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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Welcome to the Daybreak

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Speaker 1: Asia podcast. I'm Doug Krisner. It was day one of

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Speaker 1: the US government shutdown early Wednesday. The Senate failed to

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Speaker 1: pass a bill that would have reopened operations. Meantime, the

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Speaker 1: White House is now planning to swiftly dismiss federal workers.

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Speaker 1: There was also news in the last session of an

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Speaker 1: unexpected drop in US private sector payrolls, according to ADP,

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Speaker 1: a drop of thirty two thousand. So if you look

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Speaker 1: at market action, yields were down across the treasury curve. Meantime,

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Speaker 1: the equity market finished at record highs, and in a

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Speaker 1: moment or two we'll look at how the US price

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Speaker 1: action is affecting sentiment in the Asia Pacific. But we

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Speaker 1: begin here in the States. Joining me now is John Pantakeites.

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Speaker 1: He is managing partner at Twin Focus. John joining from Boston.

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Speaker 1: Thank you so much, sir for making time to chat

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Speaker 1: with me. A little nervous right now in terms of

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Speaker 1: the levels that the equity market is trading at.

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Speaker 2: We are getting nervous given where they're trading at, given valuations. However,

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Speaker 2: we think you know, given where we think that the

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Speaker 2: FED will go in terms of interest rates, and the

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Speaker 2: US economy is still showing signs that it's even though

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Speaker 2: it's softening, it's not falling apart. We think that, you know,

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Speaker 2: this has room to go. There's lots of plenty of

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Speaker 2: money on the sidelines, and with the FED being more accommodative,

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Speaker 2: equities can have some definitely room to go here, although

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Speaker 2: we're being very selective and where we put our new money.

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Speaker 1: So talk to me about that selection process. Where are

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Speaker 1: you finding value in the equity space right now?

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Speaker 2: Well, we started the year relative to what our peers

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Speaker 2: were doing, we were more equal weight we'd say international

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Speaker 2: development markets and emerging markets, and on the year to date,

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Speaker 2: that's proved to be really a good move and we

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Speaker 2: continue to be positioned that way. Although in the US

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Speaker 2: markets we still like large cap growth that we've outweighed

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Speaker 2: that for years and that continues to do well. We

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Speaker 2: like sectors like utilities, like we still like technology, and

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Speaker 2: would still stay away from certain other sectors like healthcare

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Speaker 2: given the political risks. But you know, that's how we're

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Speaker 2: positioning ourselves with inequities more on the international given where

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Speaker 2: the dollar's going, given the political tensions and what's going

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Speaker 2: on geopolitically.

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Speaker 1: So gold reached a new all time high today during

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Speaker 1: New York trading. I think we got very close to

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Speaker 1: around thirty nine hundred. What is that telling you? What

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Speaker 1: do you make of the gold market these days?

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Speaker 2: What we're saying, it's interesting you raise that we've been

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Speaker 2: big believers in gold for the past decade or so,

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Speaker 2: we've been overweight that what we're seeing is the key

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Speaker 2: difference is if you're looking what's going on with central

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Speaker 2: banks and the reserves, you're seeing central banks decreasing their

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Speaker 2: whole dollars and increasing their holdings in gold, and we

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Speaker 2: think that's a key to what's driving prices. And on

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Speaker 2: top of that, you're seeing now all you know, different

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Speaker 2: advisors recommending bigger and biger allocations to gold. It's becoming

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Speaker 2: more mainstream and that's just feeding the frenzy, and with

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Speaker 2: its continued central market buying, we think that has room

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Speaker 2: to go. We have portfolios probably greater than five percent

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Speaker 2: in gold. You know, since we've held it for such

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Speaker 2: a long time, you know the denominative effect. We're stilling

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Speaker 2: to trim, but we still like gold here.

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Speaker 1: So part of that is the FED story being accommodative,

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Speaker 1: and we've also seen a little bit of easing that's

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Speaker 1: being discounted in the market right now. I think accumulative

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Speaker 1: forty six basis points in terms of what the swaps

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Speaker 1: market is saying between let's say now in the end

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Speaker 1: of the year. How do you think the FED fits

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Speaker 1: into this story right now? And I guess I'm more

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Speaker 1: interested in whether or not there is a risk here

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Speaker 1: that the market is underestimating, and maybe that has to

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Speaker 1: do with inflation being stubborn or perhaps maybe even moving higher. Again,

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Speaker 1: here's what I would say.

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Speaker 2: We're seeing the jobs market, the employment market is definitely softening,

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Speaker 2: and that's a key thing that the FED is looking at.

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Speaker 2: We're seeing housing, which is a key component to CPI

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Speaker 2: that's showing starting to soften, and the economy is getting weaker.

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Speaker 2: So I think that the FED. There's political pressure for

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Speaker 2: the FED to to move lower, and I think that's

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Speaker 2: all going to create a situation where it will move lower.

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Speaker 2: Now inflation again, with employment being where it is softening,

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Speaker 2: with housing softening, you know, at least on the shorter term,

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Speaker 2: it should it should act a little better. Although there's

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Speaker 2: you know, key reasons why over the longer term inflation

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Speaker 2: might be stubbornly high above the FED two percent target.

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Speaker 2: On the shorter term, I think there is a room

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Speaker 2: where the FED can cut given the inflation outlook.

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Speaker 1: So, John, you don't think stagflation is an issue, then,

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Speaker 1: at least not yet.

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Speaker 2: We're not seeing it with what the US economy is doing,

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Speaker 2: what the global economy is doing, and with inflation inflation

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Speaker 2: still you know, it's not running rampant. We don't see

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Speaker 2: stagflation being a major concern here, although we are paying

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Speaker 2: attention to that.

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Speaker 1: So, if you've been a little concerned about valuations in

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Speaker 1: the equity market and you're beginning to get I don't

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Speaker 1: want to say defensive, but cautionary, and I'm wondering whether

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Speaker 1: or not the bond market represents any opportunity for you.

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Speaker 2: You know, the bond market is a funny place given

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Speaker 2: where yields are, given the current geopolitical situation. You know

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Speaker 2: what's happening with treasuries. Is China buying our treasuries? Aren't

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Speaker 2: they buying our treasuries? What impact will that have over

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Speaker 2: the long run. We're being very cautious in terms of bonds.

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Speaker 2: We still like for our clients who tend to be

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Speaker 2: ultra high networth families. We still like municipals here, but

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Speaker 2: we tend to be higher investment grade and we tend

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Speaker 2: to be shorter on the curve, probably between the three

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Speaker 2: to ten year. So we're picking our spots. Are we

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Speaker 2: going crazy with our global fixed income allocations? No, we

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Speaker 2: do like we've liked some emerging markets bond exposure for

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Speaker 2: the FX exposure, and you know, it was a relative trade.

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Speaker 2: It's done really well, spreads have compressed. Would we add

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Speaker 2: to that trade here? Probably not, But we're being very

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Speaker 2: cautious on the fixed income as well.

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Speaker 1: What about opportunities offshore? Where are you finding value these days?

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Speaker 2: Again, we've liked relative to the US, both developed anti

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Speaker 2: emerging markets, emerging markets especially and especially Asia. Let's call

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Speaker 2: it Asia ex China. What's going on with China and

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Speaker 2: the trade situation. We're seeing the rerouting of trade, We're

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Speaker 2: seeing the rerouting of supply chains, and that's been of

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Speaker 2: fitting all the smaller companies surrounding China, and that's where

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Speaker 2: we're probably seeing opportunity. I mean, over the past five years,

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Speaker 2: US markets have doubled, em markets are barely there, are

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Speaker 2: up about forty percent, So there's there's a way to

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Speaker 2: go on a relative basis for those markets, and that's

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Speaker 2: where we're probably seeing some opportunities.

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Speaker 1: So what is the strategy? Is it an ETF play

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Speaker 1: that you look.

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Speaker 2: At mainly ETF on the global equities. We think those

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Speaker 2: markets are very efficient, so we've played on, you know,

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Speaker 2: and we like to get low cost, tax efficient exposure

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Speaker 2: and ETF is probably the best vehicle for that.

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Speaker 1: You talked about things that you might be inclined to

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Speaker 1: lighten up on right now, and I'm curious about areas

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Speaker 1: of the market that you think may have peaked and

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Speaker 1: if you needed to raise a little bit of cash

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Speaker 1: or you needed to kind of look at reducing risk.

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Speaker 1: What areas of the market right now are kind of

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Speaker 1: flashing caution and may prompt you to kind of reduce

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Speaker 1: your exposure.

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Speaker 2: I want to say flashing caution, I would just say

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Speaker 2: flashing Because we've been overweight large cap growth, it's become

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Speaker 2: from the denominator effect the big part of our portfolio.

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Speaker 2: We're just taking profits. We still like it, but we're

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Speaker 2: lightning up there. We're using that as a source to

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Speaker 2: raise cash where we need be.

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Speaker 1: John will leave it there. Thank you so much for

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Speaker 1: joining us. John Pantakets, managing partner at Twin Focus, joining

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Speaker 1: from Boston here on the Daybreak Asia podcast. Welcome back

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Speaker 1: to the Daybreak Asia Podcast. I'm Doug Krisner. Equity markets

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Speaker 1: in the Asia Pacific are trading higher. This is after

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Speaker 1: records for US stocks, and in South Korea, memory chip

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Speaker 1: maker Samsung and sk Heinez are rallying. This on news

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Speaker 1: the companies will supply chips to open ais Stargate project.

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Speaker 1: Joining me now from Singapore is Retesh Canarywall. He is

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Speaker 1: head of Investment and Advisory at Seife. Ritesh, thank you

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Speaker 1: so much for taking time to chat with me. A

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Speaker 1: lot of strength today in information tech in the States.

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Speaker 1: Earlier we had the Nasdaq one hundred finishing at all

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Speaker 1: time high. I mentioned a moment ago the South Korean

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Speaker 1: chip story. We know that the theme of AI has

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Speaker 1: been a big driver of the price section. Are you

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Speaker 1: feeling confident about this trade? Still? Does it have legs

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Speaker 1: to continue?

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Speaker 3: It does seem so, Doug. It's very interesting, Like you know,

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Speaker 3: you see more bad data and the market can't catch

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Speaker 3: a breath. It keeps rallying further higher and higher. And

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Speaker 3: the ai story. The amount of investments that going into

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Speaker 3: the space just continues rolling as well. And the latest

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Speaker 3: that you see is the partnership with you know, of

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Speaker 3: open Ai with Skehihnis as well as Samsung. So that's

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Speaker 3: definitely again propping up these companies that like you know,

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Speaker 3: multi year highs as you see right now, but even

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Speaker 3: last week you saw you know, partnership between Nvidia and

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Speaker 3: open Ai. What's really interesting here is the you know,

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Speaker 3: entanglement of investments that is happening, and it's becoming more

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Speaker 3: and more murky as to how the picture evolves as

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Speaker 3: we move forward and what the applications of these would

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Speaker 3: be in the year to come. But interestingly enough, like

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Speaker 3: if you think about Nvidia, they invest into core Viv,

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Speaker 3: and core Viv, you know, is this data center manufacturer,

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Speaker 3: and that data center capacity is then made available to

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Speaker 3: open Ai. So they have like you know, feeding their

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Speaker 3: own customers in a certain way. And this is interesting

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Speaker 3: because you know, for now the story seems to hold.

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Speaker 3: What will be interesting, of course, is how that pans

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Speaker 3: out in terms of actual implications on the application side

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Speaker 3: as we move forward.

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Speaker 1: I'm curious to get your take on the Nvidia story

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Speaker 1: as it relates to the Chinese market, because we know

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Speaker 1: that Huahwei has been doing very well in terms of

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Speaker 1: its development, and Beijing is actually preferring Huawei over in

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Speaker 1: video when it comes to providing those chips for a

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Speaker 1: lot of the AI companies on the mainland. Do you

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Speaker 1: think this represents a major threat for Nvidia.

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Speaker 3: Not really in a global context. I think China is

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Speaker 3: moving more towards self sufficiency at the stage given the

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Speaker 3: kind of curbs that they have to deal with, and

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Speaker 3: that is actually benefiting the local ecosystem. And you've seen

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Speaker 3: like Ali Baba also coming in in committing more than

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Speaker 3: fifty billion dollars of investments in today I space. Alibaba

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Speaker 3: is up more than one hundred percent this year, so

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Speaker 3: you're seeing that surge a little bit of a late surge,

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Speaker 3: I would say, coming into the Chinese stock market as well.

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Speaker 3: It started with the Deep Seek moment, but I guess

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Speaker 3: we've now had the Ali Baba moment and we will

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Speaker 3: continue to see more such news items coming in from China.

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Speaker 1: It's also been a pretty amazing run for the market

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Speaker 1: in Hong Kong. I think the Hang Saying is up

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Speaker 1: about thirty percent so far this year, is that something

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Speaker 1: you expect will continue?

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Speaker 3: Absolutely. I think again, from a data standpoint, things are

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Speaker 3: still weak within China, but this is more of an

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Speaker 3: expectations based valley, right, Like you know, there is renewed

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Speaker 3: expectations that because data is weak, there will be more

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Speaker 3: policy stimulus that is going to kick in, and we

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Speaker 3: have the fifteenth five year Plan upcoming as well. Plus

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Speaker 3: I think some of the measures that have been taken

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Speaker 3: this is the golden week. You're seeing a surge in

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Speaker 3: you know, the number of interregional trips. There is a

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Speaker 3: lot of like positive sentiment coming in on the consumer

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Speaker 3: and the spending side of things as well. CPI is

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Speaker 3: starting to look a little bit better at point nine

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Speaker 3: percent and all. And from a policy standpoint, I think

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Speaker 3: so far most of the policy stimulus has been exhausted,

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Speaker 3: so investors are really looking forward to, you know, what's

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Speaker 3: next to come from a policy standpoint, as we move forward,

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Speaker 3: the whole anti involution aspects of it, in terms of

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Speaker 3: focusing on quality and you know, really on the demand side,

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Speaker 3: helping with the consumer sentiment, I think that is gonna

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Speaker 3: be the key drivers as we move forward as well.

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Speaker 3: But I think most of the rally, if you see,

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Speaker 3: has been driven a little bit more through the retail participation.

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Speaker 3: So that's very interesting because compared to the US market,

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Speaker 3: the participation of the retail segment in the China markets

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Speaker 3: have been much more pronounced. And I guess like a

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Speaker 3: little bit of fomo, a little bit of you know,

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Speaker 3: the policy expectations as well, but I do see this

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Speaker 3: equity rally continuing on expectations of you know, more policy

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Speaker 3: stimulus coming in.

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Speaker 1: So I'm glad you mentioned the retail trade there because

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Speaker 1: we are now in the Golden Week holiday and I

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Speaker 1: want to get your take on what you're expecting to

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Speaker 1: see in terms of performance among Chinese consumers. Will they

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Speaker 1: come out and spend fiercely?

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Speaker 3: Looks like, look, I think what I read readers, the

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Speaker 3: interregional trips are expected to rise to two point four billion,

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Speaker 3: So that's like four percent, not big, but in the

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Speaker 3: context of the you know, higher bar that's still major

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Speaker 3: uptick that we are seeing. And even in terms of

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Speaker 3: you know, total trips outside of mainland China, that's also

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Speaker 3: doubling year on year as well. So there is definitely

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Speaker 3: you know, positivity that is starting to show up in

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Speaker 3: the market. And as I said, you know, while the

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Speaker 3: consumer sentiment has been weak so far and there is

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Speaker 3: this deflationary trend out there, core CPI is now the

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Speaker 3: more stable you zero point nine percent as well. So overall,

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Speaker 3: I guess, like you know, when it comes to the

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Speaker 3: Chinese consumer, it is really the story of how do

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Speaker 3: you convert the savings into you know, spendings. And on

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Speaker 3: that front, I think investors are just under allocated into

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Speaker 3: the Chinese equity market, both locally as well as globally.

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Speaker 3: And the reality is, like you know, there are not

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Speaker 3: too many options because you know, interest rates are low,

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Speaker 3: bank returns are low, property market is not that attractive.

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Speaker 3: Where do you go? So you know, from that perspective,

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Speaker 3: I do see that momentum continuing going forward as well.

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Speaker 1: I'd like to get your take on trade relations between

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Speaker 1: the US and China. I know this could be a

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Speaker 1: very long conversation on that topic alone. Today we had

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Speaker 1: word that President Trump is intending to confront Chinese President

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Speaker 1: she over Beijing's refusal to purchase American soybeans. Now, apparently

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Speaker 1: Trump is under pressure from Republican lawmakers from agricultural states

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Speaker 1: in the US to break this impasse. We know that

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Speaker 1: China has been diversifying away from the United States when

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Speaker 1: it comes to certain agricultural products, and I'm thinking of

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Speaker 1: a country like Brazil in particular, perhaps secondarily Argentina. Do

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Speaker 1: you think there's going to be a lot more tension

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Speaker 1: that has to be kind of confronted here before we

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Speaker 1: see some type of trade agreement between the US and

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Speaker 1: China worked out.

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Speaker 3: I guess, like in fact, I do see, you know,

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Speaker 3: us feeling the pinch at this point of time, to

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Speaker 3: the extent that like on the agricultural sector. You know,

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Speaker 3: on the AI, you know stand there is great guns blowing,

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Speaker 3: but I think on the agricultural side, as you mentioned,

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Speaker 3: you know, there is problems, and these are problems on

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Speaker 3: the ground to the common man. So that definitely means

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Speaker 3: in my opinion that instead of being more confrontational at

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Speaker 3: the end of the day, Trump will have to have

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Speaker 3: an agreement sooner than later with the Chinese counterparts.

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Speaker 1: So, whether we're looking at the equity market in the

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Speaker 1: US at record highs, or whether we're talking about near

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Speaker 1: records for markets in Asia, whether it's Hong Kong or

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Speaker 1: even South Korea, are you a little concerned right now?

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Speaker 1: Are you apt to become perhaps a little defensive.

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Speaker 3: I think this begs the question of, like, you know,

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Speaker 3: how you're allocating your money and you know at siphe Again,

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Speaker 3: from an investor standpoint, what we have been observing is

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Speaker 3: clients are hedging number one, like, you know, they still

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Speaker 3: want the US growth story. So there's you know, investing

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Speaker 3: into the US market still, but they're hedging their exposures

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Speaker 3: in terms of you know, the dollar weakness that you're observing.

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Speaker 3: And that's a bigger story in my opinion, because if

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Speaker 3: as the dollar weekends, the emerging markets start to become

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Speaker 3: much more attractive as a region, and that's where we

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Speaker 3: have also observed investors, you know, shifting allocations away from

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Speaker 3: the US and into the emerging markets. Some of our

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Speaker 3: you know, China portfolios have the AUMs have doubled in

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Speaker 3: the course of this year. And so these are like

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Speaker 3: some of the aspects that we believe will continue to

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Speaker 3: happen as we move forward, where US dollar based exposure

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Speaker 3: and into the US market itself, that over concentration will

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Speaker 3: get paired out as we move forward. And even in

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Speaker 3: terms of you know, other asset classes, we're seeing more

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Speaker 3: domestic companies and investment opportunities panning out, especially in Singapore

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Speaker 3: for example, the reeds market has been on the uptrend

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Speaker 3: as soon as we hear the story of the FED

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Speaker 3: cutting through the end of this year and as well

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Speaker 3: as next year, plus the banking stocks as well. So

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Speaker 3: with the narrowing rate differentials between the US dollar, US

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Speaker 3: US interstrates and the other markets, that story will continue

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Speaker 3: to evolve as we move forward as well.

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Speaker 1: What about other areas of asion, I'm thinking in particular

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Speaker 1: of India, What do you think of that market these days?

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Speaker 3: I think it's an interesting juncture right now. Obviously there

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Speaker 3: is a lot of tensions with respect to the Indian

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Speaker 3: market again being bogged down a little bit with the

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Speaker 3: tension between US and India, and you've seen that pan

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Speaker 3: out in terms of the tariff's being imposed, in terms

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Speaker 3: of the H one B visa issues as well, and

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Speaker 3: then now into other territories as well. But I think

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Speaker 3: the domestic consumption story and the demographic dividends story of

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Speaker 3: India is still very very intact. In fact, like the

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Speaker 3: number of IPOs that are happening out there, the kind

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Speaker 3: of wealth that is getting created now. I hear that

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Speaker 3: every thirty minutes, there is a millionaire getting created in India.

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Speaker 3: So from all of those aspects, I think the positioning

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Speaker 3: could be more from a standpoint that there's an opportunity

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Speaker 3: for you to come in because the Indian market has

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Speaker 3: been stagnant and over the last one one and a

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Speaker 3: half years, So if you do want to take that position,

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Speaker 3: this might be a great opportunity for you to come in.

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Speaker 3: And there is also this you know, fungibility of capital

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Speaker 3: because we had a juncture a year or so back

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Speaker 3: where there was this em allocation x China that was

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Speaker 3: panning out as a theme, so money was pouring into

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Speaker 3: India and now as China comes back, some of that

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Speaker 3: money is going back into the Chinese side. But from

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Speaker 3: a longer term story, I think, you know, there's definitely

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Speaker 3: an opportunity to you know, pick on the growth story

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Speaker 3: that is secular growth story that's still intact within India.

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Speaker 1: All right, Ritesh, we'll leave it there. Thank you so much.

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Speaker 1: Ritesh Canary Wall is head of Investment and Advisory at

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Speaker 1: siphe joining us here on the Daybreak Asia podcast. Thanks

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Speaker 1: for listening to today's episode of the Bloomberg Daybreak Asia

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Speaker 1: Edition podcast. Each weekday, we look at the story shaping markets, finance,

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Speaker 1: and geopolitics in the Asia Pacific. You can find us

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Speaker 1: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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Speaker 1: else you listen. Join us again tomorrow for insight on

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Speaker 1: the market moves from Hong Kong to Singapore and Australia.

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Speaker 1: I'm Doug Prisoner and this is Bloomberg