Speaker 1: Good morning, and welcome to the Bloomberg Daybreak Asia podcast.
Speaker 1: I'm Doug Prisner. Here are the stories we're following today.
Speaker 1: Joining us now is Helen ju As. She is the
Speaker 1: chief investment Officer also a managing director at NF Trinity.
Speaker 1: Helen joins us from our studios in Hong Kong. It's
Speaker 1: always a pleasure to have the chance to visit with you. Helen.
Speaker 1: Talk to me a little bit about the way in
Speaker 1: which you understand these stimulus measures that have been unleashed
Speaker 1: by the Chinese government and how they may have a
Speaker 1: significant impact on growth. I mean, the market seems to
Speaker 1: be debating the efficacy here. I mean there may have
Speaker 1: been a little bit of enthusiasm initially, but as time
Speaker 1: went on, the equity markets seemed to say, hmm, we're
Speaker 1: a little skeptical. Are you skeptical?
Speaker 2: Look, I think the market's been very skeptical for quite
Speaker 2: a long time, and justifiably so. Right so, most of
Speaker 2: the last year and a half it's been about deflation
Speaker 2: and market drating and just generally speaking, vicious feedback loops
Speaker 2: every where because of the weaker property market. As a
Speaker 2: result of the policy tightening, property prices went down, so
Speaker 2: wealth effect when negative consumption started to suffer, and you know,
Speaker 2: as a result, that kind of all fed itself and
Speaker 2: equity markets reacted accordingly. I think what the policy makers
Speaker 2: are trying to do in this particular case is, rather
Speaker 2: than have piecemeal little bits of policies here and there,
Speaker 2: to actually, you know, take a whatever it takes type
Speaker 2: of approach for once. And this has been a big
Speaker 2: bazooka in terms of policy package. You have not just
Speaker 2: you know, rate cuts and so on, but also fiscal
Speaker 2: you have property policies.
Speaker 3: You also have a.
Speaker 2: Coin corresponding capital market stimulus where they basically have put
Speaker 2: a floor to the overall domestic a share market. Obviously,
Speaker 2: it's going to take time for things to reverse and
Speaker 2: to inflect into hopefully virtus feedback loops. That's probably going
Speaker 2: to take easily three to six months. So the market
Speaker 2: got initially very excited and kind of went vertical. I
Speaker 2: don't think the policy makers want that either, because that's
Speaker 2: a little bit too extreme, and so I think a
Speaker 2: little bit of a retlacement is good. But I think
Speaker 2: the next leg is going to be dependent on whether
Speaker 2: the policy impact starts to show through, and I think
Speaker 2: that will gradually start to happen.
Speaker 1: So what's the house view at and F trinity. Do
Speaker 1: you think this is an opportunity or are you holding
Speaker 1: back and maybe adopting kind of a wait and see approach.
Speaker 2: I think you have to kind of move ahead of
Speaker 2: the market. You know, waiting and seeing doesn't really help
Speaker 2: these days because markets respond so quickly, right So if
Speaker 2: you do have really positive data, you could see the
Speaker 2: ashare market, you know, practically limit up day after day.
Speaker 2: So I'm not saying that's going to happen right away,
Speaker 2: but we do think that after the retlacement, it's probably
Speaker 2: a decent level to get into the domestic ashare market,
Speaker 2: even some Hong Kong China stocks as well. We think
Speaker 2: the risk reward is better than a lot of other
Speaker 2: markets that have already performed very well, where expectations are
Speaker 2: very high, and you know, valuation and positioning is quite
Speaker 2: stretched as well. So relative to before, I think China
Speaker 2: is definitely a decent risk reward at this point.
Speaker 1: So are you focused primarily on equities when you're talking
Speaker 1: about side here? I'm wondering whether or not there are
Speaker 1: opportunities in credit is At the same time.
Speaker 2: I think It's difficult, right, because basically, if you look
Speaker 2: at the China tenure, we're looking at two point one percent,
Speaker 2: which is very very low by global standard and by
Speaker 2: historical standard. And the PBOC has made it very clear
Speaker 2: that they think that the ten year is too low
Speaker 2: and that there should be a proper ye curve in China.
Speaker 2: That's a lot steper, and I think there's going to
Speaker 2: be a lot more mof bond issues coming up, so
Speaker 2: more supply. So I actually am fairly negative on China CGB.
Speaker 2: I think that there's going to be an upward move
Speaker 2: in terms of the CGB yield over the next six
Speaker 2: to twelve months if data starts to improve. And on
Speaker 2: the credit side, as you know, there aren't so many
Speaker 2: credits that foreign investors like to look at because of
Speaker 2: more kind of immature rating systems and so on and
Speaker 2: so forth. So most of the activity, at least for
Speaker 2: foreign investors has been on CGB and on policy banks
Speaker 2: rather than the domestic credit market.
Speaker 1: Is there anything that you've identified thematically that you expect
Speaker 1: will outperform kind of conventional wisdom here industries or segments
Speaker 1: of the economy in which to invest.
Speaker 2: Well, I think if the push towards stabilizing the property
Speaker 2: market and property prices is effective. I think the most
Speaker 2: evident and media beneficiary is probably property, but there are
Speaker 2: not that many investable names remaining. I don't think so
Speaker 2: much the property supply chain because I think the policy
Speaker 2: makers care more about price stability rather than huge volume recovery.
Speaker 2: And I think it's going to be more secondhand market
Speaker 2: activity rather than firsthand, so it's not going to lift
Speaker 2: the demand for construction materials necessarily. But if property prices
Speaker 2: can stabilize, the biggest beneficiary is going to be consumption
Speaker 2: and so consumer stocks have debrated hugely since the beginning
Speaker 2: of this year, and internet stocks are trading at very
Speaker 2: reasonable valuations as well. I think if they can go
Speaker 2: from negative growth to stable to maybe slightly positive growth,
Speaker 2: I think the evaluation multiple can move up quite a bit.
Speaker 2: So consumption and internet I think would be two very
Speaker 2: interesting areas to watch for the coming period. Another area
Speaker 2: would probably be industrials and cyclicals. You know, if manufacturing
Speaker 2: and other areas start to show some inflection as well.
Speaker 2: Relatively speaking, if you look at defensives or central SOE
Speaker 2: yield needs that have already performed very well, in the
Speaker 2: last couple of years, those are probably likely to be
Speaker 2: more funding sources.
Speaker 1: So when you look at the States, two things come
Speaker 1: to mind for me. One is what's going on with
Speaker 1: the FED and interest rate policy. Secondarily is the US
Speaker 1: presidential election. Let's talk about the FED first. In your
Speaker 1: expectations for many more rate cuts, we had a very
Speaker 1: strong reading on retail sales here in the US, and
Speaker 1: maybe it was another one of those data points where
Speaker 1: the market struggled to rate price FED easing this year.
Speaker 1: Are you comfortable with two more twenty five basis point
Speaker 1: rate cuts? Does that fit into your thinking?
Speaker 3: Yeah?
Speaker 2: Look, you know, look, the overall volatility in terms of
Speaker 2: rates has been still pretty crazy this year, right, Expectations
Speaker 2: has been shifting all over the map because of the
Speaker 2: volatility and the fundamental data. But certainly over the last
Speaker 2: couple of months, aside from that very bad NFP print
Speaker 2: in the beginning of October and in the beginning of September,
Speaker 2: all the other data has been much stronger, and obviously
Speaker 2: the latest employment numbers were blowout positive. So I would
Speaker 2: say the likelihood of a fifty basis point further cut
Speaker 2: in November is pretty much close to zero now, so
Speaker 2: two twenty five basis point cuts remaining I think makes sense.
Speaker 2: But going into next year, whether there's actually going to
Speaker 2: be four more cuts as the market currently prices, I
Speaker 2: think it's going to be still data dependent. At this point,
Speaker 2: it looks like, you know, perhaps not, but I think
Speaker 2: we're definitely closer to the base case versus where we
Speaker 2: have been earlier this year, when the market was shifting
Speaker 2: from anywhere between like one hundred and sixty basis points
Speaker 2: of cuts this year to like only thirty basis points
Speaker 2: of cuts this year. So now we're kind of somewhere
Speaker 2: in between, in a more reasonable range, I would say.
Speaker 1: So when you listen to the rhetoric from each of
Speaker 1: the two campaigns in the US, the candidates running for president,
Speaker 1: is it cause you to kind of think about what
Speaker 1: the future may hold in terms of US policy, whether
Speaker 1: it's on trade visa VI tariffs, or whether it's something
Speaker 1: that may produce a little bit more inflation in the
Speaker 1: United States. How are you thinking about the US election
Speaker 1: when it comes to your investment strategy.
Speaker 2: Well, certainly people think that if Trump wins, that is
Speaker 2: going to be more proactive for US fiscal policy and
Speaker 2: US domestic growth, but at the same time it's going
Speaker 2: to bring a lot of uncertainties and tail risk to
Speaker 2: non US markets, especially in emerging markets China, etc. If
Speaker 2: Harris wins, then probably the dollar will sell off, the
Speaker 2: yield will come down a little bit. There's going to
Speaker 2: be more fiscal austerity, but also a lot less potential
Speaker 2: risks in terms of trade and huge deviations from the
Speaker 2: Biden administration stands on a lot of these other countries. Right,
Speaker 2: So I would say the Harris scenario would be more
Speaker 2: positive for non US markets, and the Trump scenario will
Speaker 2: probably be able to extend the US market rally a
Speaker 2: little bit more and relatively strengthen the dollar, which then
Speaker 2: comparatively speaking hurts performance of other markets. But that said,
Speaker 2: I think that Trump win has been more or less
Speaker 2: the market's default assumption for quite some time, So even
Speaker 2: if it happens, I don't see that the market's going
Speaker 2: to have a huge move. But if let's say Democrats,
Speaker 2: you know, win the White House and maybe you know,
Speaker 2: one of the you know, basically take over part of
Speaker 2: Congress as well, then I think, you know, there is
Speaker 2: more of a retlacement potential for the market, because that's
Speaker 2: not the default assumption we've had over the past few months.
Speaker 1: Hard to believe that we're about three weeks out from
Speaker 1: that event. I know and was there.
Speaker 2: Okay, time has flown by.
Speaker 1: It really has, Helen. It's always a pleasure. Thanks so much,
Speaker 1: Helen Ju, Chief Investment Officer, also Managing director at NF Trinity.
Speaker 1: Joining us now is pay Chian lu Asia, economist at
Speaker 1: Fidelity International US from the Lion City of Singapore. Peychen,
Speaker 1: thank you for making time to chat with us. Can
Speaker 1: we talk about the way in which you understand the
Speaker 1: policy rollout that authorities in China have been kind of
Speaker 1: rolling out in various stages and targeting various aspects of
Speaker 1: the economy. First, what do we know about how policy
Speaker 1: is targeting the property market, which I think we can
Speaker 1: agree is the primary trouble spot.
Speaker 3: Thanks for having me today, Dog, I think before we
Speaker 3: dive deeper into the property sector specifically, I would love
Speaker 3: to take a step back to think about why you
Speaker 3: have such set of policy right now and how this
Speaker 3: policy is rolled out. I think potentially the policy trigger
Speaker 3: was probably multifolds. Over the summer, we have experienced a
Speaker 3: lot more troubled headlines about fiscal conditions in China as
Speaker 3: well as the unemployment issue, not mentioning the property sector
Speaker 3: that mentioned has always been on top of investor's mind
Speaker 3: and is running on a weaker momentum. So putting all
Speaker 3: this together, I think the economy does need an additional
Speaker 3: set of policy boosts to stabilize, and that's why we
Speaker 3: had such a great concerted effort from the policy maker
Speaker 3: to stabilize the growth momentum. And more specifically in terms
Speaker 3: of how the policy has been delivered in the property sector,
Speaker 3: I think that all goes back to the political pivot
Speaker 3: where they mentioned about stopping the decline of the sector
Speaker 3: and stabilize it. So following through with that, we have
Speaker 3: seen a lot more policy coming out from both supply
Speaker 3: and demand side. On the supply side, they're basically trying
Speaker 3: to reduce supplies by stopping new construction and digest excessive inventories.
Speaker 3: And on the demand side, definitely more relaxation of the
Speaker 3: previous restrictive policies to stimulate domestic demand.
Speaker 1: So what is your sense in terms of the time
Speaker 1: that it's going to take. And I know some of
Speaker 1: them have not even been rolled out yet. I mean,
Speaker 1: but do you have a sense of how long it
Speaker 1: will take for these policies to have a significant impact.
Speaker 3: Well, I think it largely depends on where we are
Speaker 3: looking at in terms of policy aultimate goals. In terms
Speaker 3: of stabilization, I wouldn't think we need so long to
Speaker 3: stabilize the growth momentum, especially on the real activity side.
Speaker 3: So some of the policy that's been delivered on the margins,
Speaker 3: such as equipment upgrading, trading of home appliances, as well
Speaker 3: as additional investments. All these set of policies are set
Speaker 3: to stabilize the real activity growth momentum in a fairly
Speaker 3: quickly manner. So in Q one Q two twenty twenty five,
Speaker 3: I would think that we will be able to see
Speaker 3: some marginal sequential improvement in real activity sector, but the
Speaker 3: structural issues are more long term. I think it's probably
Speaker 3: going to take a longer time horizon to resolve significantly.
Speaker 3: But that being said, I think we're still waiting for
Speaker 3: more details to assess the actual impact and scale of
Speaker 3: these policies.
Speaker 1: But if one of the problems has been this lack
Speaker 1: of confidence sentiment has been so weak, is it the
Speaker 1: property market that's going to turn that around? Is it
Speaker 1: equity prices being at higher levels that will will necessarily
Speaker 1: improve sentiment and the outlook for the future.
Speaker 3: I think it's hard to pinpoint a specific trigger that
Speaker 3: will turn around economic confidence or in a sudden There's
Speaker 3: no magic bullet over here, given that on a downside
Speaker 3: downward shift of the economy, many factors played out unfavorably
Speaker 3: earlier during the post pandemic recovery. So looking forward, I
Speaker 3: think we probably need to see quite a few things
Speaker 3: stabilizing or recovering before we see a much more significant
Speaker 3: improvement in the confidence of the economy general. So from
Speaker 3: a sector or a big picture wise, we probably need
Speaker 3: to see physical conditions to improve so that the local
Speaker 3: government have more ammunition to spend. Private sector enterprises need
Speaker 3: to see more favorable or favorable policies in order to
Speaker 3: be more comfortable in expanding their carepax and investments, and
Speaker 3: a consumer sector, perhaps a combination of household income improvement
Speaker 3: as well as the wealth impact from property sector being stabilizing,
Speaker 3: are both very helpful for us to see the confidence
Speaker 3: coming back to the economy.
Speaker 1: Where does that leave China in trying to reach that
Speaker 1: growth target?
Speaker 3: Then, I think with the coordinated policy efforts, China might
Speaker 3: be closer to five percent grows for twenty twenty four,
Speaker 3: and looking beyond twenty twenty four, I think in twenty
Speaker 3: twenty five the next few quarters, stabilization is still going
Speaker 3: to be the key momentum key saying that we're looking
Speaker 3: at far rather than a very strong reflation. So in
Speaker 3: terms of growth momentum, we still expect China to focus
Speaker 3: a lot more on the quality of growth, whereas stabilizing
Speaker 3: its growth momentum somewhere between four point five to five
Speaker 3: percent to allow it to gradually settle in a slower range.
Speaker 1: Is there anything that you can see that might put
Speaker 1: a dent into one of the bright spots of the
Speaker 1: Chinese economy, which is the exports the manufacturing of certain
Speaker 1: goods that have been in many respects targeting the European market,
Speaker 1: the American market. Is there anything that you can see
Speaker 1: that may disrupt that positivity?
Speaker 3: Well, I think from a medium term perspective, China has
Speaker 3: been upgrading supply chain significantly over the past few decades,
Speaker 3: So from that perspective, I don't really see much of
Speaker 3: a structural challenge of China's expot composition going forward. But
Speaker 3: that being said cyclically, expots given is more excellent demand
Speaker 3: driven in nature, slow down in the US economy, the
Speaker 3: European economy, and to some extent, US and Asian blocks
Speaker 3: will all affect China's ex performances. Given that we all
Speaker 3: see that the US economy has been slowing gradually, even
Speaker 3: though soft lending remains our base case, but we still
Speaker 3: think sequential slow down it's going to weigh on the
Speaker 3: performance of China's sector going forward.
Speaker 1: I'm going to answer my own question, and I think
Speaker 1: the issue of tariffs might be one of the stumbling
Speaker 1: blocks for the export economy in China. Would you agree
Speaker 1: with that?
Speaker 3: Well, I think that largely depends on how the teriffs
Speaker 3: are implemented and what kind of scale we're looking at,
Speaker 3: So that's all uncertain at this stage. But if we
Speaker 3: think about the generally protective stunts, that's definitely going to
Speaker 3: hurt China's expot performance, especially around the time of implementitious
Speaker 3: but zoom me out to a longer term horizon, that's
Speaker 3: just going to continue to push China to upgrade itself
Speaker 3: in a global supply chain diversification in term of a
Speaker 3: supply chain, so that leads China more integrated with the
Speaker 3: rest of the world.
Speaker 1: Paychen, thank you so much for making time to chat
Speaker 1: with us. I enjoyed the conversation. Paychen Lu Asia economist
Speaker 1: at Fidelity International. Joining us on the Daybreak Asia podcast.
Speaker 1: Joining us now is George Marris. He is the chief
Speaker 1: investment officer also the global head of Equities at Principal
Speaker 1: Asset Management. George joining us from our studios in Hong Kong.
Speaker 1: Can we start by looking at the story in China?
Speaker 1: We've had this enormous flood of stimulus that the market
Speaker 1: has tried to understand. Some of this we know will
Speaker 1: be delayed. The equity market seemed at one point to
Speaker 1: be strongly convinced it was going to matter. But I
Speaker 1: think if you look at equity trading now, George, we're
Speaker 1: down roughly ten percent from the high that we put
Speaker 1: in in early October. So maybe the investment community has
Speaker 1: become a little disinhearted or at least skeptical. Is that
Speaker 1: the way you read it?
Speaker 4: For sure? I think the reaction after kind of the
Speaker 4: initial surprise has been one of continued retrenchment. And what's
Speaker 4: been interesting is, irrespective of the policy, when it comes
Speaker 4: at first comes out there's enthusiasm, and then it seems
Speaker 4: like this chorus that says that's not enough, it's not enough,
Speaker 4: and that's certainly impacted markets negatively.
Speaker 1: One of the things that I'm wondering about is the
Speaker 1: extent to which sentiment can be turned on a dime.
Speaker 1: This seems to be a challenge that's going to require
Speaker 1: years to kind of correct. Is that a fair statement.
Speaker 4: In many ways? For sure, because we've had such negativity
Speaker 4: coming emanating from China. We all understand the structural issues
Speaker 4: that it confronts. We understand the political tensions, and we
Speaker 4: also understand that for the last five plus years, the
Speaker 4: rule of law with respect to treating shareholder capital and
Speaker 4: foreign capital has been a little bit opaque, and we
Speaker 4: need to get past that. And so I think there's
Speaker 4: a notion of the government has to show you willingness
Speaker 4: further commitment to doing things, so you've got to just
Speaker 4: climb this wall of skepticism that's out there. So you'll
Speaker 4: need to see continued actions out of there to finally
Speaker 4: get the markets to break free.
Speaker 1: What about the latest measures to address the problems in
Speaker 1: the property market. Yesterday we had news that China will
Speaker 1: nearly double its loan quota to so called white list
Speaker 1: property projects. Is this going to have an impact you think.
Speaker 4: I don't know whether or not this particular policy is
Speaker 4: the policy that breaks or that sets the structure up
Speaker 4: with respect to real estate. We all understand that from
Speaker 4: a structural perspective, Chinese property is a huge problem, has
Speaker 4: been for a long period of time. It needs to
Speaker 4: get settled. What I would actually say is, I think
Speaker 4: what's more, what's more intriguing is the fact that we've
Speaker 4: seen multiple measures over the past year, and certainly over
Speaker 4: the past month to address the real estate market in
Speaker 4: a much more systematic and truly structural way than we've
Speaker 4: seen in the past. I think this just latest, this
Speaker 4: latest you know, measure with respect to white property white
Speaker 4: list property is a further example of the government's commitment
Speaker 4: to making this right. And I think it's that, frankly,
Speaker 4: that compounding of all these different policies that's more important
Speaker 4: than just the last policy in and of itself.
Speaker 1: The property market problem is just one aspect of this
Speaker 1: deflationary trap to China is caught in when you study
Speaker 1: periods of severe deflation, and I'm thinking of Japan, and
Speaker 1: I don't know whether the analog is apt or not.
Speaker 1: I mean, is it extremely difficult to break from the
Speaker 1: grip of something like this.
Speaker 4: I think Japan is a fantastic analog with respect to
Speaker 4: understanding that some of the issues confronting China. You've got
Speaker 4: the disinflation in the markets, if not outright deflation. You
Speaker 4: have a demographic situation that is going into population decline.
Speaker 4: That's also a confounding element in how Japan. You know,
Speaker 4: essentially Japan had gone through roughly thirty years of economic
Speaker 4: malaise before the last couple of years we've seen that turnaround.
Speaker 4: I think if I were a Chinese policymaker, I'd be
Speaker 4: paying rapt attention to what Japan did over the last
Speaker 4: couple of years to reignite both markets and their economy.
Speaker 4: And a lot of that is just structural reform across booth,
Speaker 4: government and corporate sector.
Speaker 1: So let's talk a little bit about japan expectations here
Speaker 1: that the boj is going to at some point be
Speaker 1: confronted with having to raise interest rates. Whether it happens
Speaker 1: before the end of the year or maybe sometime in
Speaker 1: Q one of twenty twenty five, that's up for debate.
Speaker 1: But I'm looking at a end that is weakened substantially
Speaker 1: here in the last couple of days right now at
Speaker 1: about one point fifty against the greenback. How much pressure
Speaker 1: does this put on the boj to kind of to
Speaker 1: do something essential?
Speaker 4: You know, The end is a it's complicated because it
Speaker 4: cuts both ways. A week end certainly helps exports in
Speaker 4: Japan's one of the largest exporting economies in the world.
Speaker 4: That certainly drives their own economy, and so a weekend
Speaker 4: is a competitive advantage for them obviously relative to relative
Speaker 4: to peers. On the other side, it is essentially importing
Speaker 4: inflation because it makes foreign goods much more expensive in
Speaker 4: Japanese terms, it is a headwind for domestic Japanese consumption,
Speaker 4: and like China, domestic consumption has to be addressed, right,
Speaker 4: And I think for a lot of these export dominated
Speaker 4: economy economies, not just Japan, but China, Germany, having an
Speaker 4: export driven economy means you're dependent on other countries, particularly
Speaker 4: the US, to be the engine of global growth and
Speaker 4: you're really not generating internally. That's a big structural element
Speaker 4: that has to get fixed. So I think the end
Speaker 4: continuing a weekend does make you know, a Japanese consumption
Speaker 4: story harder to attain.
Speaker 1: What you mentioned the fact that it actually benefits the exporters.
Speaker 1: So would you put money to work in some of
Speaker 1: those names in Japan right now?
Speaker 4: I don't know that I would make a necessary en
Speaker 4: trade here, and I think part of the reason is
Speaker 4: is we know that while central banks around the world
Speaker 4: are continuing to be an easing posture, whether it's the FED,
Speaker 4: the Bank of England, the the PBOC, the Bank of
Speaker 4: Japan is moving in a different direction right The Bank
Speaker 4: of Japan is in looking to raise rates obviously reverse
Speaker 4: years of zero to negative interest rates, though they have
Speaker 4: to get rates higher. So I don't know that I
Speaker 4: would necessarily play a weakening y in the forward outlook
Speaker 4: as long but as long as the yen is under control,
Speaker 4: I think you can look to the actual underlying companies
Speaker 4: and invest there well.
Speaker 1: You mentioned the FED and expectations for more rate cuts.
Speaker 1: Today in the States, we had a very solid report
Speaker 1: on retail sales. I don't know whether it's likely to
Speaker 1: contribute to the FED doing anything different than what the
Speaker 1: market is expecting right now. Maybe forty basis points in
Speaker 1: total easing between now and the end of the year,
Speaker 1: and so you flip a coin and say, Okay, the
Speaker 1: FED goes twenty five basis points in November and another
Speaker 1: twenty five basis point rate cut in December. Is that
Speaker 1: the way that you understand it right now?
Speaker 4: I think that's certainly that's the way I understand it.
Speaker 4: You have to be adjusting your probabilities. Right So, when
Speaker 4: the FED cut by fifty basis points and provided the
Speaker 4: dot plot that indicated another fifty for the rest of
Speaker 4: this year and another one hundred for twenty twenty five,
Speaker 4: We've had data that's come in over the last several
Speaker 4: weeks that have indicated that the US economy is actually
Speaker 4: performing quite well, and we are seeing some inflationary pressures
Speaker 4: out there. One of the interesting trends is we're going
Speaker 4: through this earning season is the degree to which companies
Speaker 4: are highlighting cost pressures is increasing pretty significantly. So I
Speaker 4: think their ability to necessarily go the full fifty to
Speaker 4: the rest of this year, and I think we have
Speaker 4: to moderate the odds of that and an additional one
Speaker 4: hundred basis points next year. It feels pretty aggressive.
Speaker 1: One of the things that was interesting today is that
Speaker 1: gold climb to a fresh record high. Is any of this,
Speaker 1: in your view, tied to some repositioning ahead of the
Speaker 1: US election.
Speaker 4: Look, it certainly could, right, And gold's a wonderful inflation hedge,
Speaker 4: and if you think the election is going to produce
Speaker 4: a result that'll be inflationary, you know, it's a great hedge.
Speaker 4: I'm not so sure that that's necessarily it. I think
Speaker 4: that both candidates have policies that will likely be inflationary.
Speaker 4: So I don't think there's a real change there. We've
Speaker 4: all known that. I think the issue is, you know,
Speaker 4: gold is also a stability play, right, and we continue
Speaker 4: to see geopolitical tension ratchet. The Middle East is you know,
Speaker 4: in significant turmoil. We still have a you know, a
Speaker 4: ground incursion in Ukraine. The situation here in Asia continues
Speaker 4: to be challenging with respect to you know, Chinese actions
Speaker 4: throughout the China Sea. I think I think this is
Speaker 4: just a sign that people want safety and stability and
Speaker 4: feel it's a fantastic hedge given all else that's going on.
Speaker 1: George, You're in Hong Kong and I'm sure you're taking
Speaker 1: a lot of client meetings, and I'm wondering about the
Speaker 1: questions you're being asked, right now, can you share a
Speaker 1: little bit of.
Speaker 4: That, Doug. There's really two issues that come up in
Speaker 4: every single meeting. The first one is is this the
Speaker 4: inflection point for China?
Speaker 2: Right?
Speaker 4: Obviously, people here are very concerned about the Chinese economic
Speaker 4: health and want to know whether or not this is
Speaker 4: going to break the malaise that is certainly am packed
Speaker 4: to China for not only the last five years, but
Speaker 4: if you really think about it, the Chinese equity market's
Speaker 4: been a weak performer relative to global peers for the
Speaker 4: last two decades. So they want to know whether or
Speaker 4: not this is the real change. And then secondarily, they
Speaker 4: want to understand what's going to happen with the US election.
Speaker 4: For sure, everybody's intrigued. I think the entire world is
Speaker 4: intrigued about what's going to happen in the US and
Speaker 4: what does it mean for Hong Kong and China.
Speaker 1: George, it's always a pleasure. Thanks for making time to
Speaker 1: chat with us. George Maris is the CIO. He's also
Speaker 1: the global head of Equities at Principal Asset Management. Joining
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