WEBVTT - Why China’s Real Estate Crisis Is Different 0:00:14.000 --> 0:00:17.439 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:18.040 --> 0:00:21.160 My name is Mike Reagan. I'm a senior editor at Bloomberg. 0:00:21.040 --> 0:00:24.239 Numble Down, a hare across asset reporter with Bloomberg. 0:00:24.760 --> 0:00:27.560 And this week on the show, well, as China heads 0:00:27.600 --> 0:00:31.120 into its Golden Week holiday, there won't be much celebrating 0:00:31.200 --> 0:00:35.000 in the real estate sector. Chinese property stocks are trading 0:00:35.040 --> 0:00:38.640 near the lowest level since two thy and eleven, and 0:00:38.800 --> 0:00:43.360 concerns are growing about more defaults among developers. How did 0:00:43.400 --> 0:00:46.160 the housing market in the world's second largest economy get 0:00:46.159 --> 0:00:48.240 so out of whack and what will it take to 0:00:48.320 --> 0:00:50.840 fix it and help Chinese stocks catch a bit again. 0:00:51.520 --> 0:00:53.800 We'll get into it with a fund manager who focuses 0:00:53.880 --> 0:00:58.520 on China and emerging markets. But first a programming note, Well, 0:00:58.600 --> 0:01:01.120 we've been going strong for four and a half years, 0:01:01.160 --> 0:01:03.720 but What Goes Up will be going on hiatus after 0:01:03.760 --> 0:01:07.240 this episode, as the Bloomberg podcast team works on some 0:01:07.280 --> 0:01:10.240 exciting news shows, so keep an ear out for them, 0:01:10.280 --> 0:01:13.000 and as always, tweet to us at the handle at 0:01:13.040 --> 0:01:16.280 podcasts on x so let us know what you think 0:01:16.360 --> 0:01:19.720 of the shows. Well, Dona, is it still tweeting now 0:01:19.720 --> 0:01:20.760 that the thing's called. 0:01:20.680 --> 0:01:23.840 X does anybody? Does anybody even call it X? 0:01:24.680 --> 0:01:25.040 Elon? 0:01:25.160 --> 0:01:26.840 Does Elon? But who else? 0:01:26.959 --> 0:01:27.120 You know? 0:01:27.200 --> 0:01:29.720 I never say, like, let me check my ex app. 0:01:30.120 --> 0:01:32.800 But do you X a post? Do you X a post? 0:01:33.600 --> 0:01:33.880 Yeah? 0:01:34.000 --> 0:01:35.360 Huh, I haven't heard. 0:01:35.400 --> 0:01:37.520 You wouldn't have the answers. I thought you'd have the answer. 0:01:37.600 --> 0:01:40.200 I'm not a hip millennial, but our guests this week 0:01:40.760 --> 0:01:43.720 he might be active on X slash Twitter. I'm not sure, 0:01:43.720 --> 0:01:46.119 but he's definitely been on the podcast before and I'm 0:01:46.120 --> 0:01:49.360 happy to welcome him back. It's Jason Sue, chief investment 0:01:49.400 --> 0:01:53.440 officer at Rilliant Global Advisors. Jason, thank you so much 0:01:53.480 --> 0:01:57.680 for joining us, super glad. I wanted to start out 0:01:57.720 --> 0:01:59.720 with asking you to tell us a bit about yourself 0:01:59.760 --> 0:02:02.280 because you have a very interesting background having worked with 0:02:02.760 --> 0:02:05.400 Rob are Not in the past, and you guys have, 0:02:06.520 --> 0:02:09.600 as Mike said, we're going to be focusing on internationally 0:02:09.680 --> 0:02:12.600 in this episode, so you guys have a presence in 0:02:12.639 --> 0:02:14.480 a lot of places around the globe. So tell us 0:02:14.480 --> 0:02:15.600 a bit about yourself. 0:02:16.000 --> 0:02:18.880 Well, as you mentioned, you know, I started research affiliates 0:02:18.880 --> 0:02:21.919 with Rob or Not. That's nearly twenty years ago now. 0:02:22.000 --> 0:02:26.120 I spun out in twenty sixteen, to focus primarily on 0:02:26.160 --> 0:02:28.200 emerging markets, and of course, you know, when you think 0:02:28.200 --> 0:02:30.880 about emerging markets, you can't ignore China's a lot of 0:02:30.880 --> 0:02:34.000 my research, a lot of you know, our qual models 0:02:34.080 --> 0:02:37.640 are built to create alpha in China. You know, today 0:02:37.680 --> 0:02:41.080 we got ETFs in the US that gets your exposure 0:02:41.120 --> 0:02:43.919 to China, to EMX China and actually more broadly the 0:02:44.200 --> 0:02:47.440 global markets. Basically just tells you the power of the 0:02:47.560 --> 0:02:51.520 quantitative methods when it comes to alpha generation across the globe. 0:02:53.000 --> 0:02:57.480 You know, today I am talking to everyone from Dubai 0:02:57.520 --> 0:03:01.120 and that's because the Middle East has a almost opposite 0:03:01.160 --> 0:03:04.399 of the US as a meaningful fascination, and it's probably 0:03:04.639 --> 0:03:07.959 from a strategic allocation perspective, very overweight China. 0:03:08.040 --> 0:03:09.239 So that's why I'm out here. 0:03:09.440 --> 0:03:13.440 That might be our first guest tuning in from Dubai. 0:03:13.480 --> 0:03:14.640 That's a that's a first for us. 0:03:14.639 --> 0:03:17.840 Well, Donna, yeah, I've never been over there. So I 0:03:17.880 --> 0:03:20.280 was asking Jason before we started taping, like what's it like, 0:03:20.520 --> 0:03:23.640 and he said it's very humid, which I didn't expect. 0:03:25.280 --> 0:03:30.240 Well, Jason, let's get into this whole problems with the property, 0:03:30.280 --> 0:03:34.640 real estate sector in China. I mean, you know, my 0:03:34.760 --> 0:03:39.960 sort of Layman's understanding of it is that China's developers 0:03:40.160 --> 0:03:45.000 just built entirely, way too many apartments than what's really needed. 0:03:45.160 --> 0:03:49.120 You know, how did that happen? And how bad is it? 0:03:49.200 --> 0:03:52.880 Do you think the debt problems of the developers who 0:03:52.960 --> 0:03:55.320 are having trouble selling all these apartments? 0:03:55.880 --> 0:04:00.000 Yeah, So when you think about kind of apartments in China, right, 0:04:00.040 --> 0:04:02.560 if we think about it from kind of the US perspective, 0:04:02.560 --> 0:04:04.440 which is, well, you buy it to either live in 0:04:04.480 --> 0:04:06.560 it or you rent it out to collect the yield, 0:04:06.840 --> 0:04:09.960 then you're absolutely right that there is an overbuilding of 0:04:10.080 --> 0:04:12.920 apartments in China because there are lots and lots of 0:04:12.960 --> 0:04:16.080 apartments that are owned but not lived in and not rented, 0:04:16.200 --> 0:04:19.479 so it's very unproductive. But if you're a Chinese, and 0:04:19.520 --> 0:04:22.120 I'll give you kind of a funny anecdote, So I 0:04:22.200 --> 0:04:24.960 bought a few apartments in China very early on, so 0:04:24.960 --> 0:04:27.360 they're quite cheap at the time, and I go, oh, 0:04:27.400 --> 0:04:29.120 you know, they're kind of empty, so let me rent 0:04:29.160 --> 0:04:31.360 it out. When people realize that, they kind of look 0:04:31.360 --> 0:04:33.799 at me funny and go, Jason, are you in financial trouble? 0:04:34.080 --> 0:04:36.680 Why would you rent out your place to someone else 0:04:36.720 --> 0:04:40.040 for money. So Chinese don't think of apartment as like 0:04:40.080 --> 0:04:42.760 a fixing cume, right, that produces a income for you. 0:04:43.160 --> 0:04:45.120 They think of it more like I would say how 0:04:45.480 --> 0:04:48.440 Indians think of gold, right. So it's more of a 0:04:48.480 --> 0:04:52.320 store of value. So they're perfectly happy holding an apartment, 0:04:52.400 --> 0:04:55.880 leaving it empty, believing it holds value. Does it always 0:04:55.920 --> 0:04:58.920 go up, frankly doesn't enter into their psyche. Now it's 0:04:58.960 --> 0:05:01.080 been lucky that's been going up. But they really see 0:05:01.080 --> 0:05:03.320 it as a store value, right, just something that's solid 0:05:03.360 --> 0:05:05.560 they can look at, they can point to, and oftentimes 0:05:05.600 --> 0:05:08.640 they brag about. From that perspective, there's an enormous demand 0:05:08.760 --> 0:05:12.640 when it comes to the Chinese appetite to buy property, 0:05:13.000 --> 0:05:16.960 and that demand is purely almost like collecting, right. It 0:05:17.040 --> 0:05:20.520 is not for consumption and it is not for investing. 0:05:20.760 --> 0:05:22.880 So I think that's just sort of useful to understand that. 0:05:23.360 --> 0:05:25.839 And I guess you know your question about well, you know, 0:05:26.000 --> 0:05:31.360 are the developers in trouble because maybe the Chinese are 0:05:31.360 --> 0:05:34.480 cooling off on their preference the whole you know, wealth 0:05:35.040 --> 0:05:38.160 in real estate. I would say the Chinese developers are 0:05:38.160 --> 0:05:42.120 mostly in trouble, not because somehow Chinese investors I think 0:05:42.120 --> 0:05:44.720 what's more an issue is a lot of them have 0:05:44.800 --> 0:05:48.120 simply geared up way too hot. Your country garden you're China, 0:05:48.440 --> 0:05:49.640 evergraam that that went. 0:05:49.560 --> 0:05:50.320 Under last year. 0:05:50.920 --> 0:05:54.160 They simply borrow way too much debt and they were 0:05:54.360 --> 0:05:58.320 hoarding land and hoarding apartments and not selling them fast 0:05:58.400 --> 0:06:01.080 enough to pay down the debt. They're just borrowing more 0:06:01.120 --> 0:06:03.280 to hoar more land. And I think they just irritated 0:06:03.279 --> 0:06:05.599 Beijing a little too much. And I would say these 0:06:05.640 --> 0:06:10.359 are not a real state related triggering a bankruptcy, but 0:06:10.440 --> 0:06:16.520 almost a policy engineered bankruptcy target at real state developers 0:06:16.520 --> 0:06:20.560 that have simply become two gear to liver it up. Yeah. 0:06:20.560 --> 0:06:23.200 I wanted to ask you about that because there's always 0:06:23.279 --> 0:06:27.280 sort of this assumption in the West that Beijing can 0:06:27.320 --> 0:06:30.159 come to the rescue anytime it wants for a problem 0:06:30.240 --> 0:06:32.520 like this. I don't know how true that is, but 0:06:32.800 --> 0:06:35.840 in this case, you know, they have done some things 0:06:35.880 --> 0:06:39.320 on the margin to try to show up the housing market, 0:06:39.320 --> 0:06:44.640 that eased some of the mortgage restrictions. They're lowering the 0:06:44.720 --> 0:06:47.880 reserve requirements for the banks. Is that all they can do? 0:06:47.920 --> 0:06:52.520 I mean, to your point, are they actually really holding 0:06:52.560 --> 0:06:54.960 off on sort of a Big bazooka fix for this 0:06:55.120 --> 0:06:57.520 because they do want to ring some of that excess 0:06:57.600 --> 0:07:01.240 leverage out of the market. Now, how do you view 0:07:01.320 --> 0:07:04.919 the policy response to this at what the goals of 0:07:04.960 --> 0:07:05.240 it are? 0:07:06.240 --> 0:07:08.680 Yeah, I was a In fact, I think the government 0:07:09.080 --> 0:07:11.600 doesn't think right now there is a meaningful problem in 0:07:11.640 --> 0:07:16.040 a real estate sector other than you know, consumers seem 0:07:16.120 --> 0:07:19.560 to be disappointed about how real estate is performing and 0:07:19.600 --> 0:07:23.160 therefore that lack of confidence maybe causing them to not consume. 0:07:23.240 --> 0:07:25.360 So the government realized, ah, you know, the most reliable 0:07:25.440 --> 0:07:29.120 channel for wealth effect, which is basically real estate appreciating 0:07:29.400 --> 0:07:31.600 that has coused household to be willing to increase consumption. 0:07:32.160 --> 0:07:35.440 That channel has temporarily gone away, So you know, they 0:07:35.480 --> 0:07:37.760 recognize that. But of course, the bigger problem they're trying 0:07:37.800 --> 0:07:41.600 to contain originally was they didn't want real estate price 0:07:41.640 --> 0:07:44.360 to get more expensive because it wasn't a social I mean, 0:07:44.360 --> 0:07:47.280 it wasn't becoming a financial problem. It's becoming a social problem. Right, 0:07:47.280 --> 0:07:49.280 homes are too expensive for you hen people to buy. 0:07:49.960 --> 0:07:52.840 But from a financial problem perspective, if you look at 0:07:52.840 --> 0:07:56.600 the household sector, right, Chinese household are not levered when 0:07:56.600 --> 0:07:58.040 it comes to real estate if the allo pers are 0:07:58.120 --> 0:08:00.720 very levered, but the household which is more important, right, 0:08:00.720 --> 0:08:03.119 they're not lever because they can buy their first home 0:08:03.760 --> 0:08:05.760 with money down and they paid quite a bit of 0:08:05.800 --> 0:08:08.080 money down and they generally have to sort of have 0:08:08.440 --> 0:08:12.000 enough income to cover the payment. If they want to 0:08:12.040 --> 0:08:13.840 buy a second house, it's got to be all cash, right, 0:08:13.880 --> 0:08:15.880 So most Chinese, and if you live next to the 0:08:15.960 --> 0:08:17.960 Chinese in your neighborhood, you realize they buy real estate 0:08:18.000 --> 0:08:19.760 all cash. And that's how they buy real estate in 0:08:19.840 --> 0:08:22.160 China as well, So you don't run into financial problem 0:08:22.160 --> 0:08:22.600 when you buy. 0:08:22.520 --> 0:08:23.360 Real estate all cash. 0:08:23.560 --> 0:08:25.640 It might be a bad investment, right, You might buy 0:08:25.680 --> 0:08:28.520 something it never goes up, right, It has no yield 0:08:28.520 --> 0:08:29.920 if you don't rent it, so it might not be 0:08:29.960 --> 0:08:32.679 a great investment, but doesn't become a financial crisis. So 0:08:32.679 --> 0:08:35.679 I think the government's okay with where real estate is today, right, 0:08:35.720 --> 0:08:39.360 price isn't going up that bankruptcy you're seeing a developer 0:08:39.400 --> 0:08:42.280 sector is very engineered. You know, on the household side, 0:08:42.280 --> 0:08:44.360 there's not a balance sheet crisis because they're not buying 0:08:44.360 --> 0:08:46.640 real estate on levers, so they really don't think there's 0:08:46.640 --> 0:08:47.959 a meaningful problem there. 0:08:48.120 --> 0:08:48.280 Now. 0:08:48.320 --> 0:08:52.120 Of course they wish the Chinese household would have found 0:08:52.160 --> 0:08:55.679 like another store of value or another asset that's more 0:08:55.720 --> 0:08:59.480 productive that the government could sort of help manage and 0:08:59.520 --> 0:08:59.960 create a wealth. 0:09:00.120 --> 0:09:02.240 They're hoping the stock market can be. 0:09:02.200 --> 0:09:04.240 That, but you know, it remains to be seen if 0:09:04.280 --> 0:09:06.520 they can get all of that money, that unproductive money 0:09:06.520 --> 0:09:08.960 into in real estate into the more productive long term 0:09:09.000 --> 0:09:10.000 investment in stock market. 0:09:10.320 --> 0:09:12.800 So say more about the consumer and the state of 0:09:12.800 --> 0:09:17.559 the Chinese consumer, is that another facet that's under pressure 0:09:17.640 --> 0:09:19.520 right now in China. 0:09:19.600 --> 0:09:22.480 I think that is the biggest problem right the consumers 0:09:23.080 --> 0:09:26.360 China and Bay I guess Paging specifically has been hoping 0:09:26.840 --> 0:09:31.000 that China wouldn't just be explore oriented economy where everyone 0:09:31.080 --> 0:09:33.480 just works so really hard in the factory and shook 0:09:33.520 --> 0:09:36.560 everything overseas and then you know, never spend money. Right. 0:09:36.720 --> 0:09:40.000 That's been a bit of a sort of traditional, uh, 0:09:40.040 --> 0:09:42.920 you know, Chinese mentality when it comes to working excessively, 0:09:42.960 --> 0:09:46.200 saving excessively, and not consuming enough. So it's too dependent 0:09:46.240 --> 0:09:50.280 on our export. So gradually domestic consumptions has actually picked 0:09:50.320 --> 0:09:53.240 up quite a bit more, seeing GDP going from you know, 0:09:53.520 --> 0:09:56.800 thirty six percent export today only about sixteen percent export. 0:09:56.880 --> 0:09:59.880 So consumption has sort of picked up, but more recently 0:10:00.120 --> 0:10:03.240 consumption gone fairly flat. And part of that was COVID, Right. 0:10:03.280 --> 0:10:06.319 I mean, when Americans came out of COVID, we go, yes, 0:10:06.559 --> 0:10:08.520 we saved up money. We haven't been spending money, so 0:10:08.559 --> 0:10:11.760 let's go spend money. Right, the rebnge spending. When Chinese 0:10:11.800 --> 0:10:15.680 got at COVID, they go, my god, now that was horrible. 0:10:15.720 --> 0:10:17.880 So that's save more money so we can self ensure. 0:10:17.960 --> 0:10:18.080 Right. 0:10:18.080 --> 0:10:20.560 It was a complete different mentality, right, So Chinese after 0:10:20.559 --> 0:10:22.800 any major crisis and disaster, they just go and save 0:10:22.840 --> 0:10:25.079 more money. So part of was that, and of course 0:10:25.160 --> 0:10:28.600 part of was I think disappointment with how Beijing has 0:10:28.679 --> 0:10:32.040 both managed, you know, the COVID lockdown and opening up, 0:10:32.640 --> 0:10:37.520 and also disappointment with how poorly GDB has performed post COVID. 0:10:37.760 --> 0:10:40.120 So again, both of those has caused I think consumer 0:10:40.200 --> 0:10:42.920 to go into a weight and see mode. So you're 0:10:42.960 --> 0:10:46.240 not seeing people spending money. It's not because they don't 0:10:46.280 --> 0:10:49.880 have money. Right, there's about thirty trillion dollars not even 0:10:49.920 --> 0:10:53.920 renting BIA dollars equivalent of household savings and bank accounts 0:10:54.000 --> 0:10:58.319 and sort of quasi bank accounts in money markets. Trust products, 0:10:58.679 --> 0:10:59.959 but they're just not spending money. 0:11:00.040 --> 0:11:01.280 It's a confidence issue. 0:11:01.520 --> 0:11:02.400 Thirty trillion. 0:11:03.400 --> 0:11:10.280 Yeah, wow, they save a lot of money. 0:11:12.880 --> 0:11:16.719 You launched the Ralliant Quantinmental China ETF. I guess it 0:11:16.800 --> 0:11:19.520 was at the end of twenty twenty, and it's been 0:11:19.559 --> 0:11:22.040 a bit of a rocky launch. It's down about forty 0:11:22.160 --> 0:11:25.000 two percent from the launch. Talk to us a little 0:11:25.000 --> 0:11:28.120 bit about the strategy, you know, how you pick stocks 0:11:28.160 --> 0:11:31.240 for that ETF and and why you know why this 0:11:31.360 --> 0:11:34.000 early couple of years of it have been so rough. 0:11:35.600 --> 0:11:38.720 Yeah, So, you know, the beta has been a major 0:11:38.800 --> 0:11:41.640 major headway. You know, I think we launch a product 0:11:41.679 --> 0:11:44.160 at the time where we believe, oh, you know, as 0:11:44.200 --> 0:11:47.960 trying to gets incorporated more into the sort of MSCI basket, 0:11:48.440 --> 0:11:50.800 there's going to be sort of natural flow going into 0:11:50.840 --> 0:11:53.360 the ascid claus and people are going to start to 0:11:53.400 --> 0:11:56.000 get more curious about, oh, can you directly invest in 0:11:56.120 --> 0:11:58.800 China rather than just buying Ali Baba as an American 0:11:58.840 --> 0:12:01.719 ADR made me that's looking at the next Audibaba right, 0:12:01.760 --> 0:12:03.840 an unknown firm listed on shore. So you know, we 0:12:03.880 --> 0:12:07.440 launched an onshore product that focused on issuers, and of 0:12:07.440 --> 0:12:12.199 course we ran headlong into essentially three years of turbulence 0:12:12.240 --> 0:12:15.640 all the way from the COVID lockdown to really government 0:12:16.240 --> 0:12:19.840 uh you know, experimental experimenting with policies of you know, 0:12:19.840 --> 0:12:22.839 how to manage e commerce platform companies. 0:12:23.120 --> 0:12:24.840 H and I would say huge imping. 0:12:24.840 --> 0:12:27.200 As he's marching in this third term, there's just a 0:12:27.240 --> 0:12:30.400 lot of uncertainty with regard to what will that look like, right, well, 0:12:30.440 --> 0:12:35.000 Beijing after power consolidation, uh still kind of pursue the 0:12:35.000 --> 0:12:38.200 same kind of pro growth policy from the previous. 0:12:37.800 --> 0:12:40.600 Eras or would there be a majorship? Right So there's 0:12:40.640 --> 0:12:41.840 just a lot of uncertainty. 0:12:41.840 --> 0:12:44.520 And I think so early signs has not really you know, 0:12:44.840 --> 0:12:47.440 caused people to develop confidence. And certainly you got the 0:12:47.600 --> 0:12:51.720 China US tension that started with you know, President Trump 0:12:51.800 --> 0:12:54.160 and continued to present by them. So we ran into 0:12:54.200 --> 0:12:56.920 a lot of sort of beta headwinds, unexpected of course, 0:12:57.400 --> 0:12:59.960 but it is I would say, part for the core 0:13:00.240 --> 0:13:03.480 when it comes to investing in emerging markets. You know, 0:13:03.600 --> 0:13:06.480 this is China. Now, If it's not China, I'm sure 0:13:06.920 --> 0:13:09.240 there are many many other emerging countries that also run 0:13:09.320 --> 0:13:12.160 into such your political tensions you know with someone you know, 0:13:12.200 --> 0:13:14.959 beal with China, beal with the US and also their 0:13:15.000 --> 0:13:18.439 own domestic election cycle can can play heavily into sort 0:13:18.440 --> 0:13:20.040 of the betahead wind as well. But I would say 0:13:20.120 --> 0:13:22.040 part for the course for EM investing. 0:13:22.600 --> 0:13:25.520 So can you talk about how you're making sense of 0:13:25.600 --> 0:13:29.640 what else is happening in the emerging market space? Because 0:13:30.000 --> 0:13:32.800 emerging market stocks gave up their gains for the year, 0:13:33.600 --> 0:13:36.480 So any gains that we had had up until I 0:13:36.520 --> 0:13:38.839 think it was a couple of days ago, actually they 0:13:38.840 --> 0:13:41.480 gave up all of those gains. I'm wondering what the 0:13:41.480 --> 0:13:46.240 biggest pain point for emerging market stocks has been this year. 0:13:46.400 --> 0:13:49.280 Is it what's going on in the US in terms 0:13:49.280 --> 0:13:51.600 of rising interest rates? Is it China? 0:13:51.760 --> 0:13:52.000 Is it? 0:13:52.240 --> 0:13:57.040 You know, a multiple of those factors weighing on EM stocks. 0:13:57.040 --> 0:13:58.520 How are you making sense of what's going on? 0:13:59.480 --> 0:14:02.040 Yeah? You basically have the perfect storm. 0:14:02.480 --> 0:14:05.280 So you know, our quant data process looks all the 0:14:05.320 --> 0:14:08.240 way from kind of the micro bottoms up and then 0:14:08.360 --> 0:14:10.360 you know, taking into account kind of all the macro 0:14:10.480 --> 0:14:13.640 data and unfortunately you got everything going against you. Right 0:14:13.720 --> 0:14:16.920 kind of on a fundamental side, right, EM is still 0:14:17.000 --> 0:14:19.960 so dependent on DM consumption, right, So when. 0:14:19.840 --> 0:14:24.800 EM is performing poorly, oftentimes it's because EM is looking to. 0:14:25.000 --> 0:14:27.440 D M to drive consumption growth, so they can explore right, 0:14:27.440 --> 0:14:30.359 you know, EM is very much a raw resource exporting 0:14:30.840 --> 0:14:34.640 manufacturer good exporting. So Europe has clearly been weak and 0:14:35.200 --> 0:14:37.960 most of the manufacturer in EM has been sort of 0:14:38.200 --> 0:14:42.920 forecasting a US hard landing, so they weren't aggressively seeking 0:14:42.960 --> 0:14:45.520 to build capacity, and so you got you got that 0:14:45.560 --> 0:14:48.600 going against EM. And then of course you have the 0:14:48.800 --> 0:14:52.400 dollar at record high yield and so you know, EM 0:14:52.680 --> 0:14:56.640 have historically dependent on a lot of global capital and 0:14:56.680 --> 0:14:59.200 now you have this global capital flight away from EM 0:14:59.240 --> 0:15:02.920 back to the dollar because they're dollars, safety and yield 0:15:02.960 --> 0:15:04.800 there is just so much more attractive. So it's pulling 0:15:05.000 --> 0:15:08.200 Calta away from some of the capital poor economy. So 0:15:08.320 --> 0:15:10.680 that's a that's a that's a major headwind as well. 0:15:10.760 --> 0:15:12.600 So you kind of got a fundamental against you. Now 0:15:12.680 --> 0:15:15.240 you've got kind of the financing, the liquidity part against you. 0:15:15.760 --> 0:15:18.480 And from a sentiment perspective, you know, EM sentiment is 0:15:18.520 --> 0:15:22.000 more fragile by local stock markets are shallow. 0:15:22.360 --> 0:15:23.200 So when we you. 0:15:23.160 --> 0:15:25.600 Know, when our quant scores look at sort of sentiment scores, 0:15:25.640 --> 0:15:28.200 what we've seen is sort of you know, as floor 0:15:28.240 --> 0:15:31.200 of a sentiments score across the board for EM, not 0:15:31.320 --> 0:15:33.560 just for China, but really across the board for EM 0:15:33.640 --> 0:15:36.200 and not just domestic flows, but even you know, more 0:15:36.440 --> 0:15:40.840 long term institutional global folks are showing very poor sentiment. 0:15:41.240 --> 0:15:45.120 Where do you see opportunities in EM right now? Then 0:15:45.480 --> 0:15:48.200 how are you thinking about the broader landscape? 0:15:48.560 --> 0:15:50.960 So I would say, you know, short term versus long term. 0:15:51.160 --> 0:15:54.240 Short term, I would say the interesting and fun place 0:15:54.320 --> 0:15:58.040 are really all the French shoring themes, and then you 0:15:58.080 --> 0:15:59.760 know those could could last all the way from a 0:15:59.800 --> 0:16:01.680 few months path maybe you. 0:16:01.640 --> 0:16:02.760 Know a year or two. 0:16:03.320 --> 0:16:06.280 Uh, so you know, you have you know, Mexico now 0:16:06.320 --> 0:16:08.120 being I think front and center for a lot of 0:16:08.160 --> 0:16:11.480 people thinking, hey, you know, friend shorwing Mexico is an 0:16:11.520 --> 0:16:14.800 obvious candidate as an EM economy that's big enough and 0:16:14.880 --> 0:16:17.920 obviously close enough to to the US for that theme 0:16:17.960 --> 0:16:22.720 to really thrive investment in the in New Mexico, India obviously, 0:16:22.800 --> 0:16:26.000 you know, Vietnam, you know, being where a lot of 0:16:26.080 --> 0:16:29.480 Chinese entrepreneurs and the factories have moved production to. And 0:16:29.520 --> 0:16:32.120 so that friend showing exercise has sort of pushed a 0:16:32.160 --> 0:16:34.920 lot of foreign direct investments from China, you know, and 0:16:34.960 --> 0:16:37.680 from Chinese into Vietnam. So I would say there are 0:16:37.680 --> 0:16:41.680 a lot of opportunities around the French shoring concept. That's 0:16:41.760 --> 0:16:44.520 kind of the short term and obviously we saw a 0:16:44.560 --> 0:16:47.320 major rally for for India before it pulled back more 0:16:47.360 --> 0:16:49.760 recently as well. In the long run, I would say 0:16:49.760 --> 0:16:52.960 in the long run, where I think the opportunities are UH, 0:16:53.120 --> 0:16:57.080 it'll continue to be the explot oriented and high value 0:16:57.080 --> 0:17:00.280 add economies. You know, you're China, You're in the UH, 0:17:00.320 --> 0:17:03.520 and increasingly so your your Vietnam, your Indonesia is more 0:17:03.560 --> 0:17:06.040 foreign direct investments, you know, lead China to to go 0:17:06.080 --> 0:17:10.119 to these smaller economies They're going to follow kind of 0:17:10.160 --> 0:17:13.560 the Japan, South Korea, Taiwan, and of course the China 0:17:13.600 --> 0:17:18.439 model of exporting UH and then through exporting, improving corporate profits, 0:17:18.480 --> 0:17:21.760 improving GDD growth UH. And I'm probably a bit more 0:17:21.960 --> 0:17:26.560 mixed about purely resource based EM economy because they seem 0:17:26.600 --> 0:17:28.960 to go through these boom bus cycles are just driven 0:17:29.000 --> 0:17:32.919 by commodities prices and have commodity devices could sustain the 0:17:32.960 --> 0:17:36.520 current high level due to your political tension, but without 0:17:36.600 --> 0:17:39.879 really strong on value add I'm a little you know, 0:17:40.520 --> 0:17:43.840 less fond of a pure resource oriented em economy. So 0:17:44.240 --> 0:17:47.440 very fond of the the Asian EM because you can 0:17:47.480 --> 0:17:50.119 see all of them are climbing the productivity curve, and 0:17:50.160 --> 0:17:52.360 the French showing is certainly going to accelerate the process. 0:17:52.760 --> 0:17:55.640 I like that expression, friendshuring. It's a lot more UH 0:17:56.359 --> 0:17:59.760 friendly expression than the rest of the world is at 0:17:59.800 --> 0:18:04.680 each other throats, you know, friendsuring is the positive side 0:18:04.720 --> 0:18:06.959 of that, I guess. But Jason, I'm glad you brought 0:18:07.040 --> 0:18:09.520 up the dollar because one of the things I wanted 0:18:09.560 --> 0:18:12.879 to ask you about is, you know, the really severe 0:18:12.960 --> 0:18:15.960 weakness in the Chinese currency lately. Uh it's even been 0:18:16.440 --> 0:18:19.840 sort of testing that two percent trading band that the 0:18:19.840 --> 0:18:23.159 People's Bank of China sets every day. I mean, is 0:18:23.200 --> 0:18:26.480 there a risk of the PBOC sort of losing control 0:18:26.720 --> 0:18:30.520 of the exchange rate? Where do they always have enough 0:18:30.840 --> 0:18:33.520 sort of firepower to keep it in that you know 0:18:33.760 --> 0:18:34.760 range that they wanted in. 0:18:35.680 --> 0:18:38.720 Yes, I would say the PBOC is pretty mixed when 0:18:38.720 --> 0:18:42.560 it comes to managing the remming bet. You know, part 0:18:42.600 --> 0:18:45.040 of the PBOC clearly understands that it is still an 0:18:45.080 --> 0:18:49.959 export oriented economy and for you know, stimulating the export sector, 0:18:50.000 --> 0:18:54.000 which is really great for domestic employment. And obviously the 0:18:54.080 --> 0:18:57.000 key cities that have thrived because of manufacturing, like a 0:18:57.040 --> 0:19:00.560 weaker remming Bee helped, right, So I understand. And now, 0:19:00.600 --> 0:19:02.320 of course it doesn't like to be labeled as a 0:19:02.440 --> 0:19:04.879 currency manipulator, doesn't want sanctioned that. 0:19:04.920 --> 0:19:05.399 Comes with that. 0:19:05.480 --> 0:19:08.119 So this is sort of perfect time as the dollar 0:19:08.520 --> 0:19:11.840 increased rates and then have strengthen, you know, for rending 0:19:11.920 --> 0:19:14.679 be too weakend it's really it's certainly weakening at the 0:19:14.680 --> 0:19:18.320 perfect time when China is experiencing sort of deflation, right, 0:19:18.560 --> 0:19:20.919 And so I don't think the PBOC minds it now. 0:19:20.960 --> 0:19:22.960 Of course, the PBOC is sort of you know, constantly 0:19:23.040 --> 0:19:26.359 watching to see if intervention is necessary. Again, I mean 0:19:26.400 --> 0:19:29.800 from an intervention perspective, given that person of China has 0:19:29.800 --> 0:19:32.280 a sort of massive dollar reserve and you know, other 0:19:32.359 --> 0:19:35.399 currency reserve, and given that increasingly, you know, China has 0:19:35.480 --> 0:19:39.840 been successful in marketing renming b as a viable reserve 0:19:40.119 --> 0:19:43.840 certainly for for clearing, uh for for some of the 0:19:44.280 --> 0:19:46.120 energy related resource. 0:19:46.680 --> 0:19:49.199 Remming Bee in the position it is in right now, 0:19:49.240 --> 0:19:50.000 it doesn't. 0:19:49.720 --> 0:19:52.800 Really have a an issue much like you know, the 0:19:52.920 --> 0:19:55.600 Latin currency when they're trying to defend a peg, right, 0:19:55.640 --> 0:19:57.399 you don't you just don't have that issue because of 0:19:57.440 --> 0:19:59.480 the reserve they have, and also the reserve status that 0:19:59.560 --> 0:20:02.000 rending be is increasingly achieving. 0:20:02.800 --> 0:20:05.840 Jason, I'm curious how you think investors are thinking about 0:20:05.880 --> 0:20:11.160 EM opportunities right now, because we've had, barring the last 0:20:11.200 --> 0:20:14.600 couple of weeks, maybe we've had really strong performances from 0:20:14.840 --> 0:20:19.280 US large cap tech companies so far this year, and 0:20:19.359 --> 0:20:22.560 so I'm just wondering how you think people in general 0:20:22.600 --> 0:20:27.040 are thinking about investing in EM versus investing in large 0:20:27.080 --> 0:20:31.600 cap US tech companies, or even to make it maybe 0:20:31.640 --> 0:20:35.040 more relevant to the last couple of weeks, investing in 0:20:35.520 --> 0:20:38.960 shorter dated bonds or cash like instruments where you can 0:20:39.040 --> 0:20:42.240