1 00:00:00,000 --> 00:00:01,760 Speaker 1: All right, let's get to our guess now. Generally is 2 00:00:01,800 --> 00:00:05,960 Speaker 1: ce IO for Power Sustainable Investment Management joining us from Shanghai. 3 00:00:06,240 --> 00:00:07,960 Speaker 1: So a lot to talk about when we look at 4 00:00:08,039 --> 00:00:10,440 Speaker 1: the towards the Party Congress and whether or not we 5 00:00:10,480 --> 00:00:12,920 Speaker 1: could see a change in COVID zero policy. But also 6 00:00:12,960 --> 00:00:14,960 Speaker 1: wanted to start with the sell off that we are 7 00:00:14,960 --> 00:00:17,560 Speaker 1: seeing in chip makers this route spreading to t s 8 00:00:17,640 --> 00:00:20,880 Speaker 1: MC Samsung after the US curbs on China. Does this 9 00:00:21,040 --> 00:00:25,160 Speaker 1: just increase some of the head winds around China businesses um, 10 00:00:25,239 --> 00:00:28,440 Speaker 1: That definitely is a factor. I think the U s 11 00:00:28,440 --> 00:00:31,360 Speaker 1: sanction on the China chip industry does have a very 12 00:00:31,360 --> 00:00:35,120 Speaker 1: fundamental and potentially long term impact on the development of 13 00:00:35,120 --> 00:00:39,559 Speaker 1: the chip industry in China, and also major suppliers to 14 00:00:39,680 --> 00:00:43,199 Speaker 1: the Chinese players also got hurt, like t SMC and 15 00:00:43,280 --> 00:00:46,239 Speaker 1: the leading chip makers in the US. So where we 16 00:00:46,280 --> 00:00:49,519 Speaker 1: are analyzing the situation, we think it is pretty severe 17 00:00:49,680 --> 00:00:54,160 Speaker 1: because in the only constraints chip exports to China, it 18 00:00:54,240 --> 00:00:57,959 Speaker 1: also constrains the equipment providers are provided to the Chinese 19 00:00:58,480 --> 00:01:04,120 Speaker 1: chipmaking industries, which will negatively impact the fabulous capacity increase 20 00:01:04,440 --> 00:01:08,319 Speaker 1: in China. We had anticipated very fast expansion of the 21 00:01:08,400 --> 00:01:12,600 Speaker 1: chip industry in China now things may get worse than that. 22 00:01:13,240 --> 00:01:18,000 Speaker 1: And also um there is a very restrictive terms on 23 00:01:18,280 --> 00:01:21,400 Speaker 1: U S citizens participating in the chipmaking industries in China. 24 00:01:21,800 --> 00:01:26,280 Speaker 1: So overall we see a very big negative factor on 25 00:01:26,560 --> 00:01:29,800 Speaker 1: the overall chip industries globally. So I'm wondering, I think 26 00:01:29,800 --> 00:01:32,399 Speaker 1: that would be the intent of the Biden administration right 27 00:01:32,440 --> 00:01:37,119 Speaker 1: to curtail growth in certain industries like military surveillance or 28 00:01:37,240 --> 00:01:41,959 Speaker 1: artificial intelligence. Are there companies in China now whose growth 29 00:01:42,040 --> 00:01:46,200 Speaker 1: depends on access to these high technology I mean cutting 30 00:01:46,319 --> 00:01:49,080 Speaker 1: edge chips that are and maybe that's now in question. 31 00:01:49,160 --> 00:01:52,360 Speaker 1: Is that the way you're viewing it. I think a 32 00:01:52,440 --> 00:01:57,840 Speaker 1: Bidence uh administration's intent is really to cut the development 33 00:01:57,920 --> 00:02:01,559 Speaker 1: of for example, military use of the most advanced chips 34 00:02:01,880 --> 00:02:05,720 Speaker 1: and also AI development in general in China, despite the 35 00:02:05,720 --> 00:02:09,400 Speaker 1: fact that these areas require the most advanced chips and 36 00:02:10,080 --> 00:02:14,320 Speaker 1: AI trips. I think some other industries that's used by 37 00:02:14,480 --> 00:02:18,560 Speaker 1: electric vehicles, et cetera may also be actively impacted. That 38 00:02:18,800 --> 00:02:23,480 Speaker 1: is what investors are concerned about, because you will need 39 00:02:23,560 --> 00:02:27,359 Speaker 1: to have database data centers, you will need to have 40 00:02:27,919 --> 00:02:31,640 Speaker 1: UH the AI systems to facilitate the future development of 41 00:02:32,360 --> 00:02:36,520 Speaker 1: the electric vehicles for example, and other related industries for 42 00:02:36,680 --> 00:02:41,240 Speaker 1: the general public. Let's talk about what we're saying elsewhere 43 00:02:41,280 --> 00:02:44,079 Speaker 1: in the China economy, and as I mentioned, we're looking 44 00:02:44,120 --> 00:02:46,000 Speaker 1: ahead to whether or not there could be a pivot 45 00:02:46,040 --> 00:02:48,400 Speaker 1: away from dynamic zero. But we're still got a lot 46 00:02:48,440 --> 00:02:51,520 Speaker 1: of weaknesses in the property sector and real estate market pressure. 47 00:02:52,080 --> 00:02:55,160 Speaker 1: You're looking at real estate sales which declined over the 48 00:02:55,200 --> 00:02:57,440 Speaker 1: Golden Week holidays. So what does that tell us in 49 00:02:57,520 --> 00:03:00,440 Speaker 1: terms of adjusting some of these earnings grow its potential 50 00:03:00,480 --> 00:03:06,079 Speaker 1: for Yeah, I think real estate is a very big sector. Historically, 51 00:03:06,160 --> 00:03:10,040 Speaker 1: the growth of real estate really supported strong economic growth 52 00:03:10,120 --> 00:03:13,400 Speaker 1: in China in the past ten to twenty years. However, 53 00:03:13,639 --> 00:03:16,720 Speaker 1: I think given currently we have a lot of pressure 54 00:03:17,080 --> 00:03:20,919 Speaker 1: and the leveraging on the real estate sector, we see 55 00:03:21,480 --> 00:03:24,800 Speaker 1: a big drag on economic growth. The Golden Week, at 56 00:03:24,840 --> 00:03:29,680 Speaker 1: the top thirty cities registered the nective real estate sales 57 00:03:30,440 --> 00:03:33,480 Speaker 1: due to the fact that UM, a lot of buyers 58 00:03:33,520 --> 00:03:37,160 Speaker 1: do not have enough confidence in the future outlook. So 59 00:03:37,440 --> 00:03:40,640 Speaker 1: um this may continue for a while. We believe that 60 00:03:41,720 --> 00:03:44,640 Speaker 1: this is still the weakness in the Chinese economic growth 61 00:03:45,200 --> 00:03:47,720 Speaker 1: for the next two months, and then we love to 62 00:03:47,760 --> 00:03:51,960 Speaker 1: see more policies or stimulus to support the real estate 63 00:03:52,440 --> 00:03:55,960 Speaker 1: market in China. These may include, you know, the lowering 64 00:03:56,080 --> 00:03:59,920 Speaker 1: of the mortgage rates and the lowering of the triple 65 00:04:00,040 --> 00:04:04,440 Speaker 1: our rates to support liquidity. However, looking into the earning growth, 66 00:04:05,120 --> 00:04:07,760 Speaker 1: due to the real estate market weakness as well as 67 00:04:07,760 --> 00:04:12,000 Speaker 1: the COVID zero policy which constrained traffic UH and the 68 00:04:12,040 --> 00:04:15,920 Speaker 1: consumptions of the people in China UH, the earning growth 69 00:04:16,000 --> 00:04:19,760 Speaker 1: in the second quarter was really weak. We see milder 70 00:04:19,800 --> 00:04:23,880 Speaker 1: recovery for the third quarter to twenty two, but looking 71 00:04:23,880 --> 00:04:28,040 Speaker 1: into future, we are anticipating a mild recovery from there 72 00:04:28,120 --> 00:04:31,960 Speaker 1: as well. UM, but there are still uncertainties, like I said, 73 00:04:32,279 --> 00:04:36,039 Speaker 1: depending on the COVID zero policies and also depending on 74 00:04:37,080 --> 00:04:41,080 Speaker 1: how strongly the Chinese government will support the resting market. 75 00:04:41,680 --> 00:04:45,040 Speaker 1: So a mild or modest recovery of the Chinese consumer, 76 00:04:45,279 --> 00:04:49,239 Speaker 1: A big deal of risk that remains where the property 77 00:04:49,279 --> 00:04:52,559 Speaker 1: market is concerned, and very strong headwind when it comes 78 00:04:52,600 --> 00:04:56,599 Speaker 1: to technology visa vi A semiconductor. So there is a 79 00:04:56,640 --> 00:04:59,200 Speaker 1: lot to be negative on when you look at China overall. 80 00:04:59,480 --> 00:05:02,479 Speaker 1: How are you able to put money to work in 81 00:05:02,520 --> 00:05:05,360 Speaker 1: the Chinese market right now? Are there areas or themes 82 00:05:05,400 --> 00:05:11,120 Speaker 1: that you feel represent value or strategy that makes sense. Yeah, 83 00:05:11,200 --> 00:05:13,359 Speaker 1: I think, like you mentioned, there are a lot of 84 00:05:13,440 --> 00:05:16,640 Speaker 1: bad news for the Chinese economy, for the equity market, 85 00:05:17,240 --> 00:05:21,800 Speaker 1: I think things are looking difficult globally as well. Uh so, 86 00:05:22,120 --> 00:05:25,240 Speaker 1: but it is fair to say that both the Asian 87 00:05:25,320 --> 00:05:30,360 Speaker 1: market and a share market trading at very low valuation. UH. 88 00:05:30,400 --> 00:05:34,520 Speaker 1: They are at very low levels at this moment. So 89 00:05:34,640 --> 00:05:37,760 Speaker 1: looking into the future, I think investors are looking for 90 00:05:37,920 --> 00:05:42,800 Speaker 1: more certainties, things like domestic consumption. Like I mentioned, UH, 91 00:05:42,800 --> 00:05:45,120 Speaker 1: this year is a really low based due to COVID. 92 00:05:45,560 --> 00:05:49,080 Speaker 1: Next year, if things get better, if the COVID policy 93 00:05:49,160 --> 00:05:53,320 Speaker 1: gets relaxed a little bit, you will easily see improvement 94 00:05:53,360 --> 00:05:58,239 Speaker 1: from here. We are also see investors interested into high 95 00:05:58,320 --> 00:06:03,240 Speaker 1: yield companies in the areas of utilities, etcetera. UH. And 96 00:06:03,360 --> 00:06:08,279 Speaker 1: also we see investors getting into the value stocks as well. 97 00:06:09,440 --> 00:06:12,760 Speaker 1: We just saw China September retail passenger vehicle sales rights 98 00:06:12,760 --> 00:06:16,280 Speaker 1: twenty one percent year on year, according to UH data 99 00:06:16,400 --> 00:06:18,800 Speaker 1: from authorities the p c A. I mean, we know 100 00:06:18,839 --> 00:06:21,039 Speaker 1: that's coming off a very low base from from the 101 00:06:21,080 --> 00:06:23,680 Speaker 1: prior year, but is that an encouraging sign on consumption? 102 00:06:25,680 --> 00:06:29,159 Speaker 1: I think definitely. It is electric vehicle and the auto 103 00:06:29,279 --> 00:06:34,000 Speaker 1: cells is another big aspect of the economic growth, so 104 00:06:34,160 --> 00:06:38,280 Speaker 1: it is good to see uh continuous growth from that sector. 105 00:06:38,600 --> 00:06:40,640 Speaker 1: Like you mentioned, it is from a very low base 106 00:06:40,800 --> 00:06:44,600 Speaker 1: from a prior year, and also it is driven by 107 00:06:44,760 --> 00:06:49,440 Speaker 1: policies such as tax cuts for the automobile buyers. Looking 108 00:06:49,440 --> 00:06:52,200 Speaker 1: into the future, we think the Chinese government will continue 109 00:06:52,240 --> 00:06:55,640 Speaker 1: to support the growth of the automobile industry, which is 110 00:06:55,960 --> 00:06:59,560 Speaker 1: pretty much domestic consumption driven and it's related to a 111 00:06:59,600 --> 00:07:02,760 Speaker 1: lot of uh O E M s and suppliers that 112 00:07:02,880 --> 00:07:06,960 Speaker 1: are all China manufacturers. Alright, June, great to have you 113 00:07:07,000 --> 00:07:09,760 Speaker 1: with us on on day brac Asia Today. Jun Lee 114 00:07:09,880 --> 00:07:13,320 Speaker 1: is c IO for Power Sustainable Investment Management, joining us 115 00:07:13,440 --> 00:07:14,520 Speaker 1: from Shanghai.