1 00:00:00,080 --> 00:00:02,520 Speaker 1: Let's get to our guest, Dan Feynman, cohead of a 2 00:00:02,640 --> 00:00:06,520 Speaker 1: pack equity strategy at Credit Suice. So I know, Dan, 3 00:00:06,600 --> 00:00:09,959 Speaker 1: your focus is on Asia, but let's talk briefly about 4 00:00:09,960 --> 00:00:13,200 Speaker 1: the US economy because obviously a lot of countries in 5 00:00:13,280 --> 00:00:16,520 Speaker 1: Asia depended on exporting to the United States. So we 6 00:00:16,560 --> 00:00:20,800 Speaker 1: had all this good data. And is it possible that 7 00:00:20,840 --> 00:00:24,920 Speaker 1: the bond market is wrong here of recession being inevitable 8 00:00:25,400 --> 00:00:27,680 Speaker 1: or does it just mean it gets pushed further out 9 00:00:27,760 --> 00:00:32,320 Speaker 1: and that you know, eventually growth will weaken. I think 10 00:00:32,880 --> 00:00:37,080 Speaker 1: recession is highly likely. We have to recall that what's 11 00:00:37,159 --> 00:00:40,800 Speaker 1: driving this recession is the FED. The FED wants to 12 00:00:40,840 --> 00:00:43,720 Speaker 1: slow the economy so that they can bring inflation down. 13 00:00:44,240 --> 00:00:47,320 Speaker 1: If the economy remains more robust, that means that the 14 00:00:47,320 --> 00:00:49,960 Speaker 1: FED has more work ahead of it, But it doesn't 15 00:00:50,000 --> 00:00:52,960 Speaker 1: mean that the FED no longer has a job to do. 16 00:00:53,400 --> 00:00:57,040 Speaker 1: The key issue is really inflation. What we need is 17 00:00:57,080 --> 00:01:00,760 Speaker 1: for inflation to come down, and until that happens, really 18 00:01:00,800 --> 00:01:05,479 Speaker 1: we're still at risk. Well, Dan, if inflation stays suddenly high, 19 00:01:05,480 --> 00:01:08,760 Speaker 1: and of course that's the fear among Fed watchers. Market 20 00:01:08,760 --> 00:01:11,560 Speaker 1: watchers tend to focus more on Oh, they can't stay 21 00:01:11,640 --> 00:01:15,039 Speaker 1: high that long season. Fed watchers say they have to 22 00:01:15,160 --> 00:01:18,560 Speaker 1: because the past has told them they can't stop too early. 23 00:01:18,800 --> 00:01:20,440 Speaker 1: Let's say it doesn't stop too early. What does it 24 00:01:20,440 --> 00:01:25,960 Speaker 1: mean for investors, Well, it's clearly a negative. Markets are 25 00:01:26,000 --> 00:01:29,160 Speaker 1: now pricing in rate cuts in the second half of 26 00:01:29,200 --> 00:01:32,399 Speaker 1: the year, the pivot that markets have been excited about. 27 00:01:32,640 --> 00:01:35,480 Speaker 1: If that doesn't happen, which I think is quite possible, 28 00:01:35,760 --> 00:01:39,679 Speaker 1: then markets are going to be disappointed. I just saw 29 00:01:39,760 --> 00:01:43,039 Speaker 1: a story in the Securities Daily in China saying that, 30 00:01:43,360 --> 00:01:47,240 Speaker 1: and they they cite five economists as saying that China's 31 00:01:47,280 --> 00:01:50,920 Speaker 1: GDP will expand by more than five percent next year. 32 00:01:51,640 --> 00:01:57,000 Speaker 1: Is that priced into markets? I don't think that, uh, 33 00:01:57,880 --> 00:02:02,240 Speaker 1: markets are too obsessed with the numbers for the g 34 00:02:02,360 --> 00:02:06,000 Speaker 1: d P. They're looking more at I think, more high 35 00:02:06,040 --> 00:02:11,120 Speaker 1: frequency data. They're looking at earnings, and they're looking forward 36 00:02:11,160 --> 00:02:14,880 Speaker 1: as far as what sort of approaches the government takes 37 00:02:14,919 --> 00:02:18,560 Speaker 1: to regulatory issues and and the tech sector. I don't 38 00:02:18,600 --> 00:02:22,760 Speaker 1: think that the official GDP targets are critical numbers for 39 00:02:22,800 --> 00:02:27,440 Speaker 1: the markets. So what do you think? UH? Many people 40 00:02:27,560 --> 00:02:29,880 Speaker 1: are gotten a lot more positive on China with very 41 00:02:29,880 --> 00:02:34,360 Speaker 1: good reason. Obviously, the reopening boom. What a pivot right uh, 42 00:02:34,400 --> 00:02:36,960 Speaker 1: and the the support for the property market. It's a 43 00:02:37,000 --> 00:02:39,000 Speaker 1: pillar of the economy now right when it used to 44 00:02:39,040 --> 00:02:41,160 Speaker 1: be a bit of a pariety almost seemed for the government. 45 00:02:41,840 --> 00:02:44,240 Speaker 1: How positive are all these kinds of things are investors, 46 00:02:45,520 --> 00:02:50,240 Speaker 1: They're quite positive. Given the valuation backdrop, If China weren't 47 00:02:50,280 --> 00:02:53,720 Speaker 1: so cheap, you might not get so excited that it 48 00:02:53,880 --> 00:02:57,000 Speaker 1: is now finally joining the rest of the world and 49 00:02:57,000 --> 00:03:00,680 Speaker 1: and reopening its economy in the face of the virus. 50 00:03:01,240 --> 00:03:05,080 Speaker 1: What makes China special now is that it's still very cheap. 51 00:03:05,160 --> 00:03:08,560 Speaker 1: Even after the rally we had the past month, Chinese 52 00:03:08,639 --> 00:03:12,040 Speaker 1: multiples are still very low relative to their own history, 53 00:03:12,080 --> 00:03:17,959 Speaker 1: relative to multiples elsewhere. If these economists in the Securities 54 00:03:18,000 --> 00:03:20,839 Speaker 1: Daily are correct, and we do see GDP expand never 55 00:03:20,880 --> 00:03:24,520 Speaker 1: mind if we're not tracking actually the GDP numbers, but 56 00:03:24,560 --> 00:03:28,120 Speaker 1: if we see domestic demands strong and consumers really getting 57 00:03:28,120 --> 00:03:30,440 Speaker 1: out there. They've been stunted of late because of COVID 58 00:03:30,760 --> 00:03:33,480 Speaker 1: and lockdowns. If they do get out there, does that 59 00:03:33,560 --> 00:03:38,800 Speaker 1: interest you and what how would you play that? Then well, 60 00:03:38,840 --> 00:03:43,160 Speaker 1: I think there definitely is a good story for China. 61 00:03:43,320 --> 00:03:47,240 Speaker 1: We've already seen earnings sort of bottom ount and and 62 00:03:47,320 --> 00:03:51,440 Speaker 1: start to establish some positive momentum even before the reopening 63 00:03:51,560 --> 00:03:56,200 Speaker 1: is really implemented. If we do see a an improvement 64 00:03:56,200 --> 00:04:00,560 Speaker 1: in the property market situation, that would help comps. More 65 00:04:00,640 --> 00:04:04,119 Speaker 1: broadly speaking, what we'd really like to see would be 66 00:04:04,680 --> 00:04:09,400 Speaker 1: additional stimulus for the broad based economy. Possibly a more 67 00:04:09,440 --> 00:04:13,480 Speaker 1: aggressive GDP target could indicate that that could be coming. 68 00:04:13,720 --> 00:04:16,520 Speaker 1: If we had that, then you've got the grounds for 69 00:04:16,640 --> 00:04:20,200 Speaker 1: a fairly sustainable rally in China. Let's have a Japan. 70 00:04:20,640 --> 00:04:22,640 Speaker 1: Bank of Japan seems to me like it's it's the 71 00:04:22,680 --> 00:04:25,760 Speaker 1: hot central bank now right for certainly the first half 72 00:04:25,800 --> 00:04:27,600 Speaker 1: of the year. We know the FEDS kind of on this. 73 00:04:27,839 --> 00:04:30,640 Speaker 1: We're gonna watch every you know, speech and every meeting 74 00:04:30,720 --> 00:04:32,920 Speaker 1: to see how much they do or don't move. But 75 00:04:33,240 --> 00:04:35,760 Speaker 1: Japan has been you know, with this this this shock 76 00:04:35,839 --> 00:04:39,600 Speaker 1: widen the band on the Yelker control. Uh looks like 77 00:04:39,640 --> 00:04:43,120 Speaker 1: they're now they're starting their normalization. How quickly, so many things. 78 00:04:43,760 --> 00:04:46,440 Speaker 1: What do you make of where they are now and 79 00:04:46,480 --> 00:04:51,760 Speaker 1: how this will or will not impact the path for investors. Well, 80 00:04:51,800 --> 00:04:56,039 Speaker 1: it's not entirely clear what the bo j's game plan is. 81 00:04:56,040 --> 00:05:00,320 Speaker 1: Is it, as they've said, a technical fix for woms 82 00:05:00,320 --> 00:05:02,680 Speaker 1: in the bond market on kink the kinks and the 83 00:05:02,760 --> 00:05:07,680 Speaker 1: yield curve, or is this the start of a monetary 84 00:05:07,760 --> 00:05:10,680 Speaker 1: policy tightening to bring them more in line with what 85 00:05:10,720 --> 00:05:14,919 Speaker 1: global central banks have been doing. Quite frankly, I think 86 00:05:15,160 --> 00:05:17,719 Speaker 1: that is still an open question. And given that we've 87 00:05:17,720 --> 00:05:20,600 Speaker 1: got a new governor coming in in April, that that 88 00:05:20,640 --> 00:05:25,760 Speaker 1: means that the uncertainty is especially high. Obviously, this is 89 00:05:25,920 --> 00:05:29,719 Speaker 1: of great importance for both fixed income markets in Japan 90 00:05:30,080 --> 00:05:34,440 Speaker 1: and for equities. That's not surprising that we've seen the 91 00:05:34,520 --> 00:05:38,400 Speaker 1: volatility over the past week that we have. Can we 92 00:05:38,440 --> 00:05:42,000 Speaker 1: make this argument that at some point ahead we see 93 00:05:42,040 --> 00:05:45,279 Speaker 1: a little bit of of a more normalizing process happening, 94 00:05:45,640 --> 00:05:49,320 Speaker 1: and that slowly but surely, big institutional investors will have 95 00:05:49,400 --> 00:05:53,800 Speaker 1: to transfer their bond holdings because as yields rise, the 96 00:05:53,920 --> 00:05:56,760 Speaker 1: value of the bonds are going down into equities, and 97 00:05:56,800 --> 00:05:59,520 Speaker 1: so we could be coming into a period with Japanese 98 00:05:59,560 --> 00:06:05,200 Speaker 1: equity ease benefit. That's a possible tail win for the 99 00:06:05,200 --> 00:06:09,720 Speaker 1: equities market, but there are also possible headwinds if you 100 00:06:09,760 --> 00:06:14,479 Speaker 1: do get tighter monetary policy in Japan that could place 101 00:06:14,600 --> 00:06:18,480 Speaker 1: upward pressure on the end allow the end to appreciate 102 00:06:18,760 --> 00:06:23,480 Speaker 1: Typically Japanese stocks. Like a week end and a strong dollar, 103 00:06:23,640 --> 00:06:28,400 Speaker 1: not vice versa, that would be ahead. However, a stronger 104 00:06:28,520 --> 00:06:33,440 Speaker 1: yen UH and a more appealing equity market may bring 105 00:06:33,520 --> 00:06:36,919 Speaker 1: money back to Japan UH and that could be you know, 106 00:06:37,000 --> 00:06:41,680 Speaker 1: that could could be beneficial. I suppose agreed it could 107 00:06:42,120 --> 00:06:46,400 Speaker 1: There could, uh quite oddly enough, be some benefits on 108 00:06:46,440 --> 00:06:50,440 Speaker 1: the liquidity front. Usually monetary policy is not something that's 109 00:06:50,480 --> 00:06:55,240 Speaker 1: good for domestic liquidity. But if this meant that locals 110 00:06:55,320 --> 00:06:59,640 Speaker 1: were bringing repatriating funds, if they put overseas to take 111 00:06:59,680 --> 00:07:02,680 Speaker 1: it down page of higher yields, and then that could 112 00:07:02,839 --> 00:07:06,120 Speaker 1: maybe help the domestic liquidity situation. So then let's get 113 00:07:06,120 --> 00:07:08,760 Speaker 1: a couple of questions in an action um where in 114 00:07:08,800 --> 00:07:11,559 Speaker 1: ascon it's a it's a pretty big area, right, Which 115 00:07:11,560 --> 00:07:14,960 Speaker 1: countries or which country do you like best in terms 116 00:07:15,000 --> 00:07:19,760 Speaker 1: of a good place to invest in? Well, most of 117 00:07:19,760 --> 00:07:22,360 Speaker 1: the past year and a half, the clear star has 118 00:07:22,400 --> 00:07:27,320 Speaker 1: been Indonesia, and for good reason. It's the number one 119 00:07:27,440 --> 00:07:32,080 Speaker 1: commodities exporter in Asia, and it's benefited from this boom 120 00:07:32,120 --> 00:07:36,000 Speaker 1: in commodity pricing. It's also had a nice bounce back 121 00:07:36,080 --> 00:07:39,640 Speaker 1: from the pandemic, and there's a good long term story 122 00:07:39,720 --> 00:07:45,080 Speaker 1: about industrialization and vertically integrating its commodities industry. But I 123 00:07:45,120 --> 00:07:48,000 Speaker 1: think at the moment, maybe for the next several months, 124 00:07:48,000 --> 00:07:53,240 Speaker 1: Thailand could be a more interesting story. It's got arguably 125 00:07:53,320 --> 00:07:57,480 Speaker 1: the best economic turnaround in Asia uh and one of 126 00:07:57,520 --> 00:08:01,920 Speaker 1: the best globally. On the tourism or recovery, Asian tourism 127 00:08:02,200 --> 00:08:06,240 Speaker 1: is normalizing with a long lag as compared with what 128 00:08:06,240 --> 00:08:08,720 Speaker 1: we've seen in Europe and the US. It's got a 129 00:08:08,720 --> 00:08:11,480 Speaker 1: lot of headroom to grow over the next year. Thailand 130 00:08:11,600 --> 00:08:14,840 Speaker 1: is the premier place, all right, But quickly then you've 131 00:08:14,840 --> 00:08:17,760 Speaker 1: given me a couple of countries. Is there any particular 132 00:08:17,880 --> 00:08:20,040 Speaker 1: industry or kind of company that you like. You've got 133 00:08:20,040 --> 00:08:25,320 Speaker 1: about twenty seconds. M Well, regionally, we still like banks, 134 00:08:25,520 --> 00:08:29,640 Speaker 1: and Asian is very much a banks oriented region. There's 135 00:08:29,680 --> 00:08:32,880 Speaker 1: a good story for banks as far as falling credit costs, 136 00:08:33,120 --> 00:08:37,959 Speaker 1: improving loan growth, improving margins. All right, Dan, thanks very 137 00:08:38,000 --> 00:08:39,839 Speaker 1: much for taking the time out to be with a. 138 00:08:39,960 --> 00:08:44,440 Speaker 1: Stan Feineman, co head of Asia Pacific Equity Strategy at 139 00:08:44,480 --> 00:08:45,480 Speaker 1: Credit Suite.