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Speaker 1: Let's get now to seeven Change, Managing director and Asia

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Speaker 1: portfolio manager at PIMCO on the line for us from

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Speaker 1: Hong Kong. SO an extraordinary session on Friday, and we

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Speaker 1: are expecting to see some more upside two as we

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Speaker 1: have seen these sweeping plans from China in terms of

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Speaker 1: trying to rescue its economy. How far do you think

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Speaker 1: that we can see China stocks rise in the year

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Speaker 1: end UM. I think there have been quite a lot

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Speaker 1: of bariousness in the market building up for quite some

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Speaker 1: time UH, and we are now coming to UM a

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Speaker 1: number of different positive factors that have happened over the

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Speaker 1: past week UM, including the China relaxation or at least

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Speaker 1: more precise UM kind of measures in terms of covid

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Speaker 1: UM and then in terms of the property market, we

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Speaker 1: have also seen the sixteen point document coming up from

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Speaker 1: PBOC and cbr r C On the U S side,

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Speaker 1: which is more of a macro interest rate and liquidity

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Speaker 1: related indicator. UM, the CPI number has gotten mule slow,

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Speaker 1: with perhaps more more certainty about where some of the

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Speaker 1: terminal rates can be from the FED so UM, I

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Speaker 1: think there are some gaps in in terms of the

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Speaker 1: technical charts on on Chinese equities, but I think generally

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Speaker 1: the direction is probably more of this correct correction from

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Speaker 1: from over over sold. Are we starting to see potentially

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Speaker 1: the light at the end of the tunnel here that

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Speaker 1: the worst is going to be over for China's economy,

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Speaker 1: particularly when you look at this rescue plan um. I

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Speaker 1: think we look at this rescue plan along with the

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Speaker 1: COVID policy in terms of the China policymakers having more

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Speaker 1: pragmatism in terms of how they deal with some of

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Speaker 1: these issues. I think there were a lot of fear

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Speaker 1: that they were very ideological. Is either zero or one

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Speaker 1: in terms of you know, how they tackle property or

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Speaker 1: how they tackle COVID UM And this time the kind

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Speaker 1: of like the approach seems to be more about development

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Speaker 1: of the economy and that there are problems that they

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Speaker 1: are willing to tackle and and provide some support. So

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Speaker 1: all of the is going to uh pursue the market

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Speaker 1: um in regards to the economic growth, there are still

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Speaker 1: a lot of um potential downside next year in case

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Speaker 1: some of these measures doesn't come into a kind of

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Speaker 1: better attraction for the economy. But certainly compared to a

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Speaker 1: couple of weeks ago. This is looking um, you know,

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Speaker 1: at least remove a lot of the terrorists that people

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Speaker 1: feared about. Yeah, and that's on the domestic front. On

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Speaker 1: the global gear political front, we have President Biden and

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Speaker 1: President she heading for their first meeting in person since

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Speaker 1: taking since President Biden took over. So that's going to

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Speaker 1: happen in Bali. There is, you know, increasingly concerns of

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Speaker 1: a deeper rupture between these two powerhouses that could split

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Speaker 1: the global economy. What are you expecting from these talks? Um?

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Speaker 1: Generally UM, when head of state meets to come back

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Speaker 1: with with some read out, which is generally more more benign.

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Speaker 1: I think it's usually not too confrontational. Obviously we will

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Speaker 1: have to wait for the result. Uh when we look

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Speaker 1: at the broader picture. Given some of the visits, for example,

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Speaker 1: UH last week from the German Head of State to China,

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Speaker 1: I think those kind of results were quite encouraging UM

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Speaker 1: and and that there are some practical issues that they

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Speaker 1: want to make sure the economy is going ongoing, some

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Speaker 1: of the globalization efforts will need to be maintained um

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Speaker 1: and and jointly both between China and Germany. They also

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Speaker 1: take an approach where they certainly would be on high

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Speaker 1: alert or at least discouraging any kind of step up

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Speaker 1: in terms of the Ukraine Russia situation, and talk about

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Speaker 1: where bond markets areheaded, particularly after we heard the Federal

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Speaker 1: Reserve Governor Christopher Wallace saying they've got a ways to

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Speaker 1: go before the US Central Bank stops raising interest rates.

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Speaker 1: How does this play into the the Asia bond market picture.

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Speaker 1: To Stephen Um, I think Asian bond market is looking

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Speaker 1: more into the terminal FET funds rate UH and and

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Speaker 1: how the potential kind of pivot or pausing by the

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Speaker 1: FED is going to benefit the wider resentiment UM. The

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Speaker 1: Fed is still going to high grates. In fact, they

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Speaker 1: don't want UM, the using of the financial condition to

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Speaker 1: early so that inflation might might become more entrenched. So

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Speaker 1: I think UM in terms of Fed official they will

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Speaker 1: still talk UM in a more hawkish manner. But the

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Speaker 1: market is looking through to the data where the cp

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Speaker 1: I UH last week has has moderated somewhat UH and

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Speaker 1: in particular those interest rate sensitive UM segments are showing

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Speaker 1: a bigger impact. I think broader growth will also be

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Speaker 1: seeing some some negativity from from these higher rates, which

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Speaker 1: we eventually turn turn the FED around. We're talking earlier

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Speaker 1: as well about the policy support in China. We are

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Speaker 1: seeing country Garden leading a rally in Chinese developer dollar bonds.

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Speaker 1: Your cautious in general though on China rates and duration

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Speaker 1: tell us why, UM, there are a few different factors.

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Speaker 1: I think if the growth picture were to be stronger,

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Speaker 1: I think that would potentially to the higher rates. China

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Speaker 1: has been using the fiscal level UH to stimulate demand

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Speaker 1: in particular for for these like longer term infrastructure type

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Speaker 1: of projects and that needs funding. UM. So combining both

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Speaker 1: of these and in um in contact of higher rates

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Speaker 1: are globally when China tend, your yield is still you know,

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Speaker 1: around the two kind of seventy UM area. UM, it

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Speaker 1: doesn't look like there is much of any strong incentive

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Speaker 1: to own China rates at this point. We'll be watching

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Speaker 1: for some of the the Medium Learning Facility action this

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Speaker 1: week to see, you know, how how the PPOC and

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Speaker 1: others will will kind of give us more hints on

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Speaker 1: on the broader macro picture. I mean, we've been talking

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Speaker 1: about policy with support, We've been talking about the FEDS target.

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Speaker 1: What kind of global downturn are you expecting are we

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Speaker 1: going to see a recession? How shallow, how deep? UM?

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Speaker 1: We are expecting more of a shallow recession. I think

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Speaker 1: that has been put in by a number of forecasters

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Speaker 1: as well. What we're anticipating is just slightly negative, but

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Speaker 1: for a slightly longer duration as the central banks need

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Speaker 1: to stamp out inflation UH and other wage priced type

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Speaker 1: type firral UM. But all in UM. In the US,

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Speaker 1: the growth has been quite resilient. Employment picture in particular

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Speaker 1: has remained quite quite strong, and now with China potentially

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Speaker 1: opening up and some support for property that can also

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Speaker 1: offset somebody the downside risk. So where can you where

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Speaker 1: can you be here? Steve? And then to to remain defensive,

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Speaker 1: particularly against all the headwinds are going to face in UM,

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Speaker 1: it's we were actively managing it. I think at this point,

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Speaker 1: given some of the positive factors that have played out

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Speaker 1: last week, UM, we will be more more agile in

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Speaker 1: terms of you know, are beta positioning UM. For example,

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Speaker 1: in in Asia, currencies will be having both overweights and

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Speaker 1: underweight A, whereas over the course of this year we've

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Speaker 1: been mostly underweight. Given the strength of your STYLA and

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Speaker 1: and the rate high cycle UM. Similarly for for credits,

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Speaker 1: there might be some pockets of attractive valuation for names

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Speaker 1: that might be able to UM to live through some

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Speaker 1: of the fundamental UM deterioration UM and can benefit on

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Speaker 1: the up cycle once it's out of the woods, all right,

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Speaker 1: and we do hope that we get out of the

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Speaker 1: woods sooner rather than later. We thank you as always

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Speaker 1: for your time. Stephen Chang, it's managing director Asia portfolio

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Speaker 1: manager at PIMCO on the line for us from Hong Kong,