WEBVTT - Charting China's Economic Road Ahead

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News.

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<v Speaker 2>Welcome to the Daybreak Asia podcast. I'm Doug Prisner. We

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<v Speaker 2>want to begin with China. After the annual parliamentary session,

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<v Speaker 2>President Xi Jinping seems to be determined to push ahead

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<v Speaker 2>with a very ambitious growth goal of around five percent

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<v Speaker 2>this year, despite the trade war with the US. Now

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<v Speaker 2>we know the tariffs on Chinese imports to the US

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<v Speaker 2>are a twenty percent, and if President Trump were to

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<v Speaker 2>boost that rate further, analysts are saying that Beijing will

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<v Speaker 2>definitely need to unleash some big stimulus in order to

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<v Speaker 2>hit that growth target. Let's bring in Katya Dmitrieva. She

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<v Speaker 2>is Bloomberg News Asia Economy reporter, joining us from our

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<v Speaker 2>studios in Hong Kong. Thank you. I'm sure it's been

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<v Speaker 2>busy where you are.

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<v Speaker 3>Yeah, very busy few days, right.

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<v Speaker 2>Can we talk about the growth target? Does that seem

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<v Speaker 2>realistic at this point?

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<v Speaker 3>Depends who you ask. Chinese officials definitely think they can

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<v Speaker 3>make it. It's the exact same target they've set in

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<v Speaker 3>twenty twenty four. They've met their targets for the past

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<v Speaker 3>three years, so history would suggest that once they set something,

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<v Speaker 3>they're going to do everything they can to meet it.

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<v Speaker 3>The Bloomberg survey of economists. If you ask economists, however,

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<v Speaker 3>we've got a Bloomberg survey and it says that they're

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<v Speaker 3>likely China is more likely to hit four point five percent. Now,

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<v Speaker 3>the question is really how much the stimulus can help

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<v Speaker 3>revive consumption. I know that's always the question, but this

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<v Speaker 3>year in particular, because from Premiere Li Cheng's speech, it's

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<v Speaker 3>very clear that they're doing a couple things. So they're

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<v Speaker 3>boosting how much they're going to be spending in their

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<v Speaker 3>budget deficit or how much they're comfortable with spending this year.

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<v Speaker 2>What is that part percentage right now?

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<v Speaker 3>So they've got a fiscal deficit target of four percent,

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<v Speaker 3>which means they're going to be spending a lot more

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<v Speaker 3>on a number of programs. We only know kind of

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<v Speaker 3>a handful of what those will be. They're raising the

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<v Speaker 3>pension payout levels, there's a public subsidy for medical insurance

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<v Speaker 3>that they're going to be boosting. The question, though, is

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<v Speaker 3>what else are they going to do? And if history

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<v Speaker 3>again serves as a guide, we know that throughout the year,

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<v Speaker 3>the first few months growth is quite strong. They roll

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<v Speaker 3>out these programs and then about halfway through the year

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<v Speaker 3>they're forced to do more because the numbers aren't stacking that.

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<v Speaker 2>Do you think that leadership in Beijing is operating under

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<v Speaker 2>the assumption that it is inevitable that more US tariffs

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<v Speaker 2>or at least higher US tariffs are on the way.

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<v Speaker 3>Absolutely, and you can see that in their reaction. So

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<v Speaker 3>if you just look at Trump's previous statements, everything from

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<v Speaker 3>sixty percent to one hundred percent tariffs on China, which

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<v Speaker 3>you said during the campaign trail, Now one hundred percent,

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<v Speaker 3>take that with a grain of salt, But I think

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<v Speaker 3>sixty percent was mentioned enough that that's what a lot

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<v Speaker 3>of economists and analysts and people in Beijing are now

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<v Speaker 3>pricing in. And so the reason why this NPC was

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<v Speaker 3>particularly important is because it was the first chance that

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<v Speaker 3>Chinese officials could react to that eventuality, or what is

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<v Speaker 3>perceived to be that eventuality. So raising the fiscal deficit

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<v Speaker 3>target and also raising the fiscal deficit target and also

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<v Speaker 3>focusing on the consumer is a sign that they're not

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<v Speaker 3>going to be or trying not to be, as reliant

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<v Speaker 3>on exports, right, because if you have these tariffs coming

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<v Speaker 3>in from the US and you have this growing protectionism

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<v Speaker 3>really globally. Then you can't rely on those tariffs, or

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<v Speaker 3>you can't rely on trade, you can't rely on exports

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<v Speaker 3>as much because it's just going to contribute to deflation.

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<v Speaker 3>It's not going to get your growth to about five percent.

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<v Speaker 2>So talk to me about this split screen that we

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<v Speaker 2>saw happen yes today, that would be Wednesday, where you

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<v Speaker 2>are Tuesday here in the US, where Trump, on one hand,

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<v Speaker 2>was addressing a joint session of Congress, and then we

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<v Speaker 2>had Chinese Premier Lee kind of detailing the work report. Right.

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<v Speaker 3>It was pretty incredible, especially if you had the two

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<v Speaker 3>screens on at the same time, because at a certain

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<v Speaker 3>point it was something like sixty seconds apart between the

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<v Speaker 3>premiere finishing and President Trump standing up and saying America

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<v Speaker 3>is back. And I think it's a really good image

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<v Speaker 3>of what the next few years are going to look like,

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<v Speaker 3>especially for China, because you have all these efforts domestically

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<v Speaker 3>in China to boost growth and to get the country

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<v Speaker 3>out of deflation, this dangerous firal of deflation, and trying

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<v Speaker 3>to study the property sector and doing all of these

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<v Speaker 3>things that were announced during the un PC over those

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<v Speaker 3>few hours speech, and then right after you had President

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<v Speaker 3>Trump doubling down on tariffs, mentioning reciprocal tariffs which are

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<v Speaker 3>coming in April, and mentioning China by name, as well

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<v Speaker 3>as several other countries in Asia like India and South Korea.

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<v Speaker 3>But the point being that it's just was just a

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<v Speaker 3>reminder of how limited in some ways China's policies are.

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<v Speaker 3>Because at the end of the day, you have the US,

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<v Speaker 3>the biggest economy and one of China's biggest markets, saying well, actually,

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<v Speaker 3>we're going to make it a lot more difficult for you.

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<v Speaker 2>If Chinese leadership has to do more on the stimulus side.

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<v Speaker 2>Are people talking about the risk that may be associated

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<v Speaker 2>with that, I'm thinking about the debt levels that are

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<v Speaker 2>maybe problematic already.

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<v Speaker 3>Yeah, there's going to be a lot of debt issuance

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<v Speaker 3>for sure, and of course fiscal deficit increasing. But this

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<v Speaker 3>is kind of with China is a special case in

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<v Speaker 3>some ways, and in some ways it's also not so

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<v Speaker 3>it's a special case and that they have more control

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<v Speaker 3>over these things. We're going to see a lot more bondishuans.

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<v Speaker 3>There's some response in markets. They're still hungry for that debt.

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<v Speaker 2>So the government from what I understand is also planning

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<v Speaker 2>to raise defense spending by about seven point two percent.

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<v Speaker 2>That seems to be the same thing that occurred last year, right,

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<v Speaker 2>not a big surprise on that front, but does it

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<v Speaker 2>send a message.

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<v Speaker 3>Yeah, it is the same level as last year, But again,

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<v Speaker 3>given how big China's economy is and how much they're

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<v Speaker 3>spending already on it, it's significant. And this just goes

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<v Speaker 3>to how China has said in the past and repeats

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<v Speaker 3>officials repeat quite frequently, they would like the defense sector,

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<v Speaker 3>the military in China to match US and America spends

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<v Speaker 3>among so many countries, among the top ten biggest countries,

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<v Speaker 3>spends more on their military than any other nation. And

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<v Speaker 3>so that's a pretty big ask. So you think of

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<v Speaker 3>this kind of spending and it tends to drive economic growth,

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<v Speaker 3>and it tends to be. It tends to be what

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<v Speaker 3>we saw with Germany for example this week as well

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<v Speaker 3>with this Bazuka expandis with their military like it does

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<v Speaker 3>help growth. However, of course, geopolitically, it could further increase

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<v Speaker 3>tensions between the US and China. We didn't see Trump

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<v Speaker 3>reacting to that. We didn't really see any major officials

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<v Speaker 3>raising a red flag and saying, hey, this actually indicates

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<v Speaker 3>that China is very much a threat and we need

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<v Speaker 3>to actually go forward and maybe add more tariffs aside

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<v Speaker 3>from the ones we already added this week.

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<v Speaker 2>So we're dealing with a trade war right now. And

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<v Speaker 2>one of the things that I thought was very interesting

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<v Speaker 2>is Beijing reiterating this stance on opening up markets to

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<v Speaker 2>foreign investors. Where is this foreign capital going to come from,

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<v Speaker 2>in the mind of Chinese leadership, other than the US.

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<v Speaker 3>They're hoping it'll come from all over the US, maybe Europe,

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<v Speaker 3>but Southeast State and Asia in particular. You've seen since

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<v Speaker 3>twenty eighteen really solidifying of trade and foreign direct investment

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<v Speaker 3>ties between China and Asia, especially as companies kind of

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<v Speaker 3>pulled back from the States in Europe and there were

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<v Speaker 3>a lot more restrictions in those regions and kind of

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<v Speaker 3>the Western world. So there is a sense that Asia

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<v Speaker 3>could contribute.

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<v Speaker 4>A lot more.

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<v Speaker 3>You know, think of India, think of even South Korea,

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<v Speaker 3>and a lot of the Southeast Asian economies that are

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<v Speaker 3>growing at a much faster clip and sort of minting

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<v Speaker 3>new companies and millionaires and billionaires every day. So I

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<v Speaker 3>think the thinking is that the investment will come from there, however,

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<v Speaker 3>it'll be a pretty tall order to get foreign investment

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<v Speaker 3>to come back. There's still a lot of questions about

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<v Speaker 3>the property sector bottoming out. In fact, if you speak

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<v Speaker 3>to any investor, they will flag that particular issue. The

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<v Speaker 3>data shows the opposite, that domestic investors are taking their

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<v Speaker 3>money out of China at a much faster clip and

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<v Speaker 3>money is going into China at a much slower rate.

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<v Speaker 3>So it's not looking optimistic for that.

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<v Speaker 2>I think we're going to get figures in the week

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<v Speaker 2>ahead on foreign direct investment for China. But what are

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<v Speaker 2>some of the important data points that you are looking

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<v Speaker 2>at in the coming days. I know over the weekend

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<v Speaker 2>we'll have some inflation numbers, also new loans data. But

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<v Speaker 2>is there anything in particular that you think can shed

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<v Speaker 2>a light on the vibrancy or the lack of vibrancy

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<v Speaker 2>in the Chinese economy Maybe in the next week.

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<v Speaker 3>I think three things. There's three indicators that I always

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<v Speaker 3>watch when it comes to China. There's the CPI and PPI,

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<v Speaker 3>which I'm wrapping into one as inflation. There's housing and

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<v Speaker 3>in particular how in particular ular home sales, home prices

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<v Speaker 3>for some of the biggest cities. So we get that,

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<v Speaker 3>we get the inflation data this week, we get new

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<v Speaker 3>home prices, used home prices in a couple of weeks,

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<v Speaker 3>and then I would say the third thing is retail spending.

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<v Speaker 2>So talk to me about the behavior of the Chinese consumer.

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<v Speaker 2>It's going to be some time, a few days, I think,

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<v Speaker 2>before we get the monthly activity data. Do we know

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<v Speaker 2>anything about how well retail spending has been performing.

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<v Speaker 3>It has been very weak. In fact, the last few

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<v Speaker 3>months in particular have been surprisingly weak. Given that the

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<v Speaker 3>start of the year we had a major holiday. We

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<v Speaker 3>thought spending was going to lift as a result of that,

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<v Speaker 3>but actually to end the year there was this unexpected

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<v Speaker 3>slow down and sort of starting the year as well.

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<v Speaker 3>I mean, in general, the issue is that there's still

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<v Speaker 3>a two speed economy, right. You have industrial product that's

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<v Speaker 3>picking up, you have retail sales and consumption that's flatlining,

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<v Speaker 3>and growth is just nowhere near where it should be

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<v Speaker 3>to support economic growth, and certainly nowhere near where it

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<v Speaker 3>needs to be to support five percent growth, especially if

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<v Speaker 3>you're going to be relying on the consumer.

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<v Speaker 2>Specifically, if we're talking about stimulating domestic demand very quickly,

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<v Speaker 2>can you imagine what that might look like.

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<v Speaker 3>Yes, and it has to do with stimulating households more directly,

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<v Speaker 3>in other words, providing childcare subsidies. That's a big one

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<v Speaker 3>that economists and analysts have been asking for or looking

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<v Speaker 3>for as a pretty significant way to not only boost

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<v Speaker 3>consumption but also addressing this issue of aging and the

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<v Speaker 3>demographics shift. So if you provide things like childcare subsidies,

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<v Speaker 3>or you know, take a chapter out of South Korea's

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<v Speaker 3>book and just provide direct checks are funding for new

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<v Speaker 3>couples or housing subsidies for families, I think that's something

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<v Speaker 3>that would immediately change the game.

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<v Speaker 2>Okay, we'll leave it there, Katya, thank you so much

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<v Speaker 2>for joining us. Katya Dmitrieva there, joining from our Hong

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<v Speaker 2>Kong studio here on the Daybreak Asia podcast. Welcome back

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<v Speaker 2>to the Daybreak Asia Podcast. I'm Doug Prisner. So markets

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<v Speaker 2>are now looking ahead to the US jobs data do

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<v Speaker 2>Friday morning. The latest reading on private payrolls showed that

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<v Speaker 2>hiring among US companies slowed in February to the slowest

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<v Speaker 2>pace in July. And on top of that, we know

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<v Speaker 2>that government workers are in the process of being dismissed.

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<v Speaker 2>So what do we think we will learn from the

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<v Speaker 2>February jobs data. Joining me now is George Sippoloni's portfolio

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<v Speaker 2>manager at Penn Mutual Asset Management, joining from Philadelphia here

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<v Speaker 2>on the Daybreak Asia podcast. George, it's always a pleasure

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<v Speaker 2>than thank you for making time to chat with us.

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<v Speaker 2>So what is your sense of the labor market right now?

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<v Speaker 2>Is it churning a bit?

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<v Speaker 4>Let's feel that way, Doug. It's great to be with

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<v Speaker 4>you again, yes, but it does. So the labor market

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<v Speaker 4>has a few key segments that are about to get weaker.

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<v Speaker 4>Number one obviously government jobs, which you mentioned in which

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<v Speaker 4>everybody is talking about. We're hearing some pretty big potential

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<v Speaker 4>reports coming out even from the Veterans administration maybe cutting

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<v Speaker 4>back as well. In addition to that is obviously immigration

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<v Speaker 4>and that impact on the job market. So we are

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<v Speaker 4>seeing some churn and I really do feel for corporate

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<v Speaker 4>managers out there today. So if you think about anyone

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<v Speaker 4>that's the steward of capital investors, companies, countries, they're dealing

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<v Speaker 4>with a lot of uncertainty here. So it is harder

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<v Speaker 4>now to set and make long term plans regarding employment, manufacturing,

0:13:48.679 --> 0:13:49.800
<v Speaker 4>just about anything today.

0:13:49.960 --> 0:13:51.800
<v Speaker 2>So talk to me about what you're seeing in the

0:13:51.800 --> 0:13:54.520
<v Speaker 2>bond market. Yields have been coming in recently, and I

0:13:54.600 --> 0:13:58.000
<v Speaker 2>wonder whether that is a function of the growth scare.

0:13:58.440 --> 0:14:01.040
<v Speaker 2>Doesn't seem like the bond market is too concerned about

0:14:01.080 --> 0:14:03.880
<v Speaker 2>the potential for stubborn inflation. Do I have that right?

0:14:04.679 --> 0:14:06.360
<v Speaker 4>I think you do, Doug, And so a couple of

0:14:06.360 --> 0:14:08.800
<v Speaker 4>the data points to watch. Obviously, this is a growth

0:14:08.840 --> 0:14:11.120
<v Speaker 4>scare so far. And if you just look at the

0:14:11.160 --> 0:14:15.360
<v Speaker 4>Atlanta Fed GDP number, that number was pretty stark, and

0:14:15.400 --> 0:14:18.080
<v Speaker 4>it's pretty telling in terms of just a general tone.

0:14:18.679 --> 0:14:21.560
<v Speaker 4>That's one stat and it went negative for the first

0:14:21.600 --> 0:14:24.600
<v Speaker 4>time in a while, and pretty sharply and pretty quickly.

0:14:25.200 --> 0:14:27.520
<v Speaker 4>The other thing is that best and obviously has talked

0:14:27.640 --> 0:14:30.880
<v Speaker 4>about lower rates, and I was always wondering how he

0:14:30.960 --> 0:14:32.720
<v Speaker 4>was going to do it because the tenure is a

0:14:32.720 --> 0:14:36.200
<v Speaker 4>market rate. In Trump's first administration, he was beating up

0:14:36.240 --> 0:14:38.480
<v Speaker 4>pal about short term rates. That kind of made sense,

0:14:38.520 --> 0:14:41.000
<v Speaker 4>I guess, to some respect, because that's more of a

0:14:41.280 --> 0:14:45.360
<v Speaker 4>controlled rate where the tenure is not. So it looks like, yes,

0:14:45.440 --> 0:14:47.880
<v Speaker 4>bringing in some of these growth fears, whether it was

0:14:47.920 --> 0:14:51.680
<v Speaker 4>intentional for DCHSS, whatever the administration is doing has worked

0:14:51.760 --> 0:14:52.160
<v Speaker 4>so far.

0:14:52.600 --> 0:14:54.840
<v Speaker 2>You make a very interesting point there, So I'm going

0:14:54.880 --> 0:14:57.200
<v Speaker 2>to ask you this. Could you imagine a world where

0:14:57.200 --> 0:15:00.680
<v Speaker 2>President Trump to use your term beats up on FED

0:15:00.720 --> 0:15:02.960
<v Speaker 2>share J Powell to use the balance sheet as a

0:15:02.960 --> 0:15:04.560
<v Speaker 2>way of bringing down market rates?

0:15:05.040 --> 0:15:07.600
<v Speaker 4>Certainly could so. I think one of the things is

0:15:07.640 --> 0:15:11.040
<v Speaker 4>obviously he's using this bully pulpit across the board, whether

0:15:11.400 --> 0:15:13.360
<v Speaker 4>you know, you can talk about trade or you can

0:15:13.400 --> 0:15:17.280
<v Speaker 4>talk about rates or just about anything right now. So yes,

0:15:17.360 --> 0:15:20.560
<v Speaker 4>I think he could potentially do that. Now again, I

0:15:20.560 --> 0:15:23.560
<v Speaker 4>think the biggest thing to watch is this tenure. Where

0:15:23.600 --> 0:15:26.640
<v Speaker 4>does it go? But now I think they are playing

0:15:26.680 --> 0:15:29.040
<v Speaker 4>with fire though, because you don't want to get the

0:15:29.080 --> 0:15:32.640
<v Speaker 4>market too concerned about growth, because it could really unravel

0:15:32.680 --> 0:15:35.080
<v Speaker 4>here and we could get even more volatility, and that

0:15:35.160 --> 0:15:36.560
<v Speaker 4>I think could be a big concern.

0:15:36.800 --> 0:15:38.880
<v Speaker 2>A couple of the big houses on Wall Street in

0:15:38.920 --> 0:15:42.440
<v Speaker 2>the last week a signal that they are increasingly concerned

0:15:42.440 --> 0:15:45.680
<v Speaker 2>about the risk of recession, a model from JP Morgan

0:15:45.840 --> 0:15:49.440
<v Speaker 2>showing a higher probability of that fact. Similarly, Goldman Sachs

0:15:49.800 --> 0:15:53.000
<v Speaker 2>as a model that suggests the risk is edging higher.

0:15:53.080 --> 0:15:55.440
<v Speaker 2>Is that something that you're concerned about? We're talking about

0:15:55.440 --> 0:15:58.000
<v Speaker 2>growth scare. I know that is it a bridge too

0:15:58.040 --> 0:16:01.040
<v Speaker 2>far to say that we're on the verge of a recession.

0:16:01.600 --> 0:16:04.960
<v Speaker 4>I don't think it's a bridge too far, just because again,

0:16:05.040 --> 0:16:07.480
<v Speaker 4>this uncertainty is going to cause a lot of managers

0:16:07.480 --> 0:16:10.560
<v Speaker 4>to kind of pause, and we're already seeing and earning.

0:16:10.640 --> 0:16:12.800
<v Speaker 4>So if you just look what we're we are bottom

0:16:12.880 --> 0:16:15.320
<v Speaker 4>up managers for our for our fund, and one of

0:16:15.360 --> 0:16:17.280
<v Speaker 4>the things we do is we listen to management teams

0:16:17.280 --> 0:16:20.160
<v Speaker 4>all day long, and what we're seeing is a pretty

0:16:20.200 --> 0:16:23.320
<v Speaker 4>good contrast from the fourth quarter down to the first quarter,

0:16:23.520 --> 0:16:25.760
<v Speaker 4>where we are starting to see a rollover of earnings

0:16:25.800 --> 0:16:30.040
<v Speaker 4>expectations and it's pretty much just about every sector and

0:16:30.080 --> 0:16:34.040
<v Speaker 4>that's different. So again, I think if there's more uncertainty,

0:16:34.560 --> 0:16:38.080
<v Speaker 4>that's going to make managers pause and that could lead

0:16:38.120 --> 0:16:42.280
<v Speaker 4>to even worse EPs results moving forward. So hopefully it's

0:16:42.320 --> 0:16:44.680
<v Speaker 4>not recession ary, I do. I will say full you know,

0:16:44.760 --> 0:16:47.320
<v Speaker 4>full disclosure. I do think this administration does want to

0:16:47.320 --> 0:16:49.640
<v Speaker 4>be pro growth, but I do think if there's going

0:16:49.720 --> 0:16:51.400
<v Speaker 4>to be any weakness or slow down, they're going to

0:16:51.440 --> 0:16:55.040
<v Speaker 4>want it earlier in Trump's second tenure versus later.

0:16:55.320 --> 0:16:58.640
<v Speaker 2>So, George, where are you seeing opportunity. I'm curious, Uh.

0:16:58.640 --> 0:17:01.560
<v Speaker 4>This is so this is the perfect lead into you know,

0:17:01.680 --> 0:17:05.280
<v Speaker 4>what we're doing today. Now, obviously this volatility is kicking

0:17:05.359 --> 0:17:07.520
<v Speaker 4>up a lot. What is that doing the asset prices?

0:17:07.560 --> 0:17:10.320
<v Speaker 4>It's moving them all around. I will say one of

0:17:10.320 --> 0:17:13.320
<v Speaker 4>the areas, so bonds have rallied, So we did increase

0:17:13.400 --> 0:17:16.439
<v Speaker 4>duration a few months ago, which was very beneficial. The

0:17:16.560 --> 0:17:19.720
<v Speaker 4>other areas of that most people probably don't participate in

0:17:19.840 --> 0:17:22.359
<v Speaker 4>or look at, or convertible bonds. We are seeing some

0:17:22.480 --> 0:17:25.679
<v Speaker 4>price moves down forty to fifty to sixty points in

0:17:25.720 --> 0:17:28.680
<v Speaker 4>some of these convertible bonds, and that's one area where

0:17:28.680 --> 0:17:31.119
<v Speaker 4>we can invest in for our fund because it is

0:17:31.119 --> 0:17:33.840
<v Speaker 4>so flexible. That's an area that we're spending a heck

0:17:33.880 --> 0:17:36.159
<v Speaker 4>of a lot of time in right now. Small caps

0:17:36.160 --> 0:17:38.919
<v Speaker 4>again I say small caps a lot, but you know,

0:17:38.920 --> 0:17:41.840
<v Speaker 4>if you find four of our five best performers last year,

0:17:41.840 --> 0:17:43.879
<v Speaker 4>we're small caps and they were up you know, anywhere

0:17:43.880 --> 0:17:46.880
<v Speaker 4>from eighty to one hundred percent, and there are still

0:17:46.920 --> 0:17:48.760
<v Speaker 4>there is still a lot of value there with this

0:17:48.880 --> 0:17:51.440
<v Speaker 4>recent decline. So that's where we're going to spend most

0:17:51.440 --> 0:17:52.280
<v Speaker 4>of our time today.

0:17:52.520 --> 0:17:55.000
<v Speaker 2>Are you lightning your position if you are exposed to

0:17:55.440 --> 0:17:59.800
<v Speaker 2>megacap tech let's say the Googles, the Alphabets, the Microsoft,

0:17:59.800 --> 0:18:02.840
<v Speaker 2>the Apple. Are you kind of dialing back from that exposure?

0:18:03.480 --> 0:18:05.960
<v Speaker 4>So we tend to avoid peaks in cycles and tops,

0:18:06.280 --> 0:18:09.560
<v Speaker 4>and that's one. So we did have a decent amount

0:18:09.640 --> 0:18:12.080
<v Speaker 4>of even though we're value investors, we did have some

0:18:12.240 --> 0:18:16.480
<v Speaker 4>exposure to whether it's subcomponent companies that would support this

0:18:16.560 --> 0:18:18.880
<v Speaker 4>AI move, and we did trim back on a heck

0:18:18.920 --> 0:18:20.600
<v Speaker 4>of a lot of those because they moved up a

0:18:20.640 --> 0:18:23.360
<v Speaker 4>lot at the end of last year and in November

0:18:23.359 --> 0:18:27.119
<v Speaker 4>and into December. And so, yes, we do have an

0:18:27.119 --> 0:18:29.840
<v Speaker 4>elevated cash level. Part of that is in the bond

0:18:29.880 --> 0:18:31.800
<v Speaker 4>side of the fund. Part of that is on the

0:18:31.920 --> 0:18:34.560
<v Speaker 4>equity side of the fund. So we do have dry powder,

0:18:34.600 --> 0:18:37.680
<v Speaker 4>which I'd love to have excess cash when markets get volatile,

0:18:37.720 --> 0:18:41.320
<v Speaker 4>because that's when we tend to have some fun. But

0:18:41.440 --> 0:18:43.560
<v Speaker 4>again going back to it, yes, I do think we

0:18:43.640 --> 0:18:45.760
<v Speaker 4>tend to avoid cyclical peaks, and that could be a

0:18:45.760 --> 0:18:47.920
<v Speaker 4>cyclical peak in chemicals or it could be in tech.

0:18:48.160 --> 0:18:51.520
<v Speaker 4>We are agnostic in that. From that standpoint, Are.

0:18:51.359 --> 0:18:54.879
<v Speaker 2>You looking for exposure offshore right now in this current

0:18:54.960 --> 0:18:58.200
<v Speaker 2>environment in any way, whether it's Asia or Europe or

0:18:58.640 --> 0:18:59.480
<v Speaker 2>South America.

0:19:00.040 --> 0:19:02.320
<v Speaker 4>So that's an interesting thing, Doug. If you remember last year,

0:19:02.359 --> 0:19:05.840
<v Speaker 4>international stocks were getting walloped relative to US stocks, and

0:19:05.920 --> 0:19:08.200
<v Speaker 4>so that was a pocket where we found a decent

0:19:08.240 --> 0:19:11.159
<v Speaker 4>amount of So all of the companies that we own

0:19:11.280 --> 0:19:14.600
<v Speaker 4>have to be US denominated and trading US dollars, and

0:19:14.640 --> 0:19:17.359
<v Speaker 4>so we can buy ad rs, and we did increase

0:19:17.400 --> 0:19:19.880
<v Speaker 4>our ADR exposure last year just because there were so

0:19:19.920 --> 0:19:24.000
<v Speaker 4>significantly cheap relative to US stocks, and a lot of

0:19:24.000 --> 0:19:26.800
<v Speaker 4>those have gapped up and rallied. And you know, if

0:19:26.800 --> 0:19:30.040
<v Speaker 4>you look at foreign markets, whether it's Germany today, their

0:19:30.080 --> 0:19:33.560
<v Speaker 4>stock market has rallied a lot, Japan rallied a decent amount,

0:19:33.920 --> 0:19:39.200
<v Speaker 4>and even China now is after years of just sluggish

0:19:39.240 --> 0:19:42.600
<v Speaker 4>stock movement has finally started to pick up. So yes,

0:19:42.640 --> 0:19:45.240
<v Speaker 4>to your point, we do have some exposure there starting

0:19:45.240 --> 0:19:47.399
<v Speaker 4>from last year, and we're happy we did that.

0:19:47.720 --> 0:19:49.640
<v Speaker 2>George, we'll leave it there. It's always a pleasure. Thank

0:19:49.680 --> 0:19:51.280
<v Speaker 2>you so much for making time to chat with us.

0:19:51.320 --> 0:19:54.880
<v Speaker 2>George Sippaloni there. He is portfolio manager at Pen Mutual

0:19:54.920 --> 0:19:57.960
<v Speaker 2>Asset Management, joining us here on the Daybreak Asia podcast.

0:20:00.320 --> 0:20:03.680
<v Speaker 2>Thanks for listening to today's episode of the Bloomberg Daybreak

0:20:03.840 --> 0:20:07.240
<v Speaker 2>Asia Edition podcast. Each weekday, we look at the story

0:20:07.280 --> 0:20:11.639
<v Speaker 2>shaping markets, finance, and geopolitics in the Asia Pacific. You

0:20:11.680 --> 0:20:15.800
<v Speaker 2>can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

0:20:15.920 --> 0:20:18.919
<v Speaker 2>or anywhere else you listen. Join us again tomorrow for

0:20:19.040 --> 0:20:22.560
<v Speaker 2>insight on the market moves from Hong Kong to Singapore

0:20:22.960 --> 0:20:26.720
<v Speaker 2>and Australia. I'm Doug Prisoner and this is Bloomberg