1 00:00:00,160 --> 00:00:02,240 Speaker 1: Let's get to uh a look at market action with 2 00:00:02,279 --> 00:00:05,080 Speaker 1: our guest. Ken Wong is with us. He is Asian 3 00:00:05,120 --> 00:00:08,799 Speaker 1: equity portfolio specialist at East Spring. He's on the line 4 00:00:08,840 --> 00:00:11,840 Speaker 1: from Hong Kong. Ken, thanks for being with us. I 5 00:00:11,880 --> 00:00:14,960 Speaker 1: think we can agree it's all about interest rates right now, 6 00:00:15,000 --> 00:00:18,279 Speaker 1: particularly the FED being very aggressive in its tightening path. 7 00:00:19,040 --> 00:00:21,560 Speaker 1: We're seeing a spike across the curve today and yield, 8 00:00:21,600 --> 00:00:24,800 Speaker 1: particularly at the long end, which is kind of not 9 00:00:24,840 --> 00:00:27,080 Speaker 1: what we saw yesterday. But that two year yield at 10 00:00:27,080 --> 00:00:30,240 Speaker 1: four twelve is pretty stunning. I think you'll agree. How 11 00:00:30,280 --> 00:00:32,680 Speaker 1: does this change your outlook for the equity market in 12 00:00:32,680 --> 00:00:36,280 Speaker 1: the Asia Pacific? Well, the fact is that when you 13 00:00:36,320 --> 00:00:39,559 Speaker 1: look at Asian equity markets, um there will definitely be impact, 14 00:00:39,600 --> 00:00:42,280 Speaker 1: but a lot of this um interesting rises have ready 15 00:00:42,320 --> 00:00:44,400 Speaker 1: been priced in into the markets and hence, you know, 16 00:00:44,560 --> 00:00:46,920 Speaker 1: that's where we've seemed, you know, a lot of corrections 17 00:00:46,920 --> 00:00:50,600 Speaker 1: this year with most Asian equity markets, but overall from 18 00:00:50,600 --> 00:00:54,720 Speaker 1: a valuation standpoint, we do see definitely evaluations here in 19 00:00:54,760 --> 00:00:58,960 Speaker 1: Asia still enticing, looking definitely you know, more attractive when 20 00:00:58,960 --> 00:01:01,880 Speaker 1: you look at it earnings growth potential for the remainder 21 00:01:01,920 --> 00:01:05,760 Speaker 1: of this year and well into tree. Ernie's growth is 22 00:01:05,800 --> 00:01:09,120 Speaker 1: actually looking you know, fairly optimistic here in Asia, despite 23 00:01:09,200 --> 00:01:11,560 Speaker 1: you know what we're seeing in the US with the 24 00:01:11,680 --> 00:01:13,959 Speaker 1: rising inflationary pressures and of course, you know the big 25 00:01:14,000 --> 00:01:16,319 Speaker 1: elephant the room, of course, when we talk about China. 26 00:01:16,640 --> 00:01:18,720 Speaker 1: The fact is that you know, China is still running 27 00:01:18,720 --> 00:01:22,640 Speaker 1: at very low interest rates. UH inflationary pressures is definitely 28 00:01:22,680 --> 00:01:25,800 Speaker 1: not an issue in China. Evaluation is definitely you know, 29 00:01:25,920 --> 00:01:29,399 Speaker 1: much more attractive and much more appealance compared to the US. 30 00:01:29,600 --> 00:01:31,399 Speaker 1: And this is kind of really where you know, we 31 00:01:31,440 --> 00:01:34,600 Speaker 1: see the opportunity, especially with the National People's Congress coming 32 00:01:34,680 --> 00:01:37,479 Speaker 1: up and hopefully we can see some you know, more 33 00:01:37,560 --> 00:01:42,240 Speaker 1: positive pro market related policies to help the markets. Yeah, 34 00:01:42,240 --> 00:01:45,280 Speaker 1: in terms of that, once president she is confirmed for 35 00:01:45,319 --> 00:01:49,120 Speaker 1: a third term, what sorts of changes stimulus and relaxation 36 00:01:49,120 --> 00:01:53,680 Speaker 1: of COVID restrictions you anticipating, Well, that's very difficult to 37 00:01:53,680 --> 00:01:55,560 Speaker 1: stay at the moment. But the fact is that, you know, 38 00:01:55,600 --> 00:01:58,720 Speaker 1: it's gonna be very important to see, you know, first 39 00:01:58,720 --> 00:02:01,800 Speaker 1: of all, to see who the newly elected UH Polity 40 00:02:01,880 --> 00:02:04,760 Speaker 1: member Polite Baril members are going to be to you know, 41 00:02:04,880 --> 00:02:08,440 Speaker 1: assist and work together with President Hujing, thing to you know, 42 00:02:08,560 --> 00:02:12,120 Speaker 1: enact on policies for the next five years, hopefully you know, 43 00:02:12,200 --> 00:02:14,679 Speaker 1: with some of the new individuals who are going to 44 00:02:14,800 --> 00:02:18,120 Speaker 1: be elected. You know, those individuals are going to be 45 00:02:18,240 --> 00:02:20,680 Speaker 1: you know, more pro market. Uh, you know, I think 46 00:02:20,720 --> 00:02:22,799 Speaker 1: it's gonna be also very important to see, you know, 47 00:02:22,880 --> 00:02:25,640 Speaker 1: China's zero COVID policies, whether or not things will open 48 00:02:25,720 --> 00:02:28,320 Speaker 1: up maybe towards the end of this year or early 49 00:02:28,400 --> 00:02:30,840 Speaker 1: nixt year, which will definitely help the market. Of course, 50 00:02:31,080 --> 00:02:34,000 Speaker 1: the other thing that we also do need to focus 51 00:02:34,000 --> 00:02:37,280 Speaker 1: on is the property and really the down cycle that 52 00:02:37,320 --> 00:02:39,400 Speaker 1: we've had in China over the past twelve of the 53 00:02:39,440 --> 00:02:42,840 Speaker 1: eighteen months, and specifically you know, how things evolve going forward. 54 00:02:43,440 --> 00:02:46,840 Speaker 1: We were talking earlier about inflationary pressures, and I'm looking 55 00:02:46,919 --> 00:02:51,000 Speaker 1: at the South Korean PPI number for August. I guess 56 00:02:51,040 --> 00:02:53,880 Speaker 1: this is eight point four percent to the upside year 57 00:02:53,919 --> 00:02:56,200 Speaker 1: over year, a month on month, a little bit of 58 00:02:56,200 --> 00:02:59,800 Speaker 1: a pullback. Where does this leave very quickly, Cannon about 59 00:02:59,800 --> 00:03:02,280 Speaker 1: third seconds, where does this leave the Bank of Korean 60 00:03:02,440 --> 00:03:05,960 Speaker 1: You think, um, well, there's definitely gonna be you know, 61 00:03:06,160 --> 00:03:09,920 Speaker 1: rising pressures. Um PPI is one indicator. Obviously we also 62 00:03:09,960 --> 00:03:12,079 Speaker 1: need to see what the CPI indicators are going to 63 00:03:12,160 --> 00:03:15,200 Speaker 1: be and then ultimately to see you know, where things are. 64 00:03:15,320 --> 00:03:18,560 Speaker 1: But I think right now, you know, South Korea probably 65 00:03:18,600 --> 00:03:21,480 Speaker 1: will have to raise interest rates. Uh, you know, given 66 00:03:21,480 --> 00:03:23,680 Speaker 1: the fact that you know, most other countries are raising 67 00:03:23,680 --> 00:03:26,519 Speaker 1: interest rates right now, so you know, yeah, definitely inflationary 68 00:03:26,520 --> 00:03:28,960 Speaker 1: pressures will have some impact. Yeah, and I wonder what 69 00:03:29,000 --> 00:03:31,480 Speaker 1: that means for the South Korean economy because as we know, 70 00:03:32,120 --> 00:03:36,360 Speaker 1: private debt levels in South Korea, particularly among consumers, very elevated, 71 00:03:36,400 --> 00:03:39,280 Speaker 1: and so we'll move up in rates will definitely create 72 00:03:39,320 --> 00:03:42,000 Speaker 1: a little bit of discomfort on that front. And can 73 00:03:42,040 --> 00:03:45,360 Speaker 1: Bryan mentioned that the yen and the intervention that the 74 00:03:45,400 --> 00:03:50,280 Speaker 1: Ministry of Finance finally conducted after much speculation, But the 75 00:03:50,360 --> 00:03:52,800 Speaker 1: key question, as Brian mentioned, is it going to make 76 00:03:52,840 --> 00:03:56,800 Speaker 1: a difference? Yeah, The fact is is that you know, 77 00:03:56,840 --> 00:03:59,120 Speaker 1: there's still a lot that needs to be done. Um, 78 00:03:59,160 --> 00:04:02,240 Speaker 1: you know, certain inventions that are done by central banks 79 00:04:02,240 --> 00:04:04,400 Speaker 1: could help for a short period of time, but overall, 80 00:04:04,480 --> 00:04:06,840 Speaker 1: you know, you still have a situation where you know, 81 00:04:06,880 --> 00:04:10,960 Speaker 1: you do have negative interest rates and specifically, um, you know, 82 00:04:11,000 --> 00:04:14,360 Speaker 1: if there there's not for their interactions or inventions that 83 00:04:14,360 --> 00:04:16,680 Speaker 1: needs to be done. Uh, it's tough to see how 84 00:04:16,880 --> 00:04:19,000 Speaker 1: you know, we can see this rise and the end 85 00:04:19,320 --> 00:04:22,400 Speaker 1: to be a bit more sustainable. But ultimately it's also 86 00:04:22,480 --> 00:04:26,560 Speaker 1: important for you know, Japanese yend to you know, sort 87 00:04:26,600 --> 00:04:29,119 Speaker 1: of maybe stay at these levels, especially if they want 88 00:04:29,279 --> 00:04:32,919 Speaker 1: exports to be more competitive, if specifically more attraction for 89 00:04:33,160 --> 00:04:37,640 Speaker 1: potentially foreign direct investments into Japan. Those are all potential 90 00:04:37,680 --> 00:04:40,240 Speaker 1: some of the benefits that week end could actually have 91 00:04:40,400 --> 00:04:44,040 Speaker 1: for Japan. So well said, and I would be curious 92 00:04:44,040 --> 00:04:48,080 Speaker 1: to know how that changes your investment strategy on Japanese 93 00:04:48,160 --> 00:04:51,520 Speaker 1: assets right now. Yeah, overall, you know, we we do 94 00:04:51,600 --> 00:04:54,320 Speaker 1: like Japan quite a bit. Um, Ultimately, when you look 95 00:04:54,360 --> 00:04:57,880 Speaker 1: at where we are from evaluation perspective, Japanese acture markets 96 00:04:57,960 --> 00:05:00,679 Speaker 1: right now are trading roughly about you know, twelve twelve 97 00:05:00,680 --> 00:05:04,120 Speaker 1: and a half times forward earnings up while earnings growth 98 00:05:04,120 --> 00:05:06,719 Speaker 1: for this year remains fairly robust, you know, roughly about 99 00:05:06,760 --> 00:05:08,800 Speaker 1: you know, when we look at EPs growth around fifteen 100 00:05:08,800 --> 00:05:11,320 Speaker 1: and seventeen percent for this year. Uh, you know, it's 101 00:05:11,360 --> 00:05:13,640 Speaker 1: it's gonna be interesting to see specifically what's gonna happen 102 00:05:13,720 --> 00:05:17,200 Speaker 1: next year. Uh, if we continue to see a weekend 103 00:05:17,960 --> 00:05:21,640 Speaker 1: potentially exports do benefit UH. If potentially we do see 104 00:05:21,640 --> 00:05:25,159 Speaker 1: more foreign direct investments tourism coming back now with Japan 105 00:05:25,200 --> 00:05:28,960 Speaker 1: opening up, that could potentially you know, push forward earnings 106 00:05:28,960 --> 00:05:34,160 Speaker 1: guidance as well as earnings estimates. Fore, we did hear 107 00:05:34,200 --> 00:05:36,720 Speaker 1: from how HC cur to the Bank of Japan governor 108 00:05:36,839 --> 00:05:39,840 Speaker 1: saying don't expect any change to monetary policy for two 109 00:05:39,960 --> 00:05:43,080 Speaker 1: or three years, but as term does end next year, 110 00:05:43,200 --> 00:05:46,680 Speaker 1: do you anticipate that we might see some policy alterations 111 00:05:46,680 --> 00:05:49,839 Speaker 1: from the bo J. It's very hard to say. I mean, 112 00:05:49,920 --> 00:05:52,840 Speaker 1: that's that's still you know, bits what way off into 113 00:05:52,880 --> 00:05:56,040 Speaker 1: the into the future. And obviously things can change very 114 00:05:56,120 --> 00:05:59,320 Speaker 1: quickly with how markets behave and so you know, it'll 115 00:05:59,360 --> 00:06:02,440 Speaker 1: be interesting to what happens. But right now, I think, 116 00:06:02,520 --> 00:06:06,640 Speaker 1: you know, the Japanese government specifically together with UH, you know, 117 00:06:06,760 --> 00:06:08,880 Speaker 1: the b o J, they want to be very specific 118 00:06:08,880 --> 00:06:11,560 Speaker 1: when it comes to you know, trying to really you know, 119 00:06:11,760 --> 00:06:14,360 Speaker 1: keep getting at you know, at these really at these 120 00:06:14,440 --> 00:06:17,880 Speaker 1: levels so that they can really potentially see some gains 121 00:06:18,480 --> 00:06:21,120 Speaker 1: in various ways. We're also seeing a lot of weakness 122 00:06:21,200 --> 00:06:23,680 Speaker 1: in the offshore Chinese you one now, UM, and I'm 123 00:06:23,720 --> 00:06:27,000 Speaker 1: wondering whether or not you think that has implications not 124 00:06:27,080 --> 00:06:30,760 Speaker 1: only for the Party congress next month, but for any 125 00:06:30,800 --> 00:06:36,160 Speaker 1: strategy as it applies to investing in Chinese assets. Yeah, 126 00:06:36,200 --> 00:06:38,440 Speaker 1: I mean the weakening of the ROM and B is 127 00:06:38,480 --> 00:06:40,240 Speaker 1: something that you know, I think a lot of people 128 00:06:40,240 --> 00:06:42,040 Speaker 1: are keeping a close eye on as well right now, 129 00:06:42,080 --> 00:06:43,960 Speaker 1: because when you're looking at the levels now you know, 130 00:06:43,960 --> 00:06:47,440 Speaker 1: close to seven one. Um. You know, at the end 131 00:06:47,440 --> 00:06:49,080 Speaker 1: of the day, when we look at you know, what's 132 00:06:49,080 --> 00:06:50,840 Speaker 1: happening with the RIM and B and when we look 133 00:06:50,880 --> 00:06:52,920 Speaker 1: at you know, so at these very different you know, 134 00:06:53,000 --> 00:06:57,719 Speaker 1: differentiating interest rate policies as compared with the US. You know, 135 00:06:57,800 --> 00:07:01,159 Speaker 1: this is definitely gonna be something that will happen. But again, 136 00:07:01,320 --> 00:07:04,360 Speaker 1: you know, having a weaker currency also is something that 137 00:07:04,720 --> 00:07:07,479 Speaker 1: you know, China could tick to his advantage, you know 138 00:07:07,600 --> 00:07:12,200 Speaker 1: with specifically, uh, you know, more attractiveness for exports, uh, 139 00:07:12,240 --> 00:07:15,440 Speaker 1: specifically when we talk about you know earlier with Japan, uh, 140 00:07:15,480 --> 00:07:18,360 Speaker 1: you know, potentially even attracting some foreign investments uh, you 141 00:07:18,400 --> 00:07:21,240 Speaker 1: know going into China as well for those investors you 142 00:07:21,280 --> 00:07:24,840 Speaker 1: know who are keen to look at China again. And ultimately, 143 00:07:24,880 --> 00:07:28,040 Speaker 1: if China does, um, you know, open up let's say 144 00:07:28,080 --> 00:07:31,320 Speaker 1: next year, Uh, then you're gonna definitely start to see potentially, 145 00:07:31,440 --> 00:07:33,840 Speaker 1: you know, flows heading back into China, especially when you 146 00:07:33,880 --> 00:07:37,120 Speaker 1: have more business. Uh, you know, business investors going back 147 00:07:37,160 --> 00:07:40,760 Speaker 1: into China can very quickly. Do you think we've seen 148 00:07:40,840 --> 00:07:46,080 Speaker 1: the last of property wise in China just twenty seconds? Uh? 149 00:07:46,160 --> 00:07:48,840 Speaker 1: And it's it's very difficult, and especially when we look 150 00:07:48,880 --> 00:07:50,920 Speaker 1: at the Tier one cities right now, Tier one cities, 151 00:07:50,920 --> 00:07:53,440 Speaker 1: there's still a lot of concerns and specifically what type 152 00:07:53,440 --> 00:07:56,880 Speaker 1: of policies can be enacted Tier two, tier three cities 153 00:07:56,920 --> 00:07:59,280 Speaker 1: because now, you know, we are definitely seeing more government 154 00:07:59,280 --> 00:08:03,160 Speaker 1: interventions and government support. You know, we could potentially see things, um, 155 00:08:03,280 --> 00:08:05,960 Speaker 1: you know, maybe bottlings very soon as a result of 156 00:08:06,080 --> 00:08:09,679 Speaker 1: a lot of these policy benefits. Alright, Kene Long, Asian 157 00:08:09,680 --> 00:08:12,760 Speaker 1: equity portfolio specialist at east Spring, thanks so much for 158 00:08:12,840 --> 00:08:14,440 Speaker 1: joining us on Bloomberg Daybreak Asia.