Speaker 1: To Max Mondori joins us. Max is the CEO of
Speaker 1: s GMC Capital. He joins from Singapore. It's always a
Speaker 1: pleasure Max. So much of this price action seems to
Speaker 1: be driven by this idea that the Fed is getting
Speaker 1: very close to some kind of an adjustment in it's
Speaker 1: thinking when it comes to rate hikes. Maybe as soon
Speaker 1: as December we become or we're faced with a less
Speaker 1: hawk is fed. Do you think that's a possibility. Well,
Speaker 1: definitely in terms of future rate hikes, we're going to
Speaker 1: see a slowdown. They're probably gonna do a zero seventy
Speaker 1: five now and then they're gonna slow down the pace
Speaker 1: of hiking. But I was also normal they couldn't keep
Speaker 1: going at seventy five apiece every time. The real question
Speaker 1: here is in terms of messaging and in terms of
Speaker 1: how long interest rates remain at elevated levels. Just keep
Speaker 1: in mind, if we do get to that four and
Speaker 1: a half five percent kind of band, that is quite
Speaker 1: restrictive as a policy, and the market now is probably
Speaker 1: a little bit over optimistic and expecting the Fed to
Speaker 1: start cutting rates already as early as July August of
Speaker 1: next year, when we think actually rates could remain higher
Speaker 1: for longer in order for inflation to really come down
Speaker 1: and put a humper own growth before Yes, future hikes
Speaker 1: will be lower, but from here to a dabbish FED,
Speaker 1: I think there's still a lot of time for us.
Speaker 1: Do you sense that we are getting towards the end
Speaker 1: of the inflation fight or perhaps just the end of
Speaker 1: the beginning. Well, we've seen the peak, and I think
Speaker 1: that's more or less given. I mean, of course, unless
Speaker 1: something big geopolitically happens, but how quickly that will come down,
Speaker 1: it's still a question mark. And the real issue here
Speaker 1: is that for inflation to really decline meaningfully closer to
Speaker 1: the FEDS target, unemployment in the US has to come up,
Speaker 1: because that is the only way that you really are
Speaker 1: going to be humpering growth and you're going to have
Speaker 1: less demand in the system. And then, of course, if
Speaker 1: that happens, that's bad news for living standards in general
Speaker 1: and for US and valuations. Therefore, Uh, we're definitely in
Speaker 1: a better position than we were a few months, right,
Speaker 1: But there's still a lot of work to be done.
Speaker 1: So you just mentioned geopolitical risk, and I'm wondering whether
Speaker 1: the market is maybe a little too complacent, whether it's
Speaker 1: what's going on in Ukraine, the notion of a dirty
Speaker 1: bomb of some sort, or China and incursion on Taiwan.
Speaker 1: I mean, do you think the market is too complacent
Speaker 1: in measuring geopolitical risk right now? We believe the market
Speaker 1: is too complacent. The issue with these risks is that
Speaker 1: they're extremely binary. So um, if something should break out
Speaker 1: into any of the risk that you have mentioned, whether
Speaker 1: it's the Taiwan, whether it's a dirty bomb, clearly you're
Speaker 1: going to have a massive repercaution. Negative reprocution on marketing
Speaker 1: is going to happen extremely quickly. But if that does
Speaker 1: not happen, then you've probably already seeing quite a few
Speaker 1: of the economic risks, not all of them, but a
Speaker 1: few of them already been discounted before. It's all a
Speaker 1: question of the likelihood that investors put in the materialization
Speaker 1: of such risks, and of course will depend in terms
Speaker 1: of the narrative going forward. A rise and unemployment would
Speaker 1: be one of the key things that causes the fit
Speaker 1: to make a devilish pivot should that happen, though other
Speaker 1: risks come into focus as well. What do you consider
Speaker 1: to be the risk of a recession in the US,
Speaker 1: and more broadly, well, we believe the US will enter
Speaker 1: a recession and the unemployment rising is really the only
Speaker 1: way for inflation to count down because you need to
Speaker 1: get a demand down and need to get growth down,
Speaker 1: and that's the only way that inflation is gonna come
Speaker 1: down from the current levels to roughly in line toward
Speaker 1: the fat things um with respect to economic risk. Of course,
Speaker 1: that means that there's going to be less growth and
Speaker 1: there's going to be less demand, But that's what you
Speaker 1: need in order to get inflation down. You need to
Speaker 1: call down the economy. You need to pull push on
Speaker 1: the brakes, um and the fourth That's what we think
Speaker 1: and that's actually going to be that news also for
Speaker 1: leading standards overall, because we find employment increases that's never
Speaker 1: good news. But again we believe that this period of
Speaker 1: faith will need to materialize in order for fatther Reaches objectives. Max,
Speaker 1: I'd like to get your view on China now that
Speaker 1: we have the Party Congress in the rear view mirror,
Speaker 1: and we know now that Washington is using kind of
Speaker 1: bands on US chips and chip expertise as a way
Speaker 1: of exporting that technology to China. Which has the potential
Speaker 1: to really stifle a lot of development of advanced Chinese technology.
Speaker 1: Give me your your sense of how significant this is
Speaker 1: and what the repercussions could be. Well, it is definitely
Speaker 1: very significant, first of all, in terms of relationships between
Speaker 1: the U ask China. Clearly here we are escalating on
Speaker 1: the negative side, and in terms of actual process of
Speaker 1: growth for the industry within China, that's also negative news,
Speaker 1: especially given that one of the plans and the objectives
Speaker 1: of China is to improve their technological If you want advance, obviously,
Speaker 1: if you don't have the correct access to semi conductors
Speaker 1: and microchips, that becomes extremely hard developing domestic alternative. We
Speaker 1: all know it's not that easy, uh, And therefore, in
Speaker 1: this fast space environment, even losing out a few months
Speaker 1: of normal growth and development probably needs light years in
Speaker 1: other industries before we think it will have an impact.
Speaker 1: It will have an effect. The question is China will
Speaker 1: definitely try and see some domestic alternatives, but it's not
Speaker 1: so easy. So the question is really how much of
Speaker 1: help and support they're going to try and give to
Speaker 1: this industry in order to figure out some local alternatives.
Speaker 1: How do you view the investing environment in China at
Speaker 1: the moment. You know, a number of stocks and other
Speaker 1: assets are very very cheap, but there are a number
Speaker 1: of risks as well. Are you looking at the space.
Speaker 1: We're definitely looking at the space. So it is true
Speaker 1: that from an absolute and relative point of view, valuations
Speaker 1: are cheap. But it's also true, especially after the recent
Speaker 1: cong risks, Uncertainty is very high, visibility is extremely low,
Speaker 1: geopolitical risks are very high. Headlines rings remain high. We
Speaker 1: have seen that it's unlikely that they're gonna turn particularly
Speaker 1: market friendly anytime soon before. Not having a Chinese exposure
Speaker 1: is is we believe not correct. But also we have
Speaker 1: been trimming down of our exposure given the recent news.
Speaker 1: And keep in mind that, yes, evaluations in China are cheap,
Speaker 1: but after the reason fall we've seen in other markets
Speaker 1: where you definitely have more visibility, you're also getting some
Speaker 1: cheaper evaluations elsewhere. Uh. Therefore, we do keep looking at it.
Speaker 1: We are in the market, but we have been scaling
Speaker 1: down also because now a number of alternatives have started
Speaker 1: to appear. So Max, when you have the morning meeting
Speaker 1: later today at s GMC Capital and you talk about
Speaker 1: the strategy between now, let's say in the end of
Speaker 1: the year, give me thirty seconds on what that looks like.
Speaker 1: Short term, you could see further bounce, but we think
Speaker 1: that the market is likely to go to contest June lows. Again.
Speaker 1: There will come a time of buying and there's going
Speaker 1: to be great buying opportunities, but it's not now yet.
Speaker 1: We need to be a little bit more patient. More
Speaker 1: play needs to happen within the US economy. So we're
Speaker 1: probably looking at you want you to over next year
Speaker 1: and really start deploying the remainder quarter is probably still
Speaker 1: the time to be cautious. Alright, Max Bondor We'll leave
Speaker 1: it there. Thanks so much for joining us on Bloomberg
Speaker 1: Daybreak Asia. Max Bondori is CEO of s GMC Capital