1 00:00:00,040 --> 00:00:02,680 Speaker 1: Let's get to our guest, John Vale, chief Global strategist 2 00:00:02,759 --> 00:00:06,640 Speaker 1: at NICO Asset Management. John, we had Pria Misra on 3 00:00:06,680 --> 00:00:10,160 Speaker 1: the show earlier from TV Securities and and and she 4 00:00:10,280 --> 00:00:12,959 Speaker 1: basically was saying that, you know this, the question is 5 00:00:13,000 --> 00:00:16,760 Speaker 1: whether the narrative of front loading comes to an end. 6 00:00:17,440 --> 00:00:19,279 Speaker 1: And it's the point that I made a lot last 7 00:00:19,280 --> 00:00:22,000 Speaker 1: week that you can't say you're front loading and then 8 00:00:22,560 --> 00:00:25,080 Speaker 1: you know that's the whole Tomali. I mean, at some 9 00:00:25,160 --> 00:00:27,960 Speaker 1: point you have to move into like your mid stage 10 00:00:28,000 --> 00:00:30,760 Speaker 1: and your closing stage. And they've done a lot and 11 00:00:30,760 --> 00:00:33,440 Speaker 1: they're bound to say at some point here that they 12 00:00:33,479 --> 00:00:36,360 Speaker 1: want to take a look and assess our markets. Right 13 00:00:36,479 --> 00:00:43,080 Speaker 1: to celebrate that or should they still be very wary? Well, yeah, 14 00:00:43,080 --> 00:00:46,280 Speaker 1: Pria is a very smart lady. Uh, but I tend 15 00:00:46,320 --> 00:00:49,800 Speaker 1: to agree with you that everybody knew that they would 16 00:00:49,800 --> 00:00:53,880 Speaker 1: be hiking at a less fast rate going forward. Um, 17 00:00:53,920 --> 00:00:56,880 Speaker 1: but the market is also thinking that is not going 18 00:00:56,960 --> 00:01:00,560 Speaker 1: to cut as much as they previously thought. Um. That's 19 00:01:00,600 --> 00:01:04,080 Speaker 1: the big news that for three the Fed Fund futures 20 00:01:04,120 --> 00:01:08,880 Speaker 1: contract is suggesting a lot less hiking. Not a lot less, 21 00:01:08,920 --> 00:01:12,440 Speaker 1: but quite a bit less hiking than they previously expected. 22 00:01:13,920 --> 00:01:17,920 Speaker 1: What about in terms of inflation, it is remaining stubbornly high. 23 00:01:17,959 --> 00:01:20,640 Speaker 1: But then again it is a backward looking number. So 24 00:01:21,000 --> 00:01:23,200 Speaker 1: to what degreedio since the FIT has done enough in 25 00:01:23,240 --> 00:01:27,600 Speaker 1: this fight. Well, I don't think anybody really knows for sure, 26 00:01:27,680 --> 00:01:30,720 Speaker 1: but it's other than it's coming down. Um, But everybody 27 00:01:30,720 --> 00:01:33,640 Speaker 1: knows that ask the question how far um. There's a 28 00:01:33,680 --> 00:01:36,160 Speaker 1: lot of structural things that will help it fall in, 29 00:01:37,440 --> 00:01:41,800 Speaker 1: including the CPI medical services component, which is going to 30 00:01:41,920 --> 00:01:46,080 Speaker 1: be growing at a lot lower pace based on the 31 00:01:46,080 --> 00:01:49,840 Speaker 1: way the BLS UH does it sort of annual benchmarking 32 00:01:49,880 --> 00:01:52,560 Speaker 1: of the number. So that's going to be a restraint 33 00:01:52,760 --> 00:01:56,800 Speaker 1: on course e p I and headline CPI. UM. But 34 00:01:57,280 --> 00:02:00,280 Speaker 1: on the other hand, rents obviously gonna keep going up 35 00:02:00,320 --> 00:02:04,080 Speaker 1: as the CPI catches up as new leases are signed. 36 00:02:05,360 --> 00:02:08,040 Speaker 1: So at some point when we see, you know, some 37 00:02:08,160 --> 00:02:10,560 Speaker 1: signal that they'll slow down at the at the FED 38 00:02:10,600 --> 00:02:14,200 Speaker 1: and other central banks, you probably would see the dollar 39 00:02:14,520 --> 00:02:19,119 Speaker 1: come down and and local currencies go up. So if 40 00:02:19,120 --> 00:02:21,320 Speaker 1: I don't want to play equities, can I at least 41 00:02:21,320 --> 00:02:24,679 Speaker 1: play local currency bonds and hope that Um. Yeah, I 42 00:02:24,680 --> 00:02:26,760 Speaker 1: get sort of a double whammy there where you get 43 00:02:26,760 --> 00:02:29,799 Speaker 1: the good yield. That's actually a triple whammy. You get 44 00:02:29,800 --> 00:02:32,480 Speaker 1: the good yield, you get the bond going up, and 45 00:02:32,480 --> 00:02:34,320 Speaker 1: then you get the currency in your in your back 46 00:02:34,360 --> 00:02:39,799 Speaker 1: pocket as well. I like that idea sounds pretty good. Well, well, 47 00:02:39,840 --> 00:02:42,320 Speaker 1: here's the danger though, okay, And I know that you're 48 00:02:42,320 --> 00:02:45,560 Speaker 1: a japan expert, so it kind of feeds into the problem. 49 00:02:45,600 --> 00:02:48,000 Speaker 1: Is if if the dollar goes down on the end 50 00:02:48,040 --> 00:02:50,280 Speaker 1: goes up, that may not be good for Japanese equities. 51 00:02:50,320 --> 00:02:52,920 Speaker 1: It's one place where they seem to love a weak currency. 52 00:02:54,760 --> 00:02:57,320 Speaker 1: Well yes, I mean that would be a headwind for 53 00:02:57,440 --> 00:03:00,760 Speaker 1: corporate profits here, but it would also increase the foreign 54 00:03:00,800 --> 00:03:04,560 Speaker 1: interest in this country if they could, if they could 55 00:03:04,600 --> 00:03:08,560 Speaker 1: invest in Japan without losing money on the currency side, 56 00:03:08,600 --> 00:03:11,679 Speaker 1: and the evaluations here are so low it's it's got 57 00:03:11,680 --> 00:03:13,920 Speaker 1: to be attractive to foreigners at some point, but a 58 00:03:13,919 --> 00:03:15,760 Speaker 1: lot of them have been shying away because of the 59 00:03:15,840 --> 00:03:20,000 Speaker 1: currency factor. And John, we were discussing a moment ago 60 00:03:20,120 --> 00:03:23,880 Speaker 1: the end its effects on Japanese equities, but in terms 61 00:03:23,880 --> 00:03:28,680 Speaker 1: of the level of the end one right now, the 62 00:03:28,800 --> 00:03:32,760 Speaker 1: rhetoric around strengthening that seems to have died down a little. 63 00:03:32,800 --> 00:03:35,840 Speaker 1: Do you do you sense that policymakers are now comfortable 64 00:03:35,920 --> 00:03:40,200 Speaker 1: with where we are. We at the bottom. UM. Well, 65 00:03:40,240 --> 00:03:43,680 Speaker 1: the policy of the Ministry of Finance, who controls the 66 00:03:43,720 --> 00:03:48,360 Speaker 1: intervention situation is not the b o J, which actually 67 00:03:48,360 --> 00:03:52,680 Speaker 1: is just they're broker. UM is not to stop the 68 00:03:52,840 --> 00:03:57,280 Speaker 1: end from depreciating. It's just to reduce the volatility and 69 00:03:58,080 --> 00:04:01,640 Speaker 1: making sure that nobody thinks it's a one way at UM. 70 00:04:01,680 --> 00:04:05,800 Speaker 1: And they've succeeded in that regard and that volatility has decreased. 71 00:04:06,600 --> 00:04:10,200 Speaker 1: But I don't think they're targeting anyone particular yen rate 72 00:04:10,880 --> 00:04:15,720 Speaker 1: and UM, they just get very upset and rightly so 73 00:04:16,240 --> 00:04:20,479 Speaker 1: when it when it spikes. I promised that we would 74 00:04:20,520 --> 00:04:23,360 Speaker 1: talk a little bit about China. Um, let's let's talk 75 00:04:23,360 --> 00:04:25,960 Speaker 1: a little bit about the party congress. UM. Some in 76 00:04:26,040 --> 00:04:28,679 Speaker 1: the marketplace are saying, you know, this kind of marks 77 00:04:28,680 --> 00:04:31,839 Speaker 1: a big change, the end of of the pro growth period, 78 00:04:32,279 --> 00:04:35,840 Speaker 1: and that the humiliating send off that Jujent Tao was 79 00:04:35,920 --> 00:04:39,400 Speaker 1: given was a strong signal that a new era has begun. 80 00:04:39,880 --> 00:04:42,200 Speaker 1: Does that sound scary for investors or do you think 81 00:04:42,240 --> 00:04:46,560 Speaker 1: it's all just a little bit of an overreaction. I 82 00:04:46,600 --> 00:04:51,240 Speaker 1: don't know about scary, but it's worrisome, uh, clearly, UM. 83 00:04:51,320 --> 00:04:54,080 Speaker 1: And they've certainly promised after that that they're going to 84 00:04:54,240 --> 00:04:58,320 Speaker 1: be uh not so uh tough as a market is 85 00:04:58,320 --> 00:05:01,440 Speaker 1: sort of talking about right now, there's still you know, 86 00:05:01,520 --> 00:05:06,680 Speaker 1: pro economic growth and everything else that should should help. Um. 87 00:05:06,720 --> 00:05:10,120 Speaker 1: But yeah, it is worrisome, um that they don't have 88 00:05:10,160 --> 00:05:14,479 Speaker 1: any real technocrats, um, sort of at the top, and 89 00:05:14,600 --> 00:05:18,120 Speaker 1: that uh, maybe it's even supposed to be worrisome that 90 00:05:18,240 --> 00:05:21,320 Speaker 1: it's supposed to tell everybody that you know, they're really 91 00:05:21,360 --> 00:05:26,640 Speaker 1: serious about their national security situation. It's very unhappy relationship 92 00:05:26,720 --> 00:05:29,520 Speaker 1: with the rest of the world at this uh, at 93 00:05:29,560 --> 00:05:33,960 Speaker 1: this point for both sides. So it's certainly you've been 94 00:05:34,120 --> 00:05:37,560 Speaker 1: worrisome for it quite some time. UM, and maybe it's 95 00:05:37,560 --> 00:05:42,120 Speaker 1: even a little bit more worrisome now. From an investing perspective, though, 96 00:05:42,120 --> 00:05:44,680 Speaker 1: it is very hard to turn your back on the 97 00:05:44,680 --> 00:05:49,240 Speaker 1: world's second largest economy, never mind the political climate. So 98 00:05:49,440 --> 00:05:53,440 Speaker 1: how do you invest around this? Well, you're right that 99 00:05:53,560 --> 00:05:57,000 Speaker 1: it's a very big portion of the Emerging Markets ms 100 00:05:57,080 --> 00:05:59,799 Speaker 1: c I index, and some people are starting to strip 101 00:05:59,800 --> 00:06:04,800 Speaker 1: it out, um, as far as I've heard from the States, Uh, 102 00:06:04,920 --> 00:06:08,200 Speaker 1: primarily for E s G reasons, I believe, but it's 103 00:06:08,240 --> 00:06:12,480 Speaker 1: also maybe just for diversification reasons, so, but you're right. 104 00:06:12,520 --> 00:06:14,480 Speaker 1: I mean, it's a big part of the index. If 105 00:06:14,480 --> 00:06:16,760 Speaker 1: you're a passive investor, you're gonna be having a lot 106 00:06:16,800 --> 00:06:21,160 Speaker 1: of money in in UH in China. And you know, 107 00:06:21,320 --> 00:06:25,600 Speaker 1: it's a very difficult obviously to invest in China that 108 00:06:25,640 --> 00:06:29,000 Speaker 1: the information is quite limited at certain times. We have 109 00:06:29,040 --> 00:06:32,120 Speaker 1: a joint venture there with analysts on the ground, We've 110 00:06:32,120 --> 00:06:36,240 Speaker 1: got lots of people you know, studying the stock market 111 00:06:36,240 --> 00:06:39,520 Speaker 1: from outside of China as well, so you basically just 112 00:06:39,560 --> 00:06:42,960 Speaker 1: have to do your bottoms up analysis and UH and 113 00:06:43,000 --> 00:06:46,200 Speaker 1: try to outperform the the index. John, you bring up 114 00:06:46,200 --> 00:06:49,200 Speaker 1: a good point that perhaps China's leadership in the e 115 00:06:49,360 --> 00:06:53,440 Speaker 1: M complex is lessening now because investors feel less comfortable 116 00:06:53,480 --> 00:06:57,800 Speaker 1: investing there. So where does the leadership move to, Well, 117 00:06:57,839 --> 00:06:59,800 Speaker 1: it could be quite good for the rest of Asia 118 00:06:59,839 --> 00:07:04,720 Speaker 1: and including Japan. UM if money moves out of China, UM, 119 00:07:04,760 --> 00:07:08,680 Speaker 1: it's going to be looking for other homes. And Japan 120 00:07:08,760 --> 00:07:10,760 Speaker 1: is obviously not part of the Emerging Market Index, but 121 00:07:12,160 --> 00:07:16,640 Speaker 1: you have heard stories about people diversifying out of China 122 00:07:16,680 --> 00:07:21,920 Speaker 1: and into Japan, and certainly that would be a fillip 123 00:07:22,040 --> 00:07:26,680 Speaker 1: for this this market and India and India too, Yes, 124 00:07:26,960 --> 00:07:30,440 Speaker 1: Asian markets probably in general, I would suppose, you know, 125 00:07:30,440 --> 00:07:32,440 Speaker 1: if it's big money, it's kind of hard to stick 126 00:07:32,480 --> 00:07:35,360 Speaker 1: a lot of money in some of these ascia and countries, 127 00:07:35,480 --> 00:07:39,160 Speaker 1: but it's uh, it could help quite a bit, all right, 128 00:07:39,280 --> 00:07:41,320 Speaker 1: John Vale, we'll have to leave it there. Thanks so 129 00:07:41,400 --> 00:07:44,360 Speaker 1: much for joining us on Bloomberg Daybreak Asia. John Vale 130 00:07:44,440 --> 00:07:47,480 Speaker 1: is chief Global Strategist at NICO Asset Management.