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Speaker 1: Let's get to David Gua our Chow. I'm sorry. David

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Speaker 1: is a global market strategist at Investco. I was thinking

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Speaker 1: David of Terry Gua for a minute there because of

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Speaker 1: the Wall Street Journal today was reporting that Terry, who

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Speaker 1: is founder of Fox Con, reportedly sent a letter to

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Speaker 1: Beijing saying we've got to dismantle the COVID zero policy

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Speaker 1: because otherwise China's central position in the global supply chain

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Speaker 1: would come under threat. Here, I thought maybe the protest

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Speaker 1: had an impact. I'm wrong, it doesn't matter at this point.

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Speaker 1: Restrictions have been lifted in Chinese on its way to

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Speaker 1: recover or no, that's right. I think that it could

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Speaker 1: have been a combination of factors that really led to

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Speaker 1: this very abrupt shift. So China State Council laid out

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Speaker 1: this week a departure from its stringent zero COVID pandemic

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Speaker 1: framework and and markets, and I think everyone is cheering

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Speaker 1: these new at this pivot. So do you think that

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Speaker 1: the five percent growth rate target is now a eevable

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Speaker 1: that that's the call from economists over at JP Morgan.

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Speaker 1: I think that's very possible for next year, and given

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Speaker 1: if if the property market stabilizes. If we get just

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Speaker 1: zero percent growth for the property market next year, uh,

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Speaker 1: and we have a reopening that's gradual but but continues,

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Speaker 1: then I think that five percent is achievable. Yeah. I

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Speaker 1: mean some of the same problems that David are. They

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Speaker 1: not that the you know, we're in the pandemic and

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Speaker 1: they like need to become more of a focal point.

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Speaker 1: And I'm talking about the property side of things. The

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Speaker 1: amount of debt the country's actually managed to rack up

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Speaker 1: as well, and you know we got also huge demographic

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Speaker 1: challenges as well, That's right. I think that the property

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Speaker 1: market um will continue to face some headwinds. For example,

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Speaker 1: lower tier cities have an inventory glut along with still

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Speaker 1: falling prices. But I think the exit of COVID zero

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Speaker 1: should boost household confidence in purchasing large sticket items such

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Speaker 1: as homes and cars. And I think that, you know,

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Speaker 1: we may have already seen the bottom um, but we

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Speaker 1: could be bumping along the bottom for the property market

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Speaker 1: for a while. So here is she Chinping, the Chinese

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Speaker 1: president in Saudi Arabia, ostensibly to strength and energy policy

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Speaker 1: coordination with the kingdom. I think the government in Beijing

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Speaker 1: is betting on a recovery. When you look at areas

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Speaker 1: in which to invest in China, what's top of mind

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Speaker 1: for you. I think that there are a few areas.

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Speaker 1: I think the first sector that should benefit our consumer

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Speaker 1: cyclicles and so uh China's accelerated kind of reopening timeline

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Speaker 1: and also additional monetary and physical support should really prop

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Speaker 1: up these consumer discretionary consumer staples. Thoughts, if you think

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Speaker 1: about the number of people that have been unemployed due

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Speaker 1: to the stringent lockdowns, and also a lot of people

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Speaker 1: that have pent up savings in China would look to

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Speaker 1: spend their money once China exit from this zero COVID framework. Well, okay,

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Speaker 1: we've got to the moment. Some research that Boomberg Economics

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Speaker 1: did that the perhaps showed that we've got recovery, full recovery,

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Speaker 1: um i e. The whole reopen done, already priced in.

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Speaker 1: We've got others like governments act suggesting price and I'm

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Speaker 1: sure the truth is somewhere in between. Yes, I think

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Speaker 1: that there's still legs to this market rally. Chinese ms

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Speaker 1: c I China has been up, you know, significantly in

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Speaker 1: the month of November alone. A lot of that was

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Speaker 1: due to uh, you know, thoughts about this reopening, Uh,

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Speaker 1: you know, which we're seeing right now. But if we

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Speaker 1: just look at valuations, Chinese stocks are still cheap relative

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Speaker 1: to historicals, and I think that there are there are

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Speaker 1: still quite a bit of ways for Chinese stocks to run.

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Speaker 1: You know, David, I'm wondering about the unforeseen headwinds. Maybe

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Speaker 1: we're not talking about the horizon as being maybe impactful

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Speaker 1: on what we're likely to see in markets. We had

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Speaker 1: a story yesterday on the Bloomberg terminal talking about Dutch

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Speaker 1: officials planning some new controls on exports of chip making

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Speaker 1: equipment to China that may be more closely aligned with

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Speaker 1: some of the trade rules that the US is imposing.

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Speaker 1: This is obviously in a way to prevent Beijing from

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Speaker 1: accessing the more high end uh computer chip technology. When

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Speaker 1: you look at tension between the US and China geopolitical risk,

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Speaker 1: does this show up for you? I mean, in the

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Speaker 1: longer view, does this have the potential to hold back

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Speaker 1: growth in China in a significant way? Well, I think

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Speaker 1: that geopolitical risks and concerns tend to be a shorter

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Speaker 1: term market disruption. We've seen that with what happened with Russia. Ukraine.

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Speaker 1: We see, we saw what that happened with the US

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Speaker 1: trying to trade war. I think that right now we're

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Speaker 1: kind of in a reprieve, perhaps some US trying to

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Speaker 1: UH seeing relations stabilize a bit. Ultimately, I don't think

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Speaker 1: that we're going to see a U turn when it

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Speaker 1: comes to UH US trying to relations, though, I will

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Speaker 1: say that markets do tend to look through your political

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Speaker 1: risks um and and more at the structural and fundamentals

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Speaker 1: at the end of the day. Alright, let's have a

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Speaker 1: look at the US itself, and you can link it

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Speaker 1: with China in the sense that we have a low

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Speaker 1: inflation at two point one percent of the read on

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Speaker 1: the CPI in China. Now, the thing is that we've

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Speaker 1: also got base effects coming up to certainly some of

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Speaker 1: them are already occurring. Should this all contrive together on

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Speaker 1: the one hand for China to export deflation as it

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Speaker 1: used to do before, and on the other hand, also

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Speaker 1: those base effects also make inflation look much more benign

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Speaker 1: than it has been this year. Well, I think that

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Speaker 1: China's reopening will will be inevitable and we're starting to

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Speaker 1: see um you know that play out, and that will

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Speaker 1: certainly have inflationary pressures around trying to also the region,

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Speaker 1: though the Apack region is lucky enough to to enjoy

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Speaker 1: lower UH inflation levels and consumer prices um and I

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Speaker 1: think that we will see a bit of inflation ality pressures,

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Speaker 1: especially in the second half of next year. Now, whether

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Speaker 1: that transmits itself into places like the US and Europe,

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Speaker 1: you know, I don't think so. I think it will

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Speaker 1: be more of a regional phenomenon. Hey, David, before we

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Speaker 1: let you go, let's leave China for a moment. Talk

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Speaker 1: about North Asia. Give me your take on on South

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Speaker 1: Korea and Japan. Are these places that I want to

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Speaker 1: be putting money to work in right now? Yes, I

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Speaker 1: think so. I think that the main catalysts are a

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Speaker 1: low valuation, especially in Korea for for tech companies, and

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Speaker 1: we're at the bottom of the semiconductor cycle UH. And

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Speaker 1: also China's reopening should also spur another round of consumption,

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Speaker 1: especially for tourism to these countries, and also in terms

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Speaker 1: of electronics, where these export oriented economies with benefit. Okay, David,

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Speaker 1: what about fixingcome Where are you positioned on that? And

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Speaker 1: I'm talking about sovereigns and also, of course some of

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Speaker 1: the I G grade and perhaps even looking into high yield.

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Speaker 1: I think in your term, for example, the next quarter

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Speaker 1: or two, I think it makes sense to continue to

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Speaker 1: be defensive. And you know, we had a preference for

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Speaker 1: for government bonds and also for a high level credit

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Speaker 1: investment grade. But I think that you know, we expect

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Speaker 1: to pause in federal reserve rates hikes next year, perhaps

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Speaker 1: in the first quarter. That should that should actually abode

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Speaker 1: well for risk assets, and so we moved towards high yields,

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Speaker 1: say in the second half of next year. Yeah, it's

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Speaker 1: gonna be very interesting to see what the Fed does

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Speaker 1: this month. Consensus view is that we do get a

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Speaker 1: fifty basis point rate hike that two day meeting reps

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Speaker 1: on the fourteenth. David, thanks for your time and your insight.

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Speaker 1: David Chow is global market strategist at Investo, joining from

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Speaker 1: Hong Kong today on a daybreak Asia