WEBVTT - Diversification Play: Why It's Not Too Late to Buy Asia 0:00:02.720 --> 0:00:09.440 Bloomberg Audio Studios, podcasts, radio news, Marin Talks Money listeners. 0:00:09.760 --> 0:00:12.840 Are you a Bloomberg subscriber? If you are not, here 0:00:12.920 --> 0:00:15.400 is why you should be. You will get add free 0:00:15.480 --> 0:00:18.200 episodes of this podcast and access to my Marin Talks 0:00:18.239 --> 0:00:21.520 Money newsletter. You'll also get access to John's award winning 0:00:21.560 --> 0:00:25.079 newsletter Money Distilled. And you'll get access to subscriber on 0:00:25.160 --> 0:00:26.599 the events like the one we are going to be 0:00:26.640 --> 0:00:28.920 hosting on March the seventeenth. See the link in the 0:00:28.920 --> 0:00:31.360 show notes to sign up to that. Finally, of course, 0:00:31.400 --> 0:00:34.159 you will get unlimited access to Bloomberg dot Com and 0:00:34.159 --> 0:00:37.360 the Bloomberg App, including exclusive stories and premium market tools. 0:00:37.520 --> 0:00:52.960 Subscribe now at Bloomberg dot com slash podcast offer. Welcome 0:00:52.960 --> 0:00:54.959 to Marin Talks Money, the podcast in which people who 0:00:55.000 --> 0:00:58.440 know the markets explain the markets. I am Maren Somerset Web. 0:00:58.600 --> 0:01:01.320 This week I am speaking with Fion Yang, portfolio manager 0:01:01.320 --> 0:01:05.000 on the Invesco Asia Dragon. Fiera specializes in Asian equities 0:01:05.040 --> 0:01:08.240 and she is the perfect person to help us all 0:01:08.319 --> 0:01:12.080 understand where Asia fits into our portfolios this year. Fiona, 0:01:12.120 --> 0:01:14.920 Welcome to Marin Talks Money. Hello Marion, thank you for 0:01:14.959 --> 0:01:18.679 having me on a show. Well, it's going to be good. Now. Listen, 0:01:18.800 --> 0:01:23.240 your space is absolutely huge. You're covering pretty much all 0:01:23.280 --> 0:01:25.760 of Asia bar Japan, right, all of that counts is 0:01:25.800 --> 0:01:30.039 emerging Asia. So you're covering this vast area which international 0:01:30.080 --> 0:01:35.399 investors were not paying nearly enough attention to until relatively recently. 0:01:35.480 --> 0:01:37.360 So until even you know, a year ago, it was 0:01:37.400 --> 0:01:41.040 all America, America, America, American exceptionalism. And now we've begun 0:01:41.160 --> 0:01:44.840 to see this rotation out of the US and into 0:01:44.959 --> 0:01:47.640 every other interesting market there is, which is quite a 0:01:47.680 --> 0:01:49.200 lot of the ones that you cover, and your your 0:01:49.240 --> 0:01:53.120 trust had excellent performance last year partially as a result. 0:01:53.920 --> 0:01:57.520 Now these markets aren't looking quite as cheap as they were, right, 0:01:57.600 --> 0:01:59.800 but maybe you could just talk us through the way 0:01:59.840 --> 0:02:02.640 that rotation is working for your market. Yeah. 0:02:02.720 --> 0:02:05.960 I think twenty twenty five was a year of rebalancing, 0:02:06.000 --> 0:02:09.560 I would like to call it because of external factors 0:02:09.680 --> 0:02:13.480 like the weak US dollar, as well as domestic adding 0:02:13.560 --> 0:02:16.680 like the central banking Asia basically cutting into straight to 0:02:16.720 --> 0:02:20.400 try to stumulate economic growth that just perpected a lot 0:02:20.440 --> 0:02:25.320 of tension combined with Asia, just Taiwan and Career being 0:02:25.400 --> 0:02:29.919 the engine behind the global ai revolution. I do think 0:02:30.160 --> 0:02:34.680 Ernie's growth, combined with evaluation rating has really driven the 0:02:34.720 --> 0:02:38.519 Asia market to outperform a lot of the other developed market. 0:02:39.080 --> 0:02:41.600 And we're heading into twenty twenty six, a lot of 0:02:41.600 --> 0:02:45.720 investors are thinking about rebalancing their global portfolio. Increasingly they 0:02:45.720 --> 0:02:49.560 want to racify further into Asia. Animal Asia. 0:02:51.760 --> 0:02:54.079 It's not just age obviously, it's musing markets around the world. 0:02:54.120 --> 0:02:56.320 But for purposers of this podcast, where we're sticking with 0:02:56.360 --> 0:02:59.359 the Asia. But again, we've already made this mistake almost 0:02:59.400 --> 0:03:02.799 before we be and started by referring to Asia as 0:03:02.880 --> 0:03:06.200 one big homogeneous mass, which of course it isn't. And 0:03:06.280 --> 0:03:08.360 a lot of people when they think about the Asian 0:03:08.360 --> 0:03:10.880 markets or the emerging Asian markets, they will think about 0:03:11.080 --> 0:03:14.000 China and they'll forget about all the other markets. So 0:03:14.440 --> 0:03:16.400 these are all very different, right, We have to look 0:03:16.440 --> 0:03:18.919 at them as very separate countries in separate markets. 0:03:19.680 --> 0:03:23.040 Yeah. Absolutely, I think one of the biggest misconceptions about 0:03:23.080 --> 0:03:26.280 Asia is this is China and the rest. But reality, 0:03:26.280 --> 0:03:29.440 as you pointed out, there are so many different countries 0:03:29.440 --> 0:03:32.640 there for a different sectors within Asia. Look at India, 0:03:32.639 --> 0:03:36.120 It's a country that can generate ten percent nominal GDP growth, 0:03:36.760 --> 0:03:40.080 you can't really find very rare to finding the developed market. 0:03:40.400 --> 0:03:42.960 And then you look at the East Asia block, there 0:03:42.960 --> 0:03:46.440 are just so many countries that benefit from the diversification 0:03:46.640 --> 0:03:49.320 of manufacturing hut away from China or more of a 0:03:49.440 --> 0:03:53.280 China plus one strategy. And then the tech sector is 0:03:53.520 --> 0:03:58.680 Asia is not just emerging technology, it's more like the 0:03:58.760 --> 0:04:02.120 uncompested leaders a lot of the global act sector in 0:04:02.200 --> 0:04:06.320 memory foundry and or all of this just make Asia 0:04:06.440 --> 0:04:08.760 extremely exciting place to invest. 0:04:09.600 --> 0:04:11.800 Okay, well, why don't we start I tell you what 0:04:11.840 --> 0:04:14.120 before we move on to looking at what's referred to 0:04:14.160 --> 0:04:16.520 as the emerging economies in China, although sort of slightly 0:04:16.560 --> 0:04:19.520 ridiculously the very idea that South Korea could be considered 0:04:19.560 --> 0:04:22.720 emerging at this point as ridiculous, of course, but Japan 0:04:22.920 --> 0:04:26.800 is not included in that. So let's briefly, if you 0:04:26.800 --> 0:04:30.520 don't mind, talk about is there any spillover effect from 0:04:30.839 --> 0:04:35.040 the election in Japan? So we have this supermajority now 0:04:35.080 --> 0:04:37.800 for Takeichi, and that means that she will be able 0:04:37.839 --> 0:04:40.760 to drive forward all her priorities inside Japan. And I 0:04:40.839 --> 0:04:43.240 know that one of the worries there if there are 0:04:43.279 --> 0:04:45.160 that many worries around it, but there're worries to do 0:04:45.279 --> 0:04:48.320 with with Japan's fiscal position, and there of course worries 0:04:48.360 --> 0:04:52.240 to do with any ratcheting up of tension in the 0:04:52.279 --> 0:04:55.760 whole region as a result of defense spending and talking 0:04:55.800 --> 0:04:58.400 about China and in Japan. Is there anything in that 0:04:58.400 --> 0:05:01.280 that might spill over to change the conversation that we're 0:05:01.279 --> 0:05:01.840 about to have. 0:05:02.880 --> 0:05:05.600 I think though in the China and Japan relationship is 0:05:05.640 --> 0:05:08.640 always being a bit tricky. So I've actually in Japan 0:05:08.720 --> 0:05:11.320 for holiday earlier this year. One of the main things 0:05:11.320 --> 0:05:15.320 happening is Chinese tool groups are not flying into Japan 0:05:15.360 --> 0:05:18.839 and more. That's definitely a big head to the Japanese 0:05:18.880 --> 0:05:22.039 tourism industry. But then at the flip side, it's just 0:05:22.320 --> 0:05:25.359 they might have found the Australians or the other nationals 0:05:25.760 --> 0:05:31.680 want to go to Japan because of course exactly, I 0:05:31.720 --> 0:05:33.760 think the vacancy at a skiing resort I go to 0:05:33.880 --> 0:05:37.680 pretty much get filed immediately when they release those vacancies, 0:05:38.560 --> 0:05:40.960 so there could be a bit of a transition period, 0:05:41.000 --> 0:05:44.279 but I think the impact is manageable. And in terms 0:05:44.279 --> 0:05:46.760 of you know, the competitive dynamics. What happened to the 0:05:46.920 --> 0:05:49.919 NISI en Lusus security one is something that I probably 0:05:50.000 --> 0:05:53.560 monitored more because for my portfolio, we do have significant 0:05:53.600 --> 0:05:56.920 exposure to the Korean ex borders and the current sy 0:05:57.120 --> 0:06:00.360 always play a part in terms of the pricing competitive nurse. 0:06:01.279 --> 0:06:02.960 So the current portfolio, I guess this. 0:06:03.080 --> 0:06:06.640 Concentrated a lot in the Korean memory space. I do 0:06:06.680 --> 0:06:09.120 you think Japan at this point doesn't really have this 0:06:09.200 --> 0:06:13.320 strong consentder as compared to the Korean memory producers. So 0:06:13.400 --> 0:06:16.960 I feel relatively comfortable with that ex culture in Korea. 0:06:17.920 --> 0:06:20.640 Okay, that's the first elephant in the room for this area, 0:06:20.680 --> 0:06:23.080 and the second is demographics. So I just wanted to 0:06:23.120 --> 0:06:25.200 get that talk about that a little before we move 0:06:25.240 --> 0:06:28.120 on in that. Historically, say twenty years ago, even ten 0:06:28.200 --> 0:06:30.840 years ago, when a room was looking at the investment 0:06:30.880 --> 0:06:33.760 opportunities across Asia, one of the things would be said 0:06:33.760 --> 0:06:38.120 would be growing populations, growing middle class populations, a rising prosperity, 0:06:38.160 --> 0:06:40.480 et cetera. And then that began to be people going, oh, 0:06:40.480 --> 0:06:42.240 I don't know, maybe China is going to get old 0:06:42.279 --> 0:06:45.640 before it gets rich. And then we've had this much 0:06:45.720 --> 0:06:50.480 faster than anyone ever expected fall off in fertility rates 0:06:50.480 --> 0:06:53.080 and I'm sure we both saw those numbers in China 0:06:53.160 --> 0:06:56.040 showing fewer than eight million berths in China last year, 0:06:56.040 --> 0:06:57.960 which was a bit of a shock to the system, 0:06:58.000 --> 0:07:00.719 even for people who'd been very worried about demographics. And 0:07:00.760 --> 0:07:04.000 we have Taiwan, Korea, all these countries have written up 0:07:04.040 --> 0:07:07.800 every low fertility rate and even places like you know, Vietnam, 0:07:07.800 --> 0:07:10.440 et cetera, where we thought fertility would remain higher for longer, 0:07:10.600 --> 0:07:16.120 falling below replacement rate. Does that sort of massive macro 0:07:17.240 --> 0:07:20.680 first change anything about the way you see the region. 0:07:21.440 --> 0:07:24.200 Yeah, the great question and a very long term question. 0:07:24.680 --> 0:07:28.160 And I do of the sitting here in Singapore. No, 0:07:28.320 --> 0:07:30.480 it's one of the places I have one of the 0:07:30.520 --> 0:07:34.080 lowest bust rate in the region, and in China as well. 0:07:34.200 --> 0:07:37.120 Looking at my peer groups, the incentives the government has 0:07:37.160 --> 0:07:39.280 introduced for them to have two babies or even three 0:07:39.320 --> 0:07:43.760 kid is just not enough to incentivise to have more. 0:07:44.080 --> 0:07:48.160 So this structural trend is undeniable. I think that's why 0:07:48.320 --> 0:07:51.840 a lot of the countries are trying to evolve their policies. 0:07:52.120 --> 0:07:55.920 Instead of you know, labor focused manufacturing, they're trying to 0:07:55.960 --> 0:07:58.400 move up the value added tay. They try to do 0:07:58.480 --> 0:08:01.880 more electronics using more or of robotics as well as 0:08:01.960 --> 0:08:05.640 the automation try to move away from the label sector 0:08:05.720 --> 0:08:12.000 to two different drivers. Why the structural challenge remains and 0:08:12.120 --> 0:08:14.680 we need to be selected in terms of the sector 0:08:14.800 --> 0:08:17.600 we might want to have expoke to. And then there 0:08:17.720 --> 0:08:23.400 is the added sort of silver investment theme that increasingly 0:08:23.520 --> 0:08:26.600 you start to see companies that are just attragging to 0:08:26.720 --> 0:08:31.520 the need of the retire read because instead of trying 0:08:31.520 --> 0:08:33.960 to pay their to the kids, now everyone is trying 0:08:34.000 --> 0:08:38.920 to say the hospitality industry as well as even retire 0:08:38.920 --> 0:08:42.080 re education, re education industry, all of this are gaining 0:08:42.080 --> 0:08:45.080 more affections in Asia. I think the good thing is, 0:08:45.120 --> 0:08:49.959 again it's a diverse region with many countries, and there's 0:08:50.040 --> 0:08:53.240 just every single country had the different stage of their 0:08:53.360 --> 0:08:56.679 aiding population. Career could be the first one and China 0:08:56.840 --> 0:09:00.319 follow food for Asia Fund manager myself, then there are 0:09:00.400 --> 0:09:04.319 just different sort of tracks you can tech to and 0:09:04.920 --> 0:09:07.600 imply what could happen to some of the other countries 0:09:08.040 --> 0:09:11.439 when they enter the aiding demographic a bit later on. 0:09:12.120 --> 0:09:14.679 Anyway, that's probably a bigger and different conversation. Maybe we'll 0:09:14.679 --> 0:09:17.240 pick that one up another time, but let's go on 0:09:17.320 --> 0:09:21.200 to why don't we talk about how you invest. When 0:09:21.200 --> 0:09:24.480 I look at what you do and what your trust does, 0:09:24.480 --> 0:09:26.959 it's very kid. This is a valuation driven and valuation 0:09:27.120 --> 0:09:30.600 focused method of investing across this insanely big region. So 0:09:30.640 --> 0:09:33.199 tell us a little bit about how you do that. 0:09:33.960 --> 0:09:36.800 Yeah, very happy to chat about that or something that 0:09:36.840 --> 0:09:39.680 I do every single day. So I would say we 0:09:39.800 --> 0:09:44.040 probably differentiate by three key points. The first one is, 0:09:44.200 --> 0:09:48.640 as you correctly point out, is valuation discipline. It's just 0:09:48.840 --> 0:09:54.119 we try to find unvalued miss priced opportunities. Everything basically 0:09:54.280 --> 0:09:57.080 has a fair value and we try to buy it 0:09:57.240 --> 0:10:00.240 at a point. As you know, market is few full, 0:10:00.320 --> 0:10:04.040 which are the buyer when the stock price is significantly 0:10:04.440 --> 0:10:07.280 below the fair value assessment that we have is estefinished 0:10:07.320 --> 0:10:11.240 for the company itself. And the second point is we try. 0:10:11.120 --> 0:10:13.920 To be long term. I think a lot of times. 0:10:14.640 --> 0:10:20.480 Too much actively itself is non desirable. The market extremely volatile. 0:10:21.360 --> 0:10:26.520 I think a frequent activity will not really help a 0:10:26.559 --> 0:10:29.000 lot of investors. 0:10:29.000 --> 0:10:29.719 So what we do. 0:10:29.800 --> 0:10:33.640 The typical holding period is around three to five years. 0:10:34.480 --> 0:10:37.440 We just want to be patient with our investment case, 0:10:37.840 --> 0:10:41.640 try to grow together with the portfolio company. And this 0:10:41.840 --> 0:10:44.480 so called evaluation GAT really need to give them time 0:10:44.600 --> 0:10:48.080 to close. If you look at our portful companies, a 0:10:48.080 --> 0:10:50.400 lot of them we have been holding them for more 0:10:50.440 --> 0:10:54.200 than a decade. Then that Eve is a good example. 0:10:54.960 --> 0:11:00.000 Is a gaming company in China, we have holded more 0:11:00.000 --> 0:11:02.959 more than a decade. If you hold on to the 0:11:03.000 --> 0:11:05.840 stock over the past ten years is pretty much has 0:11:05.880 --> 0:11:08.840 gone through a lot of volatility or in the market 0:11:09.280 --> 0:11:13.520 in terms of regulations as well as surprise. But marketcab 0:11:13.800 --> 0:11:18.080 has grown over six times. But that just shows that 0:11:18.600 --> 0:11:22.960 the power of stay in the seat, understanding the stock 0:11:23.040 --> 0:11:27.720 level drivers behind a single company. And last but not Lesia, 0:11:27.880 --> 0:11:32.800 we are comparing vests. This follows a more classic capital 0:11:32.840 --> 0:11:36.360 cycle if we try to find areas of the market 0:11:36.400 --> 0:11:41.080 that the other investors might not like. If a sector 0:11:41.280 --> 0:11:45.560 or company is staffed of capital, staft of investment, that's 0:11:45.640 --> 0:11:50.240 exactly when the remaining winners of the sector could enjoy 0:11:50.440 --> 0:11:53.600 higher return as well as having the price and power 0:11:53.679 --> 0:11:57.960 over that customers. So those are the three t pulars 0:11:58.080 --> 0:12:01.400 I would say about how we Asia and generally are 0:12:01.800 --> 0:12:03.479 for our investors. 0:12:04.120 --> 0:12:06.560 Okay, and in the region with thousands and thousands of 0:12:06.600 --> 0:12:09.400 listed companies, how do you narrow your universe down to 0:12:09.480 --> 0:12:14.040 even begin to analyze those companies. I think, in contrary Wetter, 0:12:14.520 --> 0:12:17.720 a lot of times we would try to identify opportunity 0:12:17.920 --> 0:12:22.679 in the sectors in the countries that other people might 0:12:22.720 --> 0:12:26.000 say not investable. I think a good example to look 0:12:26.040 --> 0:12:29.720 at is China, probably twenty four months ago, but most 0:12:29.800 --> 0:12:33.040 glowing investors were shown away from that market. 0:12:33.200 --> 0:12:38.679 But we are actually seeing world leading companies being thrown 0:12:38.720 --> 0:12:43.040 out of the bath water trading at extremely cheap multiples. Yes, 0:12:43.240 --> 0:12:47.080 there are macro conferms, but it doesn't really impact the 0:12:47.120 --> 0:12:51.800 fundamental of the company that we invest in. They still 0:12:52.120 --> 0:12:55.560 gain market share, they still try to improve their margin. 0:12:56.160 --> 0:12:58.320 A good example that we have picked up over the 0:12:58.360 --> 0:13:02.520 path few years h World. It's one of the leading 0:13:02.720 --> 0:13:05.720 hotel chain operator in China, so a bit like HILT 0:13:05.800 --> 0:13:09.760 them and what they did in China was extremely good. 0:13:10.200 --> 0:13:13.600 Throughout the extended COVID lockdown. They tried to gain more 0:13:13.920 --> 0:13:18.080 market share as well as improved their operating efficiency. So 0:13:18.280 --> 0:13:22.559 they come out of the whole CHRISTI being much lainer, 0:13:22.600 --> 0:13:27.840 operation much higher margie. So we are very happy with 0:13:28.080 --> 0:13:32.440 the operational performance of the company, but with what's going 0:13:32.480 --> 0:13:36.520 on with the macro noises. HROs training out an extreme 0:13:36.679 --> 0:13:41.800 discount as compared to the global gears. Okay, interesting, and 0:13:41.840 --> 0:13:45.360 what about dividends and income? And I see the trust 0:13:45.360 --> 0:13:48.720 has a reasonably high dividend yield three and a half. 0:13:48.960 --> 0:13:51.000 How important to that is that to you when you 0:13:51.080 --> 0:13:54.720 are stop picking? Yeah, so I think that's another common 0:13:54.720 --> 0:13:58.240 misconception maybe of some of the investors of Asia. The 0:13:58.360 --> 0:14:02.040 might think Asia is more growthy less dividend. We have 0:14:02.280 --> 0:14:05.679 really seen a partigm shift in that over the past 0:14:05.960 --> 0:14:10.480 five years. Korea is a good example. We've discussed briefly earlier. 0:14:11.120 --> 0:14:14.360 The value our initiatives is really trying to drive the 0:14:14.440 --> 0:14:18.120 Korean corporate to increase their shareholder return in the form 0:14:18.160 --> 0:14:21.560 of dividend as well as buyback, so that has their 0:14:21.600 --> 0:14:26.680 significant improved that markets dividend yield. And then if you 0:14:26.760 --> 0:14:30.120 look across Asia, similar stories could be found in Singapore 0:14:30.320 --> 0:14:33.600 as well as even the Chinese state owned enterprises. They 0:14:33.640 --> 0:14:37.120 have all driven up their shareholder return over the past 0:14:37.160 --> 0:14:40.280 few years. The Asia as a region, we can get 0:14:40.280 --> 0:14:44.880 a dividend yield about two percent on the bus and 0:14:44.920 --> 0:14:47.680 then for the trust, we actually have a bonus scheme 0:14:47.840 --> 0:14:49.920 in the sense that we pay out four percent of 0:14:49.960 --> 0:14:55.040 the need to our trust holders, so that give it 0:14:55.080 --> 0:14:59.960 a bit more gig on top of the regional index field. 0:15:00.680 --> 0:15:03.480 Okay, so this is using this ability that is peculiar 0:15:03.520 --> 0:15:05.720 to the investment trust industry, where you can pay out 0:15:05.760 --> 0:15:07.960 part of the capital as income and a lot of trust. 0:15:08.080 --> 0:15:10.040 Now do this paying out four percent a year to 0:15:10.080 --> 0:15:13.400 give investors maybe aimed particularly at older investors, to make 0:15:13.400 --> 0:15:16.600 sure they get a regular income every year, regardless of 0:15:16.640 --> 0:15:19.280 the actual income level of the trust exactly. 0:15:19.320 --> 0:15:22.040 And the majority of that dividend is funded by the 0:15:22.120 --> 0:15:25.840 trust dividend received from world Fuller company, but the additional 0:15:25.880 --> 0:15:26.920 come from the capitol. 0:15:48.960 --> 0:15:50.560 Why don't we have a look at some of your 0:15:50.760 --> 0:15:55.080 biggest markets individually. So you said earlier that you were 0:15:55.480 --> 0:15:58.200 invested in China when everyone else was running slightly scared 0:15:58.800 --> 0:16:01.320 a little while ago. Are you still pretty bullished on 0:16:01.400 --> 0:16:04.480 China or is that move gone as far as it's 0:16:04.520 --> 0:16:05.400 going to go. Do you think? 0:16:06.040 --> 0:16:09.160 I think China might not be the bargain vein like 0:16:09.280 --> 0:16:11.880 what we have seen two years back, given how much 0:16:12.000 --> 0:16:16.280 the market has rallied. But then again, I think it 0:16:16.400 --> 0:16:19.840 is a big market with steps as well as bread 0:16:19.960 --> 0:16:23.760 for bottom up stock pickers like ourselves to really find 0:16:23.800 --> 0:16:29.920 the attractives value for our trust holders, so we remain 0:16:30.200 --> 0:16:33.440 invested in the market. I actually brought the trust border 0:16:33.520 --> 0:16:36.960 directors to train the trip and of last year. I 0:16:37.000 --> 0:16:41.360 think everyone was just amazed by the level of development 0:16:41.520 --> 0:16:45.120 that we have observed over the past two years, because 0:16:45.120 --> 0:16:48.800 we do the trip every other year and it's just 0:16:48.960 --> 0:16:51.960 amazing to see some of the robotics company, look at 0:16:52.000 --> 0:16:55.960 the Eedy company on the progress that they have made 0:16:56.200 --> 0:16:59.720 in terms of products, in terms of their cops. So again, 0:16:59.800 --> 0:17:03.160 there there is just so many opportunities for us to 0:17:03.280 --> 0:17:08.080 pick from. That's why we remain excited about investing. 0:17:08.359 --> 0:17:10.960 Yeah, I suppose that the pushback against that would be 0:17:11.000 --> 0:17:15.320 that it's not necessarily the case that either economic growth 0:17:15.600 --> 0:17:19.720 or that technological development will translate into rising share prices 0:17:19.840 --> 0:17:23.240 in a difficult political environment. Yeah, I think this. 0:17:23.880 --> 0:17:27.920 Political environment actually that's probably one of the main conferences 0:17:27.960 --> 0:17:30.800 that people have as well as the other one is 0:17:30.840 --> 0:17:34.040 the housing market. That one of the most common pushbacks 0:17:34.080 --> 0:17:38.280 that we get from clients. But the reality, I think 0:17:38.480 --> 0:17:42.920 the covering the policy regime do provide a very good 0:17:43.119 --> 0:17:47.680 sort of environment for technology companies to develop their products, 0:17:48.280 --> 0:17:51.119 and that progress that we have seen in terms of 0:17:51.160 --> 0:17:55.959 ev robotics in the AI trinity China, and then on 0:17:56.000 --> 0:18:00.359 the other side of the housing market housing bubble. China 0:18:00.480 --> 0:18:04.679 fortunate enough to avoid a b of housing bubble. It 0:18:04.760 --> 0:18:08.359 has been a very painful sort of eRating carried for 0:18:08.480 --> 0:18:12.440 the reality date sector, for the reality developer. But do 0:18:12.440 --> 0:18:15.080 you think it's a better shut up then let everything 0:18:15.240 --> 0:18:18.080 run to the hillcop and then suddenly birthed That might 0:18:18.119 --> 0:18:20.720 take China ten or even twenty years to come back 0:18:20.760 --> 0:18:21.400 where it were. 0:18:22.040 --> 0:18:23.439 So it has been. 0:18:23.280 --> 0:18:26.320 Painful, But for the firm itself, I think we have 0:18:26.440 --> 0:18:31.160 avoided a lot of the real state investment in China itself. 0:18:31.720 --> 0:18:35.200 Now we are actually getting a little bit more hopeful 0:18:35.280 --> 0:18:38.680 of what to come with this sector because regulations start 0:18:39.160 --> 0:18:41.520 to lose them a little bit more and we start 0:18:41.560 --> 0:18:45.680 to see activities take up here there, especially in Hong Kong. 0:18:46.280 --> 0:18:49.439 So when the market is deal fall, maybe it's a 0:18:49.480 --> 0:18:51.800 sector that we can spend more time on and try 0:18:51.840 --> 0:18:53.240 to do a little bit more. 0:18:53.280 --> 0:18:55.920 I suppose it's two things to say about the housing 0:18:56.400 --> 0:18:59.919 residential construction problem in China. The first is that without 0:19:00.080 --> 0:19:03.080 household formation, it's quite difficult for that market to pick 0:19:03.160 --> 0:19:06.320 up again. And if we're talking about very fast falling 0:19:06.400 --> 0:19:10.440 fertility and a smaller number of babies, smaller number of marriages. 0:19:10.520 --> 0:19:14.640 It's household formation that drives housing purchase, right, So that's 0:19:14.840 --> 0:19:15.800 that's a problem. 0:19:16.000 --> 0:19:17.960 So I think that was one of the key reasons 0:19:17.960 --> 0:19:21.159 why we stayed away. You know, pricing was affordability was 0:19:21.320 --> 0:19:24.679 very poor, especially in the bigger cities, the capital studies 0:19:24.760 --> 0:19:27.640 of China, and then house information weigh as well as 0:19:27.640 --> 0:19:31.280 the true immigration into the Tier one cities is slowing down. 0:19:31.640 --> 0:19:35.439 So all that just doesn't support the demand side of saints. 0:19:35.520 --> 0:19:38.400 And then looking at the supply I think five years 0:19:38.400 --> 0:19:42.480 ago to keep coming up into the train to market, 0:19:42.640 --> 0:19:47.040 but later over the past five years that is committed many. Oh, 0:19:47.119 --> 0:19:49.600 then it's really a question of when the supply demand 0:19:49.720 --> 0:19:51.760 can bat us out. So we find a bottom of 0:19:51.800 --> 0:19:55.320 the pricing cycle in Chyna real estate market, we start 0:19:55.359 --> 0:19:59.560 to see some fint of that might STUPI supposially. 0:19:59.560 --> 0:20:02.320 The other things about it is that a huge amount 0:20:02.400 --> 0:20:05.560 of the Chinese population savings have traditionally gone into properties, 0:20:05.640 --> 0:20:08.360 as seventy percent of NetWorld is tied up in property, 0:20:08.600 --> 0:20:11.359 and any shift away from that into people maybe putting 0:20:11.359 --> 0:20:13.959 their savings into the market instead or possibly something more 0:20:14.000 --> 0:20:19.000 productive than blocks of flats is a positive long term positive. 0:20:19.200 --> 0:20:22.240 Definitely, and I and we start to notice them any 0:20:22.240 --> 0:20:27.240 more money on travel experiences, especially the younger population locally, 0:20:27.280 --> 0:20:30.240 back again to the age world investment is also trying 0:20:30.280 --> 0:20:35.000 to really understand what the new generations want. They might 0:20:35.040 --> 0:20:37.520 not want to spend all the savings our house, but 0:20:37.600 --> 0:20:39.760 because I had a small money here and there, a 0:20:39.880 --> 0:20:45.080 costumer product or traveling to really increase the enjoyment of 0:20:45.119 --> 0:20:46.080 their lack. Yeah. 0:20:46.119 --> 0:20:48.199 So do you think that consumer boom that we've been 0:20:48.200 --> 0:20:50.240 waiting for in China for such a long time might 0:20:50.320 --> 0:20:52.240 finally be nearly upon us. 0:20:52.600 --> 0:20:56.000 I think everyone has grewn up for the housing market 0:20:56.080 --> 0:21:00.240 to rebound, and the infection of the stock market has 0:21:00.280 --> 0:21:06.800 certainly enriched a certain group of the Chinese consumers. They 0:21:06.960 --> 0:21:10.840 have hand up demand for quite a while. Now they 0:21:11.240 --> 0:21:14.399 start to feel happy and try to span again. I 0:21:14.920 --> 0:21:18.080 think in the past investor also had a misconception that 0:21:18.160 --> 0:21:23.480 the consumption in China equals to housing price. But it's 0:21:23.560 --> 0:21:26.679 not like that. It doesn't happen everywhere in the world. 0:21:27.640 --> 0:21:30.040 Even the UK housing price hasn't done off, hasn't done well. 0:21:30.080 --> 0:21:33.119 I think the UK costumers you spand and so I 0:21:33.119 --> 0:21:35.560 think Chinese our serios are coming out of that cycle 0:21:36.040 --> 0:21:40.879 and they do want to band in certain areas. So 0:21:40.960 --> 0:21:43.920 again that or because we just have to find out 0:21:44.080 --> 0:21:46.520 where they want to span, which companies can gain more 0:21:46.520 --> 0:21:49.159 market share, we are to write that way, what. 0:21:49.280 --> 0:21:51.000 Of the sectors are you interested in in China? Then 0:21:51.040 --> 0:21:53.159 we talked about the hotel company as they say, this 0:21:53.240 --> 0:21:56.000 is such a massive market, where are you focused for? 0:21:56.960 --> 0:21:58.280 So another top. 0:21:58.160 --> 0:22:01.840 Holding of the trust is is kinda resources to sphere. 0:22:02.440 --> 0:22:06.359 So this is one of the largest brewery in China. 0:22:06.520 --> 0:22:10.160 They have about twenty five percent market share. They used 0:22:10.160 --> 0:22:14.679 to trade over fifty times prior to earnings Racial before 0:22:14.680 --> 0:22:20.120 COVID and since the deflationary cycle and the consumption worry 0:22:20.240 --> 0:22:22.960 in China hit the market, they now trade at the 0:22:23.160 --> 0:22:28.000 low King's price to earning Racial, a level that we 0:22:28.119 --> 0:22:34.080 see extremely attractive. But what has uh There is constant 0:22:34.080 --> 0:22:36.920 concern about the Again, the younger people do not want 0:22:36.960 --> 0:22:41.040 to drink anymore, I do a blot to their health consciousness. Again, 0:22:41.400 --> 0:22:45.800 China resource spear do have their own narratives of increasing 0:22:45.920 --> 0:22:51.240 their brand premiumization. They acquire the Heinecome brand, their China 0:22:51.320 --> 0:22:55.360 operation about five six years ago. I think then they 0:22:55.400 --> 0:22:59.800 have integrated the product distribution into their portfolio, continue to increase, 0:23:00.560 --> 0:23:04.080 brought up volume as the percentage of total volume, and 0:23:04.160 --> 0:23:08.280 that premiumization really helped them with ASP growth as well 0:23:08.320 --> 0:23:14.000 as Marti expansion. I just think the current evaluation doesn't 0:23:14.320 --> 0:23:19.080 give them justice, and management has been increasing trailholder return 0:23:19.200 --> 0:23:23.400 aggressively old harp years very backfully. We get paid while 0:23:23.400 --> 0:23:28.040 waiting for market to realize the underline value of this company. 0:23:28.520 --> 0:23:32.080 Can we talk a bit about about Korea, which, as 0:23:32.080 --> 0:23:33.840 I said, I wrote about the bet eighteen months ago, 0:23:33.920 --> 0:23:36.320 so saying like this is following the corporate governance path 0:23:36.600 --> 0:23:39.640 of Japan and its too cheap, and it has done 0:23:39.640 --> 0:23:41.800 that to a large degree, followed that path, and in 0:23:41.880 --> 0:23:45.960 regulatory terms, certainly, but it's not really cheap anymore, is it? Yes? 0:23:46.000 --> 0:23:49.680 And no? I guess, because I guess Korea has done 0:23:49.760 --> 0:23:53.840 extremely well. Twenty thirty five, its doubled in the US 0:23:53.920 --> 0:23:56.639 dollar term, almost double US dollar term, and then it 0:23:56.720 --> 0:24:01.200 had hit several street spots. The value up government initiatives. 0:24:01.200 --> 0:24:04.360 Have you highlighted The second one is really the strong 0:24:04.640 --> 0:24:09.080 clical upturn of the memory cycle and the Spianic Sometimes 0:24:09.080 --> 0:24:13.800