WEBVTT - Mitul Kotecha on the Markets (Correct)

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<v Speaker 1>Let's get to our guest. Mittle could techa he is

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<v Speaker 1>ahead of E M Strategy a T D Securities who

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<v Speaker 1>joins from Singapore. Mittle, thanks for being with us. A

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<v Speaker 1>lot of focus now on these rising COVID infections in China.

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<v Speaker 1>To what extent could we see growth really curtailed. I mean,

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<v Speaker 1>it's und not likely that we're going to have the

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<v Speaker 1>growth target met, but I mean we're going to see

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<v Speaker 1>much weaker growth on the mainland. It's a very good question,

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<v Speaker 1>and I think we've been pushing back for some time

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<v Speaker 1>about the optimism or against the optimism reopening the fact

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<v Speaker 1>that COVID cases have been rising for the last few weeks.

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<v Speaker 1>But on top of that, um the vaccine worries in

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<v Speaker 1>the sense that the elderly population in China still not

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<v Speaker 1>having the booster shots, and then at the same time

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<v Speaker 1>some of the concerns about the efficacy of the Chinese

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<v Speaker 1>vaccines has meant that in any case you'd see a

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<v Speaker 1>slow opening. And now now the fact that you're seeing

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<v Speaker 1>a amp up in COVID cases and in turn more

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<v Speaker 1>restrictions across China is just adding to that downside risk

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<v Speaker 1>as you mentioned to growth. Now, our forecast has been

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<v Speaker 1>frette downbeat anyway, three point one percent GDP growth this year.

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<v Speaker 1>We do expect some sort of a mechanical improvement in

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<v Speaker 1>growth next year, largely due to base effects, to get

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<v Speaker 1>us up to about four point seven percent, but as

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<v Speaker 1>you know, this is probably still well below the levels

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<v Speaker 1>of broth we've seen in China in recent years, so

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<v Speaker 1>we're not particularly optimistic here. And it's not just COVID cases.

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<v Speaker 1>Although there have been some new measures on the property sector,

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<v Speaker 1>it's still a long way to go before we see

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<v Speaker 1>recovery there. Exports are slowing down as well. That was

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<v Speaker 1>a big boost to growth during COVID, so there's not

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<v Speaker 1>a lot to be optimistic about their parts. Infrastructure is

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<v Speaker 1>the only real big source of support for China's economy

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<v Speaker 1>at present. You tempted to use that words and investable,

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<v Speaker 1>I wouldn't say that. Look, I think there's always a price,

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<v Speaker 1>and I think China's asset markets have come under a

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<v Speaker 1>lot of pressure in recent weeks and months. They've underperformed

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<v Speaker 1>regional markets, which have already been weak anyway, and so

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<v Speaker 1>there has been a shifting sentiment towards China equities, particularly

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<v Speaker 1>in the tech sector. I wouldn't quite say an investable,

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<v Speaker 1>but I still would be quite cautious of jumping back in.

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<v Speaker 1>We still need to get some clarity as well in

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<v Speaker 1>terms of where and what happens in terms of the

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<v Speaker 1>tech sanctions that the US has put into place, as

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<v Speaker 1>well as other tariffs and talks between President President she

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<v Speaker 1>and Biden whether that leads anywhere. But I do sense

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<v Speaker 1>a shift in sentiment from investors towards Chinese assets, despite

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<v Speaker 1>the worries about growth that are ongoing and metal. I

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<v Speaker 1>mentioned there the remarks from China's State Council about the

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<v Speaker 1>timely and appropriate use of policy tools. That does signal

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<v Speaker 1>a triple our cat is in the works. When do

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<v Speaker 1>you expect to see that? And do you expect anything

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<v Speaker 1>else to come down the line in terms of support.

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<v Speaker 1>It could happen fairly soon. I think when you've had

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<v Speaker 1>this sort of explicits eatments, it's more than likely it

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<v Speaker 1>comes in a matter of days rather than even weeks.

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<v Speaker 1>But the question I guess is will it be enough?

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<v Speaker 1>I mean, it's China shifting towards a more targeted approach

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<v Speaker 1>to easing. We didn't, for example, see any loan prime

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<v Speaker 1>rate cuts, which is another policy rate um and I

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<v Speaker 1>think this is partly again to avoid any build up

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<v Speaker 1>in lebration. So if we do see even a fifty

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<v Speaker 1>basis points maximum cut in the triple R, I don't

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<v Speaker 1>think it really am ads much to the growth picture.

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<v Speaker 1>It's not going to be enough to move the needle

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<v Speaker 1>in our view. Uh And, Look, there may be more measures,

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<v Speaker 1>and we have been seeing an array of announcements in

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<v Speaker 1>recent weeks, in particular aim towards the property sector and

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<v Speaker 1>to try and mitigate some of the COVID impact on

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<v Speaker 1>the economy as well. But again this is much of

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<v Speaker 1>the same as what we've been hearing for a long

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<v Speaker 1>time now. It's just more measures on a similar vein.

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<v Speaker 1>But we're not really seeing is huge amounts of money

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<v Speaker 1>being put into the property market or in terms of

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<v Speaker 1>other measures to boost the economy. So I think again

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<v Speaker 1>it doesn't in our view, is unlikely to move the

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<v Speaker 1>needle in terms of growth. We still stick to a

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<v Speaker 1>relatively downbeat assessment going forward. So does that necessarily mean

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<v Speaker 1>that the foreign capital will begin to flow away from China?

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<v Speaker 1>Given everything that you're saying, it seems like there's not

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<v Speaker 1>a compelling case to put money to work on the mainland.

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<v Speaker 1>I think capital in any case, if you look this

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<v Speaker 1>year has been fairly weak in terms of the investment

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<v Speaker 1>into China. There has been perhaps more optimism on the

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<v Speaker 1>equity market, although equity returns have been fairly soft, but

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<v Speaker 1>the bond market has seen now around nine months of

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<v Speaker 1>outflows continually. At the same time, foreign dict investment flows

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<v Speaker 1>have also been quite soft in relative terms. So again,

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<v Speaker 1>you know, I think investors already sort of looking at

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<v Speaker 1>this growth picture and I guess some of the other

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<v Speaker 1>concerns they have and have slowed their investment trajectory towards China.

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<v Speaker 1>Now the question is does it continue next year, where

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<v Speaker 1>you know, we well probably see better conditions globally. If

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<v Speaker 1>we do see some poring in the relationship with the US,

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<v Speaker 1>that will also help perhaps a bit more stimulus. I

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<v Speaker 1>think the outlook is better next year, But nonetheless, we've

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<v Speaker 1>already seen a fairly significant retreat of capital in this year.

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<v Speaker 1>We're seeing a bit of U as S dollar weakness

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<v Speaker 1>at the moment, and typically this would make for a

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<v Speaker 1>ball case for emerging markets trying to Notwithstanding, are there

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<v Speaker 1>any parts of emerging Asia that are looking appealing right now? Yes,

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<v Speaker 1>and I think a weaker dollar is going to help

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<v Speaker 1>everyone really in Asian in terms of you look at

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<v Speaker 1>the currency markets, you look at local currency bonds have

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<v Speaker 1>been suffering from a strong dollar um and also central

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<v Speaker 1>banks that are about to intervene dramatically in recent months.

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<v Speaker 1>So I think it will be broadly beneficial. But in

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<v Speaker 1>terms of the growth picture, we do think countries that

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<v Speaker 1>are more domestically focused, such as India, Indonesia, and perhaps

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<v Speaker 1>even tourist driven countries to just Thailand, will benefit more

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<v Speaker 1>in the coming months from a growth pickup than the

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<v Speaker 1>trade driven economies such as Career in Taiwan, for example,

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<v Speaker 1>which I've already seen some very sharp weakening in their exports,

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<v Speaker 1>in part due to China weakness, but also due to

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<v Speaker 1>impending recessions that are likely in Europe and the US

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<v Speaker 1>in the months ahead. I want to get your take

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<v Speaker 1>on a story that is moving on the Bloomberg terminal

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<v Speaker 1>a very quickly in middle Bill Ackman, the founder of

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<v Speaker 1>Pershing Square Capital, saying today that he is betting against

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<v Speaker 1>the Hong Kong dollar on the notion that the peg

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<v Speaker 1>with the green bag is going to break? Is he

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<v Speaker 1>wrong in this trade? Ok? I think Eventually they'll have

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<v Speaker 1>to be a shift in the PEG. I just don't

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<v Speaker 1>think it's going to happen anytime soon, and it'll be

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<v Speaker 1>very graduate, you know, if it does bring I mean,

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<v Speaker 1>there is an argument to say that we see a

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<v Speaker 1>PEG with the R and B, but again you're two

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<v Speaker 1>different financial systems, one country with a capital account. It's

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<v Speaker 1>not convertible, and I still think it's a very long

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<v Speaker 1>way off, all right, Middle ahead of Emerging Market Strategy

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<v Speaker 1>at t D Securities. Thanks so much for joining us

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<v Speaker 1>with your views.