WEBVTT - Chinese Banks Cut Key Reference Rate 0:00:02.200 --> 0:00:06.000 This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis 0:00:06.000 --> 0:00:09.240 along with Doug Krisner join us each day for the stories, 0:00:09.280 --> 0:00:12.440 making news and moving markets in the Asia Pacific. You 0:00:12.480 --> 0:00:15.560 can subscribe to the show anywhere you get your podcasts 0:00:15.720 --> 0:00:18.880 and always on Bloomberg Radio, the Bloomberg Terminal, and the 0:00:18.880 --> 0:00:23.120 Bloomberg Business app. Joining us now is Market's live strategist 0:00:23.200 --> 0:00:26.760 Mark Cranfield. Do with us here on the program, Mark, 0:00:26.880 --> 0:00:29.159 we are looking at the China markets and we know 0:00:29.240 --> 0:00:34.040 that this big move by the banks is partially trying 0:00:34.080 --> 0:00:37.320 to jolt investors out of their torpor and help the 0:00:37.320 --> 0:00:40.440 property market. As you look at markets this morning, you'll 0:00:40.440 --> 0:00:43.560 see some red numbers here. Will it work well? 0:00:43.560 --> 0:00:46.400 I think there's a little bit of disappointment that although 0:00:46.440 --> 0:00:50.040 the five year loan rate was cut by a little 0:00:50.040 --> 0:00:52.400 bit more than people had expected, there was no change 0:00:52.440 --> 0:00:56.480 in the one year and we also China skip doing 0:00:56.520 --> 0:01:00.000 the one year medium term facility at the weekend as well. 0:01:00.400 --> 0:01:03.720 So what we haven't seen is any short term interest 0:01:03.800 --> 0:01:08.000 rates being lowered. And in terms of markets, especially equity 0:01:08.040 --> 0:01:10.720 markets and bomb markets, they're really a bit more interested 0:01:10.760 --> 0:01:13.119 in what happens with short term rates and long term rates. 0:01:13.319 --> 0:01:16.280 So that's probably part of the disappointment as to why 0:01:16.760 --> 0:01:19.640 Chinese equities are a little bit soft in early trading 0:01:19.720 --> 0:01:20.039 so far. 0:01:20.200 --> 0:01:23.400 Do you really believe that rate policy is going to 0:01:23.520 --> 0:01:28.440 reinvigorate the investor in the Chinese market, right? Is it 0:01:28.480 --> 0:01:30.360 going to take something more than that at this point? 0:01:30.440 --> 0:01:32.920 I mean, given the kind of desperation that people have 0:01:33.000 --> 0:01:33.920 been feeling. 0:01:34.480 --> 0:01:37.480 It's only one of many things. I mean, as you suggest, 0:01:37.520 --> 0:01:40.240 I mean, on its own, no, it probably will not 0:01:40.520 --> 0:01:44.200 turn around the Chinese markets very dramatically. It needs to 0:01:44.200 --> 0:01:47.160 be in conjunction with another and a lot of other 0:01:47.240 --> 0:01:48.920 moves as well. And of course you've got these big 0:01:48.960 --> 0:01:53.040 things like more fixes for the property market, more factors 0:01:53.080 --> 0:01:56.800 which support the lending to the right sectors of the 0:01:56.840 --> 0:01:59.160 economy as well, and you can see that've been in 0:01:59.320 --> 0:02:03.160 buying stocks via ETFs and all those kind of things 0:02:03.160 --> 0:02:05.360 will have to continue. It's not going to be interest 0:02:05.440 --> 0:02:07.560 rates on their own. It has to be some sort 0:02:07.560 --> 0:02:10.919 of a coordinated approach, and investors need to really feel 0:02:10.960 --> 0:02:14.000 the love. They need to sense that the Chinese government 0:02:14.040 --> 0:02:16.720 is pulling out all the stops to try and improve 0:02:16.760 --> 0:02:17.280 the outlook. 0:02:17.960 --> 0:02:21.160 We've seen some pretty solid gains in Taiwan and also Tokyo, 0:02:21.280 --> 0:02:23.800 but for the rest of the region it's really not 0:02:23.840 --> 0:02:26.480 been all that attractive. How much is China holding back 0:02:26.520 --> 0:02:27.359 the rest of the region. 0:02:28.600 --> 0:02:31.240 Not too much now, I suspect if we had this 0:02:31.320 --> 0:02:35.600 discussion eighteen months ago, we probably yes. But if you 0:02:35.639 --> 0:02:38.160 look at the way the world has moved on, particularly 0:02:38.160 --> 0:02:40.399 you just look at the performances through twenty twenty three 0:02:41.280 --> 0:02:44.720 as the year war on, China was becoming less of 0:02:44.760 --> 0:02:46.359 a factor for the rest of the world, even for 0:02:46.400 --> 0:02:50.079 the rest of Asia as well. So increasingly investors are 0:02:50.120 --> 0:02:53.720 isolating China as a special case. So either you're interested 0:02:53.760 --> 0:02:56.720 in China or you're not. But whatever view you have 0:02:56.840 --> 0:03:00.080 there doesn't really affect your outlook for the rest of 0:02:59.919 --> 0:03:03.639 the equity market, which is a good and a bad thing. 0:03:03.680 --> 0:03:07.320 I mean, it's interesting in terms of emerging markets because 0:03:07.400 --> 0:03:10.960 China had been such a huge waiting in emerging markets, 0:03:11.040 --> 0:03:13.560 but now, of course it's shrunk anyway, because market caps 0:03:13.600 --> 0:03:16.359 have got so much smaller. So now people have to 0:03:16.400 --> 0:03:18.320 have two views. They have to have an emerging market 0:03:18.360 --> 0:03:19.880 view and a China view. 0:03:20.320 --> 0:03:22.320 I'm curious to get your take on something we were 0:03:22.320 --> 0:03:25.800 talking about yesterday. Foreign direct investment into China last year 0:03:25.919 --> 0:03:30.000 increasing by the smallest amount since the early nineteen nineties. 0:03:30.280 --> 0:03:33.880 Is this a reliable indicator that you want to kind 0:03:33.919 --> 0:03:36.680 of play in some way? Maybe it's the longer view here, 0:03:37.520 --> 0:03:39.600 and what the story that it's telling right now is 0:03:39.640 --> 0:03:41.000 not a good one? 0:03:41.520 --> 0:03:44.640 It isn't and it probably also tells you quite a 0:03:44.680 --> 0:03:47.480 lot about some of the political differences that China is 0:03:47.560 --> 0:03:51.040 encountering with other countries, people putting on restrictions, trade restrictions 0:03:51.040 --> 0:03:55.200 and other barriers to entry. So that obviously will reflect 0:03:55.240 --> 0:03:57.320 it to some extent. It will also be because maybe 0:03:57.320 --> 0:04:00.400 people are not so optimistic on the growth outlook for China. 0:04:00.480 --> 0:04:04.080 There'll be a number of factors which affect it. That 0:04:04.160 --> 0:04:08.200 won't necessarily stop people from putting money into China, because 0:04:08.200 --> 0:04:11.800 you also, there are so many equities listed in China, 0:04:11.840 --> 0:04:13.840 and there are a number of very positive stories as well, 0:04:13.920 --> 0:04:17.200 particularly related to AI and certain parts of the tech world. 0:04:17.520 --> 0:04:19.400 But you need to be a very good stock picker, 0:04:19.640 --> 0:04:22.279 and some people are not willing to do all that 0:04:22.440 --> 0:04:26.680 much homework to find those selective stocks. But yes, it's 0:04:26.680 --> 0:04:29.559 probably a slight negative, but it won't change the views 0:04:29.640 --> 0:04:33.520 of many people who look at specific sectors of China. 0:04:33.720 --> 0:04:36.760 If your view is correct, mark that investors are separating 0:04:36.839 --> 0:04:39.960 China out from the rest of the region. Would Southeast 0:04:39.960 --> 0:04:42.920 Asia be a good target for investors to look at 0:04:42.960 --> 0:04:45.920 in that they didn't have a particularly good year last year, 0:04:46.680 --> 0:04:48.440 while you did see some gains in some of the 0:04:48.480 --> 0:04:51.920 other markets, particularly in the west and also as mentioned 0:04:51.920 --> 0:04:57.520 with Tokyo and Taiwan. Or is Southeast Asia really just 0:04:57.520 --> 0:05:00.799 too small to attract a lot of interest foreign investors? 0:05:01.560 --> 0:05:04.320 Not too small? But I think I've been in Asia 0:05:04.360 --> 0:05:08.200 long enough to understand that it's very risky to blanket 0:05:08.320 --> 0:05:11.359 Southeast Asia as one trade So you really have to 0:05:11.360 --> 0:05:14.279 go country by country. And there are some encouraging stories. 0:05:14.400 --> 0:05:17.839 So for example Indonesia, they appear to have got through 0:05:18.080 --> 0:05:22.120 these elections very smoothly without any trouble. This looks as 0:05:22.160 --> 0:05:25.760 there's going to be a gentle handover to the next presidency. 0:05:25.920 --> 0:05:28.400 That is a very much a positive because in the 0:05:28.440 --> 0:05:32.920 past Indonesia has suffered from messy handovers from one president 0:05:32.960 --> 0:05:35.800 to the next. So international investors will look at that. 0:05:35.839 --> 0:05:39.719 It's a huge market and Indonesia certainly has some potential. 0:05:39.800 --> 0:05:42.919 Now if you look on the other side. Just today 0:05:43.320 --> 0:05:45.839 we had the Thailand Prime minister trying to intervene in 0:05:45.839 --> 0:05:49.360 the currency. That's not a good thing. Foreign investors don't 0:05:49.440 --> 0:05:52.719 like to see politicians getting involved in monetary policy. So 0:05:52.760 --> 0:05:54.440 you have contrast there in South Asia. 0:05:54.520 --> 0:05:57.000 So to go to your example of Indonesia and something 0:05:57.000 --> 0:05:59.400 that you were talking about a moment ago, where it's 0:05:59.480 --> 0:06:02.520 very much a stock pickers market versus going in and 0:06:02.560 --> 0:06:05.520 buying an index. Would you apply the same kind of 0:06:05.960 --> 0:06:08.440 rationale or the same approach when putting money to work 0:06:08.440 --> 0:06:09.080 in Indonesia? 0:06:09.960 --> 0:06:14.240 Yeah, I think you probably would have to, because you'd 0:06:14.279 --> 0:06:16.920 have to try to engage which sectors have already over 0:06:16.960 --> 0:06:19.520 extended or which ones have got catch up value. And 0:06:19.600 --> 0:06:21.400 for that you probably need to have quite a lot 0:06:21.440 --> 0:06:24.159 of local value. So you would certainly need to consult 0:06:24.240 --> 0:06:27.200 somebody on the ground who's been watching that market very 0:06:27.200 --> 0:06:29.599 closely to get a real sense. You could, of course 0:06:29.640 --> 0:06:32.799 take a risk and just go across the whole index, 0:06:32.839 --> 0:06:34.920 but you will probably find your performance is not as 0:06:34.960 --> 0:06:38.039 good as it might be if you knew which sectors 0:06:38.040 --> 0:06:41.120 had the undervalue compared to other sectors. 0:06:41.960 --> 0:06:44.800 Now let's take a broader look here. I'm going to 0:06:44.839 --> 0:06:46.520 say that I think it's only a matter of time 0:06:46.880 --> 0:06:49.279 before you see Hong Kong and China stocks start to 0:06:49.440 --> 0:06:53.520 rebound because so much has been discounted. So let's say 0:06:53.520 --> 0:06:56.000 that if that premise is true, will it be hurt 0:06:56.080 --> 0:06:59.200 by a potential pullback in the US because of inflation 0:06:59.320 --> 0:07:02.760 fears and also because of valuation levels and the size 0:07:02.760 --> 0:07:05.599 of the recent rally, or in a sense, will it 0:07:05.600 --> 0:07:08.080 be helped by that people will actually take money out 0:07:08.080 --> 0:07:11.680 of US equities and plow into some of these Hong 0:07:11.760 --> 0:07:12.960 Kong China stocks. 0:07:13.440 --> 0:07:13.640 Well. 0:07:13.680 --> 0:07:16.160 Based on what we've seen in the past year or so, 0:07:16.440 --> 0:07:19.240 I should think a pullback in US markets actually will 0:07:19.280 --> 0:07:22.280 be a good thing for several markets around the world, 0:07:22.320 --> 0:07:25.760 because America seems to suck a tremendous amount of investment 0:07:25.840 --> 0:07:28.800 capital from other places, So maybe it will start to 0:07:28.840 --> 0:07:30.280 go back into other parts. 0:07:30.040 --> 0:07:30.480 Of the world. 0:07:31.400 --> 0:07:35.000 That would certainly tighten financial conditions maybe a little bit, 0:07:35.080 --> 0:07:37.480 and the FED might like that. When you look at 0:07:37.720 --> 0:07:41.320 the path of Fed policy, there's been a fair amount 0:07:41.320 --> 0:07:43.920 of aggressive betting that we could get as much as 0:07:43.960 --> 0:07:47.360 maybe one hundred basis points in easing this year. The 0:07:47.400 --> 0:07:49.720 market seems to be rethinking that in a major way. 0:07:49.840 --> 0:07:53.160 After those heart readings on inflation in the States last week, 0:07:53.200 --> 0:07:56.760 both CPI and PPI. What is your view on Fed 0:07:56.800 --> 0:07:57.520 action this year? 0:07:58.200 --> 0:08:02.160 Well, the Faith do their for a reason. They try 0:08:02.200 --> 0:08:04.880 to give the market an indication of where they think 0:08:05.360 --> 0:08:07.400 interest rates so heading for the rest of the year, 0:08:07.440 --> 0:08:10.000 and it's very clear their dot plots have a medium 0:08:10.040 --> 0:08:13.080 target of three rate cuts. Some FED members only see 0:08:13.120 --> 0:08:16.960 two rate cuts. Well, the market is gradually coming closer 0:08:17.000 --> 0:08:20.040 to the FED view of where interest rates are going. 0:08:20.240 --> 0:08:23.440 Of course, the Fed may revise those dot plots when 0:08:23.440 --> 0:08:26.760 they meet in March or June, but for the time being, 0:08:26.800 --> 0:08:29.400 the market is at disconnect with where the Fed is 0:08:29.440 --> 0:08:31.520 telling them they're going. So eventually the market has to 0:08:31.520 --> 0:08:32.040 get in line. 0:08:33.640 --> 0:08:36.880 We had David Einhorn on in an extensive interview on 0:08:36.920 --> 0:08:40.000 Bloomberg and he was saying that markets are kind of 0:08:40.000 --> 0:08:42.800 broken now, that value just doesn't work. There's a lot 0:08:42.840 --> 0:08:44.840 of reasons behind it. We don't have time to go 0:08:44.880 --> 0:08:47.680 into that, but are there some pockets of areas where 0:08:47.679 --> 0:08:50.200 you see value. You're not recommending somebody buy it, but 0:08:50.280 --> 0:08:53.480 you're looking and saying, you know, this has been this 0:08:53.520 --> 0:08:55.920 has really been driven to an extent in one direction. 0:08:57.280 --> 0:09:01.960 I think there's always contrarian plays around the world on 0:09:02.000 --> 0:09:05.960 a general basis, on a regional basis, on a specific basis, 0:09:06.400 --> 0:09:08.679 and it's probably that is exactly the kind of time 0:09:08.679 --> 0:09:10.839 when you see something like in the US when the 0:09:11.120 --> 0:09:14.840 Magnificent Seven stocks dragged so much a part of the 0:09:14.880 --> 0:09:18.079 investing money going in one direction. That means a lot 0:09:18.080 --> 0:09:20.560 of people are being left behind. So if you're a 0:09:20.600 --> 0:09:22.960 contrarian who can take the time to study from the 0:09:22.960 --> 0:09:26.240 bottom up, you will always find something which has been 0:09:26.320 --> 0:09:28.400 left behind. And that would apply to any part of 0:09:28.440 --> 0:09:31.680 the world. I'm sure there are dislocations like that everywhere 0:09:31.720 --> 0:09:34.400 you look, but you need to do the homework. 0:09:34.760 --> 0:09:38.400 Okay, I'm taking notes here from Cranfield. Short the megacap, 0:09:38.760 --> 0:09:41.640 then go along in the rgon on China stocks. Both 0:09:41.640 --> 0:09:43.720 have been bombed out too much in one way. Now 0:09:43.800 --> 0:09:47.000 I'm just joking, folks. He is a Bloomberg Markets Live 0:09:47.040 --> 0:09:51.120 strategist Mark Cranfield, analyzing the markets but not recommending anything. 0:09:51.120 --> 0:09:52.880 But it's always good to take a look and a 0:09:52.960 --> 0:09:55.400 listener programs like this where you get some ideas. Mark, 0:09:55.480 --> 0:09:57.720 thank you very much for joining us, and that is 0:09:57.760 --> 0:10:11.280 Mark Cranfield with US Live. This is Bloomberg. Our guest 0:10:11.320 --> 0:10:15.240 is Eric, you lumbering economists covering China and Hong Kong. 0:10:15.760 --> 0:10:18.080 So we had this adjustment in the five year loan 0:10:18.160 --> 0:10:21.920 prime rate, Eric, and the market reaction isn't great. This 0:10:22.000 --> 0:10:24.480 is something that may take a while to play out. 0:10:24.520 --> 0:10:25.880 What's your initial assessment. 0:10:26.679 --> 0:10:29.120 Yeah, I think if you look at both one year 0:10:29.200 --> 0:10:32.760 five year, actually I think it's a mixed signal this morning. 0:10:32.880 --> 0:10:35.600 So the five year cut is bigger than expected, and 0:10:35.640 --> 0:10:39.360 it's the biggest ever I think on record, So clear 0:10:39.559 --> 0:10:43.280 to signal that the government is worrying about housing market. 0:10:43.320 --> 0:10:46.640 You know, five years linked to the mortgage rate, so 0:10:46.679 --> 0:10:50.440 it's clear signal that the housing market is still deepening 0:10:50.520 --> 0:10:54.920 the declients and the government wants to, you know, step 0:10:55.000 --> 0:10:58.080 up with more supporting measures. But it's the same time. 0:10:58.240 --> 0:11:01.600 But you have to remember that last year when PBC 0:11:01.760 --> 0:11:05.520 cut to the MF in August, actually banks held the 0:11:05.600 --> 0:11:08.480 five year rate. So so part of the twenty five Yeah, 0:11:08.520 --> 0:11:11.600 the headline number is big, but part of it probably 0:11:11.760 --> 0:11:14.959 that's just catch up you know, of last August, so 0:11:15.000 --> 0:11:18.360 it's not every of the twenty five points then new cut, 0:11:18.559 --> 0:11:19.120 I would say. 0:11:19.200 --> 0:11:21.200 So when you get a cut like this. The magnitude 0:11:21.240 --> 0:11:24.400 obviously is we just said it's greater than expected. Is 0:11:24.440 --> 0:11:27.480 there a lag period some a period of time where 0:11:27.480 --> 0:11:30.520 you would really kind of expect to see an impact 0:11:30.640 --> 0:11:31.840 in the real estate market. 0:11:33.559 --> 0:11:36.559 Obviously if you look at to what we had at 0:11:36.559 --> 0:11:39.360 the second half of the last year, lots of measured 0:11:39.400 --> 0:11:42.640 by the government, you know, trying to relax from purchase 0:11:42.960 --> 0:11:47.160 down lowering the down payment, even including lower and market 0:11:47.240 --> 0:11:50.240 rates in big cities. It's I would say it's helping 0:11:50.280 --> 0:11:53.200 on the margin, but don't really change the big picture, right. 0:11:53.280 --> 0:11:56.080 We still if you look at the macro housing market 0:11:56.160 --> 0:11:59.880 data until December, what's the official data we have the latest, 0:12:00.640 --> 0:12:03.320 the market downto and is still deepening. There's no big 0:12:03.360 --> 0:12:06.160 sign of the market turning around it anytime soon. So 0:12:07.080 --> 0:12:09.679 I think that the big problem now is not really 0:12:10.080 --> 0:12:12.280 the market rates are too high, right, It's not really 0:12:12.360 --> 0:12:14.520 the big factor. Yeah, it's preventing. 0:12:14.600 --> 0:12:17.240 One of the trends that we saw of late was 0:12:17.559 --> 0:12:21.160 buyers being more attracted now to used homes rather than 0:12:21.240 --> 0:12:23.959 new homes. A couple of reasons. They can get a 0:12:23.960 --> 0:12:26.040 bigger discount there, and plus they're not buying from the 0:12:26.080 --> 0:12:30.599 developer then, so I'm just curious whether or not we 0:12:31.520 --> 0:12:33.760 think that we just really need to see lower prices 0:12:33.840 --> 0:12:35.400 and once we see and that's not the end of 0:12:35.440 --> 0:12:38.080 the world. I mean, that's just something that markets do. 0:12:38.240 --> 0:12:40.680 I mean, you get a repricing and prices come down, 0:12:40.720 --> 0:12:43.240 people will come back in. That takes time and it 0:12:43.320 --> 0:12:45.760 means probably lower stock prices for the developers. 0:12:45.960 --> 0:12:49.040 Yeah, but the thing is nobody knows when to the 0:12:49.040 --> 0:12:52.160 bottom right people, if who is buying, they would expect 0:12:52.160 --> 0:12:54.640 the price to go down even further. So unless they 0:12:54.760 --> 0:12:58.040 really need a house right now, they can just hold 0:12:58.120 --> 0:13:02.360 hold off until later. And another factor you mentioned why 0:13:02.400 --> 0:13:05.280 people are more interesting second home is get the risks 0:13:05.360 --> 0:13:08.600 that they'll worry. If I buy a new apartment, it's 0:13:08.600 --> 0:13:12.240 probably well the developer being able to deliver it, right, 0:13:12.280 --> 0:13:14.959 that's a key risk, So they have to be very careful. 0:13:15.240 --> 0:13:17.040 What is the one thing that you're going to be 0:13:17.040 --> 0:13:19.000 looking at in a week ahead. I mean, now we're 0:13:19.000 --> 0:13:21.079 coming back from the lunar New Year. We've talked about 0:13:21.080 --> 0:13:23.680 some of the high frequency data that was stronger than expected. 0:13:24.120 --> 0:13:26.040 Is there a data point that you're keeping your eye 0:13:26.040 --> 0:13:26.600 on this week? 0:13:26.679 --> 0:13:29.120 I think next week probably the most important in the 0:13:29.200 --> 0:13:32.960 channels PMI data, both official and enter tighting PMI. But 0:13:33.360 --> 0:13:36.840 you know, given the seisonal factors, we would expect PMI 0:13:37.000 --> 0:13:39.720 to show some weakness. It's understandable. We have a long 0:13:40.120 --> 0:13:44.960 holiday in February. Although the consumption data looks good holiday spanding, 0:13:45.040 --> 0:13:48.040 but we actually we had a closer look at the data. 0:13:48.559 --> 0:13:52.200 It's probably a bit not as strong as the headline 0:13:52.200 --> 0:13:55.360 suggests because we have one more day d year at holiday. 0:13:55.720 --> 0:13:58.600 And also if you look at the spanding per capture 0:13:58.960 --> 0:14:03.680 by every travel alerts, it's actually still quite relatively low, 0:14:03.760 --> 0:14:06.520 if compared to pre COVID level or even a few 0:14:06.559 --> 0:14:09.720 years ago. So that means, yeah, more people are traveling, 0:14:09.840 --> 0:14:12.760 but they're not really you know, spending every person. 0:14:12.880 --> 0:14:16.040 So you calm, you're measured. But let's do a little 0:14:16.080 --> 0:14:19.960 swash buckling here, because you're talking about falling prices and 0:14:20.640 --> 0:14:23.240 it seemingly calls for a catalyst. Okay, so if you're 0:14:23.320 --> 0:14:26.040 swashed buckling, what's a catalyst? What can be a catalyst? 0:14:26.760 --> 0:14:29.080 I think people are looking forward in a few weeks. 0:14:29.120 --> 0:14:32.520 It's the coming National People's Congress, right, the usual, and 0:14:32.560 --> 0:14:35.800 you're gathering, so we would like to hear what's the 0:14:35.880 --> 0:14:39.360 plan of the gunment for this year and especially the 0:14:39.440 --> 0:14:42.040 key focus will be the fiscal budget this year. So 0:14:42.040 --> 0:14:45.320 are they really, you know, going to have a larger deficit. 0:14:45.480 --> 0:14:49.000 They're willing to spend more, whatever you want spending, but 0:14:49.080 --> 0:14:53.480 I think that the key thing and now the consumer's household, 0:14:53.640 --> 0:14:57.000 you know, corporates, their low confidence, they're not willing to spend. 0:14:57.120 --> 0:14:59.880 So the only way to proper economy is the gum 0:15:00.120 --> 0:15:02.560 needs to spend. So that's a key thing I think. 0:15:02.600 --> 0:15:04.800 I know you're an economist watching, but I'm going to 0:15:04.880 --> 0:15:06.920 go out on a limb here, because there was a 0:15:06.920 --> 0:15:10.520 Bank of America survey the one of the most popular 0:15:10.560 --> 0:15:14.000 trades continues to be being short China. Do you think 0:15:14.040 --> 0:15:17.800 that's increasingly risky that at some point we're going to 0:15:17.840 --> 0:15:21.680 get the big bazooka that's going to create a big squeeze. 0:15:23.600 --> 0:15:23.800 Yeah. 0:15:23.880 --> 0:15:26.920 I cannot come at the market. It's a decision. But 0:15:27.720 --> 0:15:31.720 I think markets have been quite disappointed over the past 0:15:31.880 --> 0:15:36.240 year since the reopening. Everybody expecting some bazookap but they 0:15:36.280 --> 0:15:42.240 never delivered. And I'm cautiously optimistic that the government is 0:15:42.320 --> 0:15:45.560 willing to, you know, have a big splash bazoo cup, 0:15:45.560 --> 0:15:49.880 but I think more you know, incremental or whatever you 0:15:50.000 --> 0:15:54.320 called small steps or some easing. It's still going to 0:15:55.440 --> 0:15:59.360 going to be seen this year. But if anyone expecting, 0:15:59.640 --> 0:16:02.720 you know, like for tralling they have done in the past, 0:16:03.160 --> 0:16:04.840 I don't think that's that's that's like. 0:16:04.920 --> 0:16:10.440 Okay, final question probably time, if time permits. What what 0:16:10.520 --> 0:16:12.880 part of the Hong Kong or the Chinese economy is 0:16:12.880 --> 0:16:14.640 actually working right now? What's looking good? 0:16:16.400 --> 0:16:21.120 I think some sectors like electrical vehicles right some some 0:16:21.280 --> 0:16:25.000 high tech sectors, chips, you know, some sectors the government 0:16:25.200 --> 0:16:28.760 is willing to it's a so called restructuring. They're moving 0:16:28.800 --> 0:16:33.040 away from property, but they're moving you know, those resources 0:16:33.080 --> 0:16:36.560 into this that the what they believed would to be 0:16:36.640 --> 0:16:41.360 the future growth engines for China. But they're growing fast. 0:16:41.520 --> 0:16:43.840 But we also did some an acid but so far 0:16:44.000 --> 0:16:47.160 the share of like EV is still readily small so 0:16:47.280 --> 0:16:51.120 compared to property market. So I think this will still 0:16:51.160 --> 0:16:53.280 take time for them to grow. But right now we 0:16:53.360 --> 0:16:56.280 have to you know, it's a period that in the 0:16:56.320 --> 0:16:59.800 transition period, we have to suffer some pain from the 0:17:00.040 --> 0:17:01.280 property market down siding. 0:17:01.800 --> 0:17:04.200 Eric, thanks very much for joining us here in our studios. 0:17:04.320 --> 0:17:07.920 Eric Q. Bloomberg economist looks at China and Hong Kong. 0:17:16.520 --> 0:17:18.840 Let's take a look at global fixed income now with 0:17:18.880 --> 0:17:22.199 our guests too, how Chao had to fixed income for Asia? 0:17:22.240 --> 0:17:26.360 At Robico joining us from our studios in Singapore. Nice 0:17:26.400 --> 0:17:29.080 of you to stop by, Thanks for joining us, Thank 0:17:29.119 --> 0:17:30.879 you for having me. Yeah, we've been talking about the 0:17:30.920 --> 0:17:33.560 decision and of the big banks in China to cut 0:17:33.880 --> 0:17:36.840 a long primarate the five year by twenty five basis points. 0:17:36.840 --> 0:17:39.880 A bit of a surprise. Did it take you by surprise? 0:17:41.280 --> 0:17:43.480 I mean a little bit in terms of timing, But 0:17:43.560 --> 0:17:48.480 I think you know, the situation is just, yeah, looking 0:17:48.520 --> 0:17:52.399 pretty dire, and a lot of the other policies are not, 0:17:53.320 --> 0:17:55.840 you know, stimulating the market. But that is actually in 0:17:55.880 --> 0:17:58.680 line with the fact that we expect it's a general 0:17:59.160 --> 0:18:02.520 econop malae that that is a problem in China and 0:18:02.520 --> 0:18:06.000 that can't be fixed by pure monetary policy. 0:18:06.040 --> 0:18:11.040 I'm afraid, I feel about liquidity and whether or not 0:18:11.119 --> 0:18:14.240 some developers will have to sell assets to create more 0:18:14.359 --> 0:18:18.080 internal liquidity. Uh and if not, where else could it 0:18:18.119 --> 0:18:19.200 come from? 0:18:19.840 --> 0:18:23.880 I mean they can, but I think that it needs 0:18:23.920 --> 0:18:26.240 to actually come from sales, and that's what's really going 0:18:26.320 --> 0:18:28.919 to be that's been the difficulty, which is why I 0:18:28.920 --> 0:18:33.880 think these policies are meant to stimulate demand, and demand 0:18:34.000 --> 0:18:37.159 is very weak for all the reasons. I think your 0:18:37.160 --> 0:18:42.359 previous guess has talked about the this this is a 0:18:42.520 --> 0:18:45.600 this is an adjustment that's going to take several years, 0:18:45.600 --> 0:18:49.000 and I don't think that the market nor the policy 0:18:49.040 --> 0:18:53.040 makers can expect that, you know, some changes in policy 0:18:53.160 --> 0:18:55.720 rates will change that. But however, having said that, it's 0:18:55.760 --> 0:18:57.840 been near, you know, more than two years of this 0:18:58.560 --> 0:19:02.399 uh this property allies and hopefully we're hitting some bottom, 0:19:02.440 --> 0:19:05.760 although I think a rebound, a quick rebound is probably 0:19:05.760 --> 0:19:07.200 not on the cards at the moment. 0:19:07.520 --> 0:19:10.800 So if we're near a bottom, maybe they're a little 0:19:10.800 --> 0:19:13.000 bit more restructuring. I mean, we've had a couple of 0:19:13.040 --> 0:19:16.640 attempts at restructuring a couple of these developers and that failed. 0:19:17.080 --> 0:19:19.320 Haircuts I think would be in order. If you're holding 0:19:19.359 --> 0:19:22.439 credit here, what's the risk and how do you do 0:19:22.480 --> 0:19:25.840 you hedge that in some way? Like in the CDs market. 0:19:27.280 --> 0:19:29.320 I think restructuring of the companies that need to be 0:19:29.320 --> 0:19:31.720 restructuring is already kind of there, so I think it's 0:19:31.800 --> 0:19:34.920 very hard to hedge that risk, and they're very they're 0:19:34.920 --> 0:19:36.720 going to be very much case by case. I think 0:19:36.760 --> 0:19:41.280 the biggest problem within the restructing market within the Chinese 0:19:41.320 --> 0:19:43.159 is that just there is no presidence and then the 0:19:43.200 --> 0:19:46.600 fact that the participants you know, are not acting in 0:19:46.640 --> 0:19:50.000 a concerted manner that actually helps the restructuring process. So 0:19:50.040 --> 0:19:53.959 it's taking longer, it's probably costing more because there is 0:19:54.000 --> 0:19:57.840 just no presidence of how to actually deal with you know, 0:19:57.960 --> 0:20:02.840 these bankruptcy like that we have in more established markets. 0:20:04.240 --> 0:20:06.760 Some of the markets are not seeing the same stresses 0:20:06.800 --> 0:20:09.240 as China. Where are you seeing the best value in 0:20:09.320 --> 0:20:11.520 credit now throughout your coverage area of Asia? 0:20:12.160 --> 0:20:14.920 Yeah, so I think away from China and actually even 0:20:14.960 --> 0:20:18.960 within the China ig kind of space, the companies that 0:20:19.040 --> 0:20:21.399 are surviving and stuff, you know, it's actually not too 0:20:21.800 --> 0:20:24.120 bad for them, and the fundamentals actually holding up quite 0:20:24.200 --> 0:20:27.600 quite strong. So our investment grade is actually fine. And 0:20:27.680 --> 0:20:31.440 away from and I mean India Indonesia partially is you know, 0:20:31.560 --> 0:20:35.480 they're all actually pretty holding up pretty okay. China seems 0:20:35.520 --> 0:20:38.159 to have its own dynamics, but it's actually just the 0:20:38.240 --> 0:20:41.679 Chinese property segment. Right even away from Chinese property, the 0:20:41.760 --> 0:20:45.879 industrial how your names are actually holding up Okay, financing 0:20:46.000 --> 0:20:50.639 is available on shore at relatively cheap rates, so netnet 0:20:50.680 --> 0:20:53.720 things actually away from China. Property for the credit market 0:20:53.760 --> 0:20:56.560 actually has been pretty good, and spreads are quite tight 0:20:56.680 --> 0:20:57.320 to reflect that. 0:20:57.760 --> 0:20:59.680 It's interesting. I am sure you're aware that we have 0:20:59.760 --> 0:21:02.359 the main it's from the Australian Central Bank meeting, and 0:21:02.440 --> 0:21:05.240 I think they considered raising rates earlier. I mean, it 0:21:05.240 --> 0:21:08.040 would seemed to be a pretty hefty debate. And we're 0:21:08.080 --> 0:21:12.040 talking about now that the possibility that there's going to 0:21:12.040 --> 0:21:14.320 be far fewer rate cuts in the US than the 0:21:14.359 --> 0:21:18.040 market had been braced for. Do we have to rethink 0:21:19.000 --> 0:21:21.920