1 00:00:00,080 --> 00:00:02,440 Speaker 1: Let's get to our guest, Jung Chi Way is with 2 00:00:02,520 --> 00:00:06,120 Speaker 1: US president and chief economist at Pinpoint Asset Management, who 3 00:00:06,200 --> 00:00:10,440 Speaker 1: joins from the Chinese mainland, the city of shenzen ji Wi. 4 00:00:11,160 --> 00:00:12,840 Speaker 1: Thanks for being with us. I think we have to 5 00:00:12,920 --> 00:00:16,680 Speaker 1: focus on how the market is taking the pivot here 6 00:00:16,720 --> 00:00:19,880 Speaker 1: in the COVID story in China, where local authorities now, 7 00:00:19,920 --> 00:00:22,760 Speaker 1: as we can clearly see, we're hearing they're beginning to 8 00:00:22,760 --> 00:00:25,759 Speaker 1: relax some of the most strict control measures, and the 9 00:00:25,800 --> 00:00:30,120 Speaker 1: market in Hong Kong is simply exploding to the upside. Here, 10 00:00:30,160 --> 00:00:33,159 Speaker 1: I'm Morgan Stanley. I think one of the latest firms 11 00:00:33,200 --> 00:00:36,479 Speaker 1: to turn bullish once again on Chinese stocks. Do you 12 00:00:36,560 --> 00:00:41,000 Speaker 1: think this is durable? Yes, I think very much so. 13 00:00:41,240 --> 00:00:44,400 Speaker 1: I think the the rally is going to be sustained 14 00:00:44,400 --> 00:00:48,120 Speaker 1: well into next year because this is a very big 15 00:00:48,200 --> 00:00:51,640 Speaker 1: change of policy, and I think the government has moved 16 00:00:51,760 --> 00:00:54,200 Speaker 1: beyond the point of no return. I think the what 17 00:00:54,360 --> 00:00:56,920 Speaker 1: happened in the past two weeks um, you know, even 18 00:00:56,960 --> 00:01:00,360 Speaker 1: for us on the ground is is very shark That 19 00:01:00,880 --> 00:01:04,240 Speaker 1: is is one D eighty debred you turn that made 20 00:01:04,600 --> 00:01:08,720 Speaker 1: within you know, practically days rather than months. So that's 21 00:01:09,080 --> 00:01:12,800 Speaker 1: way beyond the investors expected um and I think this 22 00:01:13,040 --> 00:01:17,120 Speaker 1: process is irreversible now irreversible, but it's probably going to 23 00:01:17,160 --> 00:01:20,399 Speaker 1: be a bumpy road out. The experience of other countries 24 00:01:20,480 --> 00:01:25,160 Speaker 1: is to be replicated with rising absenteeism that sort of thing. 25 00:01:25,200 --> 00:01:30,840 Speaker 1: What difficulties and challenges do you foresee around the supply chain? Absolutely, 26 00:01:30,880 --> 00:01:33,759 Speaker 1: you're right. I think that's a major concern. I think 27 00:01:33,840 --> 00:01:37,280 Speaker 1: for the global economy is that in the next several months, 28 00:01:37,840 --> 00:01:42,000 Speaker 1: I would expect Chinese factories not running at full capacity. 29 00:01:42,120 --> 00:01:45,600 Speaker 1: And what you observed in the past, maybe several weeks ago, 30 00:01:45,640 --> 00:01:48,760 Speaker 1: what happened in iPhones City in John Joudi Foxcong having 31 00:01:48,800 --> 00:01:52,120 Speaker 1: trouble to find um, you know, enough workers to to 32 00:01:52,240 --> 00:01:56,600 Speaker 1: assemble iPhones. That's likely to happen to many more factories 33 00:01:57,040 --> 00:02:01,120 Speaker 1: and that will hurt global supply chains. You know, investors 34 00:02:01,200 --> 00:02:03,760 Speaker 1: need to watch out for this. Particularly this is very 35 00:02:03,800 --> 00:02:07,640 Speaker 1: relevant for you know, inflation outlooking the U S and 36 00:02:07,680 --> 00:02:11,200 Speaker 1: so on. But you know, locally, in trying to underground 37 00:02:11,320 --> 00:02:15,360 Speaker 1: people are getting very bullish despite of the you know, 38 00:02:15,400 --> 00:02:18,720 Speaker 1: the shorter challenge as in people as you pointed out, 39 00:02:19,160 --> 00:02:22,160 Speaker 1: you know already look through what happened in like what 40 00:02:22,280 --> 00:02:25,120 Speaker 1: happening in Hong Kong and Singapore in the rest of 41 00:02:25,120 --> 00:02:27,600 Speaker 1: the world. The first several months, it's going to be 42 00:02:27,720 --> 00:02:32,000 Speaker 1: very challenging. But what made people more confident is the 43 00:02:32,040 --> 00:02:35,119 Speaker 1: second half of next year, the rebound becomes a lot 44 00:02:35,200 --> 00:02:37,520 Speaker 1: more certain than before. I'm wondering if we can go 45 00:02:37,639 --> 00:02:40,080 Speaker 1: so far as to say that if you look at 46 00:02:40,120 --> 00:02:44,720 Speaker 1: these easing measures, it has the country abandoned COVID zero 47 00:02:44,880 --> 00:02:47,919 Speaker 1: or is that a little too far to go at 48 00:02:47,919 --> 00:02:52,600 Speaker 1: this point. Yeah, well, there's no official announcement that they're 49 00:02:52,720 --> 00:02:55,839 Speaker 1: you know, giving up the zero COVID of policy. But effectively, 50 00:02:55,840 --> 00:02:58,600 Speaker 1: on the ground, I would say, um, the policy has 51 00:02:58,680 --> 00:03:03,200 Speaker 1: changed in the very significant way. I would say, you know, 52 00:03:04,000 --> 00:03:06,160 Speaker 1: if it is as I mentioned, you know, we passed 53 00:03:06,160 --> 00:03:09,000 Speaker 1: the point of no retire, so this becomes irreversible that 54 00:03:09,400 --> 00:03:13,600 Speaker 1: China is moving away from the zero COVID of policy 55 00:03:13,639 --> 00:03:16,239 Speaker 1: and and and decided to late into a reopening phase. 56 00:03:16,760 --> 00:03:19,760 Speaker 1: And the bigger question now is how long this transitional 57 00:03:19,880 --> 00:03:24,360 Speaker 1: period will be. And I think you know in the past, Um, 58 00:03:24,560 --> 00:03:27,040 Speaker 1: you know, if you ask me this question, say three 59 00:03:27,080 --> 00:03:30,720 Speaker 1: weeks ago, I would say the transition period may last 60 00:03:30,760 --> 00:03:33,960 Speaker 1: to say, six or twelve months. Well, you could last 61 00:03:34,160 --> 00:03:36,280 Speaker 1: all the way into the end of next year. We 62 00:03:36,440 --> 00:03:39,760 Speaker 1: just had a Paul just mentioned the Taichin private p 63 00:03:39,920 --> 00:03:43,760 Speaker 1: m I services figure. I guess we're in contraction now 64 00:03:44,040 --> 00:03:47,800 Speaker 1: even further that this is really not surprising to your point. 65 00:03:47,880 --> 00:03:51,200 Speaker 1: Though we may have reached an inflection point with the 66 00:03:51,280 --> 00:03:54,200 Speaker 1: relaxation of some of the COVID curbs, the question is 67 00:03:55,120 --> 00:03:58,280 Speaker 1: the time that it's going to take to actually fully recover. 68 00:03:58,480 --> 00:04:00,200 Speaker 1: And and I think that we need to it a 69 00:04:00,280 --> 00:04:02,960 Speaker 1: pin or at least maybe a caveat in place, saying 70 00:04:03,280 --> 00:04:06,880 Speaker 1: that it's contingent upon the number of infections and how 71 00:04:07,200 --> 00:04:10,880 Speaker 1: I would imagine the health care system in China is stressed. 72 00:04:11,680 --> 00:04:14,920 Speaker 1: Would you blame a company, any company that does business 73 00:04:15,160 --> 00:04:18,680 Speaker 1: on the mainland in either the form of outright production 74 00:04:18,760 --> 00:04:22,120 Speaker 1: or part of its supply chain for kind of thinking 75 00:04:22,160 --> 00:04:25,200 Speaker 1: again about the risk of being so exposed to China 76 00:04:25,240 --> 00:04:30,039 Speaker 1: when you're dealing with a government that is so draconian 77 00:04:30,120 --> 00:04:32,440 Speaker 1: and some of the measures that it that it seeks 78 00:04:32,480 --> 00:04:38,000 Speaker 1: to impose on on managing an economy. Yeah, I think 79 00:04:38,040 --> 00:04:41,479 Speaker 1: there there's a lot of new risks everybody needs to 80 00:04:41,520 --> 00:04:44,359 Speaker 1: think about in this new world of this day. And 81 00:04:44,400 --> 00:04:48,120 Speaker 1: I think the multinational companies right how to you know, 82 00:04:48,160 --> 00:04:52,960 Speaker 1: make their supply chains more resilient to a geopolitical risk 83 00:04:53,000 --> 00:04:56,080 Speaker 1: and all kind of other economic non economic factors. Right, 84 00:04:56,120 --> 00:04:58,960 Speaker 1: So I think that's that's happening, that that's that is 85 00:04:59,000 --> 00:05:02,600 Speaker 1: a reality that we have to devoice. Now. Having said that, 86 00:05:02,720 --> 00:05:06,200 Speaker 1: I think the the sentiment for you know, if you 87 00:05:06,320 --> 00:05:10,360 Speaker 1: do a survey among all these multinational companies, um, you know, 88 00:05:10,400 --> 00:05:14,000 Speaker 1: compare the current survey relative to say three months ago, 89 00:05:14,440 --> 00:05:17,080 Speaker 1: I think the survey may become a little bit better, 90 00:05:17,640 --> 00:05:19,960 Speaker 1: The sentiment may become a little bit better, and you 91 00:05:20,000 --> 00:05:21,800 Speaker 1: know the same as you know what you observe in 92 00:05:22,000 --> 00:05:25,240 Speaker 1: the stock market. The reason being, the government is moving 93 00:05:25,279 --> 00:05:28,240 Speaker 1: away from this zero covie policy a lot faster than 94 00:05:28,360 --> 00:05:32,039 Speaker 1: people expected. So six months, one year down the road, 95 00:05:32,520 --> 00:05:36,839 Speaker 1: the economy hopefully back to Walmer. Now, that doesn't change 96 00:05:36,880 --> 00:05:40,120 Speaker 1: the trend that some of the supply chains will really 97 00:05:40,160 --> 00:05:43,839 Speaker 1: reallocate away from China to say Vietnam and India, you know, 98 00:05:44,279 --> 00:05:48,640 Speaker 1: the less developed countries. That's a macro trend um that 99 00:05:48,800 --> 00:05:53,360 Speaker 1: driven by economic fundamentals. Um. But compared to three months ago, 100 00:05:53,520 --> 00:05:56,760 Speaker 1: you may actually become a little bit better. Um. So 101 00:05:56,760 --> 00:05:58,880 Speaker 1: so you know, this is a you know, it's it's 102 00:05:58,880 --> 00:06:01,440 Speaker 1: a complicated and and it depends on who you ask 103 00:06:01,520 --> 00:06:05,679 Speaker 1: as well. Right, what's the challenge for policymakers here, because 104 00:06:06,200 --> 00:06:09,080 Speaker 1: you know, the the relaxation of COVID zero obviously being 105 00:06:09,160 --> 00:06:12,320 Speaker 1: very formally welcomed by markets, doubtless the people of China 106 00:06:12,400 --> 00:06:15,720 Speaker 1: as well. But it's a pretty fine line to walk 107 00:06:16,000 --> 00:06:20,600 Speaker 1: ahead in terms of stimulus and supporting the economy. Yeah, yeah, absolutely. 108 00:06:20,680 --> 00:06:23,919 Speaker 1: I think the you know, after the Party Congress, we 109 00:06:24,040 --> 00:06:29,920 Speaker 1: have a very different um group of leaders who will 110 00:06:29,960 --> 00:06:32,760 Speaker 1: take over in March next year, so we have you know, 111 00:06:33,080 --> 00:06:35,680 Speaker 1: a new Prime Minister and new Central Bank governor, new 112 00:06:35,720 --> 00:06:39,360 Speaker 1: Minister of Finance, UM. And I would expect quite a 113 00:06:39,440 --> 00:06:42,719 Speaker 1: lot of policy and prises to come as well. Um 114 00:06:42,880 --> 00:06:47,279 Speaker 1: and you know, they this is only what several weeks 115 00:06:47,279 --> 00:06:50,039 Speaker 1: after the Party Congress, we already had a U turn 116 00:06:50,040 --> 00:06:53,680 Speaker 1: in zero COVID policy, a U turn property in sector policy. 117 00:06:54,160 --> 00:06:56,839 Speaker 1: I think there will probably will be uh, you know, 118 00:06:56,920 --> 00:07:01,320 Speaker 1: more stimulus on say fiscal round as well to happen 119 00:07:01,440 --> 00:07:04,039 Speaker 1: in the in the next few months. UM. I think 120 00:07:04,040 --> 00:07:06,440 Speaker 1: the market is already getting quite excited because of that 121 00:07:06,640 --> 00:07:11,560 Speaker 1: to anticipate more stimulus coming and um and they probably will, 122 00:07:11,600 --> 00:07:13,800 Speaker 1: and that there's a big question whether they will push 123 00:07:13,880 --> 00:07:16,760 Speaker 1: consumption like what what the US did right, sent checks 124 00:07:16,800 --> 00:07:20,480 Speaker 1: to household that's the most direct way to boost consumption, 125 00:07:20,520 --> 00:07:23,880 Speaker 1: which is very weak at this moment. Let's see, I 126 00:07:23,880 --> 00:07:26,840 Speaker 1: mean g Way very quickly thirty seconds in the time 127 00:07:26,880 --> 00:07:30,120 Speaker 1: that we have left. In terms of managing the currency. 128 00:07:30,240 --> 00:07:32,160 Speaker 1: Right now, we're seeing a lot of strength today in 129 00:07:32,200 --> 00:07:35,600 Speaker 1: the offshore. Is there a point at which the p 130 00:07:35,640 --> 00:07:38,840 Speaker 1: BOC would be a little too concerned about the speed 131 00:07:38,920 --> 00:07:43,440 Speaker 1: of strengthening. No, I don't think they're that concerned at 132 00:07:43,440 --> 00:07:46,880 Speaker 1: this moment. Also, I doubt the currency will was trans 133 00:07:47,080 --> 00:07:50,200 Speaker 1: a lot more because you know, once trying to open 134 00:07:50,320 --> 00:07:53,640 Speaker 1: up Chinese over will travel overseas, will spend money in 135 00:07:53,760 --> 00:07:56,600 Speaker 1: other countries, and that will put pressure on the currency 136 00:07:56,640 --> 00:08:00,960 Speaker 1: to depreciate or or new reverse so speaks. I'm not 137 00:08:01,000 --> 00:08:04,240 Speaker 1: that barried about it, all right, jan Ji Way, presidents 138 00:08:04,400 --> 00:08:07,600 Speaker 1: and chief economists at Pinpoint Asset Management, Thanks so much 139 00:08:07,600 --> 00:08:08,200 Speaker 1: for joining us.