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Speaker 1: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.

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Speaker 1: We know that Chinese officials are moving to revitalize the

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Speaker 1: domestic economy by focusing on domestic consumption, and in a

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Speaker 1: moment we'll take a look at the Chinese consumer as

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Speaker 1: well as consumer behavior right across the Asia Pacific with

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Speaker 1: David Mann. He is the chief economist for the APAC

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Speaker 1: at the MasterCard Economics Institute. But first let's get reaction

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Speaker 1: to the report on US consumer prices. In the month

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Speaker 1: of November, Core CPI was up three tenths of one

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Speaker 1: percent month on month and year on year, a gain

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Speaker 1: of three point three percent. Now, both of these readings

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Speaker 1: were in line with expectations. For a closer look, we're

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Speaker 1: joined by Robert Shine. He is the chief investment officer

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Speaker 1: at Blanky Shine Wealth Management. Robert, thank you so much

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Speaker 1: for making time to chat with us. I think it's

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Speaker 1: fair to say that the CPI print deepened the conviction

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Speaker 1: that the FED is going to cut interest rates next

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Speaker 1: week by twenty five basis points. But I'm wondering when

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Speaker 1: you look at the inflation story here in the US,

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Speaker 1: whether or not you're seeing signs of concern beneath the hood,

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Speaker 1: are you.

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Speaker 2: Well, the market actually cheered from this report, even though

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Speaker 2: we saw it tick up a little bit. Obviously we

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Speaker 2: have PPI as well tomorrow. It's going to give us

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Speaker 2: another sort of indication and read. But the CPI itself,

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Speaker 2: you know, the inflationary impulse underlying in the economy is

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Speaker 2: on a downward trajectory, which is welcome. That's what we

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Speaker 2: need to see, That's what the FED needs to see. Clearly,

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Speaker 2: we had FED fun futures point to a ninety percent

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Speaker 2: cut for next week, so that'll solidify that. But I

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Speaker 2: think the real concern, I think this is what you're

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Speaker 2: asking is in twenty twenty five, the concern is is

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Speaker 2: that inflation rears back right and so it's still stubborn

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Speaker 2: and we see an uptick in inflation which could pull

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Speaker 2: the rug out of under the what we're seeing in

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Speaker 2: terms of the rally. There's a lot of great setup

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Speaker 2: as to why the market can continue to grind high

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Speaker 2: and higher highs in twenty twenty five. But the biggest

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Speaker 2: problem I think for the markets and investors to consider

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Speaker 2: is if inflation is still there and it basically gives

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Speaker 2: the pausing effect on the easing policy for the Federal Reserve.

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Speaker 1: So I'm curious about what the house view a blanket

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Speaker 1: shine is on the outlook for inflation next year.

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Speaker 2: Well, I think you got to look at from a

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Speaker 2: bigger picture. Another reason why the market and the sentiment

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Speaker 2: of the market is the Santa Claus rally is continuing,

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Speaker 2: the trend is your friend, is because of sort of

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Speaker 2: what the new administration's policy by way of the Treasury

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Speaker 2: Secretary Scott Asset and Trump's appointee has basically laid the

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Speaker 2: baseline and he talked about three things that he's going

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Speaker 2: to focus on, which I think from a policy standpoint,

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Speaker 2: are instrumental to combat inflation, but everything else. One is

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Speaker 2: the debt and deficit. So one of the key policy

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Speaker 2: items that was proposed is to get the budget deficit

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Speaker 2: to three percent it's currently at seven. Number two, get

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Speaker 2: the GDP growth from two percent currently to three percent.

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Speaker 2: And number three, which is most important, it's the inflation

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Speaker 2: that we're all worried about, which is increasing. You know, drill,

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Speaker 2: baby drill, so increasing three million barrels a day of

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Speaker 2: currently what we're us is producing. And they're going to

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Speaker 2: deregulate and they're going to increase production. So you know

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Speaker 2: as well as I do. Energy market is within everything,

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Speaker 2: and I think that's the key. So if they could,

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Speaker 2: you know, day one policy, you know one, get that

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Speaker 2: in Washington and get their agenda moving through, that could

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Speaker 2: help subside some of the inflationary pressures.

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Speaker 1: The government is such a powerful influence on the economy.

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Speaker 1: When I'm listening to I'm wondering whether it's possible to

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Speaker 1: reduce fiscal spending by that amount and yet produce economic

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Speaker 1: growth at a rate higher than what we're currently experiencing.

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Speaker 2: Yeah, So if we look back in the last twenty

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Speaker 2: four months, with all of the spending policies and bills

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Speaker 2: that have been enacted, that has been inflationary, and quite frankly,

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Speaker 2: a lot of that money. Like let's look at the

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Speaker 2: Chip Sack. Last I checked this summer, it was a

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Speaker 2: fifty four billion dollar passing of that act and only

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Speaker 2: a billion of the fifty four billion has actually worked

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Speaker 2: its ways in the economy. That's a big problem because

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Speaker 2: there's a lot of money that it still has to

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Speaker 2: be earmarked for the future, and that spending is inflationary,

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Speaker 2: so it's not going to be an easy road ahead.

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Speaker 2: And as you know, eighty seven percent of the time

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Speaker 2: inflation comes on two waves, but it takes some time.

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Speaker 2: So we'll see how this plays out, but that would

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Speaker 2: be the biggest concern in twenty twenty five.

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Speaker 1: So I hear your painting of the landscape, so to speak,

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Speaker 1: and I'm more curious about what it's leading you to

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Speaker 1: do in terms of putting new capital to work in markets.

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Speaker 2: Yeah, So I think twenty twenty five is going to

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Speaker 2: be all its the anticipation that's going to be the theme

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Speaker 2: of the year moving in. And the reason why is

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Speaker 2: one is going to be the Federal reserve right, the

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Speaker 2: easing cycle, the front running of the Fed and trying

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Speaker 2: to guess, you know, how many more cuts are they

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Speaker 2: going to give us, you know, next year, and then

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Speaker 2: all us alongside of that policy anticipation is going to

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Speaker 2: be Washington right, tax reform, energy reform, even immigration in

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Speaker 2: some parts of that as inflationary depending upon how it's

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Speaker 2: going to be handled. So the theme is a lot

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Speaker 2: of unknowns. You have to have sort of a defensive

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Speaker 2: posture with some cash equivalent not cash because cash is

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Speaker 2: not your friend as industrates come down, but has some

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Speaker 2: dry powder on the sidelines available to take advantage of

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Speaker 2: some opportunities coming our way. I do see more volatility

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Speaker 2: because of all the anticipation, meaning the markets are going

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Speaker 2: to front run, you know, some great news and headlines,

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Speaker 2: and then reality might set in, right Congress might you know,

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Speaker 2: might not agree on everything. So we're going to have

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Speaker 2: to wait and see how these plays.

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Speaker 1: So dry powder to deploy when opportunities present themselves on

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Speaker 1: the horizon. Is that a euphemism for a pullback that

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Speaker 1: you're perhaps anticipating in the near term.

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Speaker 2: Yeah, we're long overdue. I can see well into the

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Speaker 2: maybe the first quarter market continues, but you know, any

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Speaker 2: sort of you know, geopolitical or again disappointment from Washington

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Speaker 2: on policy or anything that shows that the federal Reserve

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Speaker 2: is going to have to take a pause, we're going

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Speaker 2: to be pulled back.

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Speaker 1: So where are you on markets offshore, particularly Asia? We

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Speaker 1: know that China has been doing a lot to stimulate

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Speaker 1: the demand side of the equation, not just supply, which

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Speaker 1: is a little new I think for Shi Jinping. Is

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Speaker 1: there anything interesting in your view in markets offshore, particularly Asia?

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Speaker 2: Well, definitely, given what we're seeing in the global markets.

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Speaker 2: You know, we're seeing markets cool off if you will.

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Speaker 2: And so over thirty percent of the global banks have

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Speaker 2: cut right now, and three of the five countries have stimulated,

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Speaker 2: most recently China with that big announcement, and that's you know,

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Speaker 2: long overdue. They've had years of even dealing with that

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Speaker 2: real estate crisis and unwinding that and that takes time.

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Speaker 2: So to get the consumer back in, the investor back in.

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Speaker 2: I think those announcements that the government's willing to stimulate

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Speaker 2: is going to be welcome and they could make the

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Speaker 2: Asian markets more interesting in the new year.

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Speaker 1: We had a report to earlier today being generated by

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Speaker 1: CBS News saying that President elect Trump has invited Chinese

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Speaker 1: President Chi Jinping to Trump's inauguration. It seems like an

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Speaker 1: olive branch, even though the new Trump administration is threatening tariffs.

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Speaker 1: When you look at this relationship US China, what does

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Speaker 1: it lead you to conclude in terms of a new

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Speaker 1: trade relationship. Is it going to become more adversarial or

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Speaker 1: will something new and favorable get worked out at the end.

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Speaker 2: So I would encourage investors to watch actions, not headlines. Right,

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Speaker 2: there's a headline a day that spokes and sircs fear

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Speaker 2: into what might happen, right, the anticipation effect of what

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Speaker 2: might play into the tariff war, if you will, A

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Speaker 2: lot of that's rhetoric. I think if you go back

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Speaker 2: to the very first day of the Trump administration, he

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Speaker 2: jumped on a plane and went over there. That was

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Speaker 2: one of the biggest messages that even though adversarially the

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Speaker 2: headlines and the media and the global communities want to

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Speaker 2: make something of that, by Trump actually making an actionary

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Speaker 2: point to go over there was a very big first step.

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Speaker 2: And obviously he threw on three hundred billion dollars worth

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Speaker 2: of tariffs even though they shook hands and broke bread. However,

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Speaker 2: the Biden administration kept on most, if not all, that

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Speaker 2: three hundred billion in tariffs. So tariffs are in there.

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Speaker 2: I don't see, you know, if we look at Walmart today,

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Speaker 2: I don't see a lot of the goods that come

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Speaker 2: from China on our Walmart shriff shelves in the United States.

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Speaker 2: They haven't gone up exponentially relative to anything else. So

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Speaker 2: they can work. They are a sort of a tool

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Speaker 2: to get somebody to the table to discuss what would

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Speaker 2: be a fair, equitable outcome for all parties.

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Speaker 1: So we're talking about tariffs as one part of the

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Speaker 1: incoming administration's economic policy. But you kind of alluded to

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Speaker 1: this early, which has to do with deregulation. So if

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Speaker 1: we can accept that as an endgame, is it necessarily

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Speaker 1: the case that we're going to see a lot more

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Speaker 1: in the way of merger and acquisition activity.

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Speaker 2: You're exactly right. In fact, if you look at the

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Speaker 2: US markets in the last twenty four months to even

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Speaker 2: thirty six months, we haven't seen IPOs, we haven't seen

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Speaker 2: m and A. But if you start deregulating, think about it, right,

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Speaker 2: energy sector, healthcare sector, and a few others, even the

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Speaker 2: financial sector with the reserves put on banks, and that's

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Speaker 2: where we saw the bank rally since election day here

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Speaker 2: in the US. There's going to unleash some animal spirits

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Speaker 2: in the marketplace and we could see a pickup in

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Speaker 2: M and A and IPOs, and that's where we were

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Speaker 2: confident of markets moving higher in the new year as well.

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Speaker 1: Robert will leave it there, Thank you so much for

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Speaker 1: joining us. Robert Chine is the chief investment officer at

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Speaker 1: Blankie Shine Wealth Management, joining us today from here in

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Speaker 1: New York City on the daybreak. Asia Pont Welcome, back

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Speaker 1: to the Bloomberg Gay Break Asia podcast. I'm Doug Chrisner.

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Speaker 1: As Chinese officials take steps to stimulate their economy, domestic

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Speaker 1: demand is getting a renewed focus. To help us understand

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Speaker 1: the impact, let's bring in David Mann. He is the

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Speaker 1: chief economist for the Asia Pacific at the MasterCard Economics Institute.

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Speaker 1: David joins us from Singapore. Thank you for being with us. David,

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Speaker 1: and I'd like to begin by talking about China. We

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Speaker 1: can get to the rest of the Asia Pacific in

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Speaker 1: a moment. I'd like to get your take on the

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Speaker 1: messaging that we are getting from the polit Bureau meeting

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Speaker 1: and what that may mean for retail consumption in China.

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Speaker 3: Well, I think the best way to think about the

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Speaker 3: change in the messaging that we're seeing from policymakers in

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Speaker 3: China is one in which they're looking to leverage the

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Speaker 3: potential that there is from the consumer spending power that

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Speaker 3: China does have. It has a relatively high savings rate,

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Speaker 3: relatively lower portion of consumer spending within the economy compared

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Speaker 3: to elsewhere. That's partly, of course, as a result of

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Speaker 3: the higher levels of investment that has been in place

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Speaker 3: in China. For many years, but finding ways of releasing

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Speaker 3: some of that consumer spending power, releasing some of those

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Speaker 3: savings and converting them into consumption could really help to

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Speaker 3: support the economy in twenty twenty five. It is one

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Speaker 3: of those key things where whenever we've been asked over

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Speaker 3: the last few years, as we've been watching the weakness

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Speaker 3: and the housing market, the weakness and confidence, the weakness

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Speaker 3: and investment, what could turn this around? What could really help.

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Speaker 3: One of the big things is of course on consumer

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Speaker 3: as well as business confidence and consumer spending. So any

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Speaker 3: measures that put more money in people's pockets give them

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Speaker 3: more confidence in general on their own economic personal economic

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Speaker 3: outlook would of course be things that can then turn

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Speaker 3: into even more of that spending and could really draw

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Speaker 3: a line under the growth rate at least next year.

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Speaker 3: We know long term there are still major challenges with

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Speaker 3: the economy looking at a story of demographics which is

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Speaker 3: in decline as a contributor to growth. But there are

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Speaker 3: a few exciting industries around the world that are popping up,

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Speaker 3: in particular being driven or supported by AI and automation

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Speaker 3: that can really help to counter some of that demographic drag.

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Speaker 3: But that extra spending that you could get from the

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Speaker 3: consumer side would be very welcome. We would expect amidst

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Speaker 3: the sort of challenges that Channa's economy faces today and

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Speaker 3: we'll be facing throughout next year.

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Speaker 1: I think it's very significant that the focus now seems

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Speaker 1: to be on revitalizing domestic consumption rather than just dealing

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Speaker 1: with the supply side. Is that striking to you in

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Speaker 1: any way?

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Speaker 3: Yes, it does make a lot of sense that after

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Speaker 3: so many years where you can't really argue that there's

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Speaker 3: a lack of infrastructure that enables growth, that there's plenty

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Speaker 3: of that that's been built out over the last several decades,

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Speaker 3: that really it is more about the demand rather than

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Speaker 3: the supply side in the economy. Of course, with investment also,

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Speaker 3: we do note that because there has been that trend

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Speaker 3: slowing in growth in China, companies even from China are

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Speaker 3: looking to invest more outside of the country and going

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Speaker 3: out to find more growth opportunities, whether it's all around

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Speaker 3: the rest of the Asia Pacific region or even further afield.

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Speaker 3: And so for the domestic economy, the investment side is

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Speaker 3: probably is already that much softer, and so there's even

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Speaker 3: more of that shift in the direction of having the

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Speaker 3: higher portion of consumer spending that you see in other

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Speaker 3: major economies. We think that is the sort of trend

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Speaker 3: that makes a lot of sense in the case of China,

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Speaker 3: that we should go in that direction.

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Speaker 1: Do you have a sense of the ripple effect and

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Speaker 1: how this economic stimulus may kind of filter through markets

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Speaker 1: across the Asia Pacific.

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Speaker 3: That one is more of an open question until we

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Speaker 3: know more about the specific details. The one thing that

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Speaker 3: we look at at the MasterCard economic sensitie when thinking

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Speaker 3: about the outlook for say, other parts of the region

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Speaker 3: and what the impact is from other major economies around

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Speaker 3: the world, whether it's the US or China, as the

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Speaker 3: case may be, the two biggest economies. The big one

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Speaker 3: we're focusing on is through the lens on travel, and

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Speaker 3: on that front, we have not yet seen the complete recovery,

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Speaker 3: at least looking at the official travel data that we

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Speaker 3: can get from China for the outbound traveler going all

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Speaker 3: around the region or anywhere else coming from China. Now,

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Speaker 3: this is something that still means there is a source

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Speaker 3: of extra recovery still yet to actually happen in that space.

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Speaker 3: The interesting thing though, is when we do see it,

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Speaker 3: is it a more confident traveler or is it a

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Speaker 3: more cautious traveler. When you look at some of the

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Speaker 3: data we've been seeing, for example, out of say, there

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Speaker 3: is more evidence that there is a softer spending than

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Speaker 3: used to be the case, that there are people that

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Speaker 3: are traveling in not spending quite the same way that

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Speaker 3: they used to in twenty nineteen. But at the same time,

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Speaker 3: we're not fully back on the economy itself in being

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Speaker 3: in a stronger position. Neither are we fully back on

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Speaker 3: the total volumes of people, So just the shar volume

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Speaker 3: story would be helpful. Another location where also this is

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Speaker 3: a major focus is Thailand, for example, in the region

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Speaker 3: where China pre pandemic was such an important source market

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Speaker 3: for the tourism industry, and we think that will go back.

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Speaker 2: In that direction again.

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Speaker 3: But in the meantime, while the China recovery has not

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Speaker 3: been full, we have been seeing other markets, including further

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Speaker 3: afield in Europe or the US, but particularly including India,

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Speaker 3: starting to fill in some of those gaps all around

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Speaker 3: the region, actually including in Thailand Vietnam for example. We

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Speaker 3: noted in our travel report earlier this year that it

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Speaker 3: is it now sees two and a half as many

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Speaker 3: times travelers coming from India into Vietnam compared to where

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Speaker 3: we were in twenty nineteen, and with the projections we

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Speaker 3: have for the scale of the rise of the middle

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Speaker 3: class and the upper income consumers in India over the

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Speaker 3: next ten to fifteen years, the total numbers of people

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Speaker 3: traveling could be approaching the sort of numbers that we

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Speaker 3: had pre pandemic out of China over the next fifty

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Speaker 3: or by the end of the next fifteen years.

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Speaker 1: We can't lose sight of the fact that the US

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Speaker 1: and China are bracing for what appears to be a

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Speaker 1: renewed standoff. This obviously after Donald Trump campaigned on implementing

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Speaker 1: some fresh tariffs on all Chinese goods, Do you have

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Speaker 1: a sense of the impact? Maybe that's too much to

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Speaker 1: say at this point. I mean, perhaps the thread of

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Speaker 1: tariffs is a negotiating ploy, but let's assume for the

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Speaker 1: moment that some are implemented. Do you have a sense

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Speaker 1: of what the impact may be, not only in China

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Speaker 1: but in the APAC more generally.

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Speaker 3: Well, the main thing, I think the main thing people

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Speaker 3: focus on, rightly so at first, is on Okay, how

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Speaker 3: bad is it, how damaging is this to the amount

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Speaker 3: of exports, for example, that we would see going directly

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Speaker 3: from China into the US as we saw last time around.

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Speaker 3: Though I would note that the ratio of China's exports

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Speaker 3: to global exports is about the same as it was

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Speaker 3: even compared to before twenty seventeen, so the main change

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Speaker 3: has been China exporting more to other places around the world.

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Speaker 3: The other thing is, if we do see that weaker demand,

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Speaker 3: the weaker overall growth number, it certainly adds to the

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Speaker 3: reasons why you would then see even more of the

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Speaker 3: stimulus measures and even more of that much broader based,

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Speaker 3: stronger types of stimulus measures out of China to counter it. Now,

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Speaker 3: the other thing, those are the points with the negatives

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Speaker 3: and how to counter it. The other thing we should

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Speaker 3: be also focusing on is this also may well be

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Speaker 3: adding to an acceleration of FDI inflows into many other markets,

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Speaker 3: whether it's around the Asian region including Vietnam, or over

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Speaker 3: into parts of Africa, or even into India, where we

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Speaker 3: see even more diversification of supply chains. Even more companies

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Speaker 3: around the world from all parts of the world, whether

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Speaker 3: it's from the Asia Pacific or from the US or Europe.

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Speaker 3: Looking to be producing in multiple locations. Of course it

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Speaker 3: needs to make economic sense, but that's spreading out of

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Speaker 3: where it goes and seeing more of those FDI flows.

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Speaker 3: That is something we were very focused on, and we

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Speaker 3: would note that actually the outbound FDI, the cumulative amount

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Speaker 3: of FDI that China has been accumulating in the last

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Speaker 3: few years has been quite noteworthy already and that would

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Speaker 3: most likely also accelerate.

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Speaker 1: So you're obviously in Singapore, I'm here in New York City.

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Speaker 1: Is there something that people in my neck of the

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Speaker 1: woods are missing when it comes to understanding the dynamics

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Speaker 1: right now? The economic dynamics across the Asia Pacific.

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Speaker 3: I think the main thing that I would stress is

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Speaker 3: there's so many different stories to be told across the

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Speaker 3: Asia Pacific region. So we can talk of course I

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Speaker 3: mentioned China and India earlier, but even within say the

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Speaker 3: Asian region, which is a collection of very divergent markets

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Speaker 3: all the way from low Cambodia through to Singapore which

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Speaker 3: is a high income advanced economy. That is I think

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Speaker 3: the key thing to be watching for that there's so

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Speaker 3: many stories all the way through and everything in between.

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Speaker 3: When we think of the major the biggest market in

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Speaker 3: the Asian region in Southeast Asia being Indonesia, and the

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Speaker 3: key thing I think that is really going on that

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Speaker 3: I think has been underappreciated, maybe on a global scale

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Speaker 3: at least, is just how many reforms we have been

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Speaker 3: seeing that are helping to boost investment and growth around

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Speaker 3: this region. I mentioned India. I think that is a

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Speaker 3: top story in that regard, given it is a place

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Speaker 3: where we believe it will be the fastest growing major

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Speaker 3: sized economy in the region, and indeed even globally, it

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Speaker 3: also has the scale of population to go alongside that

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Speaker 3: growth potential. But on top of that, places like Indonesia

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Speaker 3: also have been implementing policy reforms, finding ways or looking

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Speaker 3: for new ways to boost key sectors of the economy,

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Speaker 3: whether it's tourism or other types of infrastructure buildouts that

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Speaker 3: would enable even more growth on the industrial side. I

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Speaker 3: think that's the other thing now on top of that,

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Speaker 3: I would stress, and that's particularly where we bring in

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Speaker 3: Northeast Asia as well in Southeast Asia, is thinking about

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Speaker 3: just how much innovation we've been seeing that now is

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Speaker 3: coming from this region in terms of just how rapidly

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Speaker 3: so much new technology was being developed or new approaches

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Speaker 3: were being developed and rolled out in Asia Pacific and

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Speaker 3: then being rolled out to the West. I think expecting

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Speaker 3: it to be a source of innovation even more in

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Speaker 3: the future is another thing that I think really folks

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Speaker 3: should pay a close attention.

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Speaker 1: To, and we will, I'm sure in the year ahead.

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Speaker 1: David Tank, thank you so much for being with us.

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Speaker 1: David Mann there, chief economist for the Asia Pacific for

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Speaker 1: the MasterCard Economics Institute, joining us from Singapore here on

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Speaker 1: the Daybreak Asia podcast. Thanks for listening to today's episode

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Speaker 1: of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we

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Speaker 1: look at the story shaping markets, finance, and geopolitics in

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Speaker 1: the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 1: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 1: Join us again tomorrow for insight on the market moves

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Speaker 1: from Hong Kong to Singapore and Australia. I'm Doug Chrisner,

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Speaker 1: and this is Bloomberg