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Speaker 1: Let's get to our guest, Uteen Shall, macro strategist at

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Speaker 1: State Street Global Markets. Well, I wonder if there might

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Speaker 1: be a FOMO factor coming in China stocks. UM, in

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Speaker 1: that Chinese policymakers are are aware that it's it's their

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Speaker 1: policy that has led to a lot of, um of

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Speaker 1: you know, the haircuts here in in in this entire sector,

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Speaker 1: particularly in the tech sector, and whether or not at

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Speaker 1: some point, you know, policy will get changed and these

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Speaker 1: stocks will be back in favor. Um. Is it likely

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Speaker 1: that we see a bounce at some point here, Uteen Shall,

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Speaker 1: Based on that alone, UM, I think the current environment

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Speaker 1: looks to be challenging. UM. But of course, you know,

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Speaker 1: part of the reason I think there's slight more, you know,

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Speaker 1: probably certainly coming up, is that the Party Congress itself

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Speaker 1: was not aimed at more you know, policy oriented or

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Speaker 1: market oriented. It's more of a political event. So of

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Speaker 1: course there is this lack of you know, detailed plans

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Speaker 1: or policies for what's coming. So I think, you know,

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Speaker 1: we have to wait a little bit too, perhaps at

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Speaker 1: the end of year, where we have the part of

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Speaker 1: your meeting in December, we also have the Central Economic

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Speaker 1: War Conference and of course, Uh, what we have the

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Speaker 1: term of year, we get the NPC UH in March,

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Speaker 1: so those are more of a policy intensive uh, you know,

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Speaker 1: conferences and meetings where market will likely to get a

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Speaker 1: better sense of what's coming and that could potentially help

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Speaker 1: sort of turn the sentiment the current currently is in

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Speaker 1: the market. To what degree do you think this was

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Speaker 1: a reaction to you know, the market getting us first

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Speaker 1: look at the membership of the Standing Committee, there are

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Speaker 1: no economic reformers there. That's not likely to change. Is

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Speaker 1: this going to cause an enduring problem for investors? Um?

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Speaker 1: I think there is a little bit of maybe slightly

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Speaker 1: a little bit of over reaction from the market perspective.

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Speaker 1: And I think there's a lot of factors that you know,

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Speaker 1: contributed to what we've seen yesterday. I think the un

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Speaker 1: fixing that came up early in the morning when they

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Speaker 1: let go seven point twelve, that is a little bit

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Speaker 1: of sign of there's you know, more acceptance perhaps from

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Speaker 1: the Chinese side to have a little bit more flexibility

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Speaker 1: when it comes to you. And and also the GDP data,

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Speaker 1: even though it was a beat, you still have you know,

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Speaker 1: this kind of worrying signs in terms of retail sales

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Speaker 1: being pretty weak and property sector also still struggling. UM.

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Speaker 1: And I think to your point, Um, in terms of

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Speaker 1: the composition a lot of it, Um, you have to

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Speaker 1: you have to see sort of the upside to that

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Speaker 1: perhaps and maybe find a silver lining. Two things is

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Speaker 1: that once you you have this kind of stability in

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Speaker 1: terms of the policy implementation, a lot of them actually

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Speaker 1: have a lot of local level experiences. So when it

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Speaker 1: comes through the efficiency of policy implementation, that could actually

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Speaker 1: be a little bit of upside. And I think, you know,

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Speaker 1: we should have, you know, wait a little bit longer

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Speaker 1: to see, you know, how we should really truly evaluate,

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Speaker 1: you know, what's happening and what's coming up, you think.

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Speaker 1: Just returning briefly to the investing environment in China, yes,

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Speaker 1: we have seen some declines. The NESDA Golden Dragon Index

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Speaker 1: are four and one day the most on record. But someday,

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Speaker 1: eventually COVID zero is going to be swept away. When

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Speaker 1: should trade his position for this eventuality? And what sort

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Speaker 1: of reaction do you expect when that day finally comes? Um?

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Speaker 1: I think right now, Um, in terms of COVID policy

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Speaker 1: in the very near term, we don't really you know,

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Speaker 1: see a high chance of imminent change, a mature change

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Speaker 1: to zero COVID. Very likely we'll see gradual losening UH

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Speaker 1: towards perhaps Q two of next year, once we get

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Speaker 1: n PC all the way, once you get springtime that

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Speaker 1: comes in and you get a higher vaccination right back then.

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Speaker 1: Um so then it's when you will likely to see

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Speaker 1: as you're reopening off the country. And in terms of

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Speaker 1: you know what what that means for the market, of course,

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Speaker 1: is that's going to give a huge boost to investor

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Speaker 1: confidence towards Chinese market. And also you know, in terms

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Speaker 1: of the domestic demand side, there will be a significant

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Speaker 1: amount of release of pan up demand and that is

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Speaker 1: definitely a very positive forward market. Doug just mentioned that

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Speaker 1: we saw a little bit of a pullback and yields

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Speaker 1: dropping in the Tokyo market at the moment. There is

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Speaker 1: an argument made by some that bond yields have peaked.

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Speaker 1: If you look at the two year up over four

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Speaker 1: points six zero percent, it's moved down now to around

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Speaker 1: a little under four fifty Uh. Would you be willing

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Speaker 1: to make that mark that that sort of judgment that

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Speaker 1: yields have peaked? And if so, looking forward, you know

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Speaker 1: you have to ask, why is it our yields going

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Speaker 1: down because of growth concerns and if so, how does

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Speaker 1: that affect your stock picking? Um. I think from our perspective,

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Speaker 1: we were not really confident to say that we've seen

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Speaker 1: the peak of rates yet because there is still this

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Speaker 1: you know, continual strengths in labor market and inflation is

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Speaker 1: still uncomfortably high. So we think for the time being, uh,

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Speaker 1: the FAT is still likely to continue on this path

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Speaker 1: of tightening, and perhaps we we are you know, not

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Speaker 1: yet ready to see that we have you know, confidence

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Speaker 1: that the peak race has been placed in. So what

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Speaker 1: that means is that, you know, there is perhaps still

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Speaker 1: a lot more uncertainties coming up, and we'll probably probably

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Speaker 1: get a lot more you know, evidence or confirmation from

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Speaker 1: the FAT side next week when we have the FMC meeting. Yeah,

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Speaker 1: we've already heard from San Francisco Fair president Mary Daily

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Speaker 1: saying colleagues should prepare for smaller hanks going forward. Seventy

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Speaker 1: basis points very much the consensus for November. But do

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Speaker 1: you have a sense of win we might expect to

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Speaker 1: see some of these smaller haiks. Um. I think maybe

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Speaker 1: once we turned the year again, we have to really

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Speaker 1: see what the data tells us, especially in terms of

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Speaker 1: the core inflation side of things. You know, the FED

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Speaker 1: really is determined to burn inflation donald eventually, and they

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Speaker 1: really are, you know, keeping in mind to you know,

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Speaker 1: make sure that core inflation doesn't become an anchored. So

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Speaker 1: in that perspective, they will probably continue to be on

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Speaker 1: this hiking path. And I think, you know, to some extent,

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Speaker 1: their purpose still to tighten global financial conditions. And if they,

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Speaker 1: you know, put on a break too quick, they have

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Speaker 1: to do more down the road, which means more pain

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Speaker 1: for market. If rates do head lower because of growth concerns,

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Speaker 1: that would seemingly be bad for cyclicals. Um what about

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Speaker 1: growth stocks? Though, I mean I think the market is

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Speaker 1: still kind of divided about that. Yeah, I mean, I

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Speaker 1: mean from perspective, we are still relatively you preferred to

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Speaker 1: stay defensive again until we are confident that you know,

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Speaker 1: we are seeing that the peak and US rates, which

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Speaker 1: for right now we are We're not to make that call. Um,

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Speaker 1: we've got a few seconds remaining. You think, what's your

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Speaker 1: biggest risk at the moment that you're watching out for? Um,

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Speaker 1: I think it is still this tug of war between

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Speaker 1: or finding inflation tightening conditions versus you know, GROWS concerns,

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Speaker 1: and I think, you know, Central Banks really is facing

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Speaker 1: a lot of challenges to try to make sure the

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Speaker 1: totify line between you know, making sure inflations and check

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Speaker 1: with occurring UH grows too much. But I think at

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Speaker 1: some point, you know, you gotta still focus on bring

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Speaker 1: inflation down, and that's what's the most important thing for

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Speaker 1: grows long term road, alright, you think. Sean McCraw is

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Speaker 1: strategist at State Street Global Markets