Speaker 1: Let's get to our guest. Mittle could techa he is
Speaker 1: ahead of E M Strategy a T D Securities who
Speaker 1: joins from Singapore. Mittle, thanks for being with us. A
Speaker 1: lot of focus now on these rising COVID infections in China.
Speaker 1: To what extent could we see growth really curtailed. I mean,
Speaker 1: it's und not likely that we're going to have the
Speaker 1: growth target met, but I mean we're going to see
Speaker 1: much weaker growth on the mainland. It's a very good question,
Speaker 1: and I think we've been pushing back for some time
Speaker 1: about the optimism or against the optimism reopening the fact
Speaker 1: that COVID cases have been rising for the last few weeks.
Speaker 1: But on top of that, um the vaccine worries in
Speaker 1: the sense that the elderly population in China still not
Speaker 1: having the booster shots, and then at the same time
Speaker 1: some of the concerns about the efficacy of the Chinese
Speaker 1: vaccines has meant that in any case you'd see a
Speaker 1: slow opening. And now now the fact that you're seeing
Speaker 1: a amp up in COVID cases and in turn more
Speaker 1: restrictions across China is just adding to that downside risk
Speaker 1: as you mentioned to growth. Now, our forecast has been
Speaker 1: frette downbeat anyway, three point one percent GDP growth this year.
Speaker 1: We do expect some sort of a mechanical improvement in
Speaker 1: growth next year, largely due to base effects, to get
Speaker 1: us up to about four point seven percent, but as
Speaker 1: you know, this is probably still well below the levels
Speaker 1: of broth we've seen in China in recent years, so
Speaker 1: we're not particularly optimistic here. And it's not just COVID cases.
Speaker 1: Although there have been some new measures on the property sector,
Speaker 1: it's still a long way to go before we see
Speaker 1: recovery there. Exports are slowing down as well. That was
Speaker 1: a big boost to growth during COVID, so there's not
Speaker 1: a lot to be optimistic about their parts. Infrastructure is
Speaker 1: the only real big source of support for China's economy
Speaker 1: at present. You tempted to use that words and investable,
Speaker 1: I wouldn't say that. Look, I think there's always a price,
Speaker 1: and I think China's asset markets have come under a
Speaker 1: lot of pressure in recent weeks and months. They've underperformed
Speaker 1: regional markets, which have already been weak anyway, and so
Speaker 1: there has been a shifting sentiment towards China equities, particularly
Speaker 1: in the tech sector. I wouldn't quite say an investable,
Speaker 1: but I still would be quite cautious of jumping back in.
Speaker 1: We still need to get some clarity as well in
Speaker 1: terms of where and what happens in terms of the
Speaker 1: tech sanctions that the US has put into place, as
Speaker 1: well as other tariffs and talks between President President she
Speaker 1: and Biden whether that leads anywhere. But I do sense
Speaker 1: a shift in sentiment from investors towards Chinese assets, despite
Speaker 1: the worries about growth that are ongoing and metal. I
Speaker 1: mentioned there the remarks from China's State Council about the
Speaker 1: timely and appropriate use of policy tools. That does signal
Speaker 1: a triple our cat is in the works. When do
Speaker 1: you expect to see that? And do you expect anything
Speaker 1: else to come down the line in terms of support.
Speaker 1: It could happen fairly soon. I think when you've had
Speaker 1: this sort of explicits eatments, it's more than likely it
Speaker 1: comes in a matter of days rather than even weeks.
Speaker 1: But the question I guess is will it be enough?
Speaker 1: I mean, it's China shifting towards a more targeted approach
Speaker 1: to easing. We didn't, for example, see any loan prime
Speaker 1: rate cuts, which is another policy rate um and I
Speaker 1: think this is partly again to avoid any build up
Speaker 1: in lebration. So if we do see even a fifty
Speaker 1: basis points maximum cut in the triple R, I don't
Speaker 1: think it really am ads much to the growth picture.
Speaker 1: It's not going to be enough to move the needle
Speaker 1: in our view. Uh And, Look, there may be more measures,
Speaker 1: and we have been seeing an array of announcements in
Speaker 1: recent weeks, in particular aim towards the property sector and
Speaker 1: to try and mitigate some of the COVID impact on
Speaker 1: the economy as well. But again this is much of
Speaker 1: the same as what we've been hearing for a long
Speaker 1: time now. It's just more measures on a similar vein.
Speaker 1: But we're not really seeing is huge amounts of money
Speaker 1: being put into the property market or in terms of
Speaker 1: other measures to boost the economy. So I think again
Speaker 1: it doesn't in our view, is unlikely to move the
Speaker 1: needle in terms of growth. We still stick to a
Speaker 1: relatively downbeat assessment going forward. So does that necessarily mean
Speaker 1: that the foreign capital will begin to flow away from China?
Speaker 1: Given everything that you're saying, it seems like there's not
Speaker 1: a compelling case to put money to work on the mainland.
Speaker 1: I think capital in any case, if you look this
Speaker 1: year has been fairly weak in terms of the investment
Speaker 1: into China. There has been perhaps more optimism on the
Speaker 1: equity market, although equity returns have been fairly soft, but
Speaker 1: the bond market has seen now around nine months of
Speaker 1: outflows continually. At the same time, foreign dict investment flows
Speaker 1: have also been quite soft in relative terms. So again,
Speaker 1: you know, I think investors already sort of looking at
Speaker 1: this growth picture and I guess some of the other
Speaker 1: concerns they have and have slowed their investment trajectory towards China.
Speaker 1: Now the question is does it continue next year, where
Speaker 1: you know, we well probably see better conditions globally. If
Speaker 1: we do see some poring in the relationship with the US,
Speaker 1: that will also help perhaps a bit more stimulus. I
Speaker 1: think the outlook is better next year, But nonetheless, we've
Speaker 1: already seen a fairly significant retreat of capital in this year.
Speaker 1: We're seeing a bit of U as S dollar weakness
Speaker 1: at the moment, and typically this would make for a
Speaker 1: ball case for emerging markets trying to Notwithstanding, are there
Speaker 1: any parts of emerging Asia that are looking appealing right now? Yes,
Speaker 1: and I think a weaker dollar is going to help
Speaker 1: everyone really in Asian in terms of you look at
Speaker 1: the currency markets, you look at local currency bonds have
Speaker 1: been suffering from a strong dollar um and also central
Speaker 1: banks that are about to intervene dramatically in recent months.
Speaker 1: So I think it will be broadly beneficial. But in
Speaker 1: terms of the growth picture, we do think countries that
Speaker 1: are more domestically focused, such as India, Indonesia, and perhaps
Speaker 1: even tourist driven countries to just Thailand, will benefit more
Speaker 1: in the coming months from a growth pickup than the
Speaker 1: trade driven economies such as Career in Taiwan, for example,
Speaker 1: which I've already seen some very sharp weakening in their exports,
Speaker 1: in part due to China weakness, but also due to
Speaker 1: impending recessions that are likely in Europe and the US
Speaker 1: in the months ahead. I want to get your take
Speaker 1: on a story that is moving on the Bloomberg terminal
Speaker 1: a very quickly in middle Bill Ackman, the founder of
Speaker 1: Pershing Square Capital, saying today that he is betting against
Speaker 1: the Hong Kong dollar on the notion that the peg
Speaker 1: with the green bag is going to break? Is he
Speaker 1: wrong in this trade? Ok? I think Eventually they'll have
Speaker 1: to be a shift in the PEG. I just don't
Speaker 1: think it's going to happen anytime soon, and it'll be
Speaker 1: very graduate, you know, if it does bring I mean,
Speaker 1: there is an argument to say that we see a
Speaker 1: PEG with the R and B, but again you're two
Speaker 1: different financial systems, one country with a capital account. It's
Speaker 1: not convertible, and I still think it's a very long
Speaker 1: way off, all right, Middle ahead of Emerging Market Strategy
Speaker 1: at t D Securities. Thanks so much for joining us
Speaker 1: with your views.