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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. In

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Speaker 2: the States, the House of Representatives passed a Senate measure

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Speaker 2: to end the government shutdown. The President signed it and

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Speaker 2: the government will resume operations on Thursday. In a moment,

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Speaker 2: we'll look at US markets with Mike Dixon of Horizon Investments.

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Speaker 2: We began though in Hong Kong, where we had the

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Speaker 2: chance to catch up with Hifan Hu, chief investment officer

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Speaker 2: and head of APAC macro Economics at UBS Wealth Management.

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Speaker 2: She spoke with Bloomberg TV, host of aon Men and

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Speaker 2: Annabel Droolers.

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Speaker 3: Now.

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Speaker 2: The conversation began with a question on the outlook for

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Speaker 2: the Chinese economy.

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Speaker 4: Let's talk about twenty twenty six. I mean, I feel

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Speaker 4: like the year has just sort of flown by and

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Speaker 4: we're already forecasting. So so what are you talking with

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Speaker 4: with clients about right now?

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Speaker 5: Yeah, I think sus some most interesting question. Now, I

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Speaker 5: think that for twenty twenty five, if we see the

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Speaker 5: China's GDP growth like we think, we will end up

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Speaker 5: with like a four point nine percent to five percent,

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Speaker 5: So for the next year, we think the government could

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Speaker 5: set up the target between like a four point five

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Speaker 5: percent to five percent. So in our view, if without

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Speaker 5: like a major stimulus, so the GDP could reach around

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Speaker 5: a four point five percent, so we will have probably

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Speaker 5: lower for the first half the high for the second half.

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Speaker 6: How significant would that be lowering at least or at

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Speaker 6: least that range when it comes to that growth target

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Speaker 6: for next year.

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Speaker 5: I think this year is around the five percent, so

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Speaker 5: I think that if it's end up is a four

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Speaker 5: point nine percent, so it's also hits the target. So

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Speaker 5: it's possible for them to give a range rather than

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Speaker 5: say around a five percent. Again, so because like the

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Speaker 5: next year could be lower unless the government like I

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Speaker 5: wants to put the major stimilus, but we think the

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Speaker 5: chance is not very high, so I think they would

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Speaker 5: rather put like our range, maybe more comfortable like her

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Speaker 5: for like everyone.

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Speaker 4: So not major similars. That's more of the physical side.

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Speaker 4: What about the monetary policy side.

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Speaker 5: Monetary party side, I think we'll still keep easy and

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Speaker 5: keep accommodative, and we still expect like a fifty two

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Speaker 5: hundred BIPs of the cut by the end of the

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Speaker 5: twenty twenty six and also maybe twenty to thirty BIPs

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Speaker 5: of the interest rate cuts. Because given or CPI infreation

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Speaker 5: is still pretty low.

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Speaker 6: What are you expecting to be kind of the bigger

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Speaker 6: drags next year? Is it the exports side of things

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Speaker 6: are going to be a bit softer than this year

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Speaker 6: that has been quite resilient, And are we just not

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Speaker 6: expecting any sort of meaningful recovering the consumer For.

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Speaker 5: The consumer side, I think the yeah, we think it

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Speaker 5: still will be like at between three to five percent.

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Speaker 5: We didn't see like how too much highlights about that,

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Speaker 5: I think, But the major driver should be still for

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Speaker 5: the industry autoput side, industry product because like AI AI

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Speaker 5: driven applications and also with like this kind of advanced

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Speaker 5: manufacturing and possibly like we call the new productivity growth.

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Speaker 5: So I think that will probably lead the driver. On

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Speaker 5: the other side. For the energy side, I think that

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Speaker 5: especially this year, we say for the energy reserves like

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Speaker 5: a new energy and also for this kind of the

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Speaker 5: high voltage like our elacricity, like our transmission. That's all

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Speaker 5: could become like our new highlights. But for the consumption side,

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Speaker 5: I think as will be uh in my view, will

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Speaker 5: be I could quite civil, but will not be like

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Speaker 5: very strong. Our property will still be the drag, but

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Speaker 5: we don't think the government will put too much efforts

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Speaker 5: of that, so we'll just let it go unless this

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Speaker 5: have the cliff that job, but that's the chance also small.

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Speaker 4: Picking up on that theme around increasing automation you're just

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Speaker 4: referencing there, how does that also impact the jobs outlook

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Speaker 4: and the employment outlook as well?

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Speaker 5: In this sense, I think for AI application, so like

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Speaker 5: how one side of course, like more jobs may be

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Speaker 5: taken by the machine, But at the same time, we

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Speaker 5: think maybe service sectors still have the chances. And also

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Speaker 5: withs like a new applied like a services sector, maybe

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Speaker 5: there's something like a more like how we call the

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Speaker 5: experience exposure like a services sector come out, like how

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Speaker 5: that's more like a digitized and also with like this

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Speaker 5: kind of more entertaining or like how even with more

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Speaker 5: creative like a more service oriented like actual opportunities. But

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Speaker 5: still I think there is still of pressure.

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Speaker 6: And you guys upgraded Chinese Tech just a few weeks

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Speaker 6: ago and saying it's probably the most preferred, right, most

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Speaker 6: attractive here right now, how are you looking at this

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Speaker 6: rally around AI and the light now and how do

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Speaker 6: you position around it for next year.

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Speaker 5: I think the this year AI already rallied for two

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Speaker 5: years like last year. This year, especially for this year

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Speaker 5: almost over thirty percent. But I think the think about

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Speaker 5: it for this all these kind of a big platforms

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Speaker 5: very similar to the US like Meganique since seven. I

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Speaker 5: think they just started because like one side, I think

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Speaker 5: that their valuation is still relatively low, like thirty to

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Speaker 5: thirty percent of discount comparing with the US PS. And

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Speaker 5: the second I think for the China, the AI investment

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Speaker 5: is still like a capex is still increasing like a

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Speaker 5: similar to the US. And also certain I think it's

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Speaker 5: a very a little bit different from the US side.

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Speaker 5: I think the China is more like an ecosystem. So

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Speaker 5: I think that with this kind of an ecosystem with

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Speaker 5: the basic research like then the AI, then the AI

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Speaker 5: application with this ecosystem could like the spillover effect, we

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Speaker 5: think it could be bigger.

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Speaker 4: One of tho sort of issues I guess around the

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Speaker 4: AI application side is sometimes low barriers to entry, What

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Speaker 4: are the what are the sectors that you look at

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Speaker 4: in terms that AI theme in particular is being a

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Speaker 4: bit more resilient.

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Speaker 5: I guess I think the AI, say, will range you

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Speaker 5: from the lower end to the high end. So if

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Speaker 5: the we can like AI applic applied like an advance

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Speaker 5: of manufacturing and new materials and also healthcare, I think

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Speaker 5: he's booming because of the AI like how the application,

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Speaker 5: and we also say because say AI applied to maybe

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Speaker 5: like era space and also uh some like how many

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Speaker 5: like a new fields. I think it's just like feed

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Speaker 5: up the exploration and also like innovation.

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Speaker 6: What are some of the key themes you're watching out?

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Speaker 6: I mean for the fourth part, because I think there's

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Speaker 6: been a lot of allocation into domestic tech already, especially

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Speaker 6: you take a look how institutional investors are kind of positioning.

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Speaker 6: Do you think that this is extreme levels when you

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Speaker 6: talk about fund concentration now and we've already sort of

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Speaker 6: seen some rotation out of tech cannot continue in the

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Speaker 6: fourth quarter.

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Speaker 5: Yes, I think that it's started with the tech and

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Speaker 5: also like uh yeah, the concentration set. We think the

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Speaker 5: text still have the loom, but we also see it's

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Speaker 5: applied to other sectors as well, like gradually. For example,

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Speaker 5: we think that this year it's also very shiny. Section

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Speaker 5: is for the energy reserves because now by now for

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Speaker 5: the new energy already surprise thirty five percent of the

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Speaker 5: China's like a total energy surprise, So I think that's

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Speaker 5: like a very like a significant number. And we'll also

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Speaker 5: say like maybe the healthcare will benefit because their price

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Speaker 5: has been low and I could benefit like maybe with

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Speaker 5: this kind of plakichi. And for the consumption side, yeah,

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Speaker 5: that side is ah, it's we have the new const

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Speaker 5: new consumption, but too high and it's it's it's not easy.

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Speaker 5: But I think that we still have this kind of

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Speaker 5: the like the new materials. And we also say for

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Speaker 5: the sector like booming out and also the AI is

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Speaker 5: not only the SOT to wear and also have the hardwares,

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Speaker 5: but of course most sectors, most companies are in the

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Speaker 5: A listed, so that's really we also think the issuers

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Speaker 5: and could also could slightly better perform than h year

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Speaker 5: next year because with all these kind of the like hardwares.

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Speaker 4: So that's that's the equity side. What about the fixed

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Speaker 4: income side? What are your preferences there?

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Speaker 5: Uh, for the fixed income side, because we still expect,

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Speaker 5: like for the interest rate will go down, so I

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Speaker 5: think the like for the bond side, I think it's

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Speaker 5: not very attractive. But the existing bound of course, like

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Speaker 5: I think I still like have the uh the game.

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Speaker 6: Is buying bonds again, right, Yeah, that's is that likely

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Speaker 6: to be more measured this time around?

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Speaker 5: I think the yeah, PBOC and also I think the

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Speaker 5: PBOC also, I think that this year we also say

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Speaker 5: for the company's actually issue like Chinese, like for the

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Speaker 5: c N y bounds like in Hong Kong. So I

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Speaker 5: think the government like pbios by bonds. I think it's

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Speaker 5: more like I'll keep the mandatory. They don't call it

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Speaker 5: a quantitative easy, but I think it's more like I'll

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Speaker 5: provide the liquidity adjustment of the liquidity like a provision

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Speaker 5: in the market.

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Speaker 2: That was ifan Who from UBS Wealth Management speaking with

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Speaker 2: Bloomberg TV host Von Mann and Anabel Droolers on the

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Speaker 2: Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast.

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Speaker 2: I'm Doug Prisner. As mentioned earlier, the House of Representatives

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Speaker 2: passed a Senate measure to end the longest government shutdown

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Speaker 2: in US history.

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Speaker 3: Now.

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Speaker 2: In anticipation of this development, the Dow climbed for a

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Speaker 2: fourth straight day, breaking above forty eight thousand for the

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Speaker 2: first time and closing at a record high. Financials led

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Speaker 2: the way for a closer look. I'm joined by Mike Dixon.

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Speaker 2: He is head of research and quantitative Strategies at Horizon Investments. Mike,

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Speaker 2: thank you for making time to chat with me. If

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Speaker 2: you don't mind, I'd like to start with Cisco Systems.

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Speaker 2: We heard from the company after the bill an upbeat

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Speaker 2: sales forecast, which is likely a reflection of the progress

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Speaker 2: Cisco is making and capturing more spending on AI. The

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Speaker 2: stock was up eight percent in late US trading to

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Speaker 2: around eighty dollars. Now that is the closest Cisco's shares

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Speaker 2: have come to eighty two. They're all time high, set

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Speaker 2: back on March twenty seventh, two thousand rights the dot

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Speaker 2: com bubble burst. It's interesting timing. Maybe with all the

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Speaker 2: talk we've heard about bubbles.

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Speaker 1: I certainly love the history throwback, and yeah, I mean

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Speaker 1: we are right on the cusp of reclaiming that high.

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Speaker 1: I would say, you know, at least on a dividend

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Speaker 1: adjusted basis, that has been reclaimed within the past several months.

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Speaker 1: But nonetheless, look, this is not this AI trade is

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Speaker 1: not the Internet bubble of the nineties. When we look

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Speaker 1: at the underlying fundamental at the top of the market,

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Speaker 1: you have had extremely strong earnings growth and revenue growth,

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Speaker 1: and this earning season is no exception. When you look

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Speaker 1: at the Magnificent seven and the NASDAC, you've actually had

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Speaker 1: an inflection higher and revenue growth year every year of

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Speaker 1: fifteen percent for the Nasdaq and that's up from ten

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Speaker 1: percent about a year ago. So we've had an inflection

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Speaker 1: higher in revenue growth. Obviously, earnings have been absolutely stellar.

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Speaker 1: We have seen cash flows come down a good bit

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Speaker 1: because of a lot of the cap x, but these

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Speaker 1: we are seeing significant plans to make the power demand

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Speaker 1: and the deals needed to get that infrastructure build and

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Speaker 1: make that stuff happen. So really strong fundamentals here supporting

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Speaker 1: the top of the market, which is not what we

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Speaker 1: had back in the late nineties.

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Speaker 2: Even so, over the last couple of days, we've seen

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Speaker 2: a rotation away from big cap tech. Yesterday that would

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Speaker 2: be the Tuesday session in the States, it was healthcare.

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Speaker 2: Today it was the financials. Is it prudent now to

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Speaker 2: kind of maybe take a little bit of risk off

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Speaker 2: the table.

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Speaker 1: Well, we have seen a little bit of rotation, but

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Speaker 1: I think the market overall we tend to forget that

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Speaker 1: some of these stocks actually can be flat for a day,

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Speaker 1: and that's completely normal, and in fact it's very healthy,

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Speaker 1: you know, zooming out when you look at the more

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Speaker 1: you know, equal weight version of the SMP or you know,

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Speaker 1: I believe that the Dow right cross its forty eight

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Speaker 1: thousand today, that of course does not have a lot

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Speaker 1: of the Max seven you know, top of the tech

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Speaker 1: and AI trade really embedded in there. It's healthy to

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Speaker 1: see some of that, you know, certainly with what we've

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Speaker 1: had this year, because market concentration has been has been growing,

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Speaker 1: and it is good to see a broader participation even

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Speaker 1: some of the defensives you mentioned healthcare. I mean that

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Speaker 1: that to me is a really good kind of contrarian

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Speaker 1: sector play, and I think it's good to see participation there.

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Speaker 3: We've had a stellar rally in the top of the.

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Speaker 1: Market, and I do believe right now it might be

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Speaker 1: prudent to think of.

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Speaker 3: That as more of a hold and not necessarily an ad.

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Speaker 1: We do have Nvidia next week, which is a macro

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Speaker 1: event in al so we're going to need to see

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Speaker 1: that what that holds, whether this Santa claus rally is

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Speaker 1: going to be, you know, what we get through the

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Speaker 1: end of the year. But there are other opportunities other

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Speaker 1: than AI out there, and I do think it's wise

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Speaker 1: to be looking at what some of those may be.

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Speaker 2: Earlier today, the White House said that the October reports

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Speaker 2: on unemployment and consumer prices will unlikely be released. Obviously,

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Speaker 2: these numbers have been delayed by the shutdown. This is

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Speaker 2: only going to add to a little bit more of

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Speaker 2: the difficulty engaging the outlook, especially for the FED. Right now,

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Speaker 2: I think FED fun Future suggests a sixty three percent

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Speaker 2: chance of a rate cut next month of twenty five

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Speaker 2: basis points. Although we're hearing more and more from a

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Speaker 2: number of FED members about the concern over inflation it

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Speaker 2: being sticky and perhaps a bigger risk than the unemployment story.

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Speaker 2: Where do you come down when it comes to the

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Speaker 2: FED and the outlook.

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Speaker 1: Well, you know, seeing that the headline today about the

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Speaker 1: delay in those reports is not great timing, right. I

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Speaker 1: think we are at a point where we have had

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Speaker 1: a pretty steady decline in labor market data heading into

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Speaker 1: the shutdown. But at the same time, inflation it hasn't

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Speaker 1: necessarily been a problem, but it hasn't been improving at

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Speaker 1: the rate that folks would like. And so you know

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Speaker 1: what has happened with this shutdown is a lot of

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Speaker 1: these surveys just didn't get completed and as a result

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Speaker 1: may not be for at least what I was reading

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Speaker 1: the first time. Ever, that's not great because the December

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Speaker 1: meeting as well, is a little bit earlier this year

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Speaker 1: than it typically is, and so we're going to be

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Speaker 1: kind of running up against the wire to get a

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Speaker 1: lot of this data collected and get a fresh view

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Speaker 1: on the market. But you know, overall, I do think

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Speaker 1: what we saw at the end of October was a

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Speaker 1: little bit of a surprise from Powell and the Committee

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Speaker 1: as a whole. You know, he mentioned a number of

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Speaker 1: times that the December cut was not a foregone conclusion

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Speaker 1: for me and I think the rest of the market.

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Speaker 3: That was a good bit of a surprise to hear that.

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Speaker 3: You know.

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Speaker 1: On the inflation side of things, though, and I hear

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Speaker 1: the arguments out there, but if we also zoom out

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Speaker 1: a little bit, the FED has been above their inflation

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Speaker 1: target for you know, the better part of four nearly

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Speaker 1: five years, and in their recent statement of economic projections,

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Speaker 1: they don't have us getting back down to two percent

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Speaker 1: until the end of twenty twenty seven. I mean, Look,

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Speaker 1: that's almost eight years that they're going to be spending

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Speaker 1: above a two percent, and to me, I'm not so sure.

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Speaker 1: Their target practically is two percent, and so we'll see

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Speaker 1: what the Committee committee thinks here in December. But I,

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Speaker 1: for one, do believe that in the mid two they're

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Speaker 1: probably perfectly comfortable with that so long as they get

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Speaker 1: stability in the labor market. So that's what that's the

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Speaker 1: side I'm on. I think we're going to get some

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Speaker 1: get a cut, but we're going to have to see.

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Speaker 1: It's going to be highly dependent on what the missing

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Speaker 1: information tells us.

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Speaker 2: So I'd like to get your take on whether or

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Speaker 2: not there is a great degree of bifurcation in the economy.

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Speaker 2: It was very interesting today we heard from Fitch Ratings

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Speaker 2: and the company said the share of some prime borrowers

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Speaker 2: at least sixty days past too on their auto loans

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Speaker 2: rose by more than six percent of the month of October.

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Speaker 2: I think we're now at the highest level since about

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Speaker 2: nineteen ninety four. Now you and I both know what

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Speaker 2: the wealth effect has done this move higher in the

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Speaker 2: equity market, and how higher income earners that own stocks

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Speaker 2: have been able to power a lot of consumer spending.

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Speaker 2: Maybe there's a little bit more concern about lower and

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Speaker 2: middle income households. Do you think this has the potential

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Speaker 2: really to hold back a lot of growth the way

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Speaker 2: in which we were kind of divided.

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Speaker 3: You know, I don't think we're really there yet.

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Speaker 1: I think that the economy, as we're seeing in the

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Speaker 1: stock market, you know, has become more concentrated because not

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Speaker 1: everybody is you know, participating in a lot of the

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Speaker 1: equity market wealth that has been created. But you know,

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Speaker 1: you mentioned on the debt side of things. The New

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Speaker 1: York Fed puts out their quarter debton credit report that

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Speaker 1: comes out. It was just last week the for the

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Speaker 1: for the third quarter, reporting on a lot of these statistics,

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Speaker 1: you know, across loan types and across the different you know,

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Speaker 1: age and other demographic areas. And you know, we really

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Speaker 1: didn't see many headlines around that in Bloomberger otherwise. And

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Speaker 1: the reason is because nothing really got that worse or alarming.

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Speaker 1: And I hear you on that data point on the

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Speaker 1: auto loans, but you know, it didn't really show up

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Speaker 1: in a screaming manner on a change basis, you know,

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Speaker 1: in that major.

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Speaker 3: Quarter we report.

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Speaker 1: So you know, I don't think that I think that

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Speaker 1: was good that we didn't see that tick up there.

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Speaker 1: But I don't think we're quite at a trouble area yet,

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Speaker 1: you know, as it relates to that.

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Speaker 3: And overall, the consumer is in a.

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Speaker 1: Really, really healthy pace, and we've seen that when we

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Speaker 1: used to get economic data, we saw that broadly, and

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Speaker 1: we'll hope to see that see that again here once

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Speaker 1: the floodgates open back up and we get some information.

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Speaker 2: Even so, if you look at the results of the

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Speaker 2: election last week, we're talking New Jersey, we're talking Virginia,

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Speaker 2: even here in New York City, this issue of affordability,

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Speaker 2: it's front and center, you know.

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Speaker 3: It is.

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Speaker 1: I think one thing on affordability that that's going to

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Speaker 1: be an underappreciated boost to economic activity is really on

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Speaker 1: the housing side. And I think you can see that

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Speaker 1: through the fall in mortgage rates. You know, we are

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Speaker 1: still in you know, the low sixes, but a good

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Speaker 1: bit down from where things were. And one of the

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Speaker 1: one of the metrics that we look at and have

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Speaker 1: been tracking closely is you know, interest rate volatility and

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Speaker 1: how that's been falling, and that's playing a pretty big

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Speaker 1: role in where mortgage rates are relative to the ten year,

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Speaker 1: and you know, with as we get closer and closer

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Speaker 1: to the end of this FED easing cycle, you know,

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Speaker 1: we're going to continue to see that interest rate volatility

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Speaker 1: fall and even without a change in the ten year,

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Speaker 1: mortgage rates can still come down. I think some Mesma said,

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Speaker 1: we'll looking, you know, we could see you know, in

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Speaker 1: the five and a half range with no change in

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Speaker 1: the tenure, just simply through this volatility reduction channel with

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Speaker 1: interest rates. This is going to be a really big

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Speaker 1: boost to just housing affordability overall because the activity has

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Speaker 1: been just completely on the floor there, and I think

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Speaker 1: that can be a really big boom when it comes

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Speaker 1: to consumer confidence, labor, mobility, home equity, lines of credit.

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Speaker 1: There's there's a lot of I think booming economic activity.

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Speaker 1: We can get through that mortgage channel, and I think

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Speaker 1: that that is something it's a little bit underappreciated, but

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Speaker 1: things have been moving in the right direction to make

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Speaker 1: at least the housing side there with existing homes, you know,

377
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Speaker 1: a lot more affordable, and as time passes, I think

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Speaker 1: that that's gonna be alleviated a little bit through that channel,

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Speaker 1: and that's a really good thing.

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Speaker 2: So, Mike, where are you finding opportunity domestically.

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Speaker 1: Well, you know, one of my favorite areas right now,

382
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Speaker 1: I'll give I'll give two things that that really have

383
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Speaker 1: my attention lately. One of them is the small and

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Speaker 1: MidCap space in US markets. Now, this has been a

385
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Speaker 1: trade that has had its fits and starts, right. You've

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Speaker 1: seen numerous very short lived kind of rallies in the

387
00:20:14,440 --> 00:20:17,760
Speaker 1: smaller cap segments of the market, but it's really failed

388
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Speaker 1: to sustain a rally, you know, in the last several years.

389
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Speaker 1: And I think there's a couple of things working in

390
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Speaker 1: favor of that trade right now for more of a

391
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Speaker 1: longer term hold.

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Speaker 3: You know. One of them is this rate channel.

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Speaker 1: Right, the high level of rates overall have been you know,

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Speaker 1: difficult and weighing in a disproportionate manner on the small

395
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Speaker 1: and midcaps space, right, Microsoft and Video. These folks don't

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Speaker 1: really care too much about the level.

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Speaker 3: Of interest rates.

398
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Speaker 1: They have plenty of cash flow and balance sheet. So

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Speaker 1: the fact that rate hikes are definitely off the table

400
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Speaker 1: and whether we get a cut in December is one thing,

401
00:20:51,720 --> 00:20:53,560
Speaker 1: but the direction of travel is down. That's a really

402
00:20:53,600 --> 00:20:56,360
Speaker 1: good thing for small caps overall. The second thing I'll

403
00:20:56,400 --> 00:20:59,440
Speaker 1: point out too, is we've seen earning's breadth really pick

404
00:20:59,520 --> 00:21:02,159
Speaker 1: up materially in that space. You saw it this quarter

405
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Speaker 1: with earnings for the S and P six hundred coming

406
00:21:04,720 --> 00:21:07,320
Speaker 1: in about twelve percent year every year. That's the same

407
00:21:07,320 --> 00:21:08,920
Speaker 1: as we got in the S and P five hundred.

408
00:21:08,960 --> 00:21:13,680
Speaker 1: You also saw a pretty solid near ten percent earnings

409
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Speaker 1: per share surprise, So just beats with the S and

410
00:21:16,520 --> 00:21:19,040
Speaker 1: P six hundred, those smaller cap names. That's a second

411
00:21:19,119 --> 00:21:21,280
Speaker 1: quarter in a row where it was, you know, a

412
00:21:21,359 --> 00:21:24,760
Speaker 1: stellar beat. And most importantly, evaluations have actually come down

413
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Speaker 1: on a forward looking basis for small cap stocks, so

414
00:21:27,080 --> 00:21:29,760
Speaker 1: you've got really a good entry point there they have

415
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Speaker 1: not participated with the top of the market rally.

416
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Speaker 3: And then on the longer term.

417
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Speaker 1: View, just you know, overall domestic focused policies, deregulation potentially

418
00:21:38,600 --> 00:21:40,600
Speaker 1: m and A activity picking up, I think is a

419
00:21:40,640 --> 00:21:43,280
Speaker 1: really good entry point. And I'll add a really good

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Speaker 1: seasonality kind of time a year to kind of enter

421
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Speaker 1: that trade and carry that in your portfolio through twenty six.

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Speaker 3: So that's one area I really like.

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Speaker 1: And then healthcare as well is a kind of a

424
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Speaker 1: sector contrarian play I like for similar reasons in the

425
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Speaker 1: sense that healthcare used to be a kind of crowded,

426
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Speaker 1: secular growth trade. It's now very firmly on the value

427
00:22:03,520 --> 00:22:07,639
Speaker 1: side of the market, with lower valuations only in energy

428
00:22:07,680 --> 00:22:10,600
Speaker 1: and financials, and you still see really strong strength on

429
00:22:10,640 --> 00:22:13,439
Speaker 1: the top lines there. And it also hasn't rallied. I

430
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Speaker 1: think that's poised to be a winter as we had

431
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Speaker 1: in next year too.

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Speaker 2: I'm curious about how you're feeling about markets outside the US,

433
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Speaker 2: particularly in Asia. Any interest there, maybe Japan.

434
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Speaker 1: Yeah, overall, I think international diversification in general is a

435
00:22:29,960 --> 00:22:33,840
Speaker 1: great place to be of certainly with hindsight this year, right,

436
00:22:33,920 --> 00:22:38,280
Speaker 1: international markets have done exceptionally well. But you know, one

437
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Speaker 1: of the things that I think is not just think

438
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Speaker 1: I firmly believe is going to be critical for you know,

439
00:22:44,640 --> 00:22:47,600
Speaker 1: this AI trade and the AI cap X to really

440
00:22:47,640 --> 00:22:50,680
Speaker 1: be put to work, is you know, just the infrastructure

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00:22:50,720 --> 00:22:54,320
Speaker 1: being built out. And when you look at the international block,

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00:22:54,880 --> 00:22:57,840
Speaker 1: you have a sector composition that's primarily made up more

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00:22:57,880 --> 00:23:01,440
Speaker 1: so of industrials and energy material those type companies. These

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00:23:01,480 --> 00:23:04,359
Speaker 1: sectors not only are they underrepresented in the US economy,

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00:23:04,720 --> 00:23:10,160
Speaker 1: they're also poised to participate in a you know, kind

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00:23:10,160 --> 00:23:14,240
Speaker 1: of industrial type rallying industrial type build out, and I

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00:23:14,240 --> 00:23:16,600
Speaker 1: think that's going to be a really good sector composition

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00:23:16,640 --> 00:23:19,560
Speaker 1: to look to as a diversification from the you know,

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00:23:19,720 --> 00:23:22,520
Speaker 1: tech centered US markets, but also as you get a

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00:23:22,520 --> 00:23:24,720
Speaker 1: lot of that infrastructure build out. And then you know,

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00:23:24,800 --> 00:23:27,199
Speaker 1: of course, there's also the policy side of things from

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Speaker 1: a central bank perspective. I think with the FED, you know,

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00:23:30,720 --> 00:23:33,160
Speaker 1: still in the cutting cycle, where a lot of other

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00:23:33,680 --> 00:23:36,239
Speaker 1: uh you know, global markets are kind of near the

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00:23:36,359 --> 00:23:38,560
Speaker 1: end of theirs, You're going to continue to see this

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00:23:38,680 --> 00:23:41,840
Speaker 1: kind of narrowing interest rate deferment differential that should weigh

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00:23:41,840 --> 00:23:45,040
Speaker 1: on the dollar uh more, and that should be a

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00:23:45,080 --> 00:23:48,720
Speaker 1: tailwind for those kind of foreign markets uh here in

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00:23:48,880 --> 00:23:49,600
Speaker 1: US dollars.

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00:23:49,600 --> 00:23:51,200
Speaker 3: So you know, a couple of reasons there.

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00:23:51,240 --> 00:23:54,680
Speaker 1: I think the international block as a whole U is

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00:23:54,760 --> 00:23:56,800
Speaker 1: kind of a great place to be and provide some

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00:23:56,840 --> 00:23:58,080
Speaker 1: diversification from the US.

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Speaker 2: Very quickly, Mike, do you want to be exposed China

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00:24:00,600 --> 00:24:01,000
Speaker 2: right now?

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00:24:02,720 --> 00:24:07,000
Speaker 1: I think China does have some interesting prospects to it

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00:24:07,280 --> 00:24:11,439
Speaker 1: along those similar lines, most acutely just from you know,

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00:24:11,480 --> 00:24:13,240
Speaker 1: just a policy response standpoint.

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00:24:13,920 --> 00:24:15,399
Speaker 3: So yeah, I think China.

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00:24:15,800 --> 00:24:18,680
Speaker 1: I think China is going to be critical to you know,

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00:24:18,720 --> 00:24:21,200
Speaker 1: a lot of this kind of cyclical build out theme

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00:24:21,240 --> 00:24:23,280
Speaker 1: that I'm talking about. So yes, I think that would

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00:24:23,320 --> 00:24:26,200
Speaker 1: be a good, you know, emerging market area of focus

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00:24:26,440 --> 00:24:27,440
Speaker 1: in the international block.

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Speaker 2: Okay, Mike, we'll leave it there. Thank you so very much.

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Speaker 2: Mike Dixon there. He is head of Research and Quantitative

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Speaker 2: Strategies at Horizon Investments. Joining us here on the Daybreak

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00:24:36,040 --> 00:24:40,960
Speaker 2: Asia Podcast. Thanks for listening to today's episode of the

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00:24:41,000 --> 00:24:45,159
Speaker 2: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at

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00:24:45,160 --> 00:24:49,680
Speaker 2: the story shaping markets, finance, and geopolitics in the Asia Pacific.

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00:24:49,920 --> 00:24:53,200
Speaker 2: You can find us on Apple, Spotify, the Bloomberg Podcast

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Speaker 2: YouTube channel, or anywhere else you listen. Join us again

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00:24:56,640 --> 00:24:59,840
Speaker 2: tomorrow for insight on the market moves from Hong Kong

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Speaker 2: to Singapore and Australia. I'm Doug Prisoner and this is

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Speaker 2: Bloomberg