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Speaker 1: Let's get to Mark Franklin, who was with us from

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Speaker 1: Hong Kong. Mark is Managing director also Senior portfolio Manager,

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Speaker 1: multi Asset Solutions at Manual Life Investment Management. Mark, I

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Speaker 1: want to begin kind of with the China reopening story.

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Speaker 1: I mean, this is still very much work in progress.

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Speaker 1: The data that we had yesterday was very weak on

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Speaker 1: a relative basis. Retail sales, industrial production both missed estimates.

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Speaker 1: We were speaking earlier, and when I say we, the

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Speaker 1: folks here a Bloomberg talking with Greg Jensen of Bridgewater.

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Speaker 1: He's talking about how the reopening of China is going

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Speaker 1: to impact the global growth story. And he's basically saying, Hey,

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Speaker 1: this is going to be a negative for the US

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Speaker 1: and Europe because until now the shutdowns have meant that

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Speaker 1: China has been essentially a d disinflationary force, and that's

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Speaker 1: going to reverse itself on this reopening at a time

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Speaker 1: when we're talking about recessions not only in Europe but

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Speaker 1: in the US as well. Do you agree with that

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Speaker 1: al right? I think there's definitely a chance that there

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Speaker 1: will be an inflationary post that comes out of China.

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Speaker 1: If there's six scessful in reopening the economy without too

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Speaker 1: many hiccups. For the simple reason as well as the

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Speaker 1: demand side, that the supply side for key commodities, both

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Speaker 1: energy and metallurgical commodities, the supply side has been significantly

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Speaker 1: underinvested in for a number of years now, and it

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Speaker 1: takes a long time for new supply to come on stream,

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Speaker 1: so we're already facing physical short supplies of key commodities

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Speaker 1: like copper. There's a big focus on energy supplies, both

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Speaker 1: gas and crude oil, and that supply tightness could become

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Speaker 1: exacerbated by incremental improvements in demands that are driven by

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Speaker 1: China's reopening. From an investing point of view, does that

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Speaker 1: make the materials sector of buy right now? You have

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Speaker 1: to be quite selected because not all commodities are showing

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Speaker 1: that kind of physical tightness. I think copper looks interesting.

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Speaker 1: Nickel is one which we have been active in investing

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Speaker 1: in over recent weeks, and that also has a strong

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Speaker 1: long term driver in terms of the electrification of vehicle

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Speaker 1: usage as well. And then coming back the energy that

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Speaker 1: is that is that is a sex of which does

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Speaker 1: definitely face long term question marks over the physical supply side,

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Speaker 1: given the disincentives that have been introduced for investment in

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Speaker 1: new productive capacity, particularly in Western economies. So I want

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Speaker 1: a pivot here and talk a little bit about the risk,

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Speaker 1: the geopolitical risk between the U S and China. Right now,

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Speaker 1: we just did a story about the Watchdog for accounting

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Speaker 1: practices here in the US finally getting what has been

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Speaker 1: requested from about two hundred Chinese based in Hong Kong

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Speaker 1: based firms so that their financials can be reviewed and verified.

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Speaker 1: That had been a stress point. We know that, and

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Speaker 1: we were talking earlier on our pre show meeting about

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Speaker 1: how many blacklisted companies there are now Chinese firms that

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Speaker 1: have been blacklisted UH top producers of advanced computer chips

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Speaker 1: because they will no longer have access to American technology.

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Speaker 1: So it seems like the tensions between the U S

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Speaker 1: and China are not I mean, maybe it has the

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Speaker 1: potential to even drive a wedge into this recovery story

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Speaker 1: a bit, do you think, Well, I think we have

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Speaker 1: to accept that there's going to be an ebb and

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Speaker 1: flow of this kind of news flow. At the first

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Speaker 1: point highlights there are areas upon which the Americans and

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Speaker 1: the Chinese can seek agreements, and actually the regulation and

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Speaker 1: the order sing of technology companies is an area where

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Speaker 1: we're seeing a coming together of both powers, and so

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Speaker 1: that's an encouraging point. That being said, though, as a

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Speaker 1: broader theme, it does appear to be the case that

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Speaker 1: the two countries are facing or following an industrial policy

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Speaker 1: and objectives that commenced you with that which are to

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Speaker 1: some extent not um. Let's a symbiotics. So if you

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Speaker 1: take the American side, they think of industrial policy is

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Speaker 1: increasingly one of national security now, hence the focus on

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Speaker 1: trying to limit access to high end chip technology, which

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Speaker 1: will ultimately find its way into military usage. On the

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Speaker 1: Chinese side, industrial policy is increasingly being focused on self sufficiency,

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Speaker 1: and self sufficiency is inherently an inward looking phenomenon, and

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Speaker 1: so what we're going to see over time is a

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Speaker 1: shift in this globalization model, supply chain integration model that

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Speaker 1: we've enjoyed the last twenty five years, and it's going

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Speaker 1: to become increasingly inward looking, and there will be an

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Speaker 1: air of mutual suspicion, but the key thing will be

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Speaker 1: to keep communication lines open. Your Chinese tech stock student

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Speaker 1: doing to go on another interesting ride, um, and you're

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Speaker 1: never quite sure what the regulatory framework is going to

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Speaker 1: be from one month to another. Do you buy a

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Speaker 1: Chinese tech It's a very good question. Again, you don't

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Speaker 1: want to necessarily take a broad brush approach here. There

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Speaker 1: are business models which are more robust than others. There

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Speaker 1: are technology companies which at this point in time have

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Speaker 1: stronger relationships with central governments in China than others. And

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Speaker 1: so what you're probably going to have to do is

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Speaker 1: take a stock pickers approach in terms of what you're

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Speaker 1: seeing from your vantage point in Hong Kong. On the

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Speaker 1: reopening story, I mean, it's very concerning the spike that

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Speaker 1: we have seen in cases stresses that have been reported

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Speaker 1: in the healthcare system. Is this going to be a protracted,

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Speaker 1: bumpy way out? I mean, are you seeing this as

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Speaker 1: maybe a six month endeavor. It will be bumpy and

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Speaker 1: there will be zigzags for the simple reason that healthcare capacity,

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Speaker 1: acute healthcare treatment capacity in China relative to the size

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Speaker 1: of the population is somewhat limited, and so the local

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Speaker 1: government level, what they're going to try and do is

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Speaker 1: open up quickly and aggressively. But then they may have

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Speaker 1: to manage the pace of that as they go along,

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Speaker 1: as they observe the levels of capacity utilization that have

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Speaker 1: reached a healthcare at the local level. Wouldn't put a

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Speaker 1: specific time frame on it, but it seems to me

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Speaker 1: that we are going into flu season and obviously the

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Speaker 1: weather patterns exacerbate the other spread of a coronavirus and

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Speaker 1: other airborne viruses as well, so it may well be

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Speaker 1: that we need to look to the late spring early

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Speaker 1: summer for the all clear. So to say, well, you

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Speaker 1: do work in multi asset solutions, I know one of

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Speaker 1: your top investment calls at the moment as Asian corporate critic,

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Speaker 1: and you talk us through that. Yeah, So I mean

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Speaker 1: it's it's it's an area which has sold off very,

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Speaker 1: very aggressively over the first nine months of this year,

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Speaker 1: and it's in part linked to effects vely the China lockdowns,

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Speaker 1: and so a lot of the Asian high or corporate

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Speaker 1: credit spaces occupied with real estate names and real estate

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Speaker 1: has come under huge pressure. But what we're starting to

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Speaker 1: see is a more activist policy of support from the

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Speaker 1: PBOC and from the c b I r C in

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Speaker 1: China to effectively provide a circuit breaker for the real

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Speaker 1: estate sector. So things such as supporting the issuance of

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Speaker 1: construction loans, stabilizing developer financing, encouraging banks to buy the

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Speaker 1: bonds of of of real estate developers that are no

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Speaker 1: longer in demand by retail investors, and we expect more

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Speaker 1: policy measures to come to support the real estate sector. Now,

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Speaker 1: that doesn't take anything away from the structural longer term

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Speaker 1: risks and the imbalance between demand and supply, excess, levige

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Speaker 1: andce on. But coming from the point where Asian highled

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Speaker 1: U s or a credit spread for sixteen hundred bits,

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Speaker 1: they tightened already to about eleven hundred and seventy close

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Speaker 1: to twelve hundred, there's still a huge amount of carry there.

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Speaker 1: And if you've effective, you've got the policymakers supporting the

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Speaker 1: back door, then that gives you a sense that this

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Speaker 1: could be an area that will attract capsule flow in

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Speaker 1: order to to get that carry, so to speak. All right,

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Speaker 1: twenty seconds, Mark, I'm sorry, I'm sorry. That's all I'm

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Speaker 1: going to give you the answer the question as to

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Speaker 1: whether or not three means global recession for us, It's

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Speaker 1: not so much about the binary question of will there

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Speaker 1: will not be a recession that the bigger question is

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Speaker 1: how quick can we go into a sharp growth slow

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Speaker 1: down and for how long do we see a period

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Speaker 1: of low slow growth and our view that we're probably

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Speaker 1: looking at forward to six quarters of low slow growth

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Speaker 1: at a global level, with particular pinch points in and

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Speaker 1: regions such as Europe. Always a pleasure to have the

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Speaker 1: chance to spend time with your Mark, Thanks for joining us.

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Speaker 1: Mark Franklin, Managing Director, Senior portfolio manager of multi asset

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Speaker 1: Solutions at Manual Life Investment Management. Joining us here on

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Speaker 1: dB A