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Speaker 1: Let's get to Mark Tinker. He is our guest Marcus

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Speaker 1: ce Io, a task of Fund Hong Kong, joining us

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Speaker 1: from our studios in h K. I don't know whether

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Speaker 1: you had a chance to look at the Bloomberg terminal today,

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Speaker 1: but we had a story on the strategist at be

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Speaker 1: of A surveying fund managers. They've concluded that we've been

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Speaker 1: through full capitulation already. Is that you think maybe an overstatement? Uh? Yeah,

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Speaker 1: we've We've been waiting for it. Um. I think we've

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Speaker 1: the whole year, We've we've had these squeezes into particularly

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Speaker 1: quarter end, but certainly a month end. Essentially the asset

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Speaker 1: allow cases have been sat like rabbits in the headlights,

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Speaker 1: while the c t A traders have been running rampant

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Speaker 1: with very heavy short positions in bonds, in equities, and

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Speaker 1: in almost every currency except the dollar, and then as

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Speaker 1: it gets the end of the quarter end of the month,

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Speaker 1: they closed down those positions. Ever he goes it's all over,

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Speaker 1: But then there's no follow through buying. So I think

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Speaker 1: what we're really waiting for is to see when does

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Speaker 1: the ultimately long term investor start buying the depths, Because

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Speaker 1: at the moment, they sat very much on the sidelines.

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Speaker 1: So how have we seen capitulation difficult to tell. Really,

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Speaker 1: what we're waiting for is the opposite of that, which

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Speaker 1: is when does that cash that's been pushed the sidelines

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Speaker 1: start start redeploying m you're saying POMO holding a lot

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Speaker 1: of people back as well. How much further does this

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Speaker 1: crowded dollar trade have to run to? Why that that?

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Speaker 1: That is a million dollar question, multimillion dollar question. It

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Speaker 1: reminds me very much of this time last year when

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Speaker 1: the FOMO trade was. Everybody knew that MidCap text and

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Speaker 1: spacks and and crypto was was going too fast, and

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Speaker 1: they all knew it was going up, but they were

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Speaker 1: all waiting to get out right at the top. And

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Speaker 1: as we ran into Thanksgiving, the trader started to take

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Speaker 1: the money off, and then everybody tried to get it

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Speaker 1: once and then it came right back down again. And

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Speaker 1: I really feel that that's where we are with a

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Speaker 1: dollar right now, is that everybody, the traders are all

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Speaker 1: in there, but there's a lot of investors are hiding

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Speaker 1: in there right If you're an offshore investor, the best

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Speaker 1: returns you've delivered your clients in local currency just by

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Speaker 1: holding dollar cash, and at some point they're going to

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Speaker 1: need to take that profit and they're going to need

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Speaker 1: to reallocate that. So that's going to be a I

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Speaker 1: think a similar a similar things. So it is the

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Speaker 1: most crowded tread in the world right now, and everybody's

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Speaker 1: waiting to get out right at the top, which of

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Speaker 1: course nobody efer Haus. So it turns when the FED pivots, obviously,

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Speaker 1: and do you have a sense of whether that could

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Speaker 1: happen maybe in the first quarter of next year quickly.

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Speaker 1: I think this. I mean, the idea that they'll keep

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Speaker 1: going until they completely kill the U s economy is wrong.

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Speaker 1: The risk that we have outside of the US is

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Speaker 1: that everybody follows the dollar, follows the FED rather and

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Speaker 1: it kills other economies along the way because they are

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Speaker 1: set up very, very differently for sensitivity to interest rate.

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Speaker 1: Bryan talking there about some of the comments we're hearing

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Speaker 1: from Corona Sun about the yen and also saying the

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Speaker 1: recent sudden week yend raises uncertainty is negative. We are

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Speaker 1: on intervention watch. Do you agree with a comment from

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Speaker 1: one of our Bloomberg writers, Edward Harrison, that you should

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Speaker 1: look to Japan, not Italy for the next meltdown. Ah,

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Speaker 1: that's an interesting one. I think the risk is that

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Speaker 1: the Europeans have got more problems with with bonds and

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Speaker 1: refinancing their bonds. I mean, the Japanese have this huge

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Speaker 1: bond issue, but it is all internally financed. Italy is

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Speaker 1: he equally has a lot of internifiers, but there are

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Speaker 1: other parts of Europe. I think the big issue is

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Speaker 1: we almost need to think of the UK and Europe,

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Speaker 1: and to some extent, but maybe the UK and Europe

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Speaker 1: as almost been like an emerging market. Now they've had

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Speaker 1: such moves in their currencies. The people who've got dollar

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Speaker 1: debt are the ones that are most at risk um

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Speaker 1: and that's I think where you're going to get most

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Speaker 1: of the problem. The Japanese haven't taken on a whole

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Speaker 1: lot of dollar debt. Companies and and people throughout Europe

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Speaker 1: have got a mismatch on the currency. They're getting interest

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Speaker 1: rates rising and they're getting the wrong end of the currency.

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Speaker 1: And that's exactly the format that we've seen time and

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Speaker 1: time again in emerging markets. I know it sounds a

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Speaker 1: bit exaggerated, but you've had huge volatility and bonds, huge

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Speaker 1: volatility incurrencies, and you've got that same kind of stress

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Speaker 1: in a system that has got so used to having

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Speaker 1: cheap and available debt and now it's going back the

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Speaker 1: other way to I would say, actually, I'd still be

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Speaker 1: looking at Europe rather than Japan. Does that set us

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Speaker 1: up potentially for a really rugged three I mean, if

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Speaker 1: we don't get kind of a calmer situation and volatility

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Speaker 1: does remain elevated, that we could really see some significant disruption.

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Speaker 1: I think actually, you know, to take the positive side

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Speaker 1: of it, and in the black Stone the other day

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Speaker 1: were just pointed this out is is that they've been

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Speaker 1: beaten down so much. There is enormous value in the

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Speaker 1: assets and the cash flows that are now in Europe,

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Speaker 1: including the UK to a dollar based investor that includes

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Speaker 1: people out here obviously, people in the US and people

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Speaker 1: who have been like the Middle East, who have been

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Speaker 1: hidi in dollar cash. That dollar cash is going to

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Speaker 1: get deployed and actually pick up those assets. So actually,

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Speaker 1: maybe it's volatility, but maybe it's much more that there's

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Speaker 1: a huge kind of restructuring almost m and a type

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Speaker 1: thing comes through first, and then the next thing happens

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Speaker 1: is is that you then get infrastructure built, because that's

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Speaker 1: the thing that's been exposed is that we haven't got

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Speaker 1: the infrastructure we now need. Now that we can't have

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Speaker 1: just in time supply chains because we can't afford to

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Speaker 1: tie working capital when capital is costing four when it's

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Speaker 1: costing twenty five bits, you can have loads of working

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Speaker 1: capital tied up, and global supply chains doesn't work anymore.

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Speaker 1: Let's talk about the China picture. Obviously, looking at the

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Speaker 1: China Party Congress, I'm curious as to a line you've

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Speaker 1: given us in your notes at ads will continue to

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Speaker 1: be replaced with g ds. So how does the West

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Speaker 1: invest in China? Moving forward? The West, If the West

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Speaker 1: wants to invest in China, it has to come through

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Speaker 1: Hong Kong, it has to come through essentially the Chinese system.

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Speaker 1: So essentially we had that kind of magical thinking that

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Speaker 1: a company was a dcent owned by the Americans of

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Speaker 1: the the US investors and add owned by the Chinese

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Speaker 1: at the same time, and that that's what really kind

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Speaker 1: of ended that whole process. And essentially China is saying

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Speaker 1: we we welcome foreign capital, but it has to come

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Speaker 1: in in the way that we want it to come.

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Speaker 1: So if you want to participate. You could make a

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Speaker 1: case that they got what they wanted in the process, right,

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Speaker 1: And now it's under the second part of the story,

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Speaker 1: and that which kind of takes us to the tension.

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Speaker 1: Now we're peuter chip technology is related between the US

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Speaker 1: and China. Does this have the potential to significantly hold

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Speaker 1: back the growth of the Chinese economy? Um? Personally, I

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Speaker 1: don't think so. I do think that we've we've spent

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Speaker 1: the last decade wishing China to pave like we wanted to.

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Speaker 1: So we we said, oh, everybody wants to become like

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Speaker 1: live the American dream, and G told us, no, no,

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Speaker 1: this is the China dream, which is similar but different.

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Speaker 1: And then we spent the last five years saying China's

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Speaker 1: going to turn its financial markets into the copies of

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Speaker 1: our financial markets. And and then G essentially said, now

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Speaker 1: we believe in common prosperity where we're looking for the

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Speaker 1: nine not the one percent, and we don't want George

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Speaker 1: Soros and we don't want the kind of speculators coming in.

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Speaker 1: And actually, what we're going to do and we this

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Speaker 1: is actually we've got the Party Congress at the moment,

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Speaker 1: we had a five year planned last year they set

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Speaker 1: up quite clearly what they're going to do, and it

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Speaker 1: is going to be to be investing in China's domestic

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Speaker 1: capacity to manufacture what it needs. In terms of the

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Speaker 1: technology side, they've shifted it from made in China. But

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Speaker 1: at the end of the day, I think the most

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Speaker 1: important thing for international investors is to recognize that China

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Speaker 1: is not going to be using the Western financial system

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Speaker 1: and particularly not going to be using the dollar going forward,

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Speaker 1: and that is going to be buying its oil and

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Speaker 1: gas in R and B, which means it has to

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Speaker 1: be it doesn't need to earn a hundred billion in dollars.

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Speaker 1: It's actually it can just print that R and B,

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Speaker 1: and so that changes the picture dramatically, and I think

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Speaker 1: the West needs to get its head around the fact

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Speaker 1: that China isn't going to be making cheap goods, isn't

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Speaker 1: going to be the factory of the world using polluting technologies.

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Speaker 1: It's actually and that's where the broader picture comes in

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Speaker 1: about it's an end of the disinflationary pulse from China.

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Speaker 1: China is going to be looking after China, and we've

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Speaker 1: got to work out, you know, how we can kind

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Speaker 1: of fill in the gaps because of the things that

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Speaker 1: it used to give us. Mark always a pleasure. Mark

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Speaker 1: Tinker is ce io at TUSCA Fund Hong Kong in

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Speaker 1: our Hong Kong studio here on Daybreak Asia