WEBVTT - Max Bondurri on the Markets (Radio)

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<v Speaker 1>To Max Mondori joins us. Max is the CEO of

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<v Speaker 1>s GMC Capital. He joins from Singapore. It's always a

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<v Speaker 1>pleasure Max. So much of this price action seems to

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<v Speaker 1>be driven by this idea that the Fed is getting

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<v Speaker 1>very close to some kind of an adjustment in it's

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<v Speaker 1>thinking when it comes to rate hikes. Maybe as soon

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<v Speaker 1>as December we become or we're faced with a less

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<v Speaker 1>hawk is fed. Do you think that's a possibility. Well,

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<v Speaker 1>definitely in terms of future rate hikes, we're going to

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<v Speaker 1>see a slowdown. They're probably gonna do a zero seventy

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<v Speaker 1>five now and then they're gonna slow down the pace

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<v Speaker 1>of hiking. But I was also normal they couldn't keep

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<v Speaker 1>going at seventy five apiece every time. The real question

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<v Speaker 1>here is in terms of messaging and in terms of

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<v Speaker 1>how long interest rates remain at elevated levels. Just keep

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<v Speaker 1>in mind, if we do get to that four and

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<v Speaker 1>a half five percent kind of band, that is quite

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<v Speaker 1>restrictive as a policy, and the market now is probably

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<v Speaker 1>a little bit over optimistic and expecting the Fed to

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<v Speaker 1>start cutting rates already as early as July August of

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<v Speaker 1>next year, when we think actually rates could remain higher

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<v Speaker 1>for longer in order for inflation to really come down

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<v Speaker 1>and put a humper own growth before Yes, future hikes

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<v Speaker 1>will be lower, but from here to a dabbish FED,

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<v Speaker 1>I think there's still a lot of time for us.

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<v Speaker 1>Do you sense that we are getting towards the end

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<v Speaker 1>of the inflation fight or perhaps just the end of

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<v Speaker 1>the beginning. Well, we've seen the peak, and I think

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<v Speaker 1>that's more or less given. I mean, of course, unless

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<v Speaker 1>something big geopolitically happens, but how quickly that will come down,

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<v Speaker 1>it's still a question mark. And the real issue here

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<v Speaker 1>is that for inflation to really decline meaningfully closer to

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<v Speaker 1>the FEDS target, unemployment in the US has to come up,

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<v Speaker 1>because that is the only way that you really are

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<v Speaker 1>going to be humpering growth and you're going to have

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<v Speaker 1>less demand in the system. And then, of course, if

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<v Speaker 1>that happens, that's bad news for living standards in general

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<v Speaker 1>and for US and valuations. Therefore, Uh, we're definitely in

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<v Speaker 1>a better position than we were a few months, right,

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<v Speaker 1>But there's still a lot of work to be done.

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<v Speaker 1>So you just mentioned geopolitical risk, and I'm wondering whether

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<v Speaker 1>the market is maybe a little too complacent, whether it's

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<v Speaker 1>what's going on in Ukraine, the notion of a dirty

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<v Speaker 1>bomb of some sort, or China and incursion on Taiwan.

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<v Speaker 1>I mean, do you think the market is too complacent

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<v Speaker 1>in measuring geopolitical risk right now? We believe the market

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<v Speaker 1>is too complacent. The issue with these risks is that

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<v Speaker 1>they're extremely binary. So um, if something should break out

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<v Speaker 1>into any of the risk that you have mentioned, whether

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<v Speaker 1>it's the Taiwan, whether it's a dirty bomb, clearly you're

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<v Speaker 1>going to have a massive repercaution. Negative reprocution on marketing

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<v Speaker 1>is going to happen extremely quickly. But if that does

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<v Speaker 1>not happen, then you've probably already seeing quite a few

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<v Speaker 1>of the economic risks, not all of them, but a

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<v Speaker 1>few of them already been discounted before. It's all a

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<v Speaker 1>question of the likelihood that investors put in the materialization

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<v Speaker 1>of such risks, and of course will depend in terms

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<v Speaker 1>of the narrative going forward. A rise and unemployment would

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<v Speaker 1>be one of the key things that causes the fit

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<v Speaker 1>to make a devilish pivot should that happen, though other

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<v Speaker 1>risks come into focus as well. What do you consider

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<v Speaker 1>to be the risk of a recession in the US,

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<v Speaker 1>and more broadly, well, we believe the US will enter

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<v Speaker 1>a recession and the unemployment rising is really the only

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<v Speaker 1>way for inflation to count down because you need to

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<v Speaker 1>get a demand down and need to get growth down,

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<v Speaker 1>and that's the only way that inflation is gonna come

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<v Speaker 1>down from the current levels to roughly in line toward

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<v Speaker 1>the fat things um with respect to economic risk. Of course,

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<v Speaker 1>that means that there's going to be less growth and

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<v Speaker 1>there's going to be less demand, But that's what you

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<v Speaker 1>need in order to get inflation down. You need to

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<v Speaker 1>call down the economy. You need to pull push on

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<v Speaker 1>the brakes, um and the fourth That's what we think

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<v Speaker 1>and that's actually going to be that news also for

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<v Speaker 1>leading standards overall, because we find employment increases that's never

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<v Speaker 1>good news. But again we believe that this period of

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<v Speaker 1>faith will need to materialize in order for fatther Reaches objectives. Max,

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<v Speaker 1>I'd like to get your view on China now that

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<v Speaker 1>we have the Party Congress in the rear view mirror,

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<v Speaker 1>and we know now that Washington is using kind of

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<v Speaker 1>bands on US chips and chip expertise as a way

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<v Speaker 1>of exporting that technology to China. Which has the potential

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<v Speaker 1>to really stifle a lot of development of advanced Chinese technology.

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<v Speaker 1>Give me your your sense of how significant this is

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<v Speaker 1>and what the repercussions could be. Well, it is definitely

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<v Speaker 1>very significant, first of all, in terms of relationships between

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<v Speaker 1>the U ask China. Clearly here we are escalating on

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<v Speaker 1>the negative side, and in terms of actual process of

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<v Speaker 1>growth for the industry within China, that's also negative news,

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<v Speaker 1>especially given that one of the plans and the objectives

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<v Speaker 1>of China is to improve their technological If you want advance, obviously,

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<v Speaker 1>if you don't have the correct access to semi conductors

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<v Speaker 1>and microchips, that becomes extremely hard developing domestic alternative. We

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<v Speaker 1>all know it's not that easy, uh, And therefore, in

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<v Speaker 1>this fast space environment, even losing out a few months

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<v Speaker 1>of normal growth and development probably needs light years in

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<v Speaker 1>other industries before we think it will have an impact.

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<v Speaker 1>It will have an effect. The question is China will

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<v Speaker 1>definitely try and see some domestic alternatives, but it's not

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<v Speaker 1>so easy. So the question is really how much of

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<v Speaker 1>help and support they're going to try and give to

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<v Speaker 1>this industry in order to figure out some local alternatives.

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<v Speaker 1>How do you view the investing environment in China at

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<v Speaker 1>the moment. You know, a number of stocks and other

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<v Speaker 1>assets are very very cheap, but there are a number

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<v Speaker 1>of risks as well. Are you looking at the space.

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<v Speaker 1>We're definitely looking at the space. So it is true

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<v Speaker 1>that from an absolute and relative point of view, valuations

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<v Speaker 1>are cheap. But it's also true, especially after the recent

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<v Speaker 1>cong risks, Uncertainty is very high, visibility is extremely low,

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<v Speaker 1>geopolitical risks are very high. Headlines rings remain high. We

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<v Speaker 1>have seen that it's unlikely that they're gonna turn particularly

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<v Speaker 1>market friendly anytime soon before. Not having a Chinese exposure

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<v Speaker 1>is is we believe not correct. But also we have

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<v Speaker 1>been trimming down of our exposure given the recent news.

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<v Speaker 1>And keep in mind that, yes, evaluations in China are cheap,

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<v Speaker 1>but after the reason fall we've seen in other markets

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<v Speaker 1>where you definitely have more visibility, you're also getting some

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<v Speaker 1>cheaper evaluations elsewhere. Uh. Therefore, we do keep looking at it.

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<v Speaker 1>We are in the market, but we have been scaling

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<v Speaker 1>down also because now a number of alternatives have started

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<v Speaker 1>to appear. So Max, when you have the morning meeting

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<v Speaker 1>later today at s GMC Capital and you talk about

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<v Speaker 1>the strategy between now, let's say in the end of

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<v Speaker 1>the year, give me thirty seconds on what that looks like.

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<v Speaker 1>Short term, you could see further bounce, but we think

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<v Speaker 1>that the market is likely to go to contest June lows. Again.

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<v Speaker 1>There will come a time of buying and there's going

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<v Speaker 1>to be great buying opportunities, but it's not now yet.

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<v Speaker 1>We need to be a little bit more patient. More

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<v Speaker 1>play needs to happen within the US economy. So we're

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<v Speaker 1>probably looking at you want you to over next year

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<v Speaker 1>and really start deploying the remainder quarter is probably still

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<v Speaker 1>the time to be cautious. Alright, Max Bondor We'll leave

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<v Speaker 1>it there. Thanks so much for joining us on Bloomberg

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<v Speaker 1>Daybreak Asia. Max Bondori is CEO of s GMC Capital