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Speaker 1: Let's get to our guess now. Adrian's CEO and head

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Speaker 1: of Global Asset Allocation at UBS Global Wealth Management with

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Speaker 1: us in Hong Kong. So we're looking very closely, and

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Speaker 1: we asked this question pretty much daily on Bloomberg whether

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Speaker 1: or not China is investable. You're saying it looks like

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Speaker 1: a value trap at the moment. Tell us your thoughts here, Yeah,

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Speaker 1: thank you for having me. Well, I think China looks

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Speaker 1: very cheap of course, versus its fear on history. But

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Speaker 1: there's a couple of issues that we face. Of course,

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Speaker 1: first of all, it's a value trap because COVID makes

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Speaker 1: it so difficult for earnings to recover. It makes it

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Speaker 1: also very difficult to put at tag basically behind the

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Speaker 1: fair value part. So the COVID restrictions with zero policy

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Speaker 1: are probably staying with us. A lot of people are

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Speaker 1: betting basically after the Congress National Congress, which starts in

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Speaker 1: October sixteen, that things are improving. We actually view that

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Speaker 1: the government has really boxed themselves into a corner and

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Speaker 1: will make it very difficult to get out of it,

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Speaker 1: and they probably will be only after the reshuffling of

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Speaker 1: the political establishment, which will only end in March next year,

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Speaker 1: and that's a real drag for for the economy. And

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Speaker 1: on top of that, we have this big elephant in

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Speaker 1: the room, which is the housing market. It's so important

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Speaker 1: of household wealth, one third of local garment revenues, and

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Speaker 1: it's of the of GDP and this is still not

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Speaker 1: fixed and therefore it will take longer to unlock some

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Speaker 1: of this value we see. Yeah, absolutely great point because

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Speaker 1: moving away from COVID zero doesn't fix those problems. When

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Speaker 1: it comes to what we're seeing in the currency market,

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Speaker 1: I mean, we talked so much about seven potentially being

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Speaker 1: a line in the sound. What are you seeing in

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Speaker 1: terms of these very kind of quite aggressive moves by

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Speaker 1: the PBOC to try and stem the U want weakness

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Speaker 1: And we have seen the triple are cuts by two

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Speaker 1: D basis points has been cut and checked it more liquidity.

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Speaker 1: Of course, it also means that the banks have to

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Speaker 1: hold less ethics resources to PBOC and that should basically

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Speaker 1: help to stabilize the cn why But the main issue

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Speaker 1: is that the US and the West are hiking the

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Speaker 1: p BOC is in the easing mode and the seven

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Speaker 1: is a psychological number. Um, it's very important of course,

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Speaker 1: going into some political events in China. But it's unlikely

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Speaker 1: actually that it will hold as so we actually think

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Speaker 1: it will break. It will break above it. Um. We

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Speaker 1: don't see a huge sort of sell off in the

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Speaker 1: c n Y, but just the fundamentals are weak and

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Speaker 1: therefore the PBOC will probably be forced to let the

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Speaker 1: see see in my depreciate even further. Um. And and yeah,

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Speaker 1: we would basically hatch the see in my current in

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Speaker 1: our portfolios. And if they do allow it to depreciate further,

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Speaker 1: which of course would be in rule about the movie

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Speaker 1: in the dollar. Do you see further cuts to that

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Speaker 1: effect reserve ratio again before the end of the year. Absolutely,

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Speaker 1: I think there will be more triple our cuts coming through. Um.

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Speaker 1: The p BOC will probably also be reluctant to cut

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Speaker 1: other benchmark rates because of that, they will probably try

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Speaker 1: to in check more loans into the system to support

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Speaker 1: the economy. And but it really puts the peoples in

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Speaker 1: a very difficult spot because we haven't really seen that

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Speaker 1: they are going full after this economy and try to

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Speaker 1: stage she's rebound with support measures because they're so worried

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Speaker 1: about about the c n Y. So looking at potential

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Speaker 1: opportunities in China markets and Bloomberg Big Take report today

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Speaker 1: has shown that assets in China's E s G funds

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Speaker 1: have doubled since we continue to see policies really support

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Speaker 1: renewable power and energy security. Is this is sector that

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Speaker 1: you would be looking at ahead of and of course

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Speaker 1: post the Party Congress. Well absolutely so, we tried to

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Speaker 1: online within China or portfrol is really to the policy

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Speaker 1: measures and the strategic important measures that actually China wants

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Speaker 1: to take. So EV cars, renewable energy is a really

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Speaker 1: key for for China, and do think that there's more

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Speaker 1: value actually to to to extract out of the equity market.

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Speaker 1: Some of these companies really have suffered for the last

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Speaker 1: couple of months. We actually see that EV sales have

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Speaker 1: now started to rebound um despite the macro headwinds. We

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Speaker 1: see more support measures coming through stimas coming through in

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Speaker 1: this area. Solar is another important topic, and we actually

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Speaker 1: do think the whole sustainability aspect also makes it interesting

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Speaker 1: from a global perspective to invest into China. What about

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Speaker 1: when it comes to the tech space. I mean you

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Speaker 1: mentioned earlier your cautious on the real estate sector, but

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Speaker 1: we are seeing I guess some more focus of reports

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Speaker 1: that our president, she has called for a stronger effort

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Speaker 1: to advance a lot of the key tech players in

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Speaker 1: the country. This is a sector that's been hit hard

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Speaker 1: as we know by regulation. Do you stay away? Are

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Speaker 1: you selective here? Very very selective. I think there's some

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Speaker 1: key strategic important also a policy measures there, particular when

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Speaker 1: it comes to the chip industry, but unfortunately it's still

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Speaker 1: quite behind the global chip manufacturer out of the US

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Speaker 1: and Taiwan, and it's very difficult to invest in the

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Speaker 1: whole digital economy, particularly the big names, the heavyweights in

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Speaker 1: the index. The earning season is actually quite good in

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Speaker 1: the second quarter, but there's still these regulary headwinds. You're

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Speaker 1: still relatively conservative about the whole gaming industry, particularly in China,

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Speaker 1: because there's still policy measures which are basically holding back

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Speaker 1: the whole industry and it makes difficult for Compass to

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Speaker 1: achieve a decent joarnings growth. One area we start to

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Speaker 1: like a bit more e commerce sector. We actually do

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Speaker 1: think that with also the lockdowns, that people still shifting

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Speaker 1: more to e commerce, and some of these companies have

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Speaker 1: the de rated quite a lot, so you can start

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Speaker 1: to cherry pick in these areas, but it's definitely you're

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Speaker 1: still far away from broad based buying into tech. Let's

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Speaker 1: look more broadly about the Asia Pacific and when we

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Speaker 1: could see inflation peak here in Asia, every sort of

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Speaker 1: central bank is is on a little bit of a

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Speaker 1: different cycle in terms of the fact that some of

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Speaker 1: the more developing nations are a little bit behind the pack.

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Speaker 1: Where do you see I guess inflation peak in Asia.

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Speaker 1: We're obviously going to follow the West, But what more

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Speaker 1: sort of central bank actually are you expecting. That's a

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Speaker 1: that's an interesting question. First of all, we we of

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Speaker 1: course expect that inflation has peaked in the West and

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Speaker 1: probably continued to desilerate and maybe more visible decilerate or

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Speaker 1: the next couple of months, particularly in the fourth quarter,

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Speaker 1: and in Asia we haven't really seen this peak coming through.

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Speaker 1: We are commodity importer, of course, and commodities really the

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Speaker 1: key driver of this inflation, but we also haven't seen

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Speaker 1: the very strong numbers like in the West. So it's

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Speaker 1: elevated level, but we are not in the same area. Um.

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Speaker 1: We actually do think the Korean Singapore are really well

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Speaker 1: ahead of the pack. They have hiked quite aggressively, also

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Speaker 1: more in line with the West. Um, when we look

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Speaker 1: at Malaysia, Philippines or in India they probably halfway down,

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Speaker 1: and Indonesian Thailand, they definitely have a long way to go.

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Speaker 1: They need to stabilize all their currency and I think

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Speaker 1: it's important also for the balance of payment. And just

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Speaker 1: a quick final question Yen at one forty three, when

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Speaker 1: or does the Bank of Japan finally intervene here? Good question.

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Speaker 1: We are still cautious on the end, but I would

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Speaker 1: say if you have a bit of a longer term view, uh,

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Speaker 1: we see, we see value there. It's definitely way too

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Speaker 1: too cheap and the b o J eventually will have

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Speaker 1: to start to hike interest rates. UM, so we're probably

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Speaker 1: not too far away from from the law. All right,

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Speaker 1: it is a pleasure, Adrian, Thank you. Adrian Zirka, CEO

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Speaker 1: and head of Global Asset Allocation at UBS Global Wealth

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Speaker 1: Management on the line from Hong Kong for us here