Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.
Speaker 2: President Trump's tariffs on US imports of steel and aluminum
Speaker 2: have sparked retaliation both from the European Union and Canada
Speaker 2: as well. Markets are now bracing for those reciprocal tariffs
Speaker 2: from the Trump administration. They are set to be announced
Speaker 2: April to second. So how are em investors setting up
Speaker 2: before then? Joining me now is vvck Supermanium. He is
Speaker 2: founder also the CEO of th Global Capital. Joining us
Speaker 2: from London. Vveck, thank you so much for making time
Speaker 2: to chat with us. I think all major Asian markets
Speaker 2: have seen outflows into the month of March. South Korea, Taiwan.
Speaker 2: Outflows in those jurisdictions seem to have accelerated a bit
Speaker 2: in recent weeks, and I'm wondering whether that's all about
Speaker 2: tariffs or that there's something else afoot.
Speaker 1: Look, I think clearly the developments over the last few
Speaker 1: days have spooked markets, particularly the significant sell off in
Speaker 1: the US. Our view is is that and of course
Speaker 1: there also flows have within em have been interesting. You know,
Speaker 1: last year everybody wrote wrote of China and then with
Speaker 1: the rise of Deep Seek, lots of capital flowed into
Speaker 1: China and out of India, and.
Speaker 3: We think that in general, you know, this too, this
Speaker 3: too will pass.
Speaker 1: As far as uh, the impact of tariffs is concerned, yes,
Speaker 1: we're in for a few months of months of pain,
Speaker 1: but really, you know, what we are focused on is
Speaker 1: is actually, you know, finding opportunity in in this this Spain,
Speaker 1: because valuations are a lot more attractive.
Speaker 2: I'm wondering whether the opportunities are in China. I mean,
Speaker 2: you mentioned the deep Seek story, but we also have
Speaker 2: to recognize the Annual Congress that just concluded, and it
Speaker 2: seems as though leadership confirmed what people were hoping for
Speaker 2: expansionary fiscal policy. Does that cause you to become a
Speaker 2: little bit more bullish on the China story, Well.
Speaker 1: Look, the Hangsang Tech Index has risen by thirty five
Speaker 1: percent a year to date.
Speaker 3: So those have been significant gains.
Speaker 1: And you know, obviously the rise of Chinese e I
Speaker 1: models have boosted market sentiment, as have presidencies engagement with
Speaker 1: business leaders, including Jakmar, which have improved investor confidence. Continued
Speaker 1: reforms and stimulus also are expected, and there have been
Speaker 1: flows to China from other emerging markets. What we need
Speaker 1: to see going forward is you know, first of all,
Speaker 1: EI developments like Deep Seek haven't yet significantly impacted earnings,
Speaker 1: and you know we now need to need.
Speaker 3: To see but that positive impact.
Speaker 1: And you know, actual numbers, the expectations really are just
Speaker 1: two to three percent EPs upgrades.
Speaker 3: And also you know, more confidence.
Speaker 1: And charities needed on China's regulatory policy towards big tech
Speaker 1: and the tech sector as a whole.
Speaker 2: So next week we'll have the earnings from ten Cent.
Speaker 2: How do you evaluate the larger companies, whether it's a
Speaker 2: ten Cent or even Ali Bob, Are there opportunities there?
Speaker 2: And I'm thinking as it relates to AI some of
Speaker 2: the cloud computing that those companies are involved in.
Speaker 1: Yeah, there are certainly opportunities, especially because you know a
Speaker 1: lot of software in China is still on prem and
Speaker 1: the migration to the cloud is a key opportunity and
Speaker 1: that is essential for EI.
Speaker 3: So in general, we.
Speaker 1: Believe that you know, the easy money has been made
Speaker 1: in China and obviously the developments are great for the
Speaker 1: Chinese tech sector, but we'll need to actually see follow
Speaker 1: through action over the next year based on the fundamentals.
Speaker 2: You mentioned a moment ago that money was moving away
Speaker 2: from India and back to China. How do you evaluate
Speaker 2: the Indian market right now?
Speaker 1: Right so, you know, India, we believe is one of
Speaker 1: the most attractive em markets, if not the most attractive market.
Speaker 1: We believe that it remains less exposed to trade risks
Speaker 1: than smaller export heavy economies, given that it's it's quite insulated,
Speaker 1: it's it's very domestic oriented. The economic outlook for India is,
Speaker 1: you know, really the GDP growth forecast it was seven
Speaker 1: point eight percent last year. It's it's expected to be
Speaker 1: six point four percent in the current tier and then
Speaker 1: gradually accelerating from next year to six point five percent.
Speaker 1: It remains the fastest growing large economy, outperforming you know,
Speaker 1: peers like the US which are growing at you know,
Speaker 1: over two percent, and Eurozone in China which is growing
Speaker 1: at for four and a half percent. A lot of
Speaker 1: key indicators have picked up in India and we believe
Speaker 1: that the worst is either behind us or will be
Speaker 1: behind us in the next two to three months. The
Speaker 1: Nifty index is roughly twenty to five hundred. You know,
Speaker 1: there could be some downside to say twenty k or
Speaker 1: nineteen five hundred. That's our technical view is that nineteen
Speaker 1: five hundred is probably where the bottom is and we
Speaker 1: expect that to be reached in the next you know,
Speaker 1: two to three months.
Speaker 3: Obviously, don't hold us to it.
Speaker 1: Okay, hard to call the bottom, but we think that
Speaker 1: we've got into an attractive zone in India where I
Speaker 1: should start nibbling and perhaps loading up as the next
Speaker 1: couple of months past.
Speaker 2: So what are the industries in India that you want
Speaker 2: to have exposure to right now? Is it the banking compoundent,
Speaker 2: is it more tech related or focused on the consumer?
Speaker 2: Which is it?
Speaker 1: The key themes you know that we are focusing on
Speaker 1: India are financials which should grow you know, higher than
Speaker 1: GDP growth rates. And there's you know, there are a
Speaker 1: lot of many attractive companies there. Obviously, you know, the
Speaker 1: last couple of decades have produced some some stupendous winners
Speaker 1: and financials in India, for example Bad Judge Finance, which
Speaker 1: was one thousand, seven hundred bagger over that the last
Speaker 1: you know, twenty odd years, and also stallwarts like ed
Speaker 1: SDFC Bank, and we see that you know, in spaces
Speaker 1: like housing finance, the non banking financial sector and selectively banks.
Speaker 1: There are some some exciting companies out there. There's also
Speaker 1: the digitization team. India is going through a massive phase
Speaker 1: of digitization and there are plays around that and that
Speaker 1: includes you know, payments and an e commerce adoption and
Speaker 1: also selectively consumer discretionary FEVERC.
Speaker 2: Before I let you go, I know you're in London there,
Speaker 2: so I'd like to get your take on the movement
Speaker 2: of money into European markets one and Two, how are
Speaker 2: people in the UK feeling right now about it seems
Speaker 2: to be a global trade war.
Speaker 1: I think people in the UK are feeling feeling pretty
Speaker 1: good about you know, Stama's recent visit to the US
Speaker 1: and you know what seemed like a diplomatic win, and
Speaker 1: we are feeling somewhat insulated.
Speaker 3: You know, as a result. Also, of course, you know, Europe.
Speaker 1: European markets seemed to have done decently in recent months,
Speaker 1: so you know, certainly seems like a glimmer of hope
Speaker 1: or more for Europe after a long phase of underperformance.
Speaker 2: A long phase, I think that's an understatement. VVCK thank
Speaker 2: you so much for joining us. VVAK Supermanium, founder CEO
Speaker 2: of th H Global Capital, Joining from London here on
Speaker 2: the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
Speaker 2: I'm Doug Krisner. Most of the equity market gained ground
Speaker 2: today after two days of heavy losses, and today's advance
Speaker 2: followed a cool reading on consumer prices. Even so, I
Speaker 2: think it's important to point out the risk of inflation
Speaker 2: rearing back up. We have seen a series of tariffs
Speaker 2: and as a result, prices are expected to rise on
Speaker 2: a variety of goods that could test the resilience of
Speaker 2: American consumers and, by extension, the broader economy for a
Speaker 2: closer look. Joining me now is Burns McKinney. He is
Speaker 2: Managing director also senior portfolio manager at NFJ Investment Group.
Speaker 2: Burns on the line from Dallas, Texas. How are you
Speaker 2: feeling about the price action over the last couple of days, Burns?
Speaker 4: A lot of what we're seeing in the last couple
Speaker 4: of days just really, I hate to say it, but
Speaker 4: a lot of us getting back to policymakers. You know,
Speaker 4: one way we like to think about the Trump presidency
Speaker 4: is that you know, and this is going back to
Speaker 4: the way it was twenty sixteen during Trump one point zero,
Speaker 4: but you have sort of imagine the angels on the shoulders.
Speaker 4: You have the good Trump and the bad Trump. On
Speaker 4: one side, you have the things that the market likes,
Speaker 4: like tax cuts and deregulation, and then on the other
Speaker 4: side you have tariffs and trade wars. And you know, early,
Speaker 4: I think, you know, shortly after the inauguration, investors were
Speaker 4: focused a bit more on the potential for tax cuts,
Speaker 4: But of late the narrative has really shifted to tariffs
Speaker 4: as as well as just the uncertainty around those tariffs.
Speaker 4: I think that one of the things that the.
Speaker 5: Market doesn't like. It doesn't like uncertainty as much as anything.
Speaker 4: And you know, if you have you know, tariff and
Speaker 4: positions and then reprieved and tariff and reprieve.
Speaker 5: Yeah, I've been kind of laughing.
Speaker 4: I haven't seen a thing this on again off against
Speaker 4: since Ross and Creacial on friends. But the markets definitely
Speaker 4: don't like that a whole lot.
Speaker 2: You know, after the election, I think many in the
Speaker 2: market were of the view that the threat of tariffs
Speaker 2: were nothing more than a negotiating strategy. But now it
Speaker 2: seems like we're into something that's much more ideological. Does
Speaker 2: that concern you?
Speaker 4: It absolutely does I think that again, tariffs can be
Speaker 4: useful as a as a tool or negotiating tactic, but
Speaker 4: you know, it really is a means to an end
Speaker 4: rather than an end in and of itself. And yeah,
Speaker 4: I noted that. You know, one of the things that
Speaker 4: you know, you think, well, what are the impacts? And
Speaker 4: you know, one of the macro effects is that uncertainty
Speaker 4: that I was just speaking of may lead companies to
Speaker 4: pause capital investments and slow down acquisitions and slow down hiring.
Speaker 5: And of course, you know, really.
Speaker 4: The biggest factor is how does this impact FED policy?
Speaker 4: And you know, the question that investors have is, you know,
Speaker 4: whether the FED is focused a little bit more on
Speaker 4: the inflationary impacts of the tariffs, which you might cause
Speaker 4: it to pause interest rate cuts for longer, or whether
Speaker 4: it's focused on the longer term impacts that may slow
Speaker 4: future growth. I think that the FED is in weight
Speaker 4: and see mode and trying to be data dependent, so
Speaker 4: we don't necessarily expect a cut in the near term.
Speaker 4: But that's really the place where investors should probably focus on,
Speaker 4: is the impact on the FED.
Speaker 2: That's interesting to me because I think markets right now
Speaker 2: are still fully pricing in the first quarter point rate
Speaker 2: cut in June, and I think you total, there's about
Speaker 2: sixty seven basis points of easing that has been factored
Speaker 2: in for all of this here. But you're of the
Speaker 2: view that the Fed is still going to kind of
Speaker 2: just drop back and adopt more of a wait and
Speaker 2: see approach.
Speaker 3: Is that it?
Speaker 4: You know, we don't expect one in the near term,
Speaker 4: but probably June is I think what is being priced in.
Speaker 4: I think, you know, two to three cuts this year
Speaker 4: is probably what would be expected. And that's a great
Speaker 4: example of exactly how the market is viewing this, because
Speaker 4: you know, as recently as a month ago, markets were
Speaker 4: only pricing in one cut, and so now I think
Speaker 4: that you know, what that is telling us is that
Speaker 4: the markets are actually focusing a bit more on the
Speaker 4: economic growth and the slowing of economic growth of tariffs,
Speaker 4: more so than even the inflationary impacts. But you know,
Speaker 4: in general, I think that you know, one investors can
Speaker 4: look at is that tariffs, if you look at history,
Speaker 4: they can be you know, stagflationary, and I think that
Speaker 4: that's one of the ring you know, and the fact
Speaker 4: that investors are starting to price in a little bit
Speaker 4: higher likelihood of a recession. Now it's still less than
Speaker 4: fifty percent, but you know, there's certainly a weight and
Speaker 4: see mode and it's very very difficult to predict what's
Speaker 4: going on. You could get a boost in the markets
Speaker 4: if we you know, if the call it the Trump
Speaker 4: put comes back into play, as the president maybe looks
Speaker 4: at the stock market as a scoreboard to help influence
Speaker 4: policy decisions.
Speaker 2: So it seems though that the health of the labor
Speaker 2: market is really the next great test for the growth story, right.
Speaker 4: That is, and you know, at least the good news
Speaker 4: there is that the labor market has stayed solid. You know,
Speaker 4: you had you know what, one hundred and fifty thousand
Speaker 4: jobs last month, is down a little bit from some
Speaker 4: of the recent months. But yeah, nevertheless, I think one
Speaker 4: of the things that the economy can can stand on
Speaker 4: is the fact that, you know, you're still looking at
Speaker 4: unemployment covering pretty close to four percent, and we saw
Speaker 4: just yesterday that the number of job openings had crept up,
Speaker 4: and so that we're at a place now where the
Speaker 4: number of job openings is pretty close to equal to
Speaker 4: the number of those seeking you know, filing unemployment, which
Speaker 4: is again down from where it's been in recent years
Speaker 4: in the post COVID surge, but it really puts us
Speaker 4: in a place that we're probably even better off there
Speaker 4: than we.
Speaker 5: Were in twenty nineteen. And the consumer has certainly been
Speaker 5: a workhorse.
Speaker 2: So take everything that you've been saying and formulate and
Speaker 2: investment strategy. What would it look like?
Speaker 4: Well, the first thing when we start formulating an investment strategy,
Speaker 4: especially for longer term investors, the first thing you have
Speaker 4: to focus on is, you know, what are evaluations right now?
Speaker 4: If you go back a year ago, markets were in
Speaker 4: any way climbing a wall of work. You were afraid
Speaker 4: of a recession with an inverted yield curve. We were
Speaker 4: afraid of high inflation and uncertain certain election. And as
Speaker 4: of opening this year, you have you had a lot
Speaker 4: of multiple expansion, evaluation expansion that drove the markets up
Speaker 4: to north of twenty percent last year. It's the second
Speaker 4: big year in a row. Going forward, marks are still
Speaker 4: probably priced a little bit for complacency. You have, valuation
Speaker 4: metrics are high. You know, the way we're sort of
Speaker 4: looking at this year is that if last year was
Speaker 4: you know, think of a football game, you know, the
Speaker 4: quarterback through the ball forty yards downfield. You saw the
Speaker 4: same thing in twenty twenty three. This year and next
Speaker 4: year might be because of those high evaluations. More like
Speaker 4: the good old fashion. You know, run the darn ball
Speaker 4: and you know, three.
Speaker 5: Yards and a cloud of dust. I think investors, you certainly.
Speaker 4: Don't want to fight an accommodative FED. You don't want
Speaker 4: to fight tax cuts either, but investors should probably expect
Speaker 4: more muted returns going forward, and so we wouldn't sell
Speaker 4: the market, but maybe focus on some areas that might
Speaker 4: be a little bit more defensive, dividend paying stocks or
Speaker 4: start you're starting to see perhaps a broadening of returns
Speaker 4: and maybe a paradigm shift away from some of the
Speaker 4: megacap tech towards areas like companies that are paying and
Speaker 4: growing dividends.
Speaker 2: I'd like to get your view on the American consumer.
Speaker 2: Recently we heard from both Delta air Lines American Airlines.
Speaker 2: They're very concerned about a pullback in travel leisure track
Speaker 2: and by extension, that did some damage to hotels. Also
Speaker 2: a company like Airbnb. How do you understand the American
Speaker 2: consumer right now in terms of their health?
Speaker 4: Well, again, you know, job openings are still solid, and
Speaker 4: so you know, I mean, but at the same time
Speaker 4: you are starting to see you know, you mentioned some
Speaker 4: of the travel companies that sounded alarms, you know, Walmart
Speaker 4: was another one. I think it was a couple of
Speaker 4: a couple of weeks back, whereas you know, they tend
Speaker 4: to be a bell weather for consumer spending, and they
Speaker 4: suggested that it is going to be a little bit softer.
Speaker 4: That said, I think that the good news there with
Speaker 4: respect to the consumer is that we're starting from a
Speaker 4: point of having a little bit of a cushion. You know,
Speaker 4: the consumer spending has been fairly solid, so the point
Speaker 4: that you know, if we're seeing signs of softness now,
Speaker 4: we could be softening to something that after you know,
Speaker 4: big surges that we've had in twenty twenty two, twenty three,
Speaker 4: you know, maybe something that's a little bit more long
Speaker 4: term sustainable going forward.
Speaker 5: You know.
Speaker 4: Just yeah, if you come out trying to run a
Speaker 4: marathon five minute mile, you're going to burn up pretty quickly.
Speaker 4: But if you kind of come out at a little
Speaker 4: bit more measured pace, it could allow us to maybe
Speaker 4: push off any sort of hard landing for.
Speaker 5: A little bit longer.
Speaker 2: So mortgage rates have come in a bit as well,
Speaker 2: I mean, that's got to be another positive it is.
Speaker 4: Yeah, I think that that's certainly a positive. That said,
Speaker 4: housing valuations are still fairly rich, and so even with
Speaker 4: lower mortgage rates, which you know, economy certainly needs. Yeah,
Speaker 4: I think that's something where the economy overall might not
Speaker 4: necessarily expect to get a big boost from housing, which
Speaker 4: is certainly a huge part of the economy.
Speaker 2: Are you inclined to look offshore given everything that we've
Speaker 2: been describing here and some of the turbulence that's been
Speaker 2: associated with kind of the equity market behavior as it
Speaker 2: relates to questions over the impact of tariffs, where we
Speaker 2: go in terms of earnings, the inflation story, where the
Speaker 2: FED is in all of this. I mean, are you
Speaker 2: inclined to maybe look to a place like Europe or
Speaker 2: is that trade pretty much already been effectively put to
Speaker 2: good use.
Speaker 4: No, I think there's there's a lot of meat on
Speaker 4: the bone there as far as the overseas trade. You've had,
Speaker 4: you know, circumstances where US equities have been you know this,
Speaker 4: this this concept of US exceptionalism has allowed US equities
Speaker 4: to perform over five years and and and ten plus years,
Speaker 4: and that's not necessarily going to be unwound in the
Speaker 4: span of a month or two. And you know, you
Speaker 4: have very historically wide valuation discrepancies, whereby you know, places
Speaker 4: like Europe or even the emerging markets UH trade in
Speaker 4: line with to even discounts to their historical averages, whereas
Speaker 4: the US is.
Speaker 5: Trading at a premium.
Speaker 4: And you know, one of the things that I think
Speaker 4: might be driving some of that near term outperformance of
Speaker 4: overseas stocks of late has been that, you know, whereas
Speaker 4: you know, the U, you know, I think the US
Speaker 4: is seeing you know, the FED pausing versus you know,
Speaker 4: in the EU monetary policy may be a little bit
Speaker 4: easier going forward. And so there's a lot to like there.
Speaker 4: But it really again starts and finishes with lower I mean,
Speaker 4: obviously European equities have historically traded in a discount to
Speaker 4: the United States, but that discounts as wide as we've
Speaker 4: seen in a long time.
Speaker 2: Last question, before I let you go, I'll give you
Speaker 2: twenty seconds to answer. Will we fall into recession here
Speaker 2: in the US this year?
Speaker 5: The odds are still against it.
Speaker 4: The odds now, the odds have been climbing over the
Speaker 4: last couple of months, and there are fears of hard
Speaker 4: landing or stagflation, but you know, we're still looking at
Speaker 4: you know, certainly less than the fifty to fifty chance
Speaker 4: of a recession this year.
Speaker 5: They could see employments fairly solid and the Fed.
Speaker 4: You don't want to fight the Fed, and the Fed
Speaker 4: could revert to easing mode again.
Speaker 2: Burn's always a pleasure. Thank you so much, Burns McKinney. There.
Speaker 2: He is Managing director also Senior portfolio Manager at NFJA
Speaker 2: Investment Group. Joining from Dallas, Texas here on the Daybreak
Speaker 2: Asia Podcast. Thanks for listening to today's episode of the
Speaker 2: Bloomberg Daybreak Asia Edition podcast. Each weekday look at the
Speaker 2: story shaping markets, finance, and geopolitics in the Asia Pacific.
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