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Speaker 1: All right, the time is now seven minutes past the hour.

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Speaker 1: Let's get to our guests. Moneyhi rach Aduri, who's head

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Speaker 1: of equity research in the Asia Pacific at BNP Pariba Money,

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Speaker 1: she is it too soon to be playing a software

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Speaker 1: approach from the FED? Or is that what people do

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Speaker 1: in equity markets? They get out in front. Equity markets

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Speaker 1: have a habit of looking ahead, obviously, and you know

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Speaker 1: that's clearly what's been happening. If you look at Asia,

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Speaker 1: if you look at the develop markets, it's not unusual.

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Speaker 1: But at the same time, we must point out that

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Speaker 1: the basic high trajectory of the FED and the final

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Speaker 1: FED funds rate outlook has not changed. We're still focusing

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Speaker 1: on a five point to five percent terminal FED rate

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Speaker 1: U to be reached sometime in the first quarter of

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Speaker 1: twenty twenty three, which means maybe a fifty basis points

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Speaker 1: hike in December, followed by another seventy five basis points

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Speaker 1: spread across the first quarter of next year. So you know,

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Speaker 1: I think this initial euphoria that we have seen on

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Speaker 1: the back of an expectation of a downshift in December

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Speaker 1: would possibly get capped sometime around the end of this

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Speaker 1: year or early next year, Minsia, I wanted to ask

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Speaker 1: you about that the China story, these very distressing pictures

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Speaker 1: we're seeing in China at the moment, and whether or

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Speaker 1: not these protests dent the potential newfound optimism that we

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Speaker 1: had towards Chinese assets and the overall economy. UM. It

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Speaker 1: seems clear that this whole reopening process in China UM

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Speaker 1: will be some kind of a zigzag. It will be

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Speaker 1: a set of small incremental steps UM, maybe spread over

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Speaker 1: the next six months, who knows. UM. At the same time,

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Speaker 1: it seems clear to us that the Chinese administration is

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Speaker 1: focusing on UM, you know, improving the Chinese economy, particularly

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Speaker 1: domestic consumption. That's apparent in the way they're trying to

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Speaker 1: gradually move out of the zero COVID policy. We think

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Speaker 1: that they will continue to do so, and also in

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Speaker 1: the most recent triple our cut that we saw over

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Speaker 1: the weekend. UM even though the impact of these monetary

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Speaker 1: policy adjustments are possibly declining gradually, so it needs a

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Speaker 1: more concerted effort, you know, combining both fiscal and monetary

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Speaker 1: policy action to improve UM and sustainably improved domestic consumption.

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Speaker 1: So one of the conviction points that you've you've been

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Speaker 1: making is to play financials because you like the rising

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Speaker 1: rate environment. Obviously for the banks, I mean, it's good

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Speaker 1: normally to to borrow low and loan it out higher.

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Speaker 1: But when you look at the at the tenure yield

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Speaker 1: actually lower than what we see in short term interest rates,

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Speaker 1: it may not be a good thing for the banks. Well,

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Speaker 1: I think, at least as far as this part of

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Speaker 1: the world is concerned, the imaging markets and particularly Emerging Asia,

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Speaker 1: there's been a strong correlation with the yields going up

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Speaker 1: and the banking sector out performing. It tends to happen

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Speaker 1: for different reasons in different pockets of ation um, but

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Speaker 1: for much of North Asia, you know, what we tend

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Speaker 1: to call Developed Asia, the correlation with of the net

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Speaker 1: interest margins of the banks with rising yields is almost

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Speaker 1: in controvertible, no over the past maybe ten to fifteen years,

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Speaker 1: and that's what we continue to play. We have played

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Speaker 1: that theme for you know, about eighteen months now, and

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Speaker 1: we think that theme is likely to be alive for

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Speaker 1: you know, at least about the next six months. Talking

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Speaker 1: about what your market outlook and strategy is for Asia

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Speaker 1: heading into I guess the last month of two into

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Speaker 1: twenty three we mentioned some of the overweights you have.

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Speaker 1: I'm curious as to your underweight on Taiwan. I was

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Speaker 1: just talking about the election there over the weekend, But

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Speaker 1: it does look like global investors are cane on Taiwan,

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Speaker 1: foreigners returning after five months of net outlaws. Why are

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Speaker 1: you underweight here right? Um? Tawan still suffers, along with

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Speaker 1: other North Asian tech hardware exporters, from potential demand deterioration

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Speaker 1: in the develop markets. That's been the theme for over

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Speaker 1: last one to one and a half years. We think that,

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Speaker 1: you know, the potential demand retrenchment is not yet over.

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Speaker 1: It's continuing and will likely last at least till the

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Speaker 1: first half of next year. Our forecast about the recessionary

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Speaker 1: environment in the US and Eurozone or that it will

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Speaker 1: possibly begins some time in the second quarter of next

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Speaker 1: year and continue for much of three. So in this context,

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Speaker 1: we think what we're seeing in North Asia, particularly Taiwan

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Speaker 1: and Korea is a bit of a pop resulting from

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Speaker 1: a risk of eilament because of the down shift they

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Speaker 1: expected down shift to the federate high trajectory. But I

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Speaker 1: think the you know, the case for a fundamentally cautious

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Speaker 1: attitude is still there. It's quite interesting because you mentioned

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Speaker 1: that you you also like India, but you you you

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Speaker 1: are overweight Indian I T. So there is some tech

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Speaker 1: that you like, right indeed, And that's the departure from

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Speaker 1: our usual trend. We think investors across the world are

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Speaker 1: equating indian Ity with the the North Asian tech hardware exporters.

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Speaker 1: But there's a fundamental difference. The kind of order influence

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Speaker 1: that the Indian I TED companies have seen. The front

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Speaker 1: line large camp indianity companies over the last one too

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Speaker 1: and a half years are relatively long term in nature.

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Speaker 1: These orders give a visibility, a revenue visibility to the

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Speaker 1: indianity companies over the next year, and I think that

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Speaker 1: provides some kind of defensive quality to the Indian IT sector.

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Speaker 1: Um the valuations are cheaper than they used to be

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Speaker 1: about six months ago. I think the depresation of the

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Speaker 1: Indian repeat is also a tailwind to these companies. Okay,

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Speaker 1: India I T. We mentioned some of your other overweights

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Speaker 1: are Thailand, Indonesia, and you've mentioned neutral on China. What

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Speaker 1: are what are some of the other areas you're sticking

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Speaker 1: away from right. Um, the main themes that we're focusing

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Speaker 1: on as far as Asia is concerned in twenty three

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Speaker 1: are financials. Of course, we already discussed that. UM. We

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Speaker 1: also like the reopening theme across Asia, and we're playing

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Speaker 1: pockets of China, a few in Hong Kong, and a

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Speaker 1: few pockets in Thailand. Of course, that's one of the

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Speaker 1: biggest reopening beneficiaries in Asia. UM. We are also positive

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Speaker 1: on the consumption theme, particularly um, you know, consumer discretionaries,

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Speaker 1: and in the context of some markets like dear it

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Speaker 1: actually translates into what we call affluent consumption or really

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Speaker 1: the upper end consumption, so you know, it's you know,

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Speaker 1: it's basically consumer discretionaries, selective consumer stables and financials. Those

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Speaker 1: are the three sectors that we are positive on. Okay,

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Speaker 1: we can tell from your voice, my nation, and we

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Speaker 1: know you well enough that you've got a lot of

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Speaker 1: experience and your seasoned veteran looking at at policy in Asia,

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Speaker 1: how dangerous is it getting for the leadership in China

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Speaker 1: here at the moment, with the kind of repressed anger

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Speaker 1: that we see under the service in China. You know,

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Speaker 1: as far as Chinese policy making is concerned. It seems

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Speaker 1: clear that the first thing that they would have to

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Speaker 1: focus on is improving domestic consumption or more broadly, improving

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Speaker 1: the environment for domestic consumption UM, and that is something

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Speaker 1: this zero COVID policy has harmed over last one to

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Speaker 1: one and a half years, and we believe that the

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Speaker 1: Chinese administration would like to get away from this zero

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Speaker 1: COVID policy. But it also seems clear that it's not

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Speaker 1: going to be one shot kind of action. It's going

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Speaker 1: to be a small steps of you know, a set

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Speaker 1: of small steps over un protracted no doubt. Minishi, we

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Speaker 1: thank you as always, Minishi ra Shattery, Head of Equity Research,

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Speaker 1: A pack at BNP Parabat