WEBVTT - The Fed Cut Felt Around the World 0:00:02.520 --> 0:00:06.480 You're listening to Asia Centric from Bloomberg Intelligence, the podcast 0:00:06.480 --> 0:00:09.879 that explores the big ideas and trends moving money across 0:00:09.880 --> 0:00:11.800 the region. I'm young leaving Hong Kong. 0:00:12.280 --> 0:00:16.439 I'm Kajdmitrieva, also in Hong Kong. The Fed last week 0:00:16.560 --> 0:00:20.680 delivered a much awaited interest rate cut, but they moved 0:00:20.720 --> 0:00:24.160 by fifty basis points, not twenty five, which is what 0:00:24.480 --> 0:00:28.720 most economists had anticipated. This is going to have ramifications 0:00:28.760 --> 0:00:32.760 across the world, but perhaps nowhere more so than in Asia. 0:00:33.280 --> 0:00:36.600 And joining us today to break down the potential effects 0:00:36.640 --> 0:00:41.560 across the region is Alicia Garcia Herrero. She's chief economist 0:00:41.640 --> 0:00:43.320 for Asia Pacific at Ina Texas. 0:00:43.760 --> 0:00:46.839 Welcome, Alicia, really a real pleasure to be with you 0:00:46.880 --> 0:00:48.400 all here today. 0:00:48.760 --> 0:00:52.800 Well, big news last week, the Fed cut by half 0:00:52.840 --> 0:00:57.120 a point that was largely unexpected by most economists who 0:00:57.320 --> 0:01:00.840 saw a twenty five basis point cut. Was surprising for you. 0:01:01.480 --> 0:01:04.000 Well, it was surprising for our US team if you 0:01:04.040 --> 0:01:06.960 asked me at No Texas. But basically they've been very 0:01:06.959 --> 0:01:10.240 cautious on the cuts in twenty twenty four, and I 0:01:10.280 --> 0:01:14.639 think rightly so, because we had this inflation data right before. 0:01:14.760 --> 0:01:18.319 You know, it wasn't really so clear that inflation was 0:01:18.440 --> 0:01:21.080 fully under control, or inflation service inflation. 0:01:21.160 --> 0:01:22.479 Secondly, I mean. 0:01:22.400 --> 0:01:24.600 Retail sales data was good, so the whole idea of 0:01:24.720 --> 0:01:28.320 a very rapid deceleration or heart landing for me, was 0:01:28.360 --> 0:01:32.280 out of the questions. But taking that into consideration, to me, 0:01:32.440 --> 0:01:34.759 when I read and especially the press conference, I felt 0:01:34.760 --> 0:01:37.039 it was very like a political decision. I kind of 0:01:37.200 --> 0:01:40.640 sense that they really wanted to do two things. They 0:01:40.680 --> 0:01:42.679 wanted to really sign off a new era, so we 0:01:42.720 --> 0:01:44.760 are on an easy era, and we want to do 0:01:44.800 --> 0:01:49.800 this convincingly and frankly. Probably also US elections, and you know, 0:01:49.880 --> 0:01:53.560 having a lot done at the beginning might make their 0:01:53.600 --> 0:01:56.960 lives easy as the date of the elections gets closer. 0:01:57.040 --> 0:02:00.280 So for these two reasons, it was more say, it 0:02:00.400 --> 0:02:04.360 was so economically driven as maybe I would imagine. I 0:02:04.360 --> 0:02:06.880 mean the size of the cut, of course, not the 0:02:06.920 --> 0:02:09.919 actual cut, which was long over deal. I mean, we've 0:02:09.919 --> 0:02:12.000 been waiting for this for so long, and age and 0:02:12.040 --> 0:02:14.280 economies have been waiting for it for so loon, which 0:02:14.320 --> 0:02:15.880 is what we're going to this cust next. 0:02:15.919 --> 0:02:16.360 I'm sure. 0:02:16.560 --> 0:02:19.040 Yeah, I was just about to ask you, making my 0:02:19.120 --> 0:02:21.880 job very easier, just about to ask you about that 0:02:21.960 --> 0:02:24.560 exact thing. A lot of central banks, especially across Southeast 0:02:24.600 --> 0:02:27.480 Asia East Asia, have been waiting for this easy cycle 0:02:27.880 --> 0:02:30.480 to begin. So what is next? We have the FED 0:02:30.560 --> 0:02:33.520 cutting by fifty basis points? Does that change the math 0:02:33.760 --> 0:02:37.320 on or your outlook? Maybe before the cuts on who's 0:02:37.400 --> 0:02:38.880 next and by how much they'll cut? 0:02:40.120 --> 0:02:42.800 So first of all, I would say that there's a 0:02:42.840 --> 0:02:46.919 couple of out liars in Asia. I'm sure everybody was rejoicing, 0:02:47.040 --> 0:02:50.600 but some less than others. And I think the say 0:02:50.639 --> 0:02:54.000 the BOJ, but even the Central Bank of China CBC. 0:02:54.000 --> 0:02:55.440 They are in a different situation. 0:02:55.600 --> 0:02:58.760 BOJ needs to get out of this massive FeAs in 0:03:00.000 --> 0:03:02.640 and I think having a big cut by the FED 0:03:03.080 --> 0:03:05.720 just makes it very difficult for them to hike because 0:03:06.000 --> 0:03:10.959 it's a very rapid reduction of the spread and that 0:03:11.080 --> 0:03:14.079 will push the end. And I think if there is 0:03:14.160 --> 0:03:17.520 something that government that doesn't really want to see happening again, 0:03:17.680 --> 0:03:21.840 is that black Man Day and a very rapid application 0:03:21.919 --> 0:03:24.040 of the end. So I think for the BOJ, I 0:03:24.040 --> 0:03:25.880 would say, well, I'm not sure it was such good 0:03:25.919 --> 0:03:27.320 news if you see what I mean, Because I think 0:03:27.720 --> 0:03:32.320 paced FED would help the BOJ center back of China. 0:03:32.480 --> 0:03:35.280 I mean, the column is booming in Taiwan, and they 0:03:35.360 --> 0:03:38.040 never hiked enough as you know, I mean the intergate 0:03:38.040 --> 0:03:41.360 differential they kept while the FED was hiking because this 0:03:41.480 --> 0:03:43.760 is a low interest rate environment. 0:03:44.240 --> 0:03:45.560 They just couldn't follow the Fed. 0:03:45.680 --> 0:03:47.960 And now of course they don't have any room to cut, 0:03:48.160 --> 0:03:51.960 you know, because they are in booming and frankly with 0:03:52.040 --> 0:03:54.200 a high underlying inflation. We might not see it in 0:03:54.240 --> 0:03:56.760 the day, but it's there as a price inflation. And 0:03:57.520 --> 0:03:59.560 so for these two times, I actually think it's bad 0:03:59.560 --> 0:04:01.560 news with the bad news, because all of the rest 0:04:01.600 --> 0:04:06.920 is relatively good news. But yes, it's not coffee for everybody, 0:04:06.920 --> 0:04:09.040 if you see what I mean, Like, some are not happy, 0:04:09.080 --> 0:04:12.560 and I think and Central Bank of China are the 0:04:12.720 --> 0:04:14.520 key examples of this situation. 0:04:15.000 --> 0:04:17.480 Central Back of China being the Taiwan. So Taiwan and 0:04:17.560 --> 0:04:19.080 Japan odd ones out. 0:04:19.480 --> 0:04:22.480 Yeah, Taiwan is just because the economy is on a 0:04:22.560 --> 0:04:25.080 very different cycle than the FED, and you know they 0:04:25.080 --> 0:04:28.280 are semi packed, so that doesn't help them at all. 0:04:28.920 --> 0:04:32.320 We expect, for example, for RBI, we expect very little 0:04:32.600 --> 0:04:36.080 for India because you know some might not Again I 0:04:36.200 --> 0:04:39.000 mentioned Taiwan as you know, an even clear example some 0:04:39.080 --> 0:04:43.320 might not necessary benefit for a huge reduction of rates, 0:04:43.440 --> 0:04:46.000 so you have to be careful with that, and then 0:04:46.040 --> 0:04:48.200 you could have a bubble on top of a bubble. 0:04:48.279 --> 0:04:49.359 So think about India. 0:04:49.560 --> 0:04:52.880 You know, up until the elections, you don't want to 0:04:52.880 --> 0:04:56.240 see an overheated market. Think about India with the with 0:04:56.320 --> 0:05:00.159 the booming luxury real estate market at the moment, So 0:05:00.240 --> 0:05:03.159 do you want to cut rates aggressively. So again, the 0:05:03.160 --> 0:05:05.360 FED is important, but it's not everything under the sun. 0:05:05.480 --> 0:05:09.000 I mean, these central bands have to cope with very 0:05:09.000 --> 0:05:11.159 different situations at the moment. 0:05:11.640 --> 0:05:13.160 What about the good news? 0:05:13.600 --> 0:05:17.400 The good news is that some bunking nation, you know, 0:05:17.720 --> 0:05:18.920 they cut even before the FED. 0:05:19.440 --> 0:05:20.839 They were like already cheering. 0:05:21.440 --> 0:05:23.680 And why And I think this is very important is 0:05:23.680 --> 0:05:26.040 that if you calculate the real interestrate, this is true 0:05:26.040 --> 0:05:29.240 for China, but this is true across the board. The 0:05:29.320 --> 0:05:32.880 real interest rate in Southeast Asia is just very high 0:05:32.920 --> 0:05:37.039 because inflation never reached the levels you know reached in 0:05:37.080 --> 0:05:40.039 the US, and therefore they had to cope with these 0:05:40.120 --> 0:05:43.920 high interest rates on the real economy. And I think 0:05:44.000 --> 0:05:46.400 they've been waiting. They thought it would be very temporary, 0:05:46.400 --> 0:05:49.280 but it wasn't. It became entrenched so they got into 0:05:49.320 --> 0:05:52.839 this situation with nominal rates, they couldn't cut an inflation 0:05:52.920 --> 0:05:56.599 that was below the rest of the world. I think, 0:05:56.760 --> 0:05:59.800 you know, the fact also that China has been underwhelming 0:06:00.160 --> 0:06:03.920 wise didn't help because you know, these economies weren't supported. 0:06:03.400 --> 0:06:04.479 By Chinese imports. 0:06:04.560 --> 0:06:08.080 So the combination of high real interest rates the weak 0:06:08.320 --> 0:06:11.960 Chinese economy, you know, kind of made them despair for 0:06:12.040 --> 0:06:14.120 this cut from the Fed. Yeah, and I think this 0:06:14.240 --> 0:06:17.560 is why we've seen the stock markets. I mean, it's 0:06:17.600 --> 0:06:20.520 clearly very positive, let alone from Hong Kong. If you 0:06:20.560 --> 0:06:23.840 ask me which economy should rejoice the most, I mean 0:06:23.920 --> 0:06:27.400 probably is China and Hong Kong. These were economies Hong 0:06:27.480 --> 0:06:29.640 Kong in particular, since you know you're sitting there so 0:06:29.640 --> 0:06:31.760 I'm sure you feel it. Yeah, it's like they just 0:06:31.800 --> 0:06:34.599 couldn't cope with these rates. Sending over look at the 0:06:34.640 --> 0:06:37.719 state of the real estate sector in both economies. For 0:06:37.839 --> 0:06:41.200 Hong Kong, this straight jacket at such a difficult moment, 0:06:41.240 --> 0:06:44.040 even in terms of retail sales, et cetera, was just 0:06:44.080 --> 0:06:46.279 too much too bear. So for Hong Kong, I would 0:06:46.279 --> 0:06:49.920 say you, if I have to rank the biggest beneficiaries 0:06:50.040 --> 0:06:52.800 in terms of the room. That's obviously Hong Kong, and 0:06:52.839 --> 0:06:54.719 I think the handstand is proving this right. 0:06:54.800 --> 0:06:55.880 Yeah. 0:06:56.440 --> 0:07:00.400 Asia Centric is produced by Bloomberg Intelligence, when more than 0:07:00.400 --> 0:07:04.480 five hundred experienced analysts and strategists work around the clock 0:07:04.520 --> 0:07:08.560 to bring you timely, world class research. Our coverage spans 0:07:08.600 --> 0:07:13.400 two hundred market indices, currencies, commodities, and industries, as well 0:07:13.440 --> 0:07:16.680 as over two thousand equities and credits. If you like 0:07:16.760 --> 0:07:21.040 what you hear, don't forget to subscribe and chair Alicia 0:07:21.080 --> 0:07:23.720 for the benefit of the listeners. Now, Hong Kong is 0:07:23.760 --> 0:07:26.560 an interesting case because the currency is pegged to the 0:07:26.680 --> 0:07:29.880 US dollars, so Hong Kong pretty much had to raise 0:07:29.960 --> 0:07:33.240 interest rates along with the FED, even though there wasn't 0:07:33.280 --> 0:07:34.680 an inflation problem. 0:07:34.400 --> 0:07:37.240 Right exactly, So yes, for the benefit of the listeners. 0:07:37.240 --> 0:07:39.560 You're absolute right. Let me try to go through this case. 0:07:40.640 --> 0:07:43.960 Hong Kong not only respect to the dollar that would 0:07:44.000 --> 0:07:47.360 be in itself you know, as you said, that would 0:07:47.440 --> 0:07:52.200 oblige Hong Kong to follow the FED to keep its 0:07:53.400 --> 0:07:55.560 change rate. Actually, we have a one percent badge to 0:07:55.600 --> 0:07:58.760 be you know, fully clear with our listeners. They do move, 0:07:58.840 --> 0:08:00.920 I mean the exchange rate move a little bit and 0:08:00.960 --> 0:08:03.400 the interest rate on the Hong Kong dollar so called 0:08:03.480 --> 0:08:05.840 hyber can also go up and down a little bit 0:08:05.840 --> 0:08:06.520 depending on. 0:08:06.440 --> 0:08:07.880 The exchang rate expectations. 0:08:07.960 --> 0:08:11.040 Yeah, this, this little band, the Hong Kong economy now 0:08:11.080 --> 0:08:13.760 is extremely depending on the mainland, not on the US, 0:08:13.920 --> 0:08:18.040 even for financial flows. So we actually made some estimation 0:08:18.840 --> 0:08:22.600 even before COVID, and I was surprised to see. I mean, 0:08:22.680 --> 0:08:25.440 the real economy, well know, Hong Kong, you know, because 0:08:25.440 --> 0:08:28.800 of visitors from the mainland, et cetera, is very linked 0:08:28.920 --> 0:08:33.240 to the mainland. But I thought financial flows would be 0:08:33.320 --> 0:08:36.120 more linked to the US. I thought so, and it 0:08:36.160 --> 0:08:40.120 wasn't the case, even in twenty nineteen, stock connect, bond connect, 0:08:40.240 --> 0:08:43.439 you name. It is just so linked to the mainland 0:08:43.440 --> 0:08:47.040 now even financially that following the US as. 0:08:46.880 --> 0:08:48.880 Far as interest rates are concerned. And of course the 0:08:48.920 --> 0:08:50.520 currency is. 0:08:50.520 --> 0:08:53.280 Increasingly costly in terms of you know that this location 0:08:53.440 --> 0:08:56.640 of where the economy is and where your financial conditions are. 0:08:57.240 --> 0:09:00.960 So for Hong Kong, this cut is coming from heaven really, 0:09:01.280 --> 0:09:05.880 because the economy is still doing poorly. And I'm not 0:09:05.880 --> 0:09:08.040 saying this will solve all of the problems, but there 0:09:08.120 --> 0:09:11.120 was no other way. The Mainland is a different case. 0:09:11.160 --> 0:09:14.080 There were other ways. They just didn't stimulate the economy. 0:09:14.200 --> 0:09:16.240 They could have that more fiscal they could have even 0:09:16.320 --> 0:09:18.800 cut rates. To be frank, Hong Kong had no choice 0:09:18.840 --> 0:09:21.760 but to follow. And I think this is extremely important 0:09:21.800 --> 0:09:23.720 given the state of the real estate sectoring. 0:09:24.880 --> 0:09:28.320 So Hong Kong needed the FED cut, China needed the 0:09:28.320 --> 0:09:33.160 FED cut. Japan makes it harder for them to hike Taiwan. 0:09:33.240 --> 0:09:37.680 You said, the economy is booming, So which economy, which 0:09:37.720 --> 0:09:40.840 central bank is next? Who's up next in terms of 0:09:40.880 --> 0:09:43.720 cutting in your view? In Asia? 0:09:43.920 --> 0:09:47.600 Well, I mean I could tell you a little bit. 0:09:48.040 --> 0:09:50.719 You know, the straight off cuts we have. So as 0:09:50.760 --> 0:09:53.840 I said, already cut, I mean Hong Kong obviously immediately. 0:09:55.040 --> 0:10:00.240 We do have cuts for literally everybody except MALAYSI yeah 0:10:00.400 --> 0:10:06.360 this we are not Yeah, not Malaysia. We have a 0:10:06.360 --> 0:10:10.360 cat in South Korea, we have Australia. Australia is tricky 0:10:10.520 --> 0:10:15.120 because we were expecting a cat in October and then 0:10:15.160 --> 0:10:18.680 well lift it because of inflation expectations, you know, being 0:10:18.720 --> 0:10:21.400 a little But now the question is if the FED 0:10:21.440 --> 0:10:25.840 cuts again by October, will the RBA manage to keep 0:10:26.400 --> 0:10:28.840 that call until next year? 0:10:29.000 --> 0:10:30.480 So you know, it's like I think. 0:10:30.320 --> 0:10:34.280 The fifty bps accelerates the decisions in a way because 0:10:34.679 --> 0:10:36.960 if they feel that the FED is going to front load, 0:10:37.080 --> 0:10:39.440 they may have issues about their change rate. You know, 0:10:40.000 --> 0:10:43.600 everybody has to run a little bit faster. So yeah, 0:10:43.640 --> 0:10:45.839 so we questioned Mark on October for the RBA. 0:10:46.040 --> 0:10:48.559 In my view, Alicia, we should tell the audience that 0:10:48.800 --> 0:10:52.000 we're recording this podcast on the twenty fourth of September, 0:10:52.280 --> 0:10:54.960 just literally hours before the RBA decision. So I know 0:10:55.080 --> 0:10:57.200 most economies don't expectes. 0:10:57.280 --> 0:11:00.280 Of course, I'm not expecting anything today, You're right, I 0:11:00.320 --> 0:11:03.440 need to explain also the audience here that I'm in Berlin, 0:11:03.600 --> 0:11:06.559 so you know, I know, it's like none in on Kong. 0:11:06.640 --> 0:11:09.679 I believe that when we'll know more about RBA, but 0:11:09.760 --> 0:11:12.480 for me it's kind of it's really far in time. 0:11:12.600 --> 0:11:16.199 We're not expecting any cuts for RBA today. I'm talking 0:11:16.240 --> 0:11:19.360 of October, and that I think will depend very much 0:11:19.440 --> 0:11:21.800 on how much more the fact might do, but also 0:11:22.640 --> 0:11:25.920 how much the Australian economy decelerates. 0:11:26.000 --> 0:11:29.400 We wrote a little watch for today on the RB. 0:11:29.520 --> 0:11:33.160 I think the most important thing to note, beyond the 0:11:33.200 --> 0:11:36.800 fact that inflation is indeed quite sticky still now is 0:11:36.840 --> 0:11:42.040 that disposable income is indeed decelerating in Australia. Labor market 0:11:42.080 --> 0:11:44.600 is quite okay, but disposable income is. So, you know, 0:11:44.960 --> 0:11:48.320 I think it's like saying, quite frankly, that households do 0:11:48.440 --> 0:11:51.920 need lower mortgage. I would put it this way. You know, 0:11:51.960 --> 0:11:54.240 it's like they've been quite resilient. 0:11:54.559 --> 0:11:54.959 Frankly. 0:11:55.200 --> 0:11:57.079 You know, if you think about what we thought would happen, 0:11:57.200 --> 0:12:01.000 it didn't happen. The real sector in Australia, the housing 0:12:01.040 --> 0:12:04.680 market actually reacted quite well for what was expected to 0:12:04.760 --> 0:12:07.920 happen if you recall. But I think by now it's 0:12:07.920 --> 0:12:11.319 a question of can you keep this much much longer? So, 0:12:11.400 --> 0:12:13.440 you know, I would imagine that the RBA would have 0:12:13.480 --> 0:12:16.400 to review this today's decision, which I think is going 0:12:16.440 --> 0:12:20.160 to be paused in the light of deccelerating dis possible 0:12:20.160 --> 0:12:21.760 income for the months took up. 0:12:21.920 --> 0:12:23.920 This is for me, the key issue for RBA. 0:12:25.320 --> 0:12:28.520 Arguably the consumer in Australia and possibly also a career 0:12:28.600 --> 0:12:32.880 as well. They've been impacted probably more by these high 0:12:32.960 --> 0:12:36.080 interest rates because in the US, you know, people have 0:12:36.120 --> 0:12:38.840 a mortgage, probably took out a fixed twenty year long 0:12:39.000 --> 0:12:41.000 so they probably took it out when interest rates were low, 0:12:41.080 --> 0:12:44.920 but places in like Australia that would hit automatically with 0:12:45.000 --> 0:12:46.360 high interest expense. 0:12:47.400 --> 0:12:50.680 Yes, and remember that there were also some I would 0:12:50.720 --> 0:12:53.480 say even worse in the sense that at the beginning 0:12:53.640 --> 0:12:57.840 during COVID, you remember there was this decision to facilitate 0:12:58.120 --> 0:13:02.880 the repayment of mortgages so they were protected, and then 0:13:02.920 --> 0:13:05.160 suddenly rates started to hike. You know, it's like an 0:13:05.240 --> 0:13:08.160 unprotected so you know, it's like a double womy if 0:13:08.160 --> 0:13:11.200 you are a household. And this is why I actually 0:13:11.200 --> 0:13:15.240 think that the Australian economy has been extremely resilient. Let's 0:13:15.240 --> 0:13:17.600 not forget that all of it happened at the time 0:13:17.640 --> 0:13:19.880 where you know, you had the lingering effect of the 0:13:20.000 --> 0:13:23.160 trade work with China, which then was resolved, but you 0:13:23.240 --> 0:13:24.320 had all of those shocks. 0:13:24.400 --> 0:13:26.440 Yeah, and I. 0:13:26.400 --> 0:13:30.200 Actually think that Australia did really really well. And the 0:13:30.320 --> 0:13:33.320 other issues that during COVID, they didn't have any increasing population, 0:13:33.679 --> 0:13:36.160 which is a big driver of growth in Australia because 0:13:36.160 --> 0:13:40.040 you know, all the sorts were closed. So yes, there 0:13:40.120 --> 0:13:42.760 was a little bit of a push through population increased 0:13:42.760 --> 0:13:47.120 through immigration, which of course South Korea didn't have. South 0:13:47.200 --> 0:13:52.040 Korea's solution came from the turn in the semiconductor cycle 0:13:52.160 --> 0:13:56.080 and AI revolution, but not everybody benefits from that, and 0:13:56.160 --> 0:13:57.920 this is the same things. I want to be frank, 0:13:58.360 --> 0:14:01.520 I don't have figures, but I'm convinced that income distribution 0:14:01.800 --> 0:14:03.840 worsened in South Korea and in Taiwan. 0:14:04.360 --> 0:14:06.920 You know, it's not the same type of growth as Australia. 0:14:07.640 --> 0:14:11.440 So the social implications of high rates in South Korea, 0:14:12.160 --> 0:14:16.680 I'm sure stronger than in Australia, and that makes the 0:14:16.800 --> 0:14:19.360 decision to cut highly politically, if you see. So it's 0:14:19.360 --> 0:14:22.000 a different cut. I just want to clarify that. I 0:14:22.040 --> 0:14:24.840 think South Korea's cut is more like coming from the 0:14:24.840 --> 0:14:28.440 social pressure of households, as you said, really not being 0:14:28.480 --> 0:14:33.040 able to cope any longer. I think for Australia, yes, 0:14:33.080 --> 0:14:35.880 this possible income is dicelebrity, but it's much smoother and 0:14:35.960 --> 0:14:39.000 I think more across the board employment is being created. 0:14:39.040 --> 0:14:41.880 It's a different it's a different ballgame. And we had 0:14:42.040 --> 0:14:46.200 export date. Actually it was really negative for South Korea, 0:14:46.240 --> 0:14:48.200 but I think it's about the number of days. So 0:14:48.520 --> 0:14:52.160 experts are still okay, notwith something that that data that 0:14:52.200 --> 0:14:55.320 we just had, but that doesn't help everybody, So I 0:14:55.360 --> 0:14:57.600 agree with you. I think we have a problem with 0:14:57.760 --> 0:14:59.160 the high rates. 0:14:58.840 --> 0:15:03.280 In Korea's interesting point there that you make about how 0:15:03.360 --> 0:15:08.400 each of the economy is potentially cutting for different reasons. 0:15:08.520 --> 0:15:11.040 It's not a one size fits all. Now is this 0:15:11.120 --> 0:15:14.160 sort of a new era as well as the fact 0:15:14.160 --> 0:15:16.600 ease as we're getting into the cycle. But it seems 0:15:16.640 --> 0:15:20.480 like each economy kind of is focusing on domestic issues 0:15:20.680 --> 0:15:23.400 and they're all ideosyncratic indeed. 0:15:23.440 --> 0:15:27.240 So this is why I think probably markets we see 0:15:27.280 --> 0:15:31.560 that are reacting very positively. Ahia has a high growth environment, 0:15:31.600 --> 0:15:33.720 so you know, all of these cuts are just in 0:15:33.760 --> 0:15:36.800 a way. You know, if you are into an index 0:15:36.920 --> 0:15:39.200 or a passive investor, you may not care about the 0:15:39.280 --> 0:15:41.600 arguments we're making. Now, you know, just go ahead and 0:15:41.880 --> 0:15:44.960 we'll just find ahiav area appealing because of the cuts. 0:15:45.320 --> 0:15:48.000 But if you think longer term, how you know these 0:15:48.000 --> 0:15:50.520 markets are going to react longer term? I think we 0:15:50.560 --> 0:15:53.240 need to see first do they need the cut and 0:15:53.280 --> 0:15:55.640 why do they need the cut? And in the case 0:15:55.640 --> 0:15:58.320 of Hong Kong, I think yes, this will help, but 0:15:58.360 --> 0:16:01.800 I'm not sure the market will act positively for very long. 0:16:01.920 --> 0:16:04.240 Now we have two positive needs for Hong Kong, the 0:16:04.600 --> 0:16:09.120 China stimulus and the fat so it should be like 0:16:09.280 --> 0:16:09.920 party time. 0:16:10.000 --> 0:16:12.480 But the question is Hong Kong stocks of jumping up 0:16:12.560 --> 0:16:13.040 right now? 0:16:13.880 --> 0:16:15.280 Yes, yes, I know, I know it's part of that 0:16:15.400 --> 0:16:18.160 I checked. But the issue is will it be permanent 0:16:18.280 --> 0:16:21.520 or how permanent will this be? And there I think 0:16:21.520 --> 0:16:24.720 we need to answer to questions how important are financial 0:16:24.760 --> 0:16:28.000 conditions for Hong Kong households. I mean, Hong Kong is 0:16:28.000 --> 0:16:33.080 seventy percent consumption, so are there financially constrained? How big 0:16:33.200 --> 0:16:35.360 is this impact if you look at the date, Actually 0:16:35.560 --> 0:16:39.000 it's little the case that Hong Kong houses are financially 0:16:39.000 --> 0:16:42.640 constrained because of a number of reasons that payment, so 0:16:42.680 --> 0:16:43.440 will it last? 0:16:43.600 --> 0:16:44.200 That impact? 0:16:44.280 --> 0:16:46.560 And then on China, I think it all depends on 0:16:46.560 --> 0:16:49.360 whether the stimulus is for real and you know it 0:16:49.480 --> 0:16:52.680 changes the nature of growth at least cyclically. 0:16:53.080 --> 0:16:55.240 You're talking or not about the FED cuts, but about 0:16:55.280 --> 0:16:58.120 the stimulus that was announced. People be listening to this 0:16:58.200 --> 0:17:02.400 on Thursday, but announced on Tuesday the various uh, you 0:17:02.440 --> 0:17:05.280 know are our our cut and cuts to the mortgage rates. 0:17:06.359 --> 0:17:06.920 It was a lot. 0:17:07.720 --> 0:17:10.119 Yeah, the announcement is a lot, but let's not forget 0:17:10.160 --> 0:17:13.240 that so far we had Friday nothing. They didn't cut 0:17:13.560 --> 0:17:17.359 the long prime rate, which is the benchmark for mortgages. 0:17:18.040 --> 0:17:21.320 So what has happened since Friday? You know, like then 0:17:21.359 --> 0:17:25.080 they cut which I think was a four signal, the 0:17:25.359 --> 0:17:30.400 fourteen days reverse ripple, and that is not I mean 0:17:30.440 --> 0:17:33.200 that the news was big cut is an irrelevant cut 0:17:33.280 --> 0:17:36.720 as everybody, I mean those dealing with the PVC now, 0:17:36.840 --> 0:17:40.920 because this is really just confirming the seven day cut 0:17:41.000 --> 0:17:43.760 because this is the reverse report, so you needed and 0:17:43.800 --> 0:17:45.760 they took so long for them to do that thing, 0:17:46.520 --> 0:17:50.280 which was kind of natural to cut the fourteen day after. 0:17:50.080 --> 0:17:50.640 The seventh day. 0:17:51.480 --> 0:17:53.800 So you know, when you observe all of this and 0:17:53.880 --> 0:17:57.600 you observe the announcement and I know stock markets are rejoicing, 0:17:58.400 --> 0:18:00.000 the question is who's in charge? 0:18:00.600 --> 0:18:01.800 Because you know, you could have. 0:18:01.720 --> 0:18:05.320 Done this in a more structure way and it sounds 0:18:05.359 --> 0:18:07.919 like a little bit I wouldn't say panicky, but it 0:18:08.000 --> 0:18:11.240 sounds like suddenly you come with this. You could have 0:18:11.320 --> 0:18:15.560 done it more naturally and I would have perhaps even 0:18:15.640 --> 0:18:18.040 used a third pleno to make a big story out 0:18:18.040 --> 0:18:19.080 of the stimulus. 0:18:19.480 --> 0:18:22.480 Do you think they did it? Because the Fed cut 0:18:22.560 --> 0:18:24.560 by more than expected it kind of created some room 0:18:24.560 --> 0:18:25.680 for them, but they. 0:18:25.600 --> 0:18:29.879 Could have cut on Friday, the long primary, So still 0:18:30.480 --> 0:18:33.440 did they not want to show that they would cut 0:18:33.480 --> 0:18:35.840 immediately after the FED. Then I wouldn't do it now. 0:18:35.840 --> 0:18:39.320 It's just too early. But for me, it sounds like 0:18:39.359 --> 0:18:44.040 a reluctant stimulus. I call it a reluctant stimulus. It 0:18:44.080 --> 0:18:47.680 seems like some are not into the stimulus, others are. 0:18:47.760 --> 0:18:52.040 There's no agreement, so they kind of drag their feet 0:18:52.880 --> 0:18:55.879 towards the stimulus, and those are not the stimuli that 0:18:56.000 --> 0:18:58.040 work best because you need to believe in it, you 0:18:58.080 --> 0:19:01.280 need to be convincing about it. So I think the 0:19:01.640 --> 0:19:05.719 impact today is positive, but how long will it last? 0:19:06.119 --> 0:19:08.239 To me, it's really a big question mark because it 0:19:08.240 --> 0:19:11.640 doesn't look convincing that they're going to continue on this path. 0:19:11.880 --> 0:19:12.720 You have a long way to. 0:19:12.720 --> 0:19:16.480 Go, Alicia. So with the China news, you don't expect 0:19:16.560 --> 0:19:21.040 economists to suddenly raise their economic forecast next year or 0:19:21.080 --> 0:19:21.440 this year. 0:19:21.800 --> 0:19:25.080 Well, we just had like an influential forecast. Is the 0:19:25.160 --> 0:19:28.840 IIF problem because they're semi official and they just cut 0:19:28.840 --> 0:19:33.760 to four point seven simply because the second semesters expected 0:19:33.800 --> 0:19:37.119 to be much lower than the first real interesrates in 0:19:37.200 --> 0:19:39.399 China are too high, which is absolutely true. If you 0:19:39.560 --> 0:19:43.200 hold a mortgage in China, you know what real rates 0:19:43.240 --> 0:19:46.480 are all about. I mean it's really high, much higher 0:19:46.480 --> 0:19:49.960 than anywhere else of any relevant economy in the world, 0:19:50.000 --> 0:19:53.080 because if you use the GDP inflator, for example, it's 0:19:53.160 --> 0:19:56.560 like you have five to six percent real rates on 0:19:56.680 --> 0:19:58.880 mortgages in China just to. 0:19:58.800 --> 0:20:01.560 Pull back a bit. So with the combo of the 0:20:01.600 --> 0:20:05.560 FED cutting rates by fifty pips, maybe freeing up some 0:20:05.600 --> 0:20:08.560 space for China to cut as well. Plus this new package, 0:20:09.119 --> 0:20:11.600 will that move the needle for China's economy? 0:20:11.640 --> 0:20:16.120 Do you think I think they need to really convince 0:20:16.119 --> 0:20:19.040 the market there in a new era exactly like Poweled 0:20:19.080 --> 0:20:22.320 it if you listen to I'm sure you have to 0:20:22.480 --> 0:20:26.520 Bowels state it's very clear. It's like nobody has any 0:20:26.680 --> 0:20:29.520 doubt the FED will cut again and again and again. 0:20:29.920 --> 0:20:33.159 The communication was clear. We know maybe for some they 0:20:33.160 --> 0:20:35.320 will cut one hundred, one hundred and twenty five for 0:20:35.480 --> 0:20:37.879 US seventy five, but everybody knows they're going to cut 0:20:38.040 --> 0:20:41.760 all the way even next year. In China, this is 0:20:41.800 --> 0:20:44.600 not clear. It might be that they don't cut again. 0:20:45.080 --> 0:20:48.480 There's no consensus as to whether this is big stimulus. 0:20:48.520 --> 0:20:51.320 This is just one off cut again, because you know 0:20:51.640 --> 0:20:52.720 how long has it take? 0:20:52.960 --> 0:20:53.719