Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. In
Speaker 2: the States, the House of Representatives passed a Senate measure
Speaker 2: to end the government shutdown. The President signed it and
Speaker 2: the government will resume operations on Thursday. In a moment,
Speaker 2: we'll look at US markets with Mike Dixon of Horizon Investments.
Speaker 2: We began though in Hong Kong, where we had the
Speaker 2: chance to catch up with Hifan Hu, chief investment officer
Speaker 2: and head of APAC macro Economics at UBS Wealth Management.
Speaker 2: She spoke with Bloomberg TV, host of aon Men and
Speaker 2: Annabel Droolers.
Speaker 3: Now.
Speaker 2: The conversation began with a question on the outlook for
Speaker 2: the Chinese economy.
Speaker 4: Let's talk about twenty twenty six. I mean, I feel
Speaker 4: like the year has just sort of flown by and
Speaker 4: we're already forecasting. So so what are you talking with
Speaker 4: with clients about right now?
Speaker 5: Yeah, I think sus some most interesting question. Now, I
Speaker 5: think that for twenty twenty five, if we see the
Speaker 5: China's GDP growth like we think, we will end up
Speaker 5: with like a four point nine percent to five percent,
Speaker 5: So for the next year, we think the government could
Speaker 5: set up the target between like a four point five
Speaker 5: percent to five percent. So in our view, if without
Speaker 5: like a major stimulus, so the GDP could reach around
Speaker 5: a four point five percent, so we will have probably
Speaker 5: lower for the first half the high for the second half.
Speaker 6: How significant would that be lowering at least or at
Speaker 6: least that range when it comes to that growth target
Speaker 6: for next year.
Speaker 5: I think this year is around the five percent, so
Speaker 5: I think that if it's end up is a four
Speaker 5: point nine percent, so it's also hits the target. So
Speaker 5: it's possible for them to give a range rather than
Speaker 5: say around a five percent. Again, so because like the
Speaker 5: next year could be lower unless the government like I
Speaker 5: wants to put the major stimilus, but we think the
Speaker 5: chance is not very high, so I think they would
Speaker 5: rather put like our range, maybe more comfortable like her
Speaker 5: for like everyone.
Speaker 4: So not major similars. That's more of the physical side.
Speaker 4: What about the monetary policy side.
Speaker 5: Monetary party side, I think we'll still keep easy and
Speaker 5: keep accommodative, and we still expect like a fifty two
Speaker 5: hundred BIPs of the cut by the end of the
Speaker 5: twenty twenty six and also maybe twenty to thirty BIPs
Speaker 5: of the interest rate cuts. Because given or CPI infreation
Speaker 5: is still pretty low.
Speaker 6: What are you expecting to be kind of the bigger
Speaker 6: drags next year? Is it the exports side of things
Speaker 6: are going to be a bit softer than this year
Speaker 6: that has been quite resilient, And are we just not
Speaker 6: expecting any sort of meaningful recovering the consumer For.
Speaker 5: The consumer side, I think the yeah, we think it
Speaker 5: still will be like at between three to five percent.
Speaker 5: We didn't see like how too much highlights about that,
Speaker 5: I think, But the major driver should be still for
Speaker 5: the industry autoput side, industry product because like AI AI
Speaker 5: driven applications and also with like this kind of advanced
Speaker 5: manufacturing and possibly like we call the new productivity growth.
Speaker 5: So I think that will probably lead the driver. On
Speaker 5: the other side. For the energy side, I think that
Speaker 5: especially this year, we say for the energy reserves like
Speaker 5: a new energy and also for this kind of the
Speaker 5: high voltage like our elacricity, like our transmission. That's all
Speaker 5: could become like our new highlights. But for the consumption side,
Speaker 5: I think as will be uh in my view, will
Speaker 5: be I could quite civil, but will not be like
Speaker 5: very strong. Our property will still be the drag, but
Speaker 5: we don't think the government will put too much efforts
Speaker 5: of that, so we'll just let it go unless this
Speaker 5: have the cliff that job, but that's the chance also small.
Speaker 4: Picking up on that theme around increasing automation you're just
Speaker 4: referencing there, how does that also impact the jobs outlook
Speaker 4: and the employment outlook as well?
Speaker 5: In this sense, I think for AI application, so like
Speaker 5: how one side of course, like more jobs may be
Speaker 5: taken by the machine, But at the same time, we
Speaker 5: think maybe service sectors still have the chances. And also
Speaker 5: withs like a new applied like a services sector, maybe
Speaker 5: there's something like a more like how we call the
Speaker 5: experience exposure like a services sector come out, like how
Speaker 5: that's more like a digitized and also with like this
Speaker 5: kind of more entertaining or like how even with more
Speaker 5: creative like a more service oriented like actual opportunities. But
Speaker 5: still I think there is still of pressure.
Speaker 6: And you guys upgraded Chinese Tech just a few weeks
Speaker 6: ago and saying it's probably the most preferred, right, most
Speaker 6: attractive here right now, how are you looking at this
Speaker 6: rally around AI and the light now and how do
Speaker 6: you position around it for next year.
Speaker 5: I think the this year AI already rallied for two
Speaker 5: years like last year. This year, especially for this year
Speaker 5: almost over thirty percent. But I think the think about
Speaker 5: it for this all these kind of a big platforms
Speaker 5: very similar to the US like Meganique since seven. I
Speaker 5: think they just started because like one side, I think
Speaker 5: that their valuation is still relatively low, like thirty to
Speaker 5: thirty percent of discount comparing with the US PS. And
Speaker 5: the second I think for the China, the AI investment
Speaker 5: is still like a capex is still increasing like a
Speaker 5: similar to the US. And also certain I think it's
Speaker 5: a very a little bit different from the US side.
Speaker 5: I think the China is more like an ecosystem. So
Speaker 5: I think that with this kind of an ecosystem with
Speaker 5: the basic research like then the AI, then the AI
Speaker 5: application with this ecosystem could like the spillover effect, we
Speaker 5: think it could be bigger.
Speaker 4: One of tho sort of issues I guess around the
Speaker 4: AI application side is sometimes low barriers to entry, What
Speaker 4: are the what are the sectors that you look at
Speaker 4: in terms that AI theme in particular is being a
Speaker 4: bit more resilient.
Speaker 5: I guess I think the AI, say, will range you
Speaker 5: from the lower end to the high end. So if
Speaker 5: the we can like AI applic applied like an advance
Speaker 5: of manufacturing and new materials and also healthcare, I think
Speaker 5: he's booming because of the AI like how the application,
Speaker 5: and we also say because say AI applied to maybe
Speaker 5: like era space and also uh some like how many
Speaker 5: like a new fields. I think it's just like feed
Speaker 5: up the exploration and also like innovation.
Speaker 6: What are some of the key themes you're watching out?
Speaker 6: I mean for the fourth part, because I think there's
Speaker 6: been a lot of allocation into domestic tech already, especially
Speaker 6: you take a look how institutional investors are kind of positioning.
Speaker 6: Do you think that this is extreme levels when you
Speaker 6: talk about fund concentration now and we've already sort of
Speaker 6: seen some rotation out of tech cannot continue in the
Speaker 6: fourth quarter.
Speaker 5: Yes, I think that it's started with the tech and
Speaker 5: also like uh yeah, the concentration set. We think the
Speaker 5: text still have the loom, but we also see it's
Speaker 5: applied to other sectors as well, like gradually. For example,
Speaker 5: we think that this year it's also very shiny. Section
Speaker 5: is for the energy reserves because now by now for
Speaker 5: the new energy already surprise thirty five percent of the
Speaker 5: China's like a total energy surprise, So I think that's
Speaker 5: like a very like a significant number. And we'll also
Speaker 5: say like maybe the healthcare will benefit because their price
Speaker 5: has been low and I could benefit like maybe with
Speaker 5: this kind of plakichi. And for the consumption side, yeah,
Speaker 5: that side is ah, it's we have the new const
Speaker 5: new consumption, but too high and it's it's it's not easy.
Speaker 5: But I think that we still have this kind of
Speaker 5: the like the new materials. And we also say for
Speaker 5: the sector like booming out and also the AI is
Speaker 5: not only the SOT to wear and also have the hardwares,
Speaker 5: but of course most sectors, most companies are in the
Speaker 5: A listed, so that's really we also think the issuers
Speaker 5: and could also could slightly better perform than h year
Speaker 5: next year because with all these kind of the like hardwares.
Speaker 4: So that's that's the equity side. What about the fixed
Speaker 4: income side? What are your preferences there?
Speaker 5: Uh, for the fixed income side, because we still expect,
Speaker 5: like for the interest rate will go down, so I
Speaker 5: think the like for the bond side, I think it's
Speaker 5: not very attractive. But the existing bound of course, like
Speaker 5: I think I still like have the uh the game.
Speaker 6: Is buying bonds again, right, Yeah, that's is that likely
Speaker 6: to be more measured this time around?
Speaker 5: I think the yeah, PBOC and also I think the
Speaker 5: PBOC also, I think that this year we also say
Speaker 5: for the company's actually issue like Chinese, like for the
Speaker 5: c N y bounds like in Hong Kong. So I
Speaker 5: think the government like pbios by bonds. I think it's
Speaker 5: more like I'll keep the mandatory. They don't call it
Speaker 5: a quantitative easy, but I think it's more like I'll
Speaker 5: provide the liquidity adjustment of the liquidity like a provision
Speaker 5: in the market.
Speaker 2: That was ifan Who from UBS Wealth Management speaking with
Speaker 2: Bloomberg TV host Von Mann and Anabel Droolers on the
Speaker 2: Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast.
Speaker 2: I'm Doug Prisner. As mentioned earlier, the House of Representatives
Speaker 2: passed a Senate measure to end the longest government shutdown
Speaker 2: in US history.
Speaker 3: Now.
Speaker 2: In anticipation of this development, the Dow climbed for a
Speaker 2: fourth straight day, breaking above forty eight thousand for the
Speaker 2: first time and closing at a record high. Financials led
Speaker 2: the way for a closer look. I'm joined by Mike Dixon.
Speaker 2: He is head of research and quantitative Strategies at Horizon Investments. Mike,
Speaker 2: thank you for making time to chat with me. If
Speaker 2: you don't mind, I'd like to start with Cisco Systems.
Speaker 2: We heard from the company after the bill an upbeat
Speaker 2: sales forecast, which is likely a reflection of the progress
Speaker 2: Cisco is making and capturing more spending on AI. The
Speaker 2: stock was up eight percent in late US trading to
Speaker 2: around eighty dollars. Now that is the closest Cisco's shares
Speaker 2: have come to eighty two. They're all time high, set
Speaker 2: back on March twenty seventh, two thousand rights the dot
Speaker 2: com bubble burst. It's interesting timing. Maybe with all the
Speaker 2: talk we've heard about bubbles.
Speaker 1: I certainly love the history throwback, and yeah, I mean
Speaker 1: we are right on the cusp of reclaiming that high.
Speaker 1: I would say, you know, at least on a dividend
Speaker 1: adjusted basis, that has been reclaimed within the past several months.
Speaker 1: But nonetheless, look, this is not this AI trade is
Speaker 1: not the Internet bubble of the nineties. When we look
Speaker 1: at the underlying fundamental at the top of the market,
Speaker 1: you have had extremely strong earnings growth and revenue growth,
Speaker 1: and this earning season is no exception. When you look
Speaker 1: at the Magnificent seven and the NASDAC, you've actually had
Speaker 1: an inflection higher and revenue growth year every year of
Speaker 1: fifteen percent for the Nasdaq and that's up from ten
Speaker 1: percent about a year ago. So we've had an inflection
Speaker 1: higher in revenue growth. Obviously, earnings have been absolutely stellar.
Speaker 1: We have seen cash flows come down a good bit
Speaker 1: because of a lot of the cap x, but these
Speaker 1: we are seeing significant plans to make the power demand
Speaker 1: and the deals needed to get that infrastructure build and
Speaker 1: make that stuff happen. So really strong fundamentals here supporting
Speaker 1: the top of the market, which is not what we
Speaker 1: had back in the late nineties.
Speaker 2: Even so, over the last couple of days, we've seen
Speaker 2: a rotation away from big cap tech. Yesterday that would
Speaker 2: be the Tuesday session in the States, it was healthcare.
Speaker 2: Today it was the financials. Is it prudent now to
Speaker 2: kind of maybe take a little bit of risk off
Speaker 2: the table.
Speaker 1: Well, we have seen a little bit of rotation, but
Speaker 1: I think the market overall we tend to forget that
Speaker 1: some of these stocks actually can be flat for a day,
Speaker 1: and that's completely normal, and in fact it's very healthy,
Speaker 1: you know, zooming out when you look at the more
Speaker 1: you know, equal weight version of the SMP or you know,
Speaker 1: I believe that the Dow right cross its forty eight
Speaker 1: thousand today, that of course does not have a lot
Speaker 1: of the Max seven you know, top of the tech
Speaker 1: and AI trade really embedded in there. It's healthy to
Speaker 1: see some of that, you know, certainly with what we've
Speaker 1: had this year, because market concentration has been has been growing,
Speaker 1: and it is good to see a broader participation even
Speaker 1: some of the defensives you mentioned healthcare. I mean that
Speaker 1: that to me is a really good kind of contrarian
Speaker 1: sector play, and I think it's good to see participation there.
Speaker 3: We've had a stellar rally in the top of the.
Speaker 1: Market, and I do believe right now it might be
Speaker 1: prudent to think of.
Speaker 3: That as more of a hold and not necessarily an ad.
Speaker 1: We do have Nvidia next week, which is a macro
Speaker 1: event in al so we're going to need to see
Speaker 1: that what that holds, whether this Santa claus rally is
Speaker 1: going to be, you know, what we get through the
Speaker 1: end of the year. But there are other opportunities other
Speaker 1: than AI out there, and I do think it's wise
Speaker 1: to be looking at what some of those may be.
Speaker 2: Earlier today, the White House said that the October reports
Speaker 2: on unemployment and consumer prices will unlikely be released. Obviously,
Speaker 2: these numbers have been delayed by the shutdown. This is
Speaker 2: only going to add to a little bit more of
Speaker 2: the difficulty engaging the outlook, especially for the FED. Right now,
Speaker 2: I think FED fun Future suggests a sixty three percent
Speaker 2: chance of a rate cut next month of twenty five
Speaker 2: basis points. Although we're hearing more and more from a
Speaker 2: number of FED members about the concern over inflation it
Speaker 2: being sticky and perhaps a bigger risk than the unemployment story.
Speaker 2: Where do you come down when it comes to the
Speaker 2: FED and the outlook.
Speaker 1: Well, you know, seeing that the headline today about the
Speaker 1: delay in those reports is not great timing, right. I
Speaker 1: think we are at a point where we have had
Speaker 1: a pretty steady decline in labor market data heading into
Speaker 1: the shutdown. But at the same time, inflation it hasn't
Speaker 1: necessarily been a problem, but it hasn't been improving at
Speaker 1: the rate that folks would like. And so you know
Speaker 1: what has happened with this shutdown is a lot of
Speaker 1: these surveys just didn't get completed and as a result
Speaker 1: may not be for at least what I was reading
Speaker 1: the first time. Ever, that's not great because the December
Speaker 1: meeting as well, is a little bit earlier this year
Speaker 1: than it typically is, and so we're going to be
Speaker 1: kind of running up against the wire to get a
Speaker 1: lot of this data collected and get a fresh view
Speaker 1: on the market. But you know, overall, I do think
Speaker 1: what we saw at the end of October was a
Speaker 1: little bit of a surprise from Powell and the Committee
Speaker 1: as a whole. You know, he mentioned a number of
Speaker 1: times that the December cut was not a foregone conclusion
Speaker 1: for me and I think the rest of the market.
Speaker 3: That was a good bit of a surprise to hear that.
Speaker 3: You know.
Speaker 1: On the inflation side of things, though, and I hear
Speaker 1: the arguments out there, but if we also zoom out
Speaker 1: a little bit, the FED has been above their inflation
Speaker 1: target for you know, the better part of four nearly
Speaker 1: five years, and in their recent statement of economic projections,
Speaker 1: they don't have us getting back down to two percent
Speaker 1: until the end of twenty twenty seven. I mean, Look,
Speaker 1: that's almost eight years that they're going to be spending
Speaker 1: above a two percent, and to me, I'm not so sure.
Speaker 1: Their target practically is two percent, and so we'll see
Speaker 1: what the Committee committee thinks here in December. But I,
Speaker 1: for one, do believe that in the mid two they're
Speaker 1: probably perfectly comfortable with that so long as they get
Speaker 1: stability in the labor market. So that's what that's the
Speaker 1: side I'm on. I think we're going to get some
Speaker 1: get a cut, but we're going to have to see.
Speaker 1: It's going to be highly dependent on what the missing
Speaker 1: information tells us.
Speaker 2: So I'd like to get your take on whether or
Speaker 2: not there is a great degree of bifurcation in the economy.
Speaker 2: It was very interesting today we heard from Fitch Ratings
Speaker 2: and the company said the share of some prime borrowers
Speaker 2: at least sixty days past too on their auto loans
Speaker 2: rose by more than six percent of the month of October.
Speaker 2: I think we're now at the highest level since about
Speaker 2: nineteen ninety four. Now you and I both know what
Speaker 2: the wealth effect has done this move higher in the
Speaker 2: equity market, and how higher income earners that own stocks
Speaker 2: have been able to power a lot of consumer spending.
Speaker 2: Maybe there's a little bit more concern about lower and
Speaker 2: middle income households. Do you think this has the potential
Speaker 2: really to hold back a lot of growth the way
Speaker 2: in which we were kind of divided.
Speaker 3: You know, I don't think we're really there yet.
Speaker 1: I think that the economy, as we're seeing in the
Speaker 1: stock market, you know, has become more concentrated because not
Speaker 1: everybody is you know, participating in a lot of the
Speaker 1: equity market wealth that has been created. But you know,
Speaker 1: you mentioned on the debt side of things. The New
Speaker 1: York Fed puts out their quarter debton credit report that
Speaker 1: comes out. It was just last week the for the
Speaker 1: for the third quarter, reporting on a lot of these statistics,
Speaker 1: you know, across loan types and across the different you know,
Speaker 1: age and other demographic areas. And you know, we really
Speaker 1: didn't see many headlines around that in Bloomberger otherwise. And
Speaker 1: the reason is because nothing really got that worse or alarming.
Speaker 1: And I hear you on that data point on the
Speaker 1: auto loans, but you know, it didn't really show up
Speaker 1: in a screaming manner on a change basis, you know,
Speaker 1: in that major.
Speaker 3: Quarter we report.
Speaker 1: So you know, I don't think that I think that
Speaker 1: was good that we didn't see that tick up there.
Speaker 1: But I don't think we're quite at a trouble area yet,
Speaker 1: you know, as it relates to that.
Speaker 3: And overall, the consumer is in a.
Speaker 1: Really, really healthy pace, and we've seen that when we
Speaker 1: used to get economic data, we saw that broadly, and
Speaker 1: we'll hope to see that see that again here once
Speaker 1: the floodgates open back up and we get some information.
Speaker 2: Even so, if you look at the results of the
Speaker 2: election last week, we're talking New Jersey, we're talking Virginia,
Speaker 2: even here in New York City, this issue of affordability,
Speaker 2: it's front and center, you know.
Speaker 3: It is.
Speaker 1: I think one thing on affordability that that's going to
Speaker 1: be an underappreciated boost to economic activity is really on
Speaker 1: the housing side. And I think you can see that
Speaker 1: through the fall in mortgage rates. You know, we are
Speaker 1: still in you know, the low sixes, but a good
Speaker 1: bit down from where things were. And one of the
Speaker 1: one of the metrics that we look at and have
Speaker 1: been tracking closely is you know, interest rate volatility and
Speaker 1: how that's been falling, and that's playing a pretty big
Speaker 1: role in where mortgage rates are relative to the ten year,
Speaker 1: and you know, with as we get closer and closer
Speaker 1: to the end of this FED easing cycle, you know,
Speaker 1: we're going to continue to see that interest rate volatility
Speaker 1: fall and even without a change in the ten year,
Speaker 1: mortgage rates can still come down. I think some Mesma said,
Speaker 1: we'll looking, you know, we could see you know, in
Speaker 1: the five and a half range with no change in
Speaker 1: the tenure, just simply through this volatility reduction channel with
Speaker 1: interest rates. This is going to be a really big
Speaker 1: boost to just housing affordability overall because the activity has
Speaker 1: been just completely on the floor there, and I think
Speaker 1: that can be a really big boom when it comes
Speaker 1: to consumer confidence, labor, mobility, home equity, lines of credit.
Speaker 1: There's there's a lot of I think booming economic activity.
Speaker 1: We can get through that mortgage channel, and I think
Speaker 1: that that is something it's a little bit underappreciated, but
Speaker 1: things have been moving in the right direction to make
Speaker 1: at least the housing side there with existing homes, you know,
Speaker 1: a lot more affordable, and as time passes, I think
Speaker 1: that that's gonna be alleviated a little bit through that channel,
Speaker 1: and that's a really good thing.
Speaker 2: So, Mike, where are you finding opportunity domestically.
Speaker 1: Well, you know, one of my favorite areas right now,
Speaker 1: I'll give I'll give two things that that really have
Speaker 1: my attention lately. One of them is the small and
Speaker 1: MidCap space in US markets. Now, this has been a
Speaker 1: trade that has had its fits and starts, right. You've
Speaker 1: seen numerous very short lived kind of rallies in the
Speaker 1: smaller cap segments of the market, but it's really failed
Speaker 1: to sustain a rally, you know, in the last several years.
Speaker 1: And I think there's a couple of things working in
Speaker 1: favor of that trade right now for more of a
Speaker 1: longer term hold.
Speaker 3: You know. One of them is this rate channel.
Speaker 1: Right, the high level of rates overall have been you know,
Speaker 1: difficult and weighing in a disproportionate manner on the small
Speaker 1: and midcaps space, right, Microsoft and Video. These folks don't
Speaker 1: really care too much about the level.
Speaker 3: Of interest rates.
Speaker 1: They have plenty of cash flow and balance sheet. So
Speaker 1: the fact that rate hikes are definitely off the table
Speaker 1: and whether we get a cut in December is one thing,
Speaker 1: but the direction of travel is down. That's a really
Speaker 1: good thing for small caps overall. The second thing I'll
Speaker 1: point out too, is we've seen earning's breadth really pick
Speaker 1: up materially in that space. You saw it this quarter
Speaker 1: with earnings for the S and P six hundred coming
Speaker 1: in about twelve percent year every year. That's the same
Speaker 1: as we got in the S and P five hundred.
Speaker 1: You also saw a pretty solid near ten percent earnings
Speaker 1: per share surprise, So just beats with the S and
Speaker 1: P six hundred, those smaller cap names. That's a second
Speaker 1: quarter in a row where it was, you know, a
Speaker 1: stellar beat. And most importantly, evaluations have actually come down
Speaker 1: on a forward looking basis for small cap stocks, so
Speaker 1: you've got really a good entry point there they have
Speaker 1: not participated with the top of the market rally.
Speaker 3: And then on the longer term.
Speaker 1: View, just you know, overall domestic focused policies, deregulation potentially
Speaker 1: m and A activity picking up, I think is a
Speaker 1: really good entry point. And I'll add a really good
Speaker 1: seasonality kind of time a year to kind of enter
Speaker 1: that trade and carry that in your portfolio through twenty six.
Speaker 3: So that's one area I really like.
Speaker 1: And then healthcare as well is a kind of a
Speaker 1: sector contrarian play I like for similar reasons in the
Speaker 1: sense that healthcare used to be a kind of crowded,
Speaker 1: secular growth trade. It's now very firmly on the value
Speaker 1: side of the market, with lower valuations only in energy
Speaker 1: and financials, and you still see really strong strength on
Speaker 1: the top lines there. And it also hasn't rallied. I
Speaker 1: think that's poised to be a winter as we had
Speaker 1: in next year too.
Speaker 2: I'm curious about how you're feeling about markets outside the US,
Speaker 2: particularly in Asia. Any interest there, maybe Japan.
Speaker 1: Yeah, overall, I think international diversification in general is a
Speaker 1: great place to be of certainly with hindsight this year, right,
Speaker 1: international markets have done exceptionally well. But you know, one
Speaker 1: of the things that I think is not just think
Speaker 1: I firmly believe is going to be critical for you know,
Speaker 1: this AI trade and the AI cap X to really
Speaker 1: be put to work, is you know, just the infrastructure
Speaker 1: being built out. And when you look at the international block,
Speaker 1: you have a sector composition that's primarily made up more
Speaker 1: so of industrials and energy material those type companies. These
Speaker 1: sectors not only are they underrepresented in the US economy,
Speaker 1: they're also poised to participate in a you know, kind
Speaker 1: of industrial type rallying industrial type build out, and I
Speaker 1: think that's going to be a really good sector composition
Speaker 1: to look to as a diversification from the you know,
Speaker 1: tech centered US markets, but also as you get a
Speaker 1: lot of that infrastructure build out. And then you know,
Speaker 1: of course, there's also the policy side of things from
Speaker 1: a central bank perspective. I think with the FED, you know,
Speaker 1: still in the cutting cycle, where a lot of other
Speaker 1: uh you know, global markets are kind of near the
Speaker 1: end of theirs, You're going to continue to see this
Speaker 1: kind of narrowing interest rate deferment differential that should weigh
Speaker 1: on the dollar uh more, and that should be a
Speaker 1: tailwind for those kind of foreign markets uh here in
Speaker 1: US dollars.
Speaker 3: So you know, a couple of reasons there.
Speaker 1: I think the international block as a whole U is
Speaker 1: kind of a great place to be and provide some
Speaker 1: diversification from the US.
Speaker 2: Very quickly, Mike, do you want to be exposed China
Speaker 2: right now?
Speaker 1: I think China does have some interesting prospects to it
Speaker 1: along those similar lines, most acutely just from you know,
Speaker 1: just a policy response standpoint.
Speaker 3: So yeah, I think China.
Speaker 1: I think China is going to be critical to you know,
Speaker 1: a lot of this kind of cyclical build out theme
Speaker 1: that I'm talking about. So yes, I think that would
Speaker 1: be a good, you know, emerging market area of focus
Speaker 1: in the international block.
Speaker 2: Okay, Mike, we'll leave it there. Thank you so very much.
Speaker 2: Mike Dixon there. He is head of Research and Quantitative
Speaker 2: Strategies at Horizon Investments. Joining us here on the Daybreak
Speaker 2: Asia Podcast. Thanks for listening to today's episode of the
Speaker 2: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at
Speaker 2: the story shaping markets, finance, and geopolitics in the Asia Pacific.
Speaker 2: You can find us on Apple, Spotify, the Bloomberg Podcast
Speaker 2: YouTube channel, or anywhere else you listen. Join us again
Speaker 2: tomorrow for insight on the market moves from Hong Kong
Speaker 2: to Singapore and Australia. I'm Doug Prisoner and this is
Speaker 2: Bloomberg