WEBVTT - Vikas Pershad on the Markets (Radio)

0:00:00.120 --> 0:00:02.840
<v Speaker 1>Let's get to Viksh Purshad, our guest for the half hour.

0:00:02.960 --> 0:00:07.760
<v Speaker 1>Vikas his portfolio manager at MMG Investments, joining us from Singapore. Vicas,

0:00:07.840 --> 0:00:10.000
<v Speaker 1>thanks for being with us. Can we start with a

0:00:10.039 --> 0:00:12.720
<v Speaker 1>look at the non oil exports that we had for

0:00:12.760 --> 0:00:15.200
<v Speaker 1>Singapore in the month of June. Whether you look at

0:00:15.200 --> 0:00:17.760
<v Speaker 1>it month on month or year on year, these numbers

0:00:17.760 --> 0:00:22.800
<v Speaker 1>are pretty robust. Hello, good evening, good morning. Tell your

0:00:22.800 --> 0:00:26.520
<v Speaker 1>listeners they are pretty robust. I think given our focus

0:00:26.520 --> 0:00:28.400
<v Speaker 1>on the long term and also given the challenges that

0:00:28.440 --> 0:00:31.000
<v Speaker 1>we see around the world today, we're not making too

0:00:31.080 --> 0:00:34.800
<v Speaker 1>much of these month to month prints. In contrast, or

0:00:35.360 --> 0:00:38.040
<v Speaker 1>as an extension, if you look at month on month

0:00:38.159 --> 0:00:40.560
<v Speaker 1>or year on your housing data in China, for example,

0:00:40.640 --> 0:00:43.159
<v Speaker 1>I think if you focus two months on the monthly numbers,

0:00:43.560 --> 0:00:46.000
<v Speaker 1>they can lead you astray. There are broader problems that

0:00:46.040 --> 0:00:49.200
<v Speaker 1>we're still contending with. And um, it's one data point,

0:00:49.200 --> 0:00:51.040
<v Speaker 1>but there's a lot of data points that are not

0:00:51.120 --> 0:00:54.040
<v Speaker 1>robust these days. What are the biggest points and you're

0:00:54.040 --> 0:00:58.040
<v Speaker 1>worried about that we're contending with. I think so if

0:00:58.080 --> 0:01:01.080
<v Speaker 1>we look across the region and around the road, there

0:01:01.240 --> 0:01:06.120
<v Speaker 1>is the issue of consumption at the consumer level, the price,

0:01:06.640 --> 0:01:11.600
<v Speaker 1>the pressure on volumes. There's some excitement across sectors focused

0:01:11.600 --> 0:01:15.040
<v Speaker 1>on the on the consumer f MS, f C, f

0:01:15.240 --> 0:01:19.399
<v Speaker 1>m c G, entertainment, some derivatives of housing, where people

0:01:19.400 --> 0:01:22.440
<v Speaker 1>are focused on price increases that companies are talking about.

0:01:22.600 --> 0:01:24.839
<v Speaker 1>I think given the inflationary pressures that we are seeing

0:01:25.440 --> 0:01:29.479
<v Speaker 1>UH and the willingness of consumers to pull back, I'm

0:01:29.520 --> 0:01:32.400
<v Speaker 1>not yet sure that these price hikes will stick. Whether

0:01:32.400 --> 0:01:36.200
<v Speaker 1>we're talking about consumer goods in Japan or in housing

0:01:36.240 --> 0:01:38.800
<v Speaker 1>derivative companies in the US, I think it's still too

0:01:38.840 --> 0:01:41.520
<v Speaker 1>early to say that. So that is that is one concern.

0:01:41.720 --> 0:01:43.880
<v Speaker 1>The reading that we had in the Friday session here

0:01:43.880 --> 0:01:45.800
<v Speaker 1>in the US from the University of Michigan and on

0:01:45.880 --> 0:01:49.360
<v Speaker 1>inflation expectations showed moderation in the month of July. And

0:01:49.360 --> 0:01:52.120
<v Speaker 1>we've had a few guests on the program talking or

0:01:52.240 --> 0:01:56.280
<v Speaker 1>suspecting that we may be near peak inflation. And if

0:01:56.320 --> 0:01:58.760
<v Speaker 1>that is true, maybe we're also at peak dollar. Would

0:01:58.760 --> 0:02:03.800
<v Speaker 1>you go that far? Not yet, I think first, on

0:02:03.840 --> 0:02:06.520
<v Speaker 1>the point of inflation, there's a definitional issue. If you

0:02:06.560 --> 0:02:09.240
<v Speaker 1>look at the basket of goods that that governments and

0:02:09.280 --> 0:02:13.720
<v Speaker 1>agencies track, Yes, we could given the expected moderation in

0:02:13.960 --> 0:02:19.120
<v Speaker 1>energy prices, in fuel prices on that print, on that metric, yes,

0:02:19.160 --> 0:02:21.720
<v Speaker 1>we could see some moderation. But if you think longer

0:02:21.840 --> 0:02:25.680
<v Speaker 1>term the cost of what really really matters to people

0:02:25.680 --> 0:02:30.200
<v Speaker 1>in the long term, to consumers, housing, healthcare, education, long

0:02:30.320 --> 0:02:35.520
<v Speaker 1>term energy costs, these are the trends in price prices

0:02:35.560 --> 0:02:37.480
<v Speaker 1>for these are not yet abating. I think that is

0:02:37.520 --> 0:02:41.040
<v Speaker 1>a long, long term problem and a bigger problem. We're

0:02:41.040 --> 0:02:43.240
<v Speaker 1>talking about whether or not the FED is going to

0:02:43.280 --> 0:02:46.720
<v Speaker 1>be incredibly aggressive. It's next rate meeting as well, and

0:02:46.800 --> 0:02:50.079
<v Speaker 1>when if they are, that then starts to taper out

0:02:50.120 --> 0:02:51.680
<v Speaker 1>as well. When do you then start to see the

0:02:51.720 --> 0:02:54.760
<v Speaker 1>FED potentially look to either holding or cutting rights. What's

0:02:54.800 --> 0:02:58.920
<v Speaker 1>your view as we look at these recessionary fears, well,

0:02:59.320 --> 0:03:01.160
<v Speaker 1>sincially have the There's two parts of that question. Number

0:03:01.200 --> 0:03:03.359
<v Speaker 1>one is on the interest rate and the tools at

0:03:03.400 --> 0:03:09.880
<v Speaker 1>the um disposal of bankers um. And then the again

0:03:09.919 --> 0:03:14.960
<v Speaker 1>the definition of recession. I think, on various definitions, the

0:03:14.960 --> 0:03:16.920
<v Speaker 1>base cases that we are heading to a recession in

0:03:16.919 --> 0:03:20.400
<v Speaker 1>the US. The question is of duration and of magnitude.

0:03:20.680 --> 0:03:23.360
<v Speaker 1>On the interest rates. That is a key tool in

0:03:23.800 --> 0:03:28.080
<v Speaker 1>halting the progress of inflation, and we do expect that

0:03:28.440 --> 0:03:32.520
<v Speaker 1>will continue. Now, the definition again of aggressive, I think

0:03:32.560 --> 0:03:34.960
<v Speaker 1>will vary depend on when you're speaking with So we're

0:03:34.960 --> 0:03:37.720
<v Speaker 1>talking about some of the concerns still here with the

0:03:37.800 --> 0:03:41.080
<v Speaker 1>China picture, when you've got these rising COVID cases, lockdowns

0:03:41.120 --> 0:03:43.760
<v Speaker 1>in the deepening property sector. Was I was mentioning that

0:03:43.800 --> 0:03:46.120
<v Speaker 1>the Central Bank governor has said that there will be

0:03:46.360 --> 0:03:49.120
<v Speaker 1>more support from the PBOC. But do you agree with

0:03:49.160 --> 0:03:52.400
<v Speaker 1>the likes of Goldman sets that maybe the economy momentum

0:03:52.480 --> 0:03:54.280
<v Speaker 1>is not going to be sustainable if we continue to

0:03:54.320 --> 0:03:58.880
<v Speaker 1>see this COVID zero path. Really, I think relative to

0:03:58.880 --> 0:04:02.760
<v Speaker 1>the expectations being set earlier in the year of the

0:04:02.800 --> 0:04:05.840
<v Speaker 1>five and a half percent roughly growth, right now, it's

0:04:05.840 --> 0:04:07.680
<v Speaker 1>hard to see how that will be meant. I've seen

0:04:07.720 --> 0:04:09.640
<v Speaker 1>some of the recent numbers. The cuts have started to

0:04:09.640 --> 0:04:11.960
<v Speaker 1>come through. I think they will continue. The question is

0:04:12.000 --> 0:04:14.800
<v Speaker 1>how much of this is already reflected in in asset

0:04:14.800 --> 0:04:17.560
<v Speaker 1>prices and equity prices, which is where we focus. I

0:04:17.600 --> 0:04:20.599
<v Speaker 1>think to a great extent it is. But so anybody

0:04:20.640 --> 0:04:23.880
<v Speaker 1>who's been paying attention to Bloomberg and what you all

0:04:23.920 --> 0:04:25.960
<v Speaker 1>have that saying it should be fully caught up on

0:04:26.000 --> 0:04:28.080
<v Speaker 1>a situation from from our side, what I can say

0:04:28.160 --> 0:04:32.480
<v Speaker 1>is that our focus on this sector broadly defined financials

0:04:32.520 --> 0:04:35.359
<v Speaker 1>and property companies in in China is measured not in

0:04:36.040 --> 0:04:38.080
<v Speaker 1>months or quarters of years. It's it's in decades. So

0:04:38.080 --> 0:04:41.400
<v Speaker 1>we follow this space closely. Despite the recent turbulence, which

0:04:41.440 --> 0:04:44.080
<v Speaker 1>typically we like to take advantage of, despite the recent

0:04:44.080 --> 0:04:46.240
<v Speaker 1>sell offs, again which we typically like to take advantage of,

0:04:46.400 --> 0:04:49.919
<v Speaker 1>we have allocated little to no capital in this period.

0:04:49.960 --> 0:04:51.800
<v Speaker 1>We're still white waiting and seeing. We don't see our

0:04:51.800 --> 0:04:55.279
<v Speaker 1>opportunities here, yet we see them elsewhere. So describe more

0:04:55.320 --> 0:04:57.919
<v Speaker 1>clearly for me what you do see that prevents you

0:04:58.000 --> 0:05:01.880
<v Speaker 1>from kind of staking out of position. Part of it

0:05:01.920 --> 0:05:04.919
<v Speaker 1>is is relative opportunities. So we we don't invest just

0:05:05.080 --> 0:05:07.279
<v Speaker 1>in one market. We invest across the region and around

0:05:07.279 --> 0:05:10.359
<v Speaker 1>the world. And when you look at housing in particular,

0:05:10.720 --> 0:05:14.719
<v Speaker 1>it's a it's a source of adjecat for for many

0:05:14.760 --> 0:05:18.200
<v Speaker 1>participants and market participants as well around the world. And

0:05:18.279 --> 0:05:20.320
<v Speaker 1>if you look at the trends that we are seeing,

0:05:20.400 --> 0:05:22.320
<v Speaker 1>the underlying trends that we're seeing in the ripple effects

0:05:22.320 --> 0:05:25.400
<v Speaker 1>through financials and housing derivatives in China, and you contrast

0:05:25.480 --> 0:05:27.960
<v Speaker 1>that with the market like India where penetration is low

0:05:28.240 --> 0:05:30.280
<v Speaker 1>the banks are healthy, better capitalized than they have been

0:05:30.279 --> 0:05:34.720
<v Speaker 1>in many years. Credit growth is pretty healthy. As an

0:05:34.720 --> 0:05:37.479
<v Speaker 1>offshoot of that, or related to that, the housing sector

0:05:37.520 --> 0:05:41.320
<v Speaker 1>and housing direvtors, we see opportunities there. Uh. We see opportunities,

0:05:42.240 --> 0:05:45.719
<v Speaker 1>long term investment opportunities with high perspective returns in other

0:05:45.720 --> 0:05:48.560
<v Speaker 1>parts of Asia as well and within China. Yes, the

0:05:48.560 --> 0:05:51.919
<v Speaker 1>property sector is very important, but we have a significant

0:05:51.920 --> 0:05:55.719
<v Speaker 1>allocation of time and capital and resources and people to China,

0:05:55.760 --> 0:05:59.200
<v Speaker 1>and we are actively pursuing investment opportunities there across other sectors.

0:05:59.560 --> 0:06:01.760
<v Speaker 1>And you may gine you're looking as well across other

0:06:01.800 --> 0:06:05.719
<v Speaker 1>parts of Asia. Tell us what you like in India. Yes,

0:06:05.880 --> 0:06:07.960
<v Speaker 1>So we've spoken a few times in the past couple

0:06:08.000 --> 0:06:10.320
<v Speaker 1>of years. In one area that we have yet covered

0:06:11.320 --> 0:06:14.360
<v Speaker 1>is the Indian bank sector, and we just touched upon

0:06:14.400 --> 0:06:16.120
<v Speaker 1>that very briefly. But I think if you look at

0:06:16.120 --> 0:06:19.760
<v Speaker 1>the underperformance and you couple that with the strong fundamentals

0:06:19.760 --> 0:06:22.640
<v Speaker 1>that we see, and also you overlay on top of

0:06:22.680 --> 0:06:26.840
<v Speaker 1>that the commentary from from the executives, it seems like

0:06:26.920 --> 0:06:29.320
<v Speaker 1>on a multi year investment horizon, this is a pretty

0:06:29.320 --> 0:06:32.600
<v Speaker 1>good area to be allocating capital. It's a big sector,

0:06:32.600 --> 0:06:35.440
<v Speaker 1>it's a big waiting within the benchmarks, but I think

0:06:35.560 --> 0:06:38.960
<v Speaker 1>there's still scope for being overweighted that and it's it's

0:06:38.960 --> 0:06:42.040
<v Speaker 1>worth international investors paying attention to it as well. Because

0:06:42.160 --> 0:06:44.440
<v Speaker 1>a few of these banks do have a d r S,

0:06:44.600 --> 0:06:46.560
<v Speaker 1>you can access them. You don't have to be investing

0:06:46.600 --> 0:06:50.080
<v Speaker 1>only in Indian companies. As offshoots of that, there's a

0:06:50.080 --> 0:06:52.760
<v Speaker 1>housing finance companies. As off shoots of that, there are

0:06:52.760 --> 0:06:59.679
<v Speaker 1>companies that provide um fixings and furniture and typing, small caps, midcaps,

0:06:59.720 --> 0:07:02.279
<v Speaker 1>large ups alike that we think are pretty compelling investment

0:07:02.320 --> 0:07:05.960
<v Speaker 1>opportunities that you will see high to perhaps even expanding

0:07:05.960 --> 0:07:08.560
<v Speaker 1>returns on capital for the next X number of years,

0:07:08.720 --> 0:07:12.200
<v Speaker 1>and that's pretty exciting to us. To what extent is

0:07:12.240 --> 0:07:14.960
<v Speaker 1>your thesis, whether it's for China or India, kind of

0:07:15.200 --> 0:07:17.080
<v Speaker 1>predicated on the idea that we're going to get a

0:07:17.120 --> 0:07:19.520
<v Speaker 1>little bit more from the government in terms of stimulus,

0:07:21.600 --> 0:07:24.400
<v Speaker 1>Not very much. I think it's it's very country specific

0:07:24.680 --> 0:07:28.320
<v Speaker 1>and different companies are employing or deploying different tools. If

0:07:28.320 --> 0:07:31.760
<v Speaker 1>we start in the West and then move east, if

0:07:31.760 --> 0:07:34.760
<v Speaker 1>we start with India, I think this is largely a

0:07:34.800 --> 0:07:38.520
<v Speaker 1>question of gross under penetration of the housing market, and

0:07:38.520 --> 0:07:40.200
<v Speaker 1>perhaps next time we can talk a little bit about

0:07:40.240 --> 0:07:42.280
<v Speaker 1>the auto sector in Indian why we like autos and

0:07:42.320 --> 0:07:45.880
<v Speaker 1>auto pervatives as well. But gross under penetration housing is

0:07:45.880 --> 0:07:48.360
<v Speaker 1>still affordable. If you if I can just make a comment,

0:07:48.360 --> 0:07:52.240
<v Speaker 1>if you look very yeah, so the price of stability,

0:07:52.920 --> 0:07:55.880
<v Speaker 1>staying within the middle class and progressing is still pretty fair,

0:07:55.960 --> 0:07:58.640
<v Speaker 1>and it is allowing for more spending there. And so

0:07:58.680 --> 0:08:00.480
<v Speaker 1>weirdly we're out of town, we might pick it up

0:08:00.480 --> 0:08:02.880
<v Speaker 1>on TV. You're joining me later because Bochard is from

0:08:03.000 --> 0:08:04.920
<v Speaker 1>MG Investments and this is Bloomberg