1 00:00:00,040 --> 00:00:02,080 Speaker 1: Let's get to our guests, believe to own chairman of 2 00:00:02,160 --> 00:00:05,840 Speaker 1: Dalton Investments. So Belita, I know you're more of a 3 00:00:05,880 --> 00:00:08,440 Speaker 1: bottom up investor, but we have to talk macro for 4 00:00:08,480 --> 00:00:12,039 Speaker 1: a moment. Here's what the market is saying. Profit margins 5 00:00:12,080 --> 00:00:16,440 Speaker 1: are under pressure, recession is coming, and the bear market 6 00:00:16,520 --> 00:00:19,520 Speaker 1: is still intact. But if you look at what companies 7 00:00:19,560 --> 00:00:21,960 Speaker 1: are saying, and you know, we have the earnings now 8 00:00:21,960 --> 00:00:24,279 Speaker 1: to tell us this. Look at Bank of America. US 9 00:00:24,320 --> 00:00:29,080 Speaker 1: consumer is strong, the economy is strong. There's no organic recession, 10 00:00:29,600 --> 00:00:33,320 Speaker 1: and it's really all because of the FED and it's necessary. 11 00:00:33,400 --> 00:00:36,800 Speaker 1: So as an investor, how do you play that? Hi, Brian, 12 00:00:36,880 --> 00:00:40,400 Speaker 1: thanks for having me back. Um. The thing about macro 13 00:00:40,520 --> 00:00:43,440 Speaker 1: trends is that you can see them, but it's very 14 00:00:43,479 --> 00:00:46,680 Speaker 1: difficult to call the timing of when things turn. And 15 00:00:46,880 --> 00:00:49,160 Speaker 1: in the case of the US, you've had so much 16 00:00:49,960 --> 00:00:56,240 Speaker 1: um impetus from the government's um easy monetary policy as 17 00:00:56,240 --> 00:00:59,000 Speaker 1: well as it's very generous fiscal policy, that you have 18 00:00:59,760 --> 00:01:02,480 Speaker 1: a consumer sector that has about two and a half 19 00:01:02,520 --> 00:01:06,399 Speaker 1: trillion dollars of excess savings that should keep the economy 20 00:01:06,400 --> 00:01:09,880 Speaker 1: in good stead for the time being. So for now, 21 00:01:10,120 --> 00:01:12,920 Speaker 1: the economy I don't think has much of a higher 22 00:01:13,000 --> 00:01:15,600 Speaker 1: risk of slipping into a recession, which gives the Fed 23 00:01:15,800 --> 00:01:19,679 Speaker 1: the room it needs um to tighten on interest rates 24 00:01:19,720 --> 00:01:21,800 Speaker 1: and to mop up some of the liquidity that's been 25 00:01:21,800 --> 00:01:24,720 Speaker 1: put in the system for quite a while now. And 26 00:01:24,760 --> 00:01:26,680 Speaker 1: that's the appropriate thing to do. If you see an 27 00:01:26,720 --> 00:01:29,080 Speaker 1: inflation prints of nine point one, and even we take 28 00:01:29,080 --> 00:01:32,520 Speaker 1: out the temporary factors, it's still well above what's acceptable, 29 00:01:32,800 --> 00:01:34,720 Speaker 1: you have to tighten, which is what the Fed is doing. 30 00:01:34,760 --> 00:01:37,560 Speaker 1: And so you know, it's a matter of looking to 31 00:01:37,680 --> 00:01:41,440 Speaker 1: see how the Fed can finesse and successfully bring the 32 00:01:41,480 --> 00:01:44,520 Speaker 1: economy to a slowdown such that inflation doesn't get out 33 00:01:44,560 --> 00:01:46,360 Speaker 1: of control. And the more important thing is to keep 34 00:01:46,400 --> 00:01:50,800 Speaker 1: inflationary expectations in check because once that gets out of hand, 35 00:01:50,880 --> 00:01:55,560 Speaker 1: is very difficult to contain it. And it seems that 36 00:01:55,600 --> 00:01:58,680 Speaker 1: the market continues to flip flop between whether we've reached 37 00:01:58,720 --> 00:02:02,600 Speaker 1: peak inflation or peak interest rates. How do you position 38 00:02:02,640 --> 00:02:06,480 Speaker 1: around that? So for us, we are a value investor 39 00:02:06,560 --> 00:02:09,320 Speaker 1: and we invest in companies for the long term, which 40 00:02:09,360 --> 00:02:12,760 Speaker 1: makes it easier because then you know that your companies, 41 00:02:12,800 --> 00:02:15,560 Speaker 1: even though if the prices are hit short term because 42 00:02:15,600 --> 00:02:19,120 Speaker 1: the markets being pessimistic you know that the companies are 43 00:02:19,160 --> 00:02:22,440 Speaker 1: invested in will survive, and they'll probably take market share, 44 00:02:22,720 --> 00:02:24,520 Speaker 1: and they'll probably trade at a price that will let 45 00:02:24,520 --> 00:02:26,600 Speaker 1: you buy a biggest stake in the company so that 46 00:02:26,639 --> 00:02:29,880 Speaker 1: you can make attractive long term returns. And that's how 47 00:02:29,919 --> 00:02:32,440 Speaker 1: we look at our investments. We are long term investors. 48 00:02:32,480 --> 00:02:37,119 Speaker 1: We invest alongside managements that UH seek to do well 49 00:02:37,160 --> 00:02:40,280 Speaker 1: by shareholders, and we look for businesses that have a 50 00:02:40,360 --> 00:02:44,320 Speaker 1: moat around them and will survive these downturns. And there's 51 00:02:44,360 --> 00:02:48,080 Speaker 1: a lot of companies because of that dichotomy that we 52 00:02:48,120 --> 00:02:50,920 Speaker 1: mentioned at the beginning. UH does that take you outside 53 00:02:50,919 --> 00:02:54,959 Speaker 1: the US? Do you do you prefer Asia over the US? Now? Yes, 54 00:02:55,040 --> 00:02:58,040 Speaker 1: we are focused on Asian investments. That that's the mandate 55 00:02:58,080 --> 00:03:00,360 Speaker 1: that our company has UH and ninety some of our 56 00:03:00,400 --> 00:03:02,760 Speaker 1: assets are invested in Asia because that's what the clients 57 00:03:02,800 --> 00:03:05,480 Speaker 1: have hired us to do. And in Asia, and even 58 00:03:05,520 --> 00:03:08,760 Speaker 1: if we weren't focused on Asia by our clients mandates, 59 00:03:09,160 --> 00:03:12,320 Speaker 1: we see more opportunities there, particularly in countries like Japan 60 00:03:12,760 --> 00:03:16,560 Speaker 1: where that the stock market generally speaking is very cheap, 61 00:03:16,680 --> 00:03:19,520 Speaker 1: and particularly cheap now because the end is so UH 62 00:03:19,600 --> 00:03:23,720 Speaker 1: low UM and also in Korea where we're finally seeing 63 00:03:23,760 --> 00:03:28,639 Speaker 1: some companies act to improve corporate governance, and also in India, 64 00:03:28,639 --> 00:03:30,919 Speaker 1: which is a long term bull story and Balina. We 65 00:03:30,919 --> 00:03:34,120 Speaker 1: we ended the last segment talking about the preferred markets 66 00:03:34,160 --> 00:03:37,920 Speaker 1: that you like, whether it's Japan, it's India, it's Korea. 67 00:03:38,040 --> 00:03:40,760 Speaker 1: I wonder, in terms of the earnings season that we're 68 00:03:40,800 --> 00:03:44,120 Speaker 1: about to get, how are you looking at the one 69 00:03:44,160 --> 00:03:46,160 Speaker 1: that's upcoming here, given the fact that there are so 70 00:03:46,200 --> 00:03:48,720 Speaker 1: many macro headwinds, do you think earnings estimates are really 71 00:03:48,760 --> 00:03:54,000 Speaker 1: reflecting that um In Japan, the companies we invest in 72 00:03:54,480 --> 00:03:58,480 Speaker 1: tend to benefit from digitalization and also from exports, so 73 00:03:58,480 --> 00:04:00,600 Speaker 1: the strong dollar actually has been helpful. And if you 74 00:04:00,680 --> 00:04:03,680 Speaker 1: look back a little bit at earnings last year, they 75 00:04:03,680 --> 00:04:06,360 Speaker 1: were extremely strong because of the rebound from COVID and 76 00:04:06,360 --> 00:04:09,080 Speaker 1: if you look at the guidance for this year, it's 77 00:04:09,320 --> 00:04:12,680 Speaker 1: um not bad. Actually it's a modest growth UM and 78 00:04:12,720 --> 00:04:15,600 Speaker 1: we think that the Japanese companies were invested in actually 79 00:04:15,760 --> 00:04:18,640 Speaker 1: quite conservative, and if anything, the earnings will come out 80 00:04:18,640 --> 00:04:21,600 Speaker 1: to be stronger than their guidance because if you look 81 00:04:21,640 --> 00:04:24,719 Speaker 1: at the detail of their assumptions, they're assuming, in the 82 00:04:24,720 --> 00:04:27,320 Speaker 1: case of Toyota, for example, that dollian is one fifteen, 83 00:04:27,839 --> 00:04:31,000 Speaker 1: so anything above that is extra profit for them when 84 00:04:31,040 --> 00:04:33,960 Speaker 1: it's converted back to end. So I think that in Japan, 85 00:04:34,040 --> 00:04:36,240 Speaker 1: at least the earnings will be all right this year, 86 00:04:36,279 --> 00:04:38,680 Speaker 1: if anything, maybe even a mile surprise to the upside. 87 00:04:39,040 --> 00:04:42,760 Speaker 1: I can't say the same about earnings UH in the US, 88 00:04:42,839 --> 00:04:46,880 Speaker 1: for instance. UM, that's you know, far more difficult to 89 00:04:47,279 --> 00:04:51,400 Speaker 1: predict UM, and I think there's every possibility that they 90 00:04:51,400 --> 00:04:55,960 Speaker 1: will be squeezed because of the higher input prices. UM. 91 00:04:56,080 --> 00:04:59,120 Speaker 1: There's just no getting around that. So UM, you know, 92 00:04:59,200 --> 00:05:01,200 Speaker 1: it's not what we do. We don't invest much in 93 00:05:01,240 --> 00:05:03,240 Speaker 1: the US. We invest more in Asia, and so from 94 00:05:03,279 --> 00:05:07,000 Speaker 1: our standpoint, the earnings UM, at least in Japan will 95 00:05:07,040 --> 00:05:09,560 Speaker 1: probably hold up, and elsewhere in Asia will probably under 96 00:05:09,600 --> 00:05:12,560 Speaker 1: some sort of pressure. It seems like there's more urgency 97 00:05:12,640 --> 00:05:16,400 Speaker 1: now in China. We have three developments. Yesterday Van mentioned 98 00:05:16,400 --> 00:05:20,320 Speaker 1: one that China will allow homeowners to temporarily halt mortgage payments, 99 00:05:20,320 --> 00:05:23,240 Speaker 1: but there was also regulators urging the banks to to 100 00:05:23,320 --> 00:05:25,479 Speaker 1: lean more money to the developers so they can finish 101 00:05:25,560 --> 00:05:28,880 Speaker 1: up these projects. And then there was the added liquidity 102 00:05:28,960 --> 00:05:33,680 Speaker 1: from the PBOC. Does China interest you scare you or 103 00:05:34,040 --> 00:05:37,320 Speaker 1: you just sort of avoiding it. China has always been 104 00:05:37,360 --> 00:05:40,599 Speaker 1: a market that we've under allocated to, and the reason 105 00:05:40,680 --> 00:05:43,640 Speaker 1: for that is because we look for companies that are 106 00:05:43,720 --> 00:05:46,760 Speaker 1: run by managements that tend to be owners and whose 107 00:05:46,760 --> 00:05:49,960 Speaker 1: interests are aligned with shareholders like US minority shareholders. So 108 00:05:50,000 --> 00:05:52,160 Speaker 1: in China you don't see a lot of that because 109 00:05:52,240 --> 00:05:55,080 Speaker 1: a big chunk of the market is s Ese which 110 00:05:55,160 --> 00:05:58,560 Speaker 1: run according to government policy. I would say, um and 111 00:05:58,800 --> 00:06:01,080 Speaker 1: don't have in the four front of in the top 112 00:06:01,120 --> 00:06:04,440 Speaker 1: of that priority list the shareholder. So we've been underweight China. 113 00:06:04,520 --> 00:06:06,640 Speaker 1: But that said, you know, the Chinese market is corrected 114 00:06:06,640 --> 00:06:09,680 Speaker 1: sufficiently that there are quite interesting Chinese companies, so we're 115 00:06:09,680 --> 00:06:12,839 Speaker 1: not We're still underweight when not overweight, but we have 116 00:06:12,920 --> 00:06:15,560 Speaker 1: found some interesting Chinese companies that we think will do 117 00:06:15,680 --> 00:06:18,960 Speaker 1: very well based on the government's desire to secure, for instance, 118 00:06:19,000 --> 00:06:22,440 Speaker 1: the supply chain in chips uh and to become more 119 00:06:22,480 --> 00:06:25,360 Speaker 1: self reliant. So an example of this, for instance, would 120 00:06:25,360 --> 00:06:28,600 Speaker 1: be a company called Syllogy, which is a leading designer 121 00:06:28,680 --> 00:06:35,600 Speaker 1: of integrated circuits for power management. And despite the world economy, 122 00:06:35,680 --> 00:06:39,200 Speaker 1: their revenues have you know, grown about thirty in the 123 00:06:39,240 --> 00:06:42,560 Speaker 1: first half of this year, So that's pretty remarkable. I 124 00:06:42,600 --> 00:06:44,840 Speaker 1: know Indias is something that you mentioned, this long term 125 00:06:44,839 --> 00:06:47,600 Speaker 1: bowl market. Obviously there's a lot of altflows coming out 126 00:06:47,600 --> 00:06:50,239 Speaker 1: of that market with with central banks just not able 127 00:06:50,279 --> 00:06:52,440 Speaker 1: to catch up with the FED. But I wonder how 128 00:06:52,480 --> 00:06:54,600 Speaker 1: long do you think this bowl market in India can 129 00:06:54,640 --> 00:06:57,839 Speaker 1: actually last. I think India can be a bull market 130 00:06:57,880 --> 00:07:02,960 Speaker 1: for many decades UM, but near term is far more UM. 131 00:07:03,440 --> 00:07:05,839 Speaker 1: It's far more problematic because of all the problems we 132 00:07:05,880 --> 00:07:08,360 Speaker 1: have in the world today. I mean, we can't avoid 133 00:07:08,360 --> 00:07:10,760 Speaker 1: the fact that we had a pandemic. We can't avoid 134 00:07:10,800 --> 00:07:13,080 Speaker 1: the fact that there is a war, and that energy 135 00:07:13,080 --> 00:07:16,160 Speaker 1: prices are higher across the board, and we can't avoid 136 00:07:16,240 --> 00:07:17,840 Speaker 1: this thing that people can talk about so much, but 137 00:07:18,720 --> 00:07:22,320 Speaker 1: the aging population across the world, this demographic problem that 138 00:07:22,360 --> 00:07:25,760 Speaker 1: we have worldwide. So all of those are very serious problems. 139 00:07:25,800 --> 00:07:29,840 Speaker 1: And there's capital problem. Capital flight has been a big 140 00:07:29,880 --> 00:07:34,560 Speaker 1: problem since the beginning of this year, for Korea, for India, 141 00:07:34,640 --> 00:07:38,320 Speaker 1: for UM Taiwan. But the good news is that in 142 00:07:38,440 --> 00:07:41,640 Speaker 1: India and Korean in particular, you've seen an increase from 143 00:07:41,680 --> 00:07:44,640 Speaker 1: domestic investors who have taken up some of the slack 144 00:07:45,200 --> 00:07:48,840 Speaker 1: that has been left by the foreign investors. So I mean, 145 00:07:48,880 --> 00:07:50,880 Speaker 1: that's a very good trend because that's what makes a 146 00:07:51,000 --> 00:07:55,080 Speaker 1: market more mature and more um steady, Lada. We're gonna 147 00:07:55,160 --> 00:07:56,560 Speaker 1: leave it there, but thank you so much, Belata on 148 00:07:56,640 --> 00:07:59,640 Speaker 1: their chairman, Adalton Investments. This is Bloomberg