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Speaker 1: Our guest is Kieren Calder, head of equity research for

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Speaker 1: Asia at U b P. Kieren, we see the four

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Speaker 1: job cuts, the lift job cuts, the slowdown in hiring

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Speaker 1: at at companies like Apple, Microsoft and Google. Is this

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Speaker 1: the beginning of a wave? And does it indicate that

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Speaker 1: recession risks are rising well? So from our from our

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Speaker 1: point of view, definitely, recession risks are rising UM and

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Speaker 1: and in fact, we think there's a you know, probability

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Speaker 1: of at least a technical recession towards the end of

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Speaker 1: this year or possibly first quarter next year. So if

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Speaker 1: you look look at the the job cuts and the

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Speaker 1: hiring freezes that you you just UM mentioned, obviously this

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Speaker 1: is the way that corporates can preemptively react to UH

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Speaker 1: potential decline in demand ahead UM and so UM creative

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Speaker 1: destruction at work UH and and this is one of

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Speaker 1: the reasons that you know, earnings expectations for the next

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Speaker 1: couple of years are still for high single digits UM

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Speaker 1: for the pete UM as corporates are able to address

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Speaker 1: the cost side of things in the face of potential

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Speaker 1: UH risk to to to revenue. Karen, you could argue

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Speaker 1: that some of this slowdown in hiring in particular is

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Speaker 1: just you know, kind of warranted it amidst how tight

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Speaker 1: some of the labor markets have been, and particularly as

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Speaker 1: we see, as you say, it's some natural attrition coming

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Speaker 1: through when it comes to corporate earning. So as you

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Speaker 1: just mentioned there, will they continue to hold up amidst

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Speaker 1: these concerns though, of recession fears. I think that's certainly

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Speaker 1: in the in the second quarters. So far, second quarter earnings, UM,

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Speaker 1: they've generally been pretty pretty positive. You know, we got

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Speaker 1: a positive surprise for example, from from Netflix at the

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Speaker 1: end of the day. Um. If you look at the

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Speaker 1: US banks, they've very quickly been able to um effectively

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Speaker 1: raised prices and that interest income has has a surprise

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Speaker 1: to the upside for for most of the big banks.

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Speaker 1: So I think we're um probably a K for this quarter,

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Speaker 1: which means that we're worrying about it again. Uh, you

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Speaker 1: know around October with third quarter results and obviously, UM,

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Speaker 1: given the uh you know, the sort of fed path

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Speaker 1: for rising rates to tackle inflation, UM, it's going to

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Speaker 1: get worse as we're going into the second half of

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Speaker 1: further into the second half of the year, some investors

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Speaker 1: are making the point, uh that earnings are pretty good actually,

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Speaker 1: and companies and consumers seem to be handling things much

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Speaker 1: better than what the financial markets are suggesting. Yeah, exactly agree, Um,

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Speaker 1: And this is one of the you know, the reasons

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Speaker 1: that the USMP for example, has started to recover from

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Speaker 1: the the year lows UM the end last month. Um,

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Speaker 1: And there we are, So, I mean, we'll be uh

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Speaker 1: corporating is a pretty good short term revisions are are

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Speaker 1: positive for the SUP and expectations still are for high

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Speaker 1: single digits UM over the next couple of years. And

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Speaker 1: if that doesn't deteriorate, and you know, from from equity

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Speaker 1: market point of view, at least UM would look like

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Speaker 1: a like a soft landing. We're continuing to see the

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Speaker 1: property crisis spill over into China and the mortgage boycott

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Speaker 1: as well, spreading and Bloomberg intelligence saying that this mortgage

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Speaker 1: crisis could hurt the steelmakers profits and slow China's green push.

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Speaker 1: As you say, this is not going according to plan

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Speaker 1: for China. What are you looking at in the property space, Well,

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Speaker 1: so you know, we've been pretty wary of Chinese property

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Speaker 1: basically since this time, since this time last year. So, um,

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Speaker 1: first point is we're not really exposed there. UM. But secondly,

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Speaker 1: it's quite extraordinary that the sort of bottom up I

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Speaker 1: would say rebellion but you know, unsatisfaction with with what's

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Speaker 1: going on and people uh campaign to not pay their mortgages. UM.

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Speaker 1: So certainly you know they're potentially political implications here. The

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Speaker 1: political calendar for China. It's not very convenient for for

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Speaker 1: UM for president she UM. But more from a from

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Speaker 1: a corporate earnings perspective, will certainly be looking at how

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Speaker 1: this impact the Chinese banks and the global banks is

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Speaker 1: operating in China. UM. So we'll starting to see some

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Speaker 1: of those results from from the beginning of the of

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Speaker 1: August and some we'll start to get a better picture

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Speaker 1: how it's actually affecting banks that are exposed to that UM.

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Speaker 1: And then you said you're not too exposed there. Do

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Speaker 1: you mean to this sector of the property sector. Do

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Speaker 1: you mean China altogether? Right? So I was referring to

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Speaker 1: the property sector, And in fact, we have become more

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Speaker 1: positive on broader China UM over the last couple of months. UM.

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Speaker 1: So while we we kind of have an underrat view

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Speaker 1: on global equities at the moment against the as we

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Speaker 1: discussed earlier, rising risk of recession, not owing the US,

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Speaker 1: but also in Europe. UM. We think that sort of

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Speaker 1: UM non correlated to that is China, you know, with

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Speaker 1: its underperformance over the last year or so, has it

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Speaker 1: looks pretty cheap so UM excluding UH property and property

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Speaker 1: related sectors become a bit more positive on on broader China.

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Speaker 1: How positive are you on the tech space? UM? So

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Speaker 1: from again, it's kind of a you know, similar to

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Speaker 1: China versus global equities, Asia tech versus global tech, which

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Speaker 1: is basically US we think also looks quite quite attractive.

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Speaker 1: Again beaten down UM kind of videosyncratic reasons. The regulation

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Speaker 1: drive in China, which UM, you know you're seeing the

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Speaker 1: end of it. We think at certainly the end of

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Speaker 1: new UM regulation. Certainly we're seeing some fines coming through

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Speaker 1: UM you know, legacy investigations, etcetera. UM, but we think

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Speaker 1: that that cycle is ending UM and against that, we

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Speaker 1: think that that that's China track is cheap UM and

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Speaker 1: and broader. We think that Asia tech is a definitely

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Speaker 1: area that we'd like to focus on. It seems like

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Speaker 1: even though we can see through some of this that

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Speaker 1: that there's pain ahead that has to be gone through

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Speaker 1: the Asian Development Bank, as I mentioned, has cut its

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Speaker 1: growth forecast for China all the way to four percent

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Speaker 1: from five and it's lowered its estimates for developing Asia

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Speaker 1: down to four point six percent from five point two.

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Speaker 1: How much of that do you think is due to

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Speaker 1: pressure from the FED the stronger dollar versus organic developments.

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Speaker 1: I mean, I think a lot of it is related

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Speaker 1: to global UM events. So for example, you know, we

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Speaker 1: think there's a few key uh I guess arguments playing out.

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Speaker 1: One is inflation versus interest rates, obviously, and that's led

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Speaker 1: by by the US. We think that UM, the zero

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Speaker 1: COVID versus science argument. Science seems to be getting a

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Speaker 1: little bit of a better hand UM in China as

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Speaker 1: they kind of ease off a little bit while still

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Speaker 1: saying they're going for zero COVID UM and the impact

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Speaker 1: of all of those on on corporateating. So if you

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Speaker 1: add all that up, UM, Yeah, certainly there's a risk

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Speaker 1: of slower growth and prolonged inflation UM. And you know,

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Speaker 1: although I haven't seen a DV report, UM, certainly that's

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Speaker 1: what those would be factors that would be part of

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Speaker 1: those down grades, which, by the way, the market is

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Speaker 1: already UM below close to four or below for China

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Speaker 1: growth for this year. UM China's nowhere near going to

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Speaker 1: meet their own target UH five and a half and

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Speaker 1: very likely to see some some stimulus out of out

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Speaker 1: of out of China if they if they want to

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Speaker 1: start to recover within this year. All right, Kiara, I'm

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Speaker 1: gonna have to live it there. Thank you. Kien Cold

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Speaker 1: Ahead of Equity Research for Asia at UVP on the

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Speaker 1: line from Singapore for US here on Bloomberg Daybreak, Asia