1 00:00:00,160 --> 00:00:10,479 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:10,520 --> 00:00:13,720 Speaker 1: Daybreak Asia podcast. I'm Doug Krisner. You can join Brian 3 00:00:13,800 --> 00:00:16,680 Speaker 1: Curtis and myself for the stories, making news and moving 4 00:00:16,720 --> 00:00:19,560 Speaker 1: markets in the APAC region. You can subscribe to the 5 00:00:19,600 --> 00:00:23,120 Speaker 1: show anywhere you get your podcast and always on Bloomberg Radio, 6 00:00:23,320 --> 00:00:27,800 Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app. Joining us 7 00:00:27,840 --> 00:00:30,880 Speaker 1: now is Todd Jablonski. He is Global head of Multi 8 00:00:30,880 --> 00:00:36,000 Speaker 1: asset and Quantitative Investments at Principal Asset Management. Joining us 9 00:00:36,000 --> 00:00:39,600 Speaker 1: from our studios in Hong Kong. So you're normally based 10 00:00:39,600 --> 00:00:41,920 Speaker 1: in Seattle. I understand what are you doing in Hong Kong. 11 00:00:43,159 --> 00:00:47,279 Speaker 2: Well, Principal Asset Management is having its summit series and 12 00:00:47,320 --> 00:00:52,400 Speaker 2: we're on a barnstorming tour through Kuala Lumpur, Singapore and 13 00:00:52,479 --> 00:00:54,720 Speaker 2: Hong Kong, and it gives us a great opportunity to 14 00:00:54,840 --> 00:00:58,560 Speaker 2: share out to investors how we're projecting the economic landscape 15 00:00:58,760 --> 00:01:01,200 Speaker 2: through the remainder of twenty two four and into twenty 16 00:01:01,280 --> 00:01:02,000 Speaker 2: twenty five. 17 00:01:02,160 --> 00:01:04,640 Speaker 1: So we'll get the monthly activity data later in the week. 18 00:01:04,680 --> 00:01:07,840 Speaker 1: For China, there's been so much focus right now on 19 00:01:07,920 --> 00:01:11,120 Speaker 1: the various stimulus measures that we have seen Beijing roll out, 20 00:01:11,160 --> 00:01:15,280 Speaker 1: and a lot of disappointment with some shortcomings. And it 21 00:01:15,360 --> 00:01:18,520 Speaker 1: strikes me so strange that the CSI three hundred, with 22 00:01:18,600 --> 00:01:21,520 Speaker 1: that powerful rally that we had took us to a 23 00:01:21,600 --> 00:01:25,440 Speaker 1: high in around October eighth, we're down down ten percent 24 00:01:25,520 --> 00:01:28,959 Speaker 1: since then. What do you think is underneath this at. 25 00:01:28,880 --> 00:01:33,119 Speaker 2: The bottom of that decline, I think is investor skepticism 26 00:01:33,640 --> 00:01:37,399 Speaker 2: that the stimulus programs, whether on the monetary side and 27 00:01:37,520 --> 00:01:41,080 Speaker 2: or the fiscal side, are sufficient to stimulate the kind 28 00:01:41,120 --> 00:01:45,080 Speaker 2: of economic activity required to really lift the world's second 29 00:01:45,160 --> 00:01:49,440 Speaker 2: largest economy out of a bit of an economic malaise. Notably, 30 00:01:49,960 --> 00:01:53,160 Speaker 2: i'd note that deflation is really the greater concern than 31 00:01:53,240 --> 00:01:56,280 Speaker 2: inflation at this point in China, and I think you're 32 00:01:56,280 --> 00:01:59,080 Speaker 2: seeing investors skeptical of the size of the response, but 33 00:01:59,240 --> 00:02:04,600 Speaker 2: yet wanting to rely on policy to stimulate the demand 34 00:02:04,640 --> 00:02:07,800 Speaker 2: for credit. We look at China as a credit demand 35 00:02:07,960 --> 00:02:10,720 Speaker 2: driven market, and what we really need is for people 36 00:02:10,720 --> 00:02:13,720 Speaker 2: who want to borrow money and undertake new projects. 37 00:02:13,800 --> 00:02:16,239 Speaker 1: So are you seeing opportunity in the credit space. 38 00:02:17,120 --> 00:02:19,560 Speaker 2: Well, we are seeing opportunity in the credit space, not 39 00:02:19,600 --> 00:02:23,760 Speaker 2: necessarily in China. Within credit, our actual favorite complexes are 40 00:02:23,760 --> 00:02:27,280 Speaker 2: an in short term investment grade credits as well as 41 00:02:27,400 --> 00:02:31,640 Speaker 2: preferred securities. We like the credit and carry in those 42 00:02:31,680 --> 00:02:34,960 Speaker 2: two groups on the short end of the curve, excuse me. 43 00:02:35,120 --> 00:02:37,240 Speaker 2: And on the long end of the curve, it's really 44 00:02:37,360 --> 00:02:40,560 Speaker 2: long sovereigns, like a long German boon to a long 45 00:02:40,800 --> 00:02:44,480 Speaker 2: US treasury. We think that that's the right barbell approach 46 00:02:44,520 --> 00:02:46,960 Speaker 2: where you can have income, you know, playing offense on 47 00:02:47,000 --> 00:02:49,760 Speaker 2: the short end as well as defense just in case 48 00:02:49,800 --> 00:02:51,200 Speaker 2: we get a shock on the long end. 49 00:02:51,320 --> 00:02:55,840 Speaker 1: So explain to me how you understand FED policy impacting 50 00:02:55,960 --> 00:02:57,720 Speaker 1: the credit markets globally right now. 51 00:02:58,840 --> 00:03:01,320 Speaker 2: Well, fed's been leading the way in terms of a 52 00:03:01,480 --> 00:03:06,040 Speaker 2: synchronized global easing cycle. It's been remarkable to watch. You're 53 00:03:06,040 --> 00:03:08,920 Speaker 2: getting cuts of course in China, you're getting cuts in Europe, 54 00:03:08,960 --> 00:03:12,080 Speaker 2: cuts in England, cuts in India. So you do have 55 00:03:12,200 --> 00:03:16,520 Speaker 2: this synchronized easing cycle and the FEDS leading the way. Now, 56 00:03:16,560 --> 00:03:19,920 Speaker 2: what I do note is that you have speculation in 57 00:03:19,960 --> 00:03:23,000 Speaker 2: the market today around the pace at which these cuts 58 00:03:23,000 --> 00:03:26,680 Speaker 2: will happen, and therefore where you see a separation between 59 00:03:26,680 --> 00:03:31,120 Speaker 2: the expectations of investors and the actual actions of central banks. 60 00:03:31,440 --> 00:03:35,240 Speaker 2: That's causing more rate volatility than we typically have in 61 00:03:35,320 --> 00:03:39,800 Speaker 2: fixed income markets. Bonds are indeed showing elevated levels of 62 00:03:40,040 --> 00:03:44,200 Speaker 2: standard deviation excess volatility, and that means bonds have slightly 63 00:03:44,280 --> 00:03:47,600 Speaker 2: more volatility than mossed investors are typically used to seeing. 64 00:03:47,720 --> 00:03:50,680 Speaker 1: So can you give me your sober assessment as to 65 00:03:50,880 --> 00:03:52,320 Speaker 1: where you think the FED is headed? 66 00:03:52,320 --> 00:03:52,520 Speaker 2: Here? 67 00:03:52,960 --> 00:03:54,760 Speaker 1: Are we going to get two rate cuts before the 68 00:03:54,840 --> 00:03:57,000 Speaker 1: end of the year, each twenty five basis points? 69 00:03:57,720 --> 00:03:59,760 Speaker 2: That's our view as well. We expect twenty five and 70 00:03:59,840 --> 00:04:04,040 Speaker 2: no November twenty five in December, as well as potentially 71 00:04:04,120 --> 00:04:06,080 Speaker 2: more than one hundred next year, one hundred to one 72 00:04:06,160 --> 00:04:07,520 Speaker 2: hundred and fifty next year. 73 00:04:07,680 --> 00:04:08,000 Speaker 1: Wow. 74 00:04:08,040 --> 00:04:11,560 Speaker 2: So put that entire easing cycle together, that's about two 75 00:04:11,680 --> 00:04:13,760 Speaker 2: hundred and fifty bits of easing going back to our 76 00:04:13,800 --> 00:04:16,680 Speaker 2: first move in August, and that's in the middle of 77 00:04:16,760 --> 00:04:19,160 Speaker 2: FED easing. If you look historically, we've cut by more 78 00:04:19,320 --> 00:04:21,600 Speaker 2: in the US. We've also cut by far less in 79 00:04:21,720 --> 00:04:25,839 Speaker 2: the US. This actually feels like a pretty normal easing cycle. 80 00:04:26,320 --> 00:04:29,679 Speaker 1: So we've talked about opportunities in credit in the bond market. 81 00:04:29,760 --> 00:04:33,039 Speaker 1: How are you feeling about the equity space against the 82 00:04:33,080 --> 00:04:36,440 Speaker 1: backdrop of the FED continuing to ease through the remainder 83 00:04:36,440 --> 00:04:38,880 Speaker 1: of this year, and as you just kind of laid 84 00:04:38,920 --> 00:04:41,800 Speaker 1: out there into much of twenty twenty five. 85 00:04:42,920 --> 00:04:45,960 Speaker 2: It's a tailwind. The FED is providing a tailwind to 86 00:04:46,040 --> 00:04:50,360 Speaker 2: equity investors, and we are overweight equities in our multi 87 00:04:50,440 --> 00:04:55,960 Speaker 2: asset to global portfolios. In particular, we like US megacap technology. 88 00:04:56,440 --> 00:04:59,320 Speaker 2: I know those technology giants are expensive. I know the 89 00:04:59,360 --> 00:05:03,440 Speaker 2: Magnificent Seven have run significantly, but that's an overweight, a 90 00:05:03,520 --> 00:05:06,800 Speaker 2: structural overweight in our portfolios, and of late it has 91 00:05:06,839 --> 00:05:10,000 Speaker 2: continued to deliver the kind of performance patterns that we expect. 92 00:05:10,480 --> 00:05:14,160 Speaker 2: I also note that outside of the US, we're overweight 93 00:05:14,200 --> 00:05:17,800 Speaker 2: to Japan across the DM complex, and we all like 94 00:05:17,960 --> 00:05:23,080 Speaker 2: India within EM India indeed has shown tremendous positive momentum, 95 00:05:23,120 --> 00:05:25,599 Speaker 2: gaining over forty percent in the last twelve months and 96 00:05:25,680 --> 00:05:29,359 Speaker 2: dollar terms, that's been on the back of strong fundamentals, 97 00:05:29,680 --> 00:05:33,080 Speaker 2: strong demographic story. That's been the more interesting space in 98 00:05:33,120 --> 00:05:34,080 Speaker 2: the EM zone. 99 00:05:34,120 --> 00:05:36,800 Speaker 1: When you look at big cap tech, is there regulatory 100 00:05:36,920 --> 00:05:39,520 Speaker 1: risk that we need to kind of expose a little 101 00:05:39,520 --> 00:05:39,880 Speaker 1: bit here? 102 00:05:40,960 --> 00:05:44,400 Speaker 2: Yeah, there is regulatory risk. These giants are so big. 103 00:05:44,480 --> 00:05:48,200 Speaker 2: I do note again, seven US corporations have a market 104 00:05:48,240 --> 00:05:53,640 Speaker 2: capitalization and excess of fifteen trillion US dollars. That is 105 00:05:53,800 --> 00:05:58,359 Speaker 2: larger perhaps than in fact, every single company in Europe combined, 106 00:05:58,920 --> 00:06:01,520 Speaker 2: just in those seven US names. So to give your 107 00:06:01,600 --> 00:06:04,240 Speaker 2: listeners a sense of the size of these firms, So 108 00:06:04,320 --> 00:06:06,080 Speaker 2: the only thing big enough to kind of tackle these 109 00:06:06,120 --> 00:06:09,120 Speaker 2: giants are in fact a government. Now you do note 110 00:06:09,200 --> 00:06:13,760 Speaker 2: we're seeing some increased regulatory threats affecting the group, But 111 00:06:13,880 --> 00:06:15,480 Speaker 2: you know, I think that's a threat to I think 112 00:06:15,480 --> 00:06:18,680 Speaker 2: it's a threat perhaps to managers within those organizations, But 113 00:06:18,760 --> 00:06:22,800 Speaker 2: in terms of shareholders stockholders, I would argue that in fact, 114 00:06:23,000 --> 00:06:25,440 Speaker 2: any regulatory action that would move to break up one 115 00:06:25,440 --> 00:06:28,640 Speaker 2: of the giants would just unlock value. So we continued 116 00:06:28,680 --> 00:06:32,000 Speaker 2: to see opportunities for shareholders to invest in and gain 117 00:06:32,000 --> 00:06:32,479 Speaker 2: in the group. 118 00:06:32,640 --> 00:06:36,960 Speaker 1: How is the US election entering your thinking, your analysis 119 00:06:37,040 --> 00:06:39,719 Speaker 1: on how to deploy capital at this point in time? 120 00:06:41,640 --> 00:06:44,520 Speaker 2: We ran a bunch of stats to try to determine 121 00:06:44,760 --> 00:06:49,160 Speaker 2: the statistical significance of election outcomes. We looked at historical 122 00:06:49,240 --> 00:06:52,800 Speaker 2: Republican sweeps, historical democratic sweeps, and we looked at both 123 00:06:52,880 --> 00:06:57,000 Speaker 2: kinds of divided government and by any statistical measure that 124 00:06:57,040 --> 00:07:00,839 Speaker 2: we could use for significance. There is not a significant 125 00:07:00,880 --> 00:07:05,719 Speaker 2: relationship between political outcomes and returns in the equity market. 126 00:07:06,279 --> 00:07:09,120 Speaker 2: I note that, yes, while politicians are elected, and while 127 00:07:09,160 --> 00:07:12,560 Speaker 2: they do dictate what is the public policy, when it 128 00:07:12,600 --> 00:07:16,840 Speaker 2: comes to trade policy, it's really more US corporations than 129 00:07:16,880 --> 00:07:20,200 Speaker 2: it is US government that determines that trade policy. And 130 00:07:20,240 --> 00:07:23,239 Speaker 2: the US trade policy in a corporate sense is wide 131 00:07:23,240 --> 00:07:26,840 Speaker 2: open for business. So I'm actually putting a pretty low 132 00:07:27,040 --> 00:07:32,720 Speaker 2: amount of risk and stock into presidential election outcomes relative 133 00:07:32,720 --> 00:07:35,640 Speaker 2: to our investment outcomes. We think the markets are in 134 00:07:35,680 --> 00:07:37,880 Speaker 2: a good spot to continue to deliver. We think a 135 00:07:37,920 --> 00:07:42,000 Speaker 2: soft landing can and happen. Putting that together with FED easing, 136 00:07:42,080 --> 00:07:44,800 Speaker 2: that's an environment where we can continue to deploy risk 137 00:07:45,160 --> 00:07:47,280 Speaker 2: despite the noise coming from the elections. 138 00:07:47,360 --> 00:07:49,960 Speaker 1: So you mentioned trade there. I'm wondering how you're thinking 139 00:07:50,000 --> 00:07:55,720 Speaker 1: about the notion of reshoring bringing certain manufacturing back to 140 00:07:56,200 --> 00:07:59,920 Speaker 1: North America from Asia, particularly Mexico. Is that a theme 141 00:08:00,080 --> 00:08:01,800 Speaker 1: that you're looking at that you're investing in. 142 00:08:03,040 --> 00:08:07,160 Speaker 2: Absolutely, the Mexican moment, as it is referred to in country, 143 00:08:07,280 --> 00:08:10,000 Speaker 2: is a real thing. Principle has a great deal of 144 00:08:10,040 --> 00:08:13,080 Speaker 2: operations in Mexico. I spent a lot of time in Mexico. Actually, 145 00:08:13,440 --> 00:08:16,000 Speaker 2: and what I do note is one, you have a 146 00:08:16,000 --> 00:08:19,200 Speaker 2: certain amount of political stability in Mexico. Despite some of 147 00:08:19,240 --> 00:08:22,960 Speaker 2: the judicial reforms you've seen recently, you do have certain 148 00:08:23,000 --> 00:08:25,840 Speaker 2: set of expectations that have remained in place for some time, 149 00:08:26,240 --> 00:08:29,400 Speaker 2: and that gives foreign investors at least some comfort acknowledgement 150 00:08:29,440 --> 00:08:32,360 Speaker 2: around what to expect. I also note that in our 151 00:08:32,440 --> 00:08:37,400 Speaker 2: research we are indeed seeing near shoring happen. The price 152 00:08:37,520 --> 00:08:42,120 Speaker 2: of industrial properties in the north of Mexico has begun 153 00:08:42,160 --> 00:08:46,079 Speaker 2: to come up significantly. I also think that redundant supply 154 00:08:46,200 --> 00:08:48,880 Speaker 2: chains remember that was verboten for a long time in 155 00:08:48,920 --> 00:08:53,480 Speaker 2: the industry. Redundant items are expensive, but you find American 156 00:08:53,480 --> 00:08:56,040 Speaker 2: corporations are now willing to carry that a little bit 157 00:08:56,080 --> 00:08:58,800 Speaker 2: of extra expense to have a source in Asia for 158 00:08:58,880 --> 00:09:01,760 Speaker 2: their critical inputs as well as a source for those 159 00:09:01,800 --> 00:09:03,600 Speaker 2: same inputs in our neighbor to the south. 160 00:09:04,320 --> 00:09:07,199 Speaker 1: Todd, enjoy your time in Hong Kong and the rest 161 00:09:07,240 --> 00:09:10,720 Speaker 1: of the Asia Pacific during your trip. Todd Jablonski is 162 00:09:10,840 --> 00:09:14,760 Speaker 1: global head of multi asset and Quantitative Investments at Principal 163 00:09:14,800 --> 00:09:27,520 Speaker 1: Asset Management. Joining us now is Stephen Soon. He is 164 00:09:27,640 --> 00:09:31,680 Speaker 1: head of Research at HSBC Chianghai, joining us from our 165 00:09:31,800 --> 00:09:34,760 Speaker 1: studios in Hong Kong. Stephen, good of you to drop by. 166 00:09:35,360 --> 00:09:37,720 Speaker 1: I think we have to begin the conversation with China, 167 00:09:37,840 --> 00:09:40,240 Speaker 1: especially since the market has been on a roller coaster 168 00:09:40,360 --> 00:09:44,800 Speaker 1: ride since late September. There have been a series of 169 00:09:45,000 --> 00:09:49,120 Speaker 1: measures unleashed by the government, a burst of optimism that 170 00:09:49,240 --> 00:09:51,600 Speaker 1: quickly cooled. What's happening in your. 171 00:09:51,559 --> 00:09:56,560 Speaker 3: View, okay, yeah, we are first and foremost seeing a 172 00:09:56,640 --> 00:10:01,280 Speaker 3: policy pivot. The policy pivert is a grand plan to 173 00:10:01,320 --> 00:10:05,480 Speaker 3: first trying to engineer wealth effect in the stock market 174 00:10:05,800 --> 00:10:08,240 Speaker 3: as well as you know, also stabilizing price in the 175 00:10:08,280 --> 00:10:12,239 Speaker 3: property market as a way to boost the confidence, especially 176 00:10:13,120 --> 00:10:17,120 Speaker 3: for the Chinese household. The second step is clearly in 177 00:10:17,160 --> 00:10:22,439 Speaker 3: a more fiscal stimulus in order to reflate the Chinese economy, 178 00:10:22,960 --> 00:10:27,240 Speaker 3: help improve fundamental and the last step of which is 179 00:10:27,880 --> 00:10:33,520 Speaker 3: structural reforms to deal with you know, the aiming, you know, 180 00:10:34,480 --> 00:10:38,680 Speaker 3: the problems Chinese facing from demographics, you know, to DA, 181 00:10:39,720 --> 00:10:43,959 Speaker 3: insufficient demand, so on, so force. The reason why we're 182 00:10:44,000 --> 00:10:48,719 Speaker 3: seeing so much volativity in the market is because investors 183 00:10:49,120 --> 00:10:53,360 Speaker 3: view in terms of how to interpretate whether these policies 184 00:10:53,440 --> 00:10:57,679 Speaker 3: are sufficient, whether these policies will be effective are widely 185 00:10:57,760 --> 00:11:03,040 Speaker 3: divergent between I'm sure in China and the offshore investors, 186 00:11:03,920 --> 00:11:04,800 Speaker 3: between hedge. 187 00:11:04,559 --> 00:11:06,479 Speaker 1: Funds and loandowners. 188 00:11:07,320 --> 00:11:09,640 Speaker 3: And I would say, you know, on the positive side 189 00:11:09,640 --> 00:11:12,920 Speaker 3: of things, people view that, you know, this time around, 190 00:11:13,120 --> 00:11:16,840 Speaker 3: China is going to get things work if not, and 191 00:11:16,880 --> 00:11:19,880 Speaker 3: the more policies will keep on coming until it's working. 192 00:11:20,880 --> 00:11:24,040 Speaker 3: On the negative side, there's also a complaint, Oh, how 193 00:11:24,080 --> 00:11:26,640 Speaker 3: can you're not giving me you know, the magic number. 194 00:11:26,800 --> 00:11:31,400 Speaker 3: Why can't you just show me the bazuku? You know, stimulus, 195 00:11:32,640 --> 00:11:36,599 Speaker 3: you know, anything coming out is still viewed sort of incremental, 196 00:11:37,400 --> 00:11:41,560 Speaker 3: not sufficient, lack of you know, shock and all. So 197 00:11:41,800 --> 00:11:45,760 Speaker 3: you got different opinions. That's why market the moolatility. 198 00:11:46,160 --> 00:11:48,800 Speaker 1: I'm wondering about the property market in particular. From what 199 00:11:48,840 --> 00:11:52,280 Speaker 1: I understand, the Housing Minister later today will give a 200 00:11:52,320 --> 00:11:57,320 Speaker 1: little bit more detail on measures to support the property market. 201 00:11:57,360 --> 00:11:59,800 Speaker 1: This seems to be critical, right, I mean, it's something 202 00:11:59,840 --> 00:12:02,960 Speaker 1: that can't happen simply with the flip of a switch, 203 00:12:03,040 --> 00:12:05,880 Speaker 1: can it. This is going to make or take many 204 00:12:05,920 --> 00:12:10,359 Speaker 1: many years of process to unfold, right exactly. 205 00:12:10,440 --> 00:12:14,719 Speaker 3: You know, property is critical for Chinese economy. You cannot 206 00:12:15,200 --> 00:12:20,719 Speaker 3: reinvigrated economy without stabilizing property market. Directly it's a to 207 00:12:21,200 --> 00:12:25,480 Speaker 3: nine percent of GDP and indirectly with both up and downstream, 208 00:12:25,559 --> 00:12:29,439 Speaker 3: it's almost a quarter of China's economy. That's how important 209 00:12:29,640 --> 00:12:34,640 Speaker 3: it is. And also from a fiscal stimulus perspective, if 210 00:12:34,679 --> 00:12:39,120 Speaker 3: you want a fiscal stimulus to be effective, eventually that 211 00:12:39,240 --> 00:12:42,400 Speaker 3: leads to what the transmission mechanism needs to walk through 212 00:12:43,080 --> 00:12:47,400 Speaker 3: different sectors to create demand for credit and the credit 213 00:12:47,520 --> 00:12:51,760 Speaker 3: cycle to lift economic growth. And the most critical sector 214 00:12:52,160 --> 00:12:55,920 Speaker 3: is again steal property. That's why you've seen this press 215 00:12:55,920 --> 00:12:59,160 Speaker 3: conference today. And to take a step back, this is 216 00:12:59,200 --> 00:13:02,720 Speaker 3: actually not the first time for them to deal with, 217 00:13:02,840 --> 00:13:06,240 Speaker 3: you know, property sector stimulus. If you can recall back 218 00:13:06,280 --> 00:13:09,200 Speaker 3: in the meat of May, that was the first massive 219 00:13:09,320 --> 00:13:13,319 Speaker 3: runt of property stimulus policy, followed by on the twenty 220 00:13:13,360 --> 00:13:18,200 Speaker 3: fourth of September what the PBOC has pledged to do 221 00:13:18,679 --> 00:13:23,359 Speaker 3: provide liquidity support for local government to acquire lend reserves. 222 00:13:24,040 --> 00:13:27,160 Speaker 3: And then today's conference without knowing you know what's going 223 00:13:27,240 --> 00:13:30,559 Speaker 3: to be discussed. I think that direction of travel, it's 224 00:13:30,880 --> 00:13:31,720 Speaker 3: very clear. 225 00:13:32,679 --> 00:13:34,400 Speaker 1: I want to change gears and talk a little bit 226 00:13:34,400 --> 00:13:37,640 Speaker 1: about deflation in China. I think at the factory gate level, 227 00:13:37,800 --> 00:13:41,600 Speaker 1: at the wholesale level, China has been in deflation now 228 00:13:41,679 --> 00:13:45,360 Speaker 1: for two years. Do you is the firm is your 229 00:13:45,440 --> 00:13:48,840 Speaker 1: firm HSBC at all concerned that China, if it doesn't 230 00:13:48,840 --> 00:13:51,920 Speaker 1: get this right at this moment in time, that it 231 00:13:52,000 --> 00:13:56,680 Speaker 1: could kind of repeat what Japan went through thirty years ago, 232 00:13:56,920 --> 00:13:58,960 Speaker 1: something that lasted multiple decades. 233 00:14:00,000 --> 00:14:03,600 Speaker 3: Okay, yeah, First of all, there are you know, different metrics. 234 00:14:03,640 --> 00:14:06,160 Speaker 3: You can looking at the one you refer to as 235 00:14:06,240 --> 00:14:09,360 Speaker 3: pp I. It has stayed in active territory as I mentioned, 236 00:14:09,360 --> 00:14:13,200 Speaker 3: for two years. But the other important measure for whether 237 00:14:13,240 --> 00:14:17,920 Speaker 3: it's or in deflation or you know, UH inflation or 238 00:14:17,920 --> 00:14:21,240 Speaker 3: desinflation reflation, I think it's you should also look at 239 00:14:21,280 --> 00:14:24,560 Speaker 3: the headline CPR number right as we speak, it's still 240 00:14:24,600 --> 00:14:28,440 Speaker 3: in the positive territory. So regardless, I think, you know, 241 00:14:28,600 --> 00:14:34,040 Speaker 3: it's not deliable, that China is actually facing insufficient demand. 242 00:14:35,120 --> 00:14:39,000 Speaker 3: And then that's why the fiscal stimulus is so important 243 00:14:39,280 --> 00:14:43,520 Speaker 3: in order to pick up that out you know, fieling 244 00:14:43,520 --> 00:14:48,080 Speaker 3: that output gap if you will. But all these are 245 00:14:48,480 --> 00:14:54,280 Speaker 3: cychnical problems met with you know, cychnical solutions UH in 246 00:14:54,320 --> 00:14:57,480 Speaker 3: the long term. Right over the non run, China definitely 247 00:14:57,520 --> 00:15:02,160 Speaker 3: toity needs to unleash you know, more structural reform, particularly 248 00:15:02,200 --> 00:15:06,560 Speaker 3: you know, on the household side, how do they improved 249 00:15:06,680 --> 00:15:10,320 Speaker 3: way for income distribution as a way to lift you know, 250 00:15:10,400 --> 00:15:14,080 Speaker 3: consumption as a percent of GDP. And then on the 251 00:15:14,160 --> 00:15:19,040 Speaker 3: private sector side, how do they reinvigrate you know, animal spirits, 252 00:15:19,720 --> 00:15:24,600 Speaker 3: entrepreneurship that really is going to decide the future outcome, 253 00:15:24,640 --> 00:15:28,200 Speaker 3: the future pass. I don't think anything is set in 254 00:15:28,280 --> 00:15:31,880 Speaker 3: stone yet. And then that's very convenient to compare China 255 00:15:32,120 --> 00:15:35,960 Speaker 3: with Japan. There are similarities, but there are even more 256 00:15:36,160 --> 00:15:39,880 Speaker 3: you know, differences. At the end of the day, I think, 257 00:15:39,960 --> 00:15:43,800 Speaker 3: you know, it's the outcome still in the hands of 258 00:15:43,920 --> 00:15:46,760 Speaker 3: the Chinese people write what exactly they're going to do 259 00:15:47,960 --> 00:15:48,800 Speaker 3: in years to come. 260 00:15:49,040 --> 00:15:51,600 Speaker 1: That's a fair point. One of the bright spots of 261 00:15:51,640 --> 00:15:55,120 Speaker 1: the Chinese economy has been exports, and one of the 262 00:15:55,120 --> 00:15:57,400 Speaker 1: things that we're dealing with now in the US is 263 00:15:57,400 --> 00:16:00,000 Speaker 1: a presidential election that will happen in about three weeks 264 00:16:00,080 --> 00:16:03,160 Speaker 1: time and the possibility that we will have a new 265 00:16:03,200 --> 00:16:08,040 Speaker 1: administration that is much more aggressive on applying exports to 266 00:16:08,160 --> 00:16:12,920 Speaker 1: Chinese goods. How critical would an outcome like that be 267 00:16:13,040 --> 00:16:17,760 Speaker 1: for kind of really hampering the exports sector in China 268 00:16:17,800 --> 00:16:21,160 Speaker 1: and perhaps creating a stumbling block for growth. 269 00:16:22,520 --> 00:16:26,000 Speaker 3: Yeah, the US election is still a very close call. 270 00:16:26,520 --> 00:16:29,600 Speaker 3: I don't think we have any above marketing knowledge about 271 00:16:29,600 --> 00:16:32,880 Speaker 3: the outcome. We will just have to wait and see 272 00:16:33,360 --> 00:16:37,040 Speaker 3: what's the outcome. Okay. And in terms of the impact 273 00:16:37,840 --> 00:16:43,040 Speaker 3: for Chinese economy, for Chinese exports, for competitiveness of China's 274 00:16:43,120 --> 00:16:48,480 Speaker 3: you know, manufacturers, I do think we should overplay, you know, 275 00:16:49,000 --> 00:16:54,040 Speaker 3: impact from either Chinese or US government in terms of policy. 276 00:16:54,560 --> 00:16:57,640 Speaker 3: The reason being that you know, from budding up, you know, 277 00:16:57,720 --> 00:17:03,160 Speaker 3: the Chinese companies has become increasingly global. Right, we publish 278 00:17:03,240 --> 00:17:07,800 Speaker 3: the thematic back in June talking about this ongoing trend. 279 00:17:08,800 --> 00:17:12,360 Speaker 3: Give you some numbers. Put that in perspective. For the 280 00:17:12,400 --> 00:17:16,320 Speaker 3: top three hundred Asia listed company, we're talking about ten 281 00:17:16,359 --> 00:17:21,399 Speaker 3: percent of their revenue coming from overseas market. Whereas industry 282 00:17:21,480 --> 00:17:26,240 Speaker 3: leaders across you know, the major sectors EV and EV battery, 283 00:17:27,119 --> 00:17:33,000 Speaker 3: medical equipment, construction, machinery, consumer electronics, so on, so force, 284 00:17:33,920 --> 00:17:38,040 Speaker 3: we're talking about thirty forty percent of revenue coming from 285 00:17:38,080 --> 00:17:41,960 Speaker 3: overseas market. However, that still has has a very long 286 00:17:42,000 --> 00:17:46,520 Speaker 3: distance to go. If you're compare into global leaders in Japan, 287 00:17:46,760 --> 00:17:50,920 Speaker 3: in Germany, in Europe, and certainly that's what the Chinese 288 00:17:50,960 --> 00:17:55,120 Speaker 3: company are aiming for, right They want to become global. 289 00:17:55,800 --> 00:17:59,160 Speaker 3: They want to hatch their risk to a specific countries, 290 00:17:59,240 --> 00:18:02,280 Speaker 3: you know policy, you know, to do R and D globally, 291 00:18:02,359 --> 00:18:05,720 Speaker 3: to do manufacturing globally, to do marketing globally, and to 292 00:18:05,840 --> 00:18:09,800 Speaker 3: sell globally, and then to become a truly global company 293 00:18:10,040 --> 00:18:14,480 Speaker 3: like most of those you know, SMP five hundred company 294 00:18:14,480 --> 00:18:15,320 Speaker 3: in the US. 295 00:18:15,520 --> 00:18:18,800 Speaker 1: I want to ask you about one industry in particular, 296 00:18:18,880 --> 00:18:21,199 Speaker 1: only because we were talking in the last couple of 297 00:18:21,280 --> 00:18:26,920 Speaker 1: days about this revelation from the chip making equipment from 298 00:18:26,960 --> 00:18:30,400 Speaker 1: ASML that it will not make kind of the delivery 299 00:18:30,480 --> 00:18:33,600 Speaker 1: target that analysts had been expecting. And we know that 300 00:18:33,640 --> 00:18:36,680 Speaker 1: the export controls are in place from the United States 301 00:18:36,720 --> 00:18:40,000 Speaker 1: in terms of trying to get companies like ASML to 302 00:18:40,080 --> 00:18:45,720 Speaker 1: withhold certain advanced semiconductor technology to China. I don't want 303 00:18:45,760 --> 00:18:49,280 Speaker 1: to talk about the impact as much as I want 304 00:18:49,320 --> 00:18:52,439 Speaker 1: to know whether or not you see evidence that China 305 00:18:52,560 --> 00:18:57,800 Speaker 1: is really able now to create its own semiconductor industry 306 00:18:57,880 --> 00:19:00,359 Speaker 1: in a meaningful way. Are you seeing sign of that 307 00:19:00,400 --> 00:19:04,119 Speaker 1: happening right now? I'm not attag analyst. 308 00:19:04,440 --> 00:19:06,960 Speaker 3: So probably I cannot drive too much, you know, into 309 00:19:07,000 --> 00:19:11,840 Speaker 3: the details of technology. But having said that, at the 310 00:19:11,880 --> 00:19:15,760 Speaker 3: fifty you know, fifty thousand feet level in terms of 311 00:19:15,800 --> 00:19:19,840 Speaker 3: industry policy, in terms of you know, the capitals pledged 312 00:19:19,920 --> 00:19:23,720 Speaker 3: by the central government and the various you know, local governments, 313 00:19:24,640 --> 00:19:27,520 Speaker 3: I think it's enormous, right. You know, you could argue 314 00:19:27,520 --> 00:19:30,960 Speaker 3: with that money it's you know, the most efficient way 315 00:19:31,080 --> 00:19:34,760 Speaker 3: to use or not. But the outcome so far has 316 00:19:34,800 --> 00:19:36,320 Speaker 3: been quite amazing. 317 00:19:36,480 --> 00:19:36,680 Speaker 2: Right. 318 00:19:36,760 --> 00:19:41,240 Speaker 3: You know, for the stock market that I cover, China 319 00:19:41,240 --> 00:19:44,720 Speaker 3: has set up this you know star board in Shanghai, right, 320 00:19:44,800 --> 00:19:49,119 Speaker 3: you know, the number one sector, the sector with the 321 00:19:49,119 --> 00:19:54,320 Speaker 3: biggest market cap, which the most IPO fundraising activity is 322 00:19:54,359 --> 00:19:59,840 Speaker 3: in semiconductor. So admittedly China would still be far like 323 00:20:00,160 --> 00:20:06,080 Speaker 3: behind the top lonche technology developed in Silicon Valley and 324 00:20:06,280 --> 00:20:11,520 Speaker 3: US together with its allies. But you know, in the nests, 325 00:20:11,560 --> 00:20:15,880 Speaker 3: you know, top lunch or you know, you know, above 326 00:20:16,080 --> 00:20:19,880 Speaker 3: fourteen nanometer, you know, sort of twenty eight, twenty two, 327 00:20:20,359 --> 00:20:26,800 Speaker 3: even fifty six nanometer technology space, certainly China is dominating, right, 328 00:20:27,280 --> 00:20:32,680 Speaker 3: and those technology standards I think, you know, they're still 329 00:20:32,720 --> 00:20:36,200 Speaker 3: contributing to the majority what you know, a consumer piece 330 00:20:36,240 --> 00:20:40,720 Speaker 3: of consumer electronics is going to you know, it's going 331 00:20:40,760 --> 00:20:44,280 Speaker 3: to use, perhaps with only exception being you know, in 332 00:20:44,440 --> 00:20:50,639 Speaker 3: handsets or maybe in the most advanced AI algorithm calculation. 333 00:20:51,400 --> 00:20:55,400 Speaker 3: But other than that, I see China make very steady 334 00:20:55,520 --> 00:20:57,879 Speaker 3: and significant you know, in roads. 335 00:20:58,200 --> 00:21:00,280 Speaker 1: Yeah, so it's interesting today here in the US we 336 00:21:00,320 --> 00:21:04,320 Speaker 1: had a number of key lawmakers pushing the Commerce Department 337 00:21:04,359 --> 00:21:08,160 Speaker 1: to try to prevent Whilewei from making progress on its 338 00:21:08,200 --> 00:21:11,600 Speaker 1: semiconductor manufacturing. Stephen, thank you so much for being with us. 339 00:21:11,720 --> 00:21:15,200 Speaker 1: Enjoyed the conversation with Stephen Sun, head of research at 340 00:21:15,400 --> 00:21:19,920 Speaker 1: HSBC Changhai, joining us here on the Daybreak Asia podcast. 341 00:21:27,920 --> 00:21:31,280 Speaker 1: Joining us now is Newpoor Gupta, portfolio manager at east 342 00:21:31,359 --> 00:21:35,480 Speaker 1: Spring Investments, joining us from a lion city of Singapore, Napur. 343 00:21:35,560 --> 00:21:37,480 Speaker 1: Thank you so much for making time to chat with us. 344 00:21:37,720 --> 00:21:40,919 Speaker 1: Can we begin by talking about what everybody has been discussing, 345 00:21:41,440 --> 00:21:45,120 Speaker 1: This enormous rally that we had in Chinese equities which 346 00:21:45,160 --> 00:21:47,399 Speaker 1: appears to have faded. Do you have a sense of 347 00:21:47,440 --> 00:21:49,560 Speaker 1: what's going on right now in this ten percent pulled 348 00:21:49,600 --> 00:21:52,480 Speaker 1: back from that the high that we had in early October. 349 00:21:53,240 --> 00:21:56,520 Speaker 4: Yes, good morning. So Chinese equities, of course has been 350 00:21:56,600 --> 00:21:59,639 Speaker 4: quite top of mind for all investors in Asia. Over 351 00:21:59,680 --> 00:22:02,080 Speaker 4: the last four weeks, there has been a shift in 352 00:22:02,119 --> 00:22:05,080 Speaker 4: the policy maker's intention which is driving a lot of 353 00:22:05,080 --> 00:22:08,639 Speaker 4: the investors to cover their shorts that have been in 354 00:22:08,680 --> 00:22:11,440 Speaker 4: their portfolios for the last one to two years. So 355 00:22:11,480 --> 00:22:14,800 Speaker 4: post COVID, most of the fund managers didn't really bring 356 00:22:14,920 --> 00:22:18,919 Speaker 4: Chinese equities up to overweights in their portfolios because of 357 00:22:19,000 --> 00:22:23,159 Speaker 4: the uncertainty around the economic and the growth outlook. But 358 00:22:23,240 --> 00:22:25,800 Speaker 4: over the last one month they have been forced to 359 00:22:25,840 --> 00:22:29,399 Speaker 4: cover some of that. The recent pullback has been partly 360 00:22:29,480 --> 00:22:34,159 Speaker 4: driven by underwhelming follow through from the policy makers in 361 00:22:34,240 --> 00:22:37,760 Speaker 4: terms of fiscal support. So the market was really anticipating 362 00:22:37,840 --> 00:22:40,600 Speaker 4: that in addition to the monetary stimulus that the Chinese 363 00:22:40,600 --> 00:22:44,200 Speaker 4: policy makers were giving, they would also then support through 364 00:22:44,240 --> 00:22:48,640 Speaker 4: the fiscal measures, particularly to revive the consumer sector, because 365 00:22:48,680 --> 00:22:52,760 Speaker 4: if you look at Chinese growth contributions over the last 366 00:22:52,760 --> 00:22:55,720 Speaker 4: one year, you will see that it's mainly the consumption 367 00:22:55,840 --> 00:23:00,760 Speaker 4: growth that is lagging and youth unemployment is increasing, which 368 00:23:00,800 --> 00:23:04,399 Speaker 4: is driving some of the deflationary pressures as well. So 369 00:23:04,440 --> 00:23:08,560 Speaker 4: I think the recent pullback is partly and unwind of 370 00:23:08,680 --> 00:23:11,879 Speaker 4: that expectation that the policy makers are really going to 371 00:23:11,920 --> 00:23:16,879 Speaker 4: come in, you know, pressing hard on the accelerator immediately. 372 00:23:17,920 --> 00:23:20,920 Speaker 4: But now it's more a patient game where we try 373 00:23:20,960 --> 00:23:24,440 Speaker 4: to or at least markets are trying to recalibrate how 374 00:23:24,520 --> 00:23:26,600 Speaker 4: much the policy makers are willing to push ahead. 375 00:23:26,760 --> 00:23:29,760 Speaker 1: So how are you feeling about not just China but 376 00:23:29,800 --> 00:23:31,520 Speaker 1: the overall global growth story? 377 00:23:32,280 --> 00:23:35,560 Speaker 4: So Chinese growth and global growth are quite decoupled now, 378 00:23:35,680 --> 00:23:40,200 Speaker 4: So going moving to global growth, from our perspective, we're 379 00:23:40,240 --> 00:23:44,080 Speaker 4: still cautious. We recognize that the recent data prints out 380 00:23:44,080 --> 00:23:46,640 Speaker 4: of the US in particular have surprise to the upside, 381 00:23:46,680 --> 00:23:49,159 Speaker 4: and you know a lot of the narrative has shifted 382 00:23:49,160 --> 00:23:51,159 Speaker 4: towards the fact that there might not even be a 383 00:23:51,240 --> 00:23:55,760 Speaker 4: no landing scenario, let alone of soft landing. But from 384 00:23:55,800 --> 00:23:59,560 Speaker 4: our perspective, all the micro data that we see in 385 00:23:59,640 --> 00:24:02,119 Speaker 4: terms of of you know, looking under the covers in 386 00:24:02,160 --> 00:24:04,439 Speaker 4: the different sectors and even in labor markets, if you 387 00:24:04,440 --> 00:24:07,560 Speaker 4: look at some of the regional data out of the 388 00:24:07,640 --> 00:24:10,679 Speaker 4: US States, it's still suggesting to us that the weakness 389 00:24:10,680 --> 00:24:14,919 Speaker 4: still remains. The consumption growth is of course quite strong 390 00:24:14,960 --> 00:24:17,680 Speaker 4: and that's really holding up the economy and that's reflected 391 00:24:17,720 --> 00:24:21,560 Speaker 4: in the services PMI readings. But the manufacturing sector is 392 00:24:22,480 --> 00:24:25,520 Speaker 4: in contractioning territory right according to the according to the 393 00:24:25,520 --> 00:24:31,639 Speaker 4: Purchasing Managers Index, particularly in Europe, we are seeing that 394 00:24:32,000 --> 00:24:36,800 Speaker 4: even economic data is surprising to the downside, despite economists 395 00:24:36,840 --> 00:24:43,080 Speaker 4: already downgrading their expectations. So labor market, manufacturing sector still 396 00:24:43,119 --> 00:24:46,439 Speaker 4: looking quite weak to us, and so we're a bit 397 00:24:46,520 --> 00:24:50,199 Speaker 4: more cautious and taking all the recent upside surprises with 398 00:24:50,240 --> 00:24:51,040 Speaker 4: a pinch of salt. 399 00:24:51,600 --> 00:24:55,000 Speaker 1: So what do you think the key here would be 400 00:24:55,080 --> 00:24:58,760 Speaker 1: for European authorities, whether it's the ECB or based on 401 00:24:58,800 --> 00:25:03,200 Speaker 1: a country by country base, to create revitalization across the continent. 402 00:25:03,240 --> 00:25:04,960 Speaker 1: But what's going to be required? 403 00:25:05,400 --> 00:25:08,920 Speaker 4: So monetary policy is too tight. If inflation has come 404 00:25:09,000 --> 00:25:11,639 Speaker 4: off as it has over the last couple of years, 405 00:25:11,640 --> 00:25:14,000 Speaker 4: and if it stays at these levels, then real rates 406 00:25:14,040 --> 00:25:17,560 Speaker 4: are tracking much higher than what they should be, which 407 00:25:17,600 --> 00:25:21,359 Speaker 4: implies that overall speaking, the monetary policy is too tight 408 00:25:21,920 --> 00:25:25,040 Speaker 4: for an economy that isn't that isn't very strong. So 409 00:25:25,080 --> 00:25:28,200 Speaker 4: the first, the first arrow it really is to lose 410 00:25:28,200 --> 00:25:31,679 Speaker 4: in monetary policy in a concertain in a concerted and 411 00:25:31,720 --> 00:25:35,480 Speaker 4: a confident fashion, So that means not only cutting rates 412 00:25:35,480 --> 00:25:39,800 Speaker 4: but also providing that dubbish commentary to inform the markets 413 00:25:39,840 --> 00:25:42,600 Speaker 4: that they are willing to do more if necessary. That's 414 00:25:42,680 --> 00:25:48,240 Speaker 4: number one, followed by that any support given to consumption growth, 415 00:25:48,600 --> 00:25:52,040 Speaker 4: either in the form of direct measures in terms of 416 00:25:52,080 --> 00:25:56,400 Speaker 4: the fiscal policy or indirect measures by reducing taxes or 417 00:25:56,440 --> 00:26:01,280 Speaker 4: by you know, improving liquidity overall liquid in the banking 418 00:26:01,320 --> 00:26:05,000 Speaker 4: sector can all help to revive growth in Europe. 419 00:26:05,600 --> 00:26:08,359 Speaker 1: Are you as cautious about the equity story in the 420 00:26:08,480 --> 00:26:09,159 Speaker 1: United States? 421 00:26:10,480 --> 00:26:13,960 Speaker 4: We are more neutral equity story in the United States, 422 00:26:14,119 --> 00:26:16,480 Speaker 4: partly because of the strength that we've seen over the 423 00:26:16,560 --> 00:26:19,119 Speaker 4: last one to one and a half months, particularly the 424 00:26:19,200 --> 00:26:22,040 Speaker 4: earning season that's been trickling through so far is still 425 00:26:22,080 --> 00:26:26,240 Speaker 4: showing pretty strong corporate fundamentals. We're not seeing that in Europe, 426 00:26:26,280 --> 00:26:30,240 Speaker 4: and so we're taking our more bearish views to the 427 00:26:30,320 --> 00:26:35,360 Speaker 4: European part of the developed world. For the US, if 428 00:26:35,400 --> 00:26:37,680 Speaker 4: we you know, we're very data dependent. Of course, we 429 00:26:37,800 --> 00:26:42,680 Speaker 4: all know that it's extremely important to be nimble. The 430 00:26:42,760 --> 00:26:45,640 Speaker 4: things that's keeping us neutral and not kind of overweight 431 00:26:45,800 --> 00:26:49,720 Speaker 4: is because the cash levels from fund managers is really 432 00:26:49,840 --> 00:26:52,080 Speaker 4: very low now, which means a lot of these fund 433 00:26:52,119 --> 00:26:54,840 Speaker 4: managers are quite invested into the markets and so positioning 434 00:26:54,960 --> 00:26:58,600 Speaker 4: is quite stretched. Couple that with valuations that have been 435 00:26:58,680 --> 00:27:01,280 Speaker 4: lofty for quite a while now, you really do need 436 00:27:01,359 --> 00:27:05,040 Speaker 4: to see earnings growing at high double digit numbers in 437 00:27:05,240 --> 00:27:09,800 Speaker 4: order for us to even just sustain sustain the SPX 438 00:27:09,840 --> 00:27:10,719 Speaker 4: at where it is right now. 439 00:27:11,080 --> 00:27:14,400 Speaker 1: So as I'm listening to I'm thinking to myself, if 440 00:27:14,480 --> 00:27:17,200 Speaker 1: you're really kind of neutral on the equities and you're 441 00:27:17,440 --> 00:27:20,440 Speaker 1: bearish on what's going on in Europe, China is not 442 00:27:20,560 --> 00:27:23,600 Speaker 1: a growth story, You've got to be in the fixed 443 00:27:23,640 --> 00:27:25,520 Speaker 1: income space. Do you like credit right now? 444 00:27:25,960 --> 00:27:28,800 Speaker 4: Yes, absolutely so. From multi asset space, I think credit 445 00:27:29,640 --> 00:27:33,320 Speaker 4: is probably one of our strongest places in the economy. 446 00:27:33,680 --> 00:27:36,040 Speaker 4: If you look at the corporate balance sheets in the US, 447 00:27:36,160 --> 00:27:40,280 Speaker 4: whether it's investment grade or high yield, they're looking very strong. 448 00:27:41,160 --> 00:27:44,200 Speaker 4: There was a time where the default rates were rising 449 00:27:44,400 --> 00:27:46,320 Speaker 4: in the US, but you can see over the last 450 00:27:46,359 --> 00:27:49,240 Speaker 4: couple of data prints that that's also rolled down, which 451 00:27:49,320 --> 00:27:52,560 Speaker 4: means that the tighter monetary policy or the higher rates 452 00:27:52,680 --> 00:27:54,760 Speaker 4: over the last couple of years has really not hurt 453 00:27:54,800 --> 00:27:57,920 Speaker 4: the corporate balance sheets or margins much, which can be 454 00:27:58,080 --> 00:28:02,000 Speaker 4: quite surprising to somebody who thinks about it from an 455 00:28:02,000 --> 00:28:05,040 Speaker 4: economic fundamental point of view, but obviously there has been 456 00:28:05,080 --> 00:28:08,600 Speaker 4: other off offsetting factors that are keeping the corporates quite strong. 457 00:28:09,160 --> 00:28:12,200 Speaker 4: So corporate credit, both US investment grade, US high yield, 458 00:28:12,680 --> 00:28:16,280 Speaker 4: and even in emerging markets dollar bonds we think are 459 00:28:16,359 --> 00:28:19,879 Speaker 4: quite attractive to add Carrie to the portfolio with pretty 460 00:28:19,960 --> 00:28:21,600 Speaker 4: minimal draw down risk. 461 00:28:21,880 --> 00:28:23,960 Speaker 1: So as long as we're talking about fixed income, I 462 00:28:24,000 --> 00:28:26,879 Speaker 1: think we have to include the Fed in the conversation. 463 00:28:27,040 --> 00:28:30,200 Speaker 1: What's your view on the path forward for rate cuts? 464 00:28:30,840 --> 00:28:33,040 Speaker 4: We are still off the view that the Fed will 465 00:28:33,080 --> 00:28:36,560 Speaker 4: continue to cut rates, but the pricing in the market 466 00:28:36,640 --> 00:28:40,160 Speaker 4: for the next twelve months seems quite aggressive, and we 467 00:28:40,280 --> 00:28:45,760 Speaker 4: believe that if it's inconsistent with what the market is 468 00:28:45,840 --> 00:28:48,440 Speaker 4: expecting on the growth outlook, Because if the growth and 469 00:28:48,560 --> 00:28:51,200 Speaker 4: labor market is indeed as strong as the narrative has 470 00:28:51,280 --> 00:28:54,000 Speaker 4: moved towards over the last one month, even though that's 471 00:28:54,080 --> 00:28:57,680 Speaker 4: not the Springs based case, if the growth outlook is 472 00:28:57,720 --> 00:28:59,600 Speaker 4: indeed that strong, then there is no reason for the 473 00:28:59,640 --> 00:29:02,800 Speaker 4: Fed to do the amount of cos that's been priced 474 00:29:02,840 --> 00:29:05,520 Speaker 4: in over the next twelve months. So my perspective is 475 00:29:06,120 --> 00:29:10,040 Speaker 4: that we think the Federal Reserve will continue to cut rates, 476 00:29:10,360 --> 00:29:15,160 Speaker 4: but if growth remains steady or slows down only marginally, 477 00:29:15,520 --> 00:29:17,120 Speaker 4: then it won't be at the pace at which the 478 00:29:17,160 --> 00:29:18,160 Speaker 4: market is pricing. 479 00:29:17,880 --> 00:29:20,840 Speaker 1: In Newpoor Thanks so much for making time to chat 480 00:29:20,880 --> 00:29:25,040 Speaker 1: with us. Nupor Gupta is portfolio manager at east Spring Investments, 481 00:29:25,120 --> 00:29:28,960 Speaker 1: joining us from Singapore here on the Daybreak Asia podcast. 482 00:29:32,560 --> 00:29:35,440 Speaker 1: This has been the Bloomberg Daybreak Asia podcast, bringing you 483 00:29:35,560 --> 00:29:38,600 Speaker 1: the stories making news and moving markets in the Asia Pacific. 484 00:29:39,160 --> 00:29:42,240 Speaker 1: Visit the Bloomberg Podcast channel on YouTube to get more 485 00:29:42,320 --> 00:29:45,880 Speaker 1: episodes of this and other shows from Bloomberg. Subscribe to 486 00:29:45,960 --> 00:29:49,680 Speaker 1: the podcast on Apple, Spotify, or anywhere else you listen, 487 00:29:49,840 --> 00:29:52,920 Speaker 1: and always on Bloomberg Radio, the Bloomberg Terminal, and the 488 00:29:52,960 --> 00:29:54,040 Speaker 1: Bloomberg Business App.