Speaker 1: Let's get to Viksh Purshad, our guest for the half hour.
Speaker 1: Vikas his portfolio manager at MMG Investments, joining us from Singapore. Vicas,
Speaker 1: thanks for being with us. Can we start with a
Speaker 1: look at the non oil exports that we had for
Speaker 1: Singapore in the month of June. Whether you look at
Speaker 1: it month on month or year on year, these numbers
Speaker 1: are pretty robust. Hello, good evening, good morning. Tell your
Speaker 1: listeners they are pretty robust. I think given our focus
Speaker 1: on the long term and also given the challenges that
Speaker 1: we see around the world today, we're not making too
Speaker 1: much of these month to month prints. In contrast, or
Speaker 1: as an extension, if you look at month on month
Speaker 1: or year on your housing data in China, for example,
Speaker 1: I think if you focus two months on the monthly numbers,
Speaker 1: they can lead you astray. There are broader problems that
Speaker 1: we're still contending with. And um, it's one data point,
Speaker 1: but there's a lot of data points that are not
Speaker 1: robust these days. What are the biggest points and you're
Speaker 1: worried about that we're contending with. I think so if
Speaker 1: we look across the region and around the road, there
Speaker 1: is the issue of consumption at the consumer level, the price,
Speaker 1: the pressure on volumes. There's some excitement across sectors focused
Speaker 1: on the on the consumer f MS, f C, f
Speaker 1: m c G, entertainment, some derivatives of housing, where people
Speaker 1: are focused on price increases that companies are talking about.
Speaker 1: I think given the inflationary pressures that we are seeing
Speaker 1: UH and the willingness of consumers to pull back, I'm
Speaker 1: not yet sure that these price hikes will stick. Whether
Speaker 1: we're talking about consumer goods in Japan or in housing
Speaker 1: derivative companies in the US, I think it's still too
Speaker 1: early to say that. So that is that is one concern.
Speaker 1: The reading that we had in the Friday session here
Speaker 1: in the US from the University of Michigan and on
Speaker 1: inflation expectations showed moderation in the month of July. And
Speaker 1: we've had a few guests on the program talking or
Speaker 1: suspecting that we may be near peak inflation. And if
Speaker 1: that is true, maybe we're also at peak dollar. Would
Speaker 1: you go that far? Not yet, I think first, on
Speaker 1: the point of inflation, there's a definitional issue. If you
Speaker 1: look at the basket of goods that that governments and
Speaker 1: agencies track, Yes, we could given the expected moderation in
Speaker 1: energy prices, in fuel prices on that print, on that metric, yes,
Speaker 1: we could see some moderation. But if you think longer
Speaker 1: term the cost of what really really matters to people
Speaker 1: in the long term, to consumers, housing, healthcare, education, long
Speaker 1: term energy costs, these are the trends in price prices
Speaker 1: for these are not yet abating. I think that is
Speaker 1: a long, long term problem and a bigger problem. We're
Speaker 1: talking about whether or not the FED is going to
Speaker 1: be incredibly aggressive. It's next rate meeting as well, and
Speaker 1: when if they are, that then starts to taper out
Speaker 1: as well. When do you then start to see the
Speaker 1: FED potentially look to either holding or cutting rights. What's
Speaker 1: your view as we look at these recessionary fears, well,
Speaker 1: sincially have the There's two parts of that question. Number
Speaker 1: one is on the interest rate and the tools at
Speaker 1: the um disposal of bankers um. And then the again
Speaker 1: the definition of recession. I think, on various definitions, the
Speaker 1: base cases that we are heading to a recession in
Speaker 1: the US. The question is of duration and of magnitude.
Speaker 1: On the interest rates. That is a key tool in
Speaker 1: halting the progress of inflation, and we do expect that
Speaker 1: will continue. Now, the definition again of aggressive, I think
Speaker 1: will vary depend on when you're speaking with So we're
Speaker 1: talking about some of the concerns still here with the
Speaker 1: China picture, when you've got these rising COVID cases, lockdowns
Speaker 1: in the deepening property sector. Was I was mentioning that
Speaker 1: the Central Bank governor has said that there will be
Speaker 1: more support from the PBOC. But do you agree with
Speaker 1: the likes of Goldman sets that maybe the economy momentum
Speaker 1: is not going to be sustainable if we continue to
Speaker 1: see this COVID zero path. Really, I think relative to
Speaker 1: the expectations being set earlier in the year of the
Speaker 1: five and a half percent roughly growth, right now, it's
Speaker 1: hard to see how that will be meant. I've seen
Speaker 1: some of the recent numbers. The cuts have started to
Speaker 1: come through. I think they will continue. The question is
Speaker 1: how much of this is already reflected in in asset
Speaker 1: prices and equity prices, which is where we focus. I
Speaker 1: think to a great extent it is. But so anybody
Speaker 1: who's been paying attention to Bloomberg and what you all
Speaker 1: have that saying it should be fully caught up on
Speaker 1: a situation from from our side, what I can say
Speaker 1: is that our focus on this sector broadly defined financials
Speaker 1: and property companies in in China is measured not in
Speaker 1: months or quarters of years. It's it's in decades. So
Speaker 1: we follow this space closely. Despite the recent turbulence, which
Speaker 1: typically we like to take advantage of, despite the recent
Speaker 1: sell offs, again which we typically like to take advantage of,
Speaker 1: we have allocated little to no capital in this period.
Speaker 1: We're still white waiting and seeing. We don't see our
Speaker 1: opportunities here, yet we see them elsewhere. So describe more
Speaker 1: clearly for me what you do see that prevents you
Speaker 1: from kind of staking out of position. Part of it
Speaker 1: is is relative opportunities. So we we don't invest just
Speaker 1: in one market. We invest across the region and around
Speaker 1: the world. And when you look at housing in particular,
Speaker 1: it's a it's a source of adjecat for for many
Speaker 1: participants and market participants as well around the world. And
Speaker 1: if you look at the trends that we are seeing,
Speaker 1: the underlying trends that we're seeing in the ripple effects
Speaker 1: through financials and housing derivatives in China, and you contrast
Speaker 1: that with the market like India where penetration is low
Speaker 1: the banks are healthy, better capitalized than they have been
Speaker 1: in many years. Credit growth is pretty healthy. As an
Speaker 1: offshoot of that, or related to that, the housing sector
Speaker 1: and housing direvtors, we see opportunities there. Uh. We see opportunities,
Speaker 1: long term investment opportunities with high perspective returns in other
Speaker 1: parts of Asia as well and within China. Yes, the
Speaker 1: property sector is very important, but we have a significant
Speaker 1: allocation of time and capital and resources and people to China,
Speaker 1: and we are actively pursuing investment opportunities there across other sectors.
Speaker 1: And you may gine you're looking as well across other
Speaker 1: parts of Asia. Tell us what you like in India. Yes,
Speaker 1: So we've spoken a few times in the past couple
Speaker 1: of years. In one area that we have yet covered
Speaker 1: is the Indian bank sector, and we just touched upon
Speaker 1: that very briefly. But I think if you look at
Speaker 1: the underperformance and you couple that with the strong fundamentals
Speaker 1: that we see, and also you overlay on top of
Speaker 1: that the commentary from from the executives, it seems like
Speaker 1: on a multi year investment horizon, this is a pretty
Speaker 1: good area to be allocating capital. It's a big sector,
Speaker 1: it's a big waiting within the benchmarks, but I think
Speaker 1: there's still scope for being overweighted that and it's it's
Speaker 1: worth international investors paying attention to it as well. Because
Speaker 1: a few of these banks do have a d r S,
Speaker 1: you can access them. You don't have to be investing
Speaker 1: only in Indian companies. As offshoots of that, there's a
Speaker 1: housing finance companies. As off shoots of that, there are
Speaker 1: companies that provide um fixings and furniture and typing, small caps, midcaps,
Speaker 1: large ups alike that we think are pretty compelling investment
Speaker 1: opportunities that you will see high to perhaps even expanding
Speaker 1: returns on capital for the next X number of years,
Speaker 1: and that's pretty exciting to us. To what extent is
Speaker 1: your thesis, whether it's for China or India, kind of
Speaker 1: predicated on the idea that we're going to get a
Speaker 1: little bit more from the government in terms of stimulus,
Speaker 1: Not very much. I think it's it's very country specific
Speaker 1: and different companies are employing or deploying different tools. If
Speaker 1: we start in the West and then move east, if
Speaker 1: we start with India, I think this is largely a
Speaker 1: question of gross under penetration of the housing market, and
Speaker 1: perhaps next time we can talk a little bit about
Speaker 1: the auto sector in Indian why we like autos and
Speaker 1: auto pervatives as well. But gross under penetration housing is
Speaker 1: still affordable. If you if I can just make a comment,
Speaker 1: if you look very yeah, so the price of stability,
Speaker 1: staying within the middle class and progressing is still pretty fair,
Speaker 1: and it is allowing for more spending there. And so
Speaker 1: weirdly we're out of town, we might pick it up
Speaker 1: on TV. You're joining me later because Bochard is from
Speaker 1: MG Investments and this is Bloomberg