool in the months ahead,

132
00:06:44,200 --> 00:06:46,560
Speaker 1: so that should pave the way for um, you know,

133
00:06:46,680 --> 00:06:50,400
Speaker 1: a policy inflection again in first quarter next year. I

134
00:06:50,440 --> 00:06:52,839
Speaker 1: just want to quickly look at Japan as well. Um

135
00:06:53,160 --> 00:06:55,480
Speaker 1: this is typically no movement from the Bank of Japan.

136
00:06:55,560 --> 00:06:58,880
Speaker 1: I just wonder that if you are anticipating a change

137
00:06:59,000 --> 00:07:02,880
Speaker 1: once like govnor Road steps down in April. But also

138
00:07:03,160 --> 00:07:05,120
Speaker 1: if we've got to keep in mind the GDP numbers

139
00:07:05,160 --> 00:07:07,520
Speaker 1: that expected out this week are not expected to be

140
00:07:07,600 --> 00:07:11,160
Speaker 1: very pretty for Japan, so we we um we have

141
00:07:11,320 --> 00:07:14,600
Speaker 1: final GDP numbers for Japan this week. The economy unexpectedly

142
00:07:15,280 --> 00:07:18,600
Speaker 1: contracted in the in the third quarter, so ironically Bank

143
00:07:18,640 --> 00:07:21,200
Speaker 1: of Japan's pro growth policy is turning out to be

144
00:07:21,240 --> 00:07:24,680
Speaker 1: anti growth because it's fueling inflationary pressures. And of course

145
00:07:24,760 --> 00:07:27,840
Speaker 1: Japanese consumers are extremely sensitive to increases in prices because

146
00:07:27,840 --> 00:07:30,640
Speaker 1: they haven't had any inflation in twenty years UM. So

147
00:07:30,680 --> 00:07:33,840
Speaker 1: we do think that the current situation is not sustainable

148
00:07:33,960 --> 00:07:37,480
Speaker 1: going forwards. UM. If we continue to see CPI above

149
00:07:37,520 --> 00:07:40,640
Speaker 1: three point zero percent UM and core inflation about two

150
00:07:40,680 --> 00:07:44,640
Speaker 1: point zero percent UM, inevitably a conversation will have to

151
00:07:44,680 --> 00:07:47,520
Speaker 1: be had about moving away from negative interest rate policy

152
00:07:47,520 --> 00:07:50,160
Speaker 1: and yield curve control. We think that most likely Bank

153
00:07:50,160 --> 00:07:53,480
Speaker 1: of Japan is waiting for the shouldnt wage negotiations in

154
00:07:53,520 --> 00:07:56,720
Speaker 1: the spring, and if we see a higher wage growth,

155
00:07:56,800 --> 00:07:59,480
Speaker 1: I mean some some commentators in Japan are saying five percent,

156
00:07:59,520 --> 00:08:01,840
Speaker 1: that would be huge for Japan. If we see that

157
00:08:01,920 --> 00:08:04,960
Speaker 1: in the spring, then that justifies of policy pivoted by

158
00:08:04,960 --> 00:08:08,120
Speaker 1: a Bank of Japan. All right, we will watch and wait.

159
00:08:08,480 --> 00:08:12,160
Speaker 1: Carlos Casanova, Senior Asia economist at UVP, Thanks so much

160
00:08:12,200 --> 00:08:13,000
Speaker 1: for joining us