1
00:00:00,160 --> 00:00:01,880
Speaker 1: In a half minutes past the hour to our guest,

2
00:00:01,960 --> 00:00:05,280
Speaker 1: Julia Lee, a pack equity investment strategist at State Street

3
00:00:05,320 --> 00:00:09,280
Speaker 1: Global Advisors. So the power play by Chinese President shi

4
00:00:09,360 --> 00:00:13,480
Speaker 1: Jinping did catch China experts by surprise. So that's a

5
00:00:13,840 --> 00:00:16,360
Speaker 1: that's a whole part of the discussion that we can have, Julia.

6
00:00:16,960 --> 00:00:19,159
Speaker 1: But I want to pick up on the point that

7
00:00:19,200 --> 00:00:21,239
Speaker 1: we noted in our in our clip there that the

8
00:00:21,280 --> 00:00:26,560
Speaker 1: president is vowing to open the Chinese economy even further.

9
00:00:26,680 --> 00:00:30,560
Speaker 1: Do we take that at face value? Look? I think

10
00:00:30,600 --> 00:00:32,800
Speaker 1: for investors they have to have a look at what's

11
00:00:32,880 --> 00:00:35,640
Speaker 1: been happening, what's happening now, and then what's likely to

12
00:00:35,680 --> 00:00:38,120
Speaker 1: happen in a couple of years ahead. I have to

13
00:00:38,159 --> 00:00:41,120
Speaker 1: say that the conference was a little bit disappointing. We

14
00:00:41,120 --> 00:00:44,320
Speaker 1: were hoping to hear a little bit more, perhaps on

15
00:00:44,840 --> 00:00:48,479
Speaker 1: pulling back on the zero COVID policy, but instead we

16
00:00:48,560 --> 00:00:51,120
Speaker 1: saw a bit of a disappointment by markets, so that

17
00:00:51,240 --> 00:00:55,040
Speaker 1: zero COVID policy would remain. But I guess looking into

18
00:00:55,920 --> 00:01:00,440
Speaker 1: three and four, the big question for investors is is

19
00:01:00,480 --> 00:01:03,840
Speaker 1: growth going to spiral downwards and continue downwards or are

20
00:01:03,880 --> 00:01:05,880
Speaker 1: we going to see a bit of a reversal, and

21
00:01:05,959 --> 00:01:09,080
Speaker 1: we know that from past economy is opening up. That

22
00:01:09,240 --> 00:01:13,039
Speaker 1: rebound has been relatively swift. So I think the attraction

23
00:01:13,080 --> 00:01:16,160
Speaker 1: of China is not only around the valuation at the moment,

24
00:01:16,360 --> 00:01:19,319
Speaker 1: but that it is marching to a different tune of

25
00:01:19,400 --> 00:01:23,600
Speaker 1: other developed markets around the world, and where asset prices

26
00:01:23,640 --> 00:01:27,120
Speaker 1: are really moving the same, It's very different around the

27
00:01:27,200 --> 00:01:30,360
Speaker 1: region and especially in terms of the Chinese markets. So

28
00:01:30,680 --> 00:01:34,200
Speaker 1: I guess the attractiveness of China isn't right now, but

29
00:01:34,400 --> 00:01:38,040
Speaker 1: perhaps a year or even two years up or never.

30
00:01:38,120 --> 00:01:40,880
Speaker 1: Perhaps Julia, given that this is a speech which she

31
00:01:41,000 --> 00:01:45,360
Speaker 1: made where generally it wasn't much there for those people

32
00:01:45,360 --> 00:01:49,800
Speaker 1: who were interested in a freer free market. I guess

33
00:01:49,920 --> 00:01:52,920
Speaker 1: China's you know, always been communists. But I guess if

34
00:01:52,920 --> 00:01:56,000
Speaker 1: we have a look, it is still the manufacturing growth

35
00:01:56,040 --> 00:01:58,720
Speaker 1: engine of the world. So are looking back on that

36
00:01:58,840 --> 00:02:02,320
Speaker 1: reopening and hope think that we do see trade bouncing

37
00:02:02,360 --> 00:02:05,680
Speaker 1: back strongly and that momentum continuing. And like I said,

38
00:02:05,720 --> 00:02:07,840
Speaker 1: you know, China has been weaken. A big thing for

39
00:02:07,920 --> 00:02:11,079
Speaker 1: markets this week is going to be those delayed GDP

40
00:02:11,280 --> 00:02:14,600
Speaker 1: numbers which he is expected to come out this week,

41
00:02:14,680 --> 00:02:17,639
Speaker 1: But of course that's measuring the past once again. So

42
00:02:17,960 --> 00:02:20,720
Speaker 1: I think the key for China is to be watching

43
00:02:20,800 --> 00:02:24,080
Speaker 1: China as the reopening happens and things return back to

44
00:02:24,160 --> 00:02:27,000
Speaker 1: normal and see whether there can can be some sort

45
00:02:27,040 --> 00:02:30,400
Speaker 1: of sustained momentum. We know that outside of COVID zero,

46
00:02:30,440 --> 00:02:33,400
Speaker 1: there's other problems to be dealing with as well, including

47
00:02:33,400 --> 00:02:36,720
Speaker 1: the property market. So it isn't an easy market. But

48
00:02:36,880 --> 00:02:39,560
Speaker 1: for investors, it's always about is the news going to

49
00:02:39,600 --> 00:02:43,800
Speaker 1: get relatively better or is it going to get worse? Okay,

50
00:02:43,840 --> 00:02:46,520
Speaker 1: you know, how do you navigate then what's going on

51
00:02:46,560 --> 00:02:50,120
Speaker 1: at the moment, because it does seem in many ways

52
00:02:50,200 --> 00:02:54,320
Speaker 1: that we've now got a real kind of bipolar world

53
00:02:54,320 --> 00:02:57,079
Speaker 1: in some ways, I mean with this whole ban on semiconductors,

54
00:02:57,080 --> 00:03:00,600
Speaker 1: which has actually got far reaching consequences. It does almost

55
00:03:00,680 --> 00:03:04,960
Speaker 1: seen that the US has declared war on China and

56
00:03:05,040 --> 00:03:09,960
Speaker 1: nobody noticed. It looks like trade, yes, very much back

57
00:03:10,000 --> 00:03:12,680
Speaker 1: in focus, but there's so much going on in the

58
00:03:12,720 --> 00:03:15,360
Speaker 1: world at the momentation. This week is going to be

59
00:03:15,440 --> 00:03:18,840
Speaker 1: another huge, huge week. I mean, you mentioned earnings and

60
00:03:19,200 --> 00:03:21,840
Speaker 1: we see forty seven percent, so almost half of the

61
00:03:22,000 --> 00:03:26,280
Speaker 1: s P five companies reporting their third quarter earnings this

62
00:03:26,320 --> 00:03:28,400
Speaker 1: week and don't forget that one of the things that

63
00:03:28,440 --> 00:03:31,880
Speaker 1: the market is really looking for is the outlook for

64
00:03:31,919 --> 00:03:35,360
Speaker 1: earnings to moderate before becoming a bit more bullish about

65
00:03:35,400 --> 00:03:38,360
Speaker 1: the market, because one thing we haven't seen in this

66
00:03:38,560 --> 00:03:42,200
Speaker 1: recessionary outlook is the hit to earnings and if we

67
00:03:42,240 --> 00:03:45,560
Speaker 1: have a look at earnings forecasts for three or even

68
00:03:45,560 --> 00:03:50,120
Speaker 1: into still very positive, so that number really needs to

69
00:03:50,160 --> 00:03:52,920
Speaker 1: come down and we haven't seen that as yet. In fact,

70
00:03:53,000 --> 00:03:56,120
Speaker 1: a lot of the commentary from companies talking about how

71
00:03:56,160 --> 00:03:59,680
Speaker 1: positive the economic backdrop is. So I know the market

72
00:03:59,720 --> 00:04:02,160
Speaker 1: at the moment, there's a lot of hope, hope, hope

73
00:04:02,280 --> 00:04:05,800
Speaker 1: this week, especially given but there's an expectation in the

74
00:04:05,840 --> 00:04:09,000
Speaker 1: second of November f o MC meeting that we will

75
00:04:09,040 --> 00:04:12,520
Speaker 1: see some sort of comment around the slowing down in

76
00:04:12,560 --> 00:04:16,440
Speaker 1: the pace of rate timing, and that's they've made it

77
00:04:16,480 --> 00:04:19,680
Speaker 1: clear that they're not ready to make any changes yet,

78
00:04:19,720 --> 00:04:23,480
Speaker 1: but just the mere fact that they're having discussion about

79
00:04:23,520 --> 00:04:27,480
Speaker 1: when they might slow down the pace it seemed to

80
00:04:27,640 --> 00:04:29,920
Speaker 1: spark a little bit of hope in the markets. Um,

81
00:04:30,080 --> 00:04:34,640
Speaker 1: you think that that's um sort of false false hopes. Well,

82
00:04:34,640 --> 00:04:37,640
Speaker 1: we talk so much about interest rates, but let's not

83
00:04:37,720 --> 00:04:40,040
Speaker 1: forget the balance sheet or the pet as well, where

84
00:04:40,040 --> 00:04:43,200
Speaker 1: we are seeing liquidity draining. So I think it's very

85
00:04:43,279 --> 00:04:47,760
Speaker 1: hard for markets to be too bullish given that we

86
00:04:47,800 --> 00:04:52,120
Speaker 1: are seeing still seeing the balance sheet shrinking. So while

87
00:04:52,480 --> 00:04:56,680
Speaker 1: any commentary around peak rates is going to be welcomed

88
00:04:56,720 --> 00:04:59,279
Speaker 1: by the market, I think there's still a bit of

89
00:04:59,360 --> 00:05:01,479
Speaker 1: time to oh as well as a few things to

90
00:05:01,560 --> 00:05:05,000
Speaker 1: take off before a sustainable rally in terms of the market.

91
00:05:05,200 --> 00:05:08,440
Speaker 1: Don't forget such as such as a few things to

92
00:05:08,520 --> 00:05:11,479
Speaker 1: take off. The first thing to take off would be

93
00:05:11,520 --> 00:05:14,279
Speaker 1: the moderation in terms of the earnings outlook. The second

94
00:05:14,279 --> 00:05:17,240
Speaker 1: thing to be watching is I guess the markets at

95
00:05:17,320 --> 00:05:20,560
Speaker 1: the moment are looking for peak inflation. But I think

96
00:05:20,560 --> 00:05:23,000
Speaker 1: the bigger question for markets is going to be how

97
00:05:23,080 --> 00:05:26,279
Speaker 1: long high inflation lasts for whether this is something we're

98
00:05:26,320 --> 00:05:29,440
Speaker 1: still battling in eighteen months or twenty four months. So

99
00:05:29,640 --> 00:05:33,080
Speaker 1: it's not just the peak, but how long these conditions

100
00:05:33,080 --> 00:05:36,000
Speaker 1: are going to last for the higher interest rates, which

101
00:05:36,040 --> 00:05:38,120
Speaker 1: of course act as a break for the economy as

102
00:05:38,120 --> 00:05:41,960
Speaker 1: well as company profits. Okay, so you know the thing

103
00:05:42,080 --> 00:05:45,680
Speaker 1: is we haven't even mentioned the FED with peak hawkishness.

104
00:05:46,040 --> 00:05:47,880
Speaker 1: Do we get peak dollarin how does that figure in

105
00:05:47,920 --> 00:05:52,960
Speaker 1: your thinking. I guess hopes that five percent is now

106
00:05:53,040 --> 00:05:55,920
Speaker 1: the peak is what's driving markets at the moment, and

107
00:05:56,120 --> 00:05:57,760
Speaker 1: I guess we'll get more of a read on the

108
00:05:57,800 --> 00:06:01,279
Speaker 1: second of November around where the peak might be. But

109
00:06:01,360 --> 00:06:03,800
Speaker 1: also this week in terms of other central banks, it's

110
00:06:03,839 --> 00:06:06,120
Speaker 1: going to be a huge week. We see the Bank

111
00:06:06,160 --> 00:06:08,719
Speaker 1: of Canada meeting and it could go either way fifty

112
00:06:08,760 --> 00:06:12,200
Speaker 1: basis points or seventy five basis points. We also see

113
00:06:12,720 --> 00:06:16,920
Speaker 1: we see over in Japan the bo j J meeting

114
00:06:17,279 --> 00:06:21,680
Speaker 1: on Friday, and while no policy changes are expected, we

115
00:06:21,760 --> 00:06:25,360
Speaker 1: are watching things like forecasts for inflation, and it's going

116
00:06:25,400 --> 00:06:28,160
Speaker 1: to be especially interesting given the intervention that we've seen

117
00:06:28,200 --> 00:06:30,760
Speaker 1: in terms of the currency markets as well, and of

118
00:06:30,800 --> 00:06:34,080
Speaker 1: course the ECB meeting where seventy five basis points is

119
00:06:34,120 --> 00:06:37,520
Speaker 1: baked into the pipe. So it's not let's go back.

120
00:06:37,600 --> 00:06:39,560
Speaker 1: Let's go back to the China question because we don't

121
00:06:39,560 --> 00:06:41,160
Speaker 1: have too much time here. I just wanted to ask

122
00:06:41,200 --> 00:06:43,480
Speaker 1: you about whether or not one man rule, or getting

123
00:06:43,480 --> 00:06:46,880
Speaker 1: close to it, raises the risks of investing in China

124
00:06:46,960 --> 00:06:51,360
Speaker 1: and beyond. I think there's always been risks of investing

125
00:06:51,400 --> 00:06:54,880
Speaker 1: in China. This year, the question is whether that's accelerated,

126
00:06:54,920 --> 00:06:57,760
Speaker 1: and I guess in terms of the conference there has

127
00:06:57,800 --> 00:07:00,920
Speaker 1: been a little bit disappointing. I guess there's a lot

128
00:07:01,000 --> 00:07:03,080
Speaker 1: of debate at the moment on the visuals of the

129
00:07:03,080 --> 00:07:07,360
Speaker 1: President who also being escorted out of the closing ceremony.

130
00:07:08,080 --> 00:07:11,920
Speaker 1: But I guess in terms of China for investors, for me,

131
00:07:12,040 --> 00:07:14,480
Speaker 1: the key question always is a thing that's going to

132
00:07:14,520 --> 00:07:17,800
Speaker 1: get increment. In terms of Julia, Thank you so much,

133
00:07:17,840 --> 00:07:21,120
Speaker 1: Julia Lee. The APEC equity investment strategies from State Street

134
00:07:21,200 --> 00:07:22,440
Speaker 1: Global Advisors