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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg day Break Asia Podcast. I'm Doug Chrisner.

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Speaker 2: It was very much a risk off day in the US.

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Speaker 2: Equities sold off, especially the big tech names, and this

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Speaker 2: selling wiped out more than a trillion dollars in market

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Speaker 2: value for US stocks. Corporate bond sales were scrapped as

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Speaker 2: a lot of fear and uncertainty spiked. And in a

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Speaker 2: moment we'll be speaking with Scott Landner. He is the

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Speaker 2: chief investment officer at Horizon Investments. But we begin in China,

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Speaker 2: where mainland investors bought an unprecedented three point eight billion

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Speaker 2: dollars worth of Hong Kong stocks on a net basis

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Speaker 2: in the Monday session. Joining me now is Ben Harberg.

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Speaker 2: He is the founder also portfolio manager at Core Values Alpha.

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Speaker 2: Ben is based in Beijing. Ben, always a pleasure. Thanks

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Speaker 2: for making time to chat with us. Did you make

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Speaker 2: of the buying yesterday in Hong Kong? Can you give

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Speaker 2: me some insight here?

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Speaker 1: Our view is that people are finally kind of coming

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Speaker 1: to their senses and also starting to feel safe again

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Speaker 1: that they can come back to the public markets. You know,

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Speaker 1: the Chinese had stayed away largely to do with, you know,

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Speaker 1: the kind of austerity environment that we've encountered, of real

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Speaker 1: estate prices collapsing, rock bottom portfolio values, you know, lack

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Speaker 1: of really consistent stimulus package, a fear of where people's

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Speaker 1: next paycheck might come from, and we really felt to bottoming.

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Speaker 1: And that's the reason why we started our ETF eighteen

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Speaker 1: months ago, was a view that that that the market

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Speaker 1: was itself bottoming and that we were in a countercyclical

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Speaker 1: environment visa in the United States. These two economies are

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Speaker 1: no longer coupled at all, and the US was at

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Speaker 1: unprecedented heights and in most instances, I think, un irrationally

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Speaker 1: valued most many and mini companies. And so I think

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Speaker 1: what we were waiting for, and what I think people

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Speaker 1: in Hong Kong been waiting for, was were kind of

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Speaker 1: some of these catalytic events. And one of them, for instance,

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Speaker 1: was this deep Seak moment right where kind of exposed

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Speaker 1: a bit of the hubris of US tech, but also

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Speaker 1: the potency and resilience of Chinese technology. And then you had,

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Speaker 1: you know, you had historically the government in Beijing kind

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Speaker 1: of at odds with technology entrepreneurs just in the last

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Speaker 1: week or two, we had meetings where high profile entrepreneurs

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Speaker 1: like Jack maulmet directly with Shijinping. We had during the

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Speaker 1: Central Party Congress or the National People's Congress a focus

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Speaker 1: on technology and kind of a description of it being

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Speaker 1: the core and main driver of future growth in the country.

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Speaker 1: And so the net result of all that bottoming stability

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Speaker 1: stabilizing power is that I think people were recognizing that

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Speaker 1: a lot of these equities were significantly undervalued, They see

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Speaker 1: a secular support from the Chinese government, and they are

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Speaker 1: therefore buying.

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Speaker 2: Well, let's talk a little bit more about the support

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Speaker 2: from the government, because as part of the two Sessions meeting,

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Speaker 2: we heard from Premier Lee Chung, and there's seems like

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Speaker 2: a lot more on the way in terms of government stimulus.

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Speaker 2: And I'm wondering if you kind of make that connection

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Speaker 2: with the sentiment that we had in the Monday session.

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Speaker 1: Absolutely, I mean again, so we had kind of four

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Speaker 1: I call them four levers of growth that would drive

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Speaker 1: the Chinese stocks significantly higher than where they've been valued today.

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Speaker 1: When was that stabilization of real estate and public portfolios

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Speaker 1: where people maybe became less afraid to spend or take

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Speaker 1: a bit more risk. Two was this future stimulus package,

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Speaker 1: which has been promised but really kind of still continued

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Speaker 1: to dribble out, and obviously we got kind of solid

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Speaker 1: rhetoric around that during the Congress. The third was that

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Speaker 1: reevaluation of equities, you know, as a result of deep

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Speaker 1: seek or whatever else. And then the fourth is that

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Speaker 1: there would be some kind of pragmatic trajectory for US

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Speaker 1: trade dynamics. So if any one of those four levers

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Speaker 1: is pulled, and it doesn't have to be all four,

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Speaker 1: we think we'd see an uptake inequities and uptick in valuations.

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Speaker 1: And we're getting and we're getting kind of inklings now

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Speaker 1: of two out or three out of four of them.

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Speaker 2: Yesterday in Australia, one of my colleagues sat down with

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Speaker 2: Malcolm Turnbull, the former PM of Australia, and essentially what

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Speaker 2: he said is that the way in which President Trump

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Speaker 2: is behaving, his treatment of long time allies, is providing

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Speaker 2: an opportunity for China, especially if President Chichinping can essentially

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Speaker 2: do the opposite of what Trump is doing, which is

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Speaker 2: to say, being consistent, respectful, predictable, and maybe that's a

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Speaker 2: way of inviting some capital into China, what do you think.

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Speaker 1: So, certainly the ETF numbers, the public equity numbers would

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Speaker 1: tell you that global capital is starting to come back

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Speaker 1: to China and it's staying away from some of the

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Speaker 1: markets that were kind of net recipients of some of

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Speaker 1: the off flow, and that was, you know, the likes

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Speaker 1: of Japan or India. So I think that the capital

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Speaker 1: is certainly coming back, and it does have a unique

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Speaker 1: moment in time here. They were already, you know, the

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Speaker 1: leading trading partner to most of the key economies around

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Speaker 1: the world. They were already kind of perfecting the bill

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Speaker 1: to kind of take global their technology companies, kind of

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Speaker 1: next generation technology companies in a way that their hardware

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Speaker 1: was already going global. And so the Chinese today are

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Speaker 1: dominating in electric vehicles and say the Middle East, or

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Speaker 1: cross border e commerce in Latin America, you know, digital

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Speaker 1: social networking and gaming obviously through lights of TikTok across

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Speaker 1: the world. And so it's an opportune moment for them,

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Speaker 1: and they do have the ability to differentiate from the West.

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Speaker 1: And I think what really is critical for them is

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Speaker 1: stimulating domestic consumption because right now they're operating the trade

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Speaker 1: deficit or surplus spending on what side you're sitting on

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Speaker 1: with almost every one of their trade partners, and if

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Speaker 1: they can somehow figure out a way to reconcile that

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Speaker 1: a bit to buy more goods from those countries and

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Speaker 1: make it feel more reciproble plus being more stable and

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Speaker 1: less emotional and more predictable, then there's a really unique

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Speaker 1: moment in time for China.

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Speaker 2: I want to get your view on the tariff story.

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Speaker 2: We know what the US is doing to Chinese imports

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Speaker 2: into the United States, and yesterday Chinese tariffs of up

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Speaker 2: to fifteen percent and on US agricultural goods took effect.

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Speaker 2: Do you think this is something that markets are going

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Speaker 2: to have to deal with for a while longer or

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Speaker 2: is this part of a strategy and negotiation and will

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Speaker 2: have resolution in short order.

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Speaker 1: So it's a dance. And to some degree, markets were

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Speaker 1: anticipating much worse, right, I mean, we'd heard, you know,

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Speaker 1: things like sixty percent tariffs, and so there was this

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Speaker 1: kind of fear already baked in. And so when that

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Speaker 1: dropped to ten percent and now increased up to you know,

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Speaker 1: say twenty percent on certain goods from the US, side

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Speaker 1: that felt like a discount on the trade. And then

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Speaker 1: you know the Chinese, I think, for their part, obviously,

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Speaker 1: in kind of in the first inning, they tried to

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Speaker 1: take a very soft touch. They didn't hit back hard

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Speaker 1: against the US in terms of the tariffs that they

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Speaker 1: were imposing onto goods coming into the US or coming

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Speaker 1: out of the US into China. And then this time

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Speaker 1: round it feels like they are rationing it up there,

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Speaker 1: taking a little bit of a playbook, you know, the

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Speaker 1: Canadian playbook, and going after some of those agricult culture

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Speaker 1: products that are coming out of swing states or states

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Speaker 1: that were supportive of the Trump campaign. And so I

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Speaker 1: do think there will be this kind of tit for

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Speaker 1: tat dance. But I do think that President Trump is

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Speaker 1: highly transactional.

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Speaker 3: He wants to do a deal.

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Speaker 1: We've seen deals being struck in record time elsewhere, and

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Speaker 1: so I think if the Chinese are willing to come

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Speaker 1: to the table with authentic kind of ability to enforce

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Speaker 1: what they agreed to, because the problem wasn't trade at

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Speaker 1: one point, oh they didn't, you know, they didn't do

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Speaker 1: what they said they were going to do. So if

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Speaker 1: there are some types of protections against that, I think

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Speaker 1: you'll see a deal done and that will be that

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Speaker 1: fourth level that I mentioned that will really drive upward

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Speaker 1: Chutton's equities.

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Speaker 2: Over the weekend, we learned that consumer inflation in China

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Speaker 2: was down in the month of February. So we're deeper

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Speaker 2: into deflation, with the CPI falling seven tens of one

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Speaker 2: percent from last year, and I think we're below zero

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Speaker 2: now for the first time in thirteen months. Obviously this

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Speaker 2: is a critical problem. Are you confident that Beijing can

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Speaker 2: can solve this conundrum?

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Speaker 1: It didn't shock us to see those numbers. We've not

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Speaker 1: expected any real improvement around those. It is still a

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Speaker 1: very tough day to day market in China, so still hard,

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Speaker 1: you know, for even consumer facing businesses in the discretionary

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Speaker 1: spending space to attract much much capital out of people

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Speaker 1: that are really bunkered down and worried again about the

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Speaker 1: equity value in their home and their stock portfolios, and

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Speaker 1: worry where their next paycheck is going to come from.

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Speaker 1: So we still don't feel that livelihood jumping back into

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Speaker 1: the Chinese market. Our thesis was simply that Chinese equities,

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Speaker 1: even in this high deflationary environment, were still massively undervalued

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Speaker 1: relative to their western piers and therefore deserving of a

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Speaker 1: rerating which will drive upward the value of RTF and others.

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Speaker 1: And so we didn't need to see an improvement in

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Speaker 1: the consumer picture in China to YEP rewards rep awards,

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Speaker 1: But I think that will come as all those kind

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Speaker 1: of kind of components stabilized around stimulus and in real estate.

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Speaker 2: Ben will leave it. There are always a pleasure. Thank

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Speaker 2: you so much at Ben Harberg there. He is a

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Speaker 2: founder also a portfolio manager at Core Values Alpha. Ben

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Speaker 2: is based in Beijing. Joining us here on the Daybreak

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Speaker 2: Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm

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Speaker 2: Doug Chrisner. So the US equity market sold off on Monday,

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Speaker 2: given a lot of anxiety over slower growth as the

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Speaker 2: result of tariffs and those government firings over the weekend.

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Speaker 2: President Trump refused to rule out the possibility of a recession,

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Speaker 2: and today the S and P five hundred tumbled by

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Speaker 2: two point seven percent. For a closer look, I'm joined

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Speaker 2: now by Scott Ladner. He is the chief investment officer

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Speaker 2: at Horizon Investments. Scott is on the line from Charlotte,

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Speaker 2: North Carolina. Thanks for making time to chat with us.

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Speaker 2: It's always a pleasure. I'm curious to hear what you

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Speaker 2: have to say about how clients were reacting to this

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Speaker 2: enormity of selling today.

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Speaker 3: Yeah, hey, thanks and thanks for having me on.

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Speaker 4: Look the clients are, they're starting to they're starting to

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Speaker 4: freak out a little bit.

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Speaker 3: We actually did a kind of an.

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Speaker 4: Impromptu webinar of our clients this morning and it got

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Speaker 4: you know, what I thought was but I thought would

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Speaker 4: be you know, if I thought maybe ten people get

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Speaker 4: on or t one of people get on.

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Speaker 3: We had a couple hundred people on this.

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Speaker 4: People are definitely interested in what's and what's going on

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Speaker 4: and sort of you know, people's take on it because

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Speaker 4: they just don't they don't understand. I mean, folks are

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Speaker 4: generally confused and it all, you know, I can think

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Speaker 4: it really all stems from this idea that uh, Trump

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Speaker 4: two point oh isn't like Trump one point oh, and

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Speaker 4: that and that has caught an investors very much by surprise.

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Speaker 2: Today we had the S and P five hundred breaking

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Speaker 2: below that two hundred day moving average in there. I

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Speaker 2: referred to this earlier in the day that there is

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Speaker 2: an old saying on the street that nothing good happens

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Speaker 2: below the two hundred day. Is this concerning to you

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Speaker 2: on a technical basis, Yeah, it's and you know, I would.

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Speaker 4: Say I thought mildly concerning on a technical basis. You

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Speaker 4: know that you're absolutely right, nothing does good happen under

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Speaker 4: the two hundred day. But there are some signs on

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Speaker 4: the other side of that that that we could take

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Speaker 4: in some positives.

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Speaker 3: You know.

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Speaker 4: One of those is, you know a lot of systematic

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Speaker 4: selling that that I think is driven part of this

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Speaker 4: unwind and probably part of the selling. It can be

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Speaker 4: from baal heartening strategies or from from monit trading advisors,

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Speaker 4: kind of menum traders. You know, those are probably likely

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Speaker 4: exhausted or very close to being exhausted, and so and

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Speaker 4: so you know, the additional selling pressure coming off the

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Speaker 4: back of us from that kind of technical element, it's

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Speaker 4: probably gonna be someone limited. But but you know, that

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Speaker 4: doesn't mean that we're out of the woods yet.

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Speaker 2: Certainly, when the tariffs were first put in place, there

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Speaker 2: were a lot of analysts saying this was nothing more

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Speaker 2: than a negotiating ploy, that they would not be lasting.

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Speaker 2: I think the street is coming to terms with the

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Speaker 2: possibility that these tariffs could be extended into the future,

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Speaker 2: and maybe that's creating a lot of stability. Trump seems

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Speaker 2: to want to make a point here, and he's trying

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Speaker 2: to kind of deglobalize, uh, the economy to some extent.

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Speaker 2: Would you agree with that?

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Speaker 4: Yeah, Look, I think it's kind of hard to disagree

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Speaker 4: with that right now, Doug. It's it's, you know what,

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Speaker 4: what we're where. We're getting out a Trump two point oh,

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Speaker 4: which is different than Trump one point oh. Is like

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Speaker 4: we're dealing now with an ideologue rather than as a

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Speaker 4: than with a pragmatist. So I think you can make

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Speaker 4: the case that in Trump's first term he was willing.

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Speaker 4: He's much more of a pragmatist about some of this stuff,

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Speaker 4: and he was really willing to do almost anything in

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Speaker 4: order to not take pain, either economic wise or or

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Speaker 4: market wise. And this, you know, this, run this, you

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Speaker 4: know this. This time around, it seems like we got more.

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Speaker 4: You know, he's acting more like an ideologue. He just

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Speaker 4: he just thinks these are the right things to do,

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Speaker 4: and he's willing and almost it seems like almost welcoming

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Speaker 4: some short term economic pain in order to enact some

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Speaker 4: of these policies. And that's you know, that makes and

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Speaker 4: that's just think that he doesn't really have their back

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Speaker 4: in a way that I think folks generally assumed that

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Speaker 4: he would after horr he behaved in his first term,

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Speaker 4: and that is you know, that's that's causing you know,

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Speaker 4: this this ideologue versus pragmatist sort of realization is definitely

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Speaker 4: causing a major, major rethink about you know, what he means,

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Speaker 4: at least in the short term for markets.

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Speaker 2: So it shouldn't really be a surprise that thes were

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Speaker 2: in favor today. We had yields falling quite a bit

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Speaker 2: across the curve. At the long end, the tenure was

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Speaker 2: down more than eight basis points today. I think we

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Speaker 2: were last quoted in New York at around four point

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Speaker 2: two one percent. And the market I think was also

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Speaker 2: supported not just by this notion of slower economic growth,

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Speaker 2: but the bet that the Fed is going to come

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Speaker 2: to the rescue here and policymakers are essentially going to

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Speaker 2: be forced to have to slash interest rates. So if

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Speaker 2: we get three rate cuts this year, is that within

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Speaker 2: your thinking at this point, or maybe it's too soon

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Speaker 2: to make that call.

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Speaker 3: It's probably still a little too soon.

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Speaker 4: We're actually in the campdug that we thought they were

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Speaker 4: done with everything. We thought this was they sort of

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Speaker 4: settled on what they where they were going to be.

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Speaker 4: We thought that was done with either hikes or cuts.

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Speaker 4: But certainly, you know, sort of the momentum that we've

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Speaker 4: seen out of out of some of these economic numbers

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Speaker 4: over the last thirty or forty five days, it brings

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Speaker 4: in a question like, you know, are we having we

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Speaker 4: are going to have a little bit of growth scare

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Speaker 4: because the secreencing of the bad stuff first, like tariff

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Speaker 4: stuff first, and the good stuff later, you know, the

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Speaker 4: regulation impaxes later. You know that that is that is

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Speaker 4: you know, certainly calling in the question how strong this this?

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Speaker 3: This?

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Speaker 4: What is a strong economy? How long can it stay

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Speaker 4: this way? With some of these headwinds that we didn't

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Speaker 4: think we're going to be a big edwinds, but they're

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Speaker 4: certainly turning out to be, so that that is definitely

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Speaker 4: caught in.

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Speaker 3: A bit of a bit of a pickle. You know,

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Speaker 3: I thought Pawell did.

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Speaker 4: A great job of kind of talking about the four

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Speaker 4: You know, they need to understand that they didn't net

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Speaker 4: impact of ford Trump.

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Speaker 3: Policy, not just the tariff stuff.

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Speaker 4: You know, if they need to understand that impact of

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Speaker 4: you know, trade policy, immigration policy, regulatory policy, and fiscal

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Speaker 4: policy and see how all those things end up wrapping

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Speaker 4: up together in order to effect the economy or they

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Speaker 4: have any competence to move. And we're obviously a long

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Speaker 4: way from any of those things being solved.

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Speaker 2: So Scott, I'm curious, given everything that you are laying

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Speaker 2: out there, how is this changing your investment strategy these days?

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Speaker 3: Well, it's it's not, I would say, isn't changing it drastically.

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Speaker 4: I mean, we certainly have some protection strategies that clients

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Speaker 4: I think are probably happy.

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Speaker 3: They're in right now.

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Speaker 4: But but but overall, this is still an economy that

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Speaker 4: has amazing some amazing talents at it. You know, the

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Speaker 4: AI thing is real. I mean, the productivity games we're

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Speaker 4: to get out of this in a global basis is massively, massively, uh,

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Speaker 4: you know, like the important for the global economy. And

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Speaker 4: because US consumers are in amazing shape and there's no

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Speaker 4: leverage in the system and so you know, there is

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Speaker 4: some really good things out there, but we're dealing with

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Speaker 4: like the short termed out of unexpected unexpected uncertainty because

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Speaker 4: we thought we knew Trump, and it turns out maybe

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Speaker 4: we didn't quite know them as well, and that is,

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Speaker 4: you know, that's driving the next few months to be

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Speaker 4: probably pretty choppy. But once we get to the back

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Speaker 4: half of this year, Doug, we're pretty bullish on stuff

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Speaker 4: and we think this is going to be some pretty

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Speaker 4: good buying opportunities. But if you know, if you have

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Speaker 4: a short term horizon trama, hangout until we get to

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Speaker 4: till late springer.

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Speaker 3: Early summer. But you know, if you've got a longer.

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Speaker 4: Term perspective, we're getting some pretty good deals in like

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Speaker 4: that are actually coming into play right about now.

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Speaker 2: I don't want to get political necessarily, but Elon Musk

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Speaker 2: was saying today that he is essentially calling for cuts

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Speaker 2: to an titlement spending and that would include Social Security

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Speaker 2: and Medicare. This was during an interview with Fox Business,

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Speaker 2: and he pointed out the obvious that most federal spending

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Speaker 2: is in entitlements and that's the big one to eliminate.

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Speaker 2: In his words, that seems to contradict what we've been

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Speaker 2: hearing or have heard from the president's pledge not to

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Speaker 2: touch those programs. How do you feel right now about this,

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Speaker 2: Doge movement and the way that it's impacting market psychology.

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Speaker 1: Is it a.

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Speaker 2: Positive, is it a negative? Where do you come down

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Speaker 2: with this?

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Speaker 4: So, you know, in terms of markets psychology as a

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Speaker 4: clear negative, you know, this is I'm not gonna I'm

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Speaker 4: not going to stand here and argue that that you know,

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Speaker 4: cutting cutting federal spending and sort of rationalizing some things

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Speaker 4: and moving some workers from the public sector into the

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Speaker 4: private sector.

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Speaker 3: You know, those things are all probably pretty like really

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Speaker 3: good things over the medium and long term.

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Speaker 4: But if they're they're undoubtedly a challenging thing from a

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Speaker 4: from a from a kind of near term perspective. We've

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Speaker 4: seen through COVID and through and periods this like afterwards,

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Speaker 4: that the market rewards this kind of expansionary fiscal policy.

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Speaker 4: You know, this is part of the reason, you know,

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Speaker 4: not the only reason that part of the reason why

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Speaker 4: the US has equity market has been so dominant is

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Speaker 4: because US fiscal expansion has been so dominant, whereas places

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Speaker 4: like Europe and China have basically refused to spend money.

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Speaker 4: And now that's you know, what we're seeing over the

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Speaker 4: last couple of weeks, really last week, that that paradigm

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Speaker 4: might be shifting and shifting pretty mediately if the US

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Speaker 4: is going to be sort of in a period of

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Speaker 4: negative fyscoal thrust or at least kind of note note

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Speaker 4: fiscal expansion and uh, you know whereas places like you know, Germany,

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Speaker 4: Europe and possibly even China enter into a period of

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Speaker 4: fiscal expansion, that investors, you should stand up and take

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Speaker 4: notice of this.

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Speaker 3: You know.

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Speaker 4: That's that is the kind of thing that markets, equity

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Speaker 4: markets especially tend to really pay attention to rewards. So

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Speaker 4: that's that's that's pretty much top of mind for us

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Speaker 4: right now.

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Speaker 2: Scott will leave it there. Thank you so much for

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Speaker 2: joining us. Scott Ladner there. He is the chief investment

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Speaker 2: officer at Horizon Investment. Joining from Charlotte, North Carolina. Here

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Speaker 2: on the Daybreak Asia Podcast. Thanks for listening to today's

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Speaker 2: episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

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Speaker 2: we look at the story shaping markets, finance, and geopolitics

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Speaker 2: in the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 2: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 2: Join us again tomorrow for insight on the market moves

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Speaker 2: from Hong Kong to Singapore and Australia. I'm Doug Chrisner,

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Speaker 2: and this is Bloomberg.