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Speaker 1: Let's take a closer look at today's price section with

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Speaker 1: Ni Raj Seth. He has head of Asia Credit at

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Speaker 1: black Rock, joining from our studios in Singapore. Ni Rash

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Speaker 1: thanks for being with us. Some hawkish commentary from Jim Bullard,

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Speaker 1: but he has been a hawk for some time now.

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Speaker 1: He's looking at a terminal rate maybe five in the

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Speaker 1: quarter percent. How does that square with your forecast? So

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Speaker 1: I would say overall, that's not very far from what

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Speaker 1: we would be expecting here. And I think the key

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Speaker 1: point here is as we can imagine, the inflasion issues

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Speaker 1: still very much there. We've seemed dearly some slowdown and

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Speaker 1: potentially a peak in the US inflation, but from a

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Speaker 1: fig perspective, would still far from the target. So the

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Speaker 1: comments are very much to just keep market expectations in

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Speaker 1: line with the focus on inflation and what it will

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Speaker 1: take to get back to the target. Let's talk a

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Speaker 1: little bit about the internal plumbing that we have going on,

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Speaker 1: or it's taking place right now in global bond markets.

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Speaker 1: One of the things that Bullard indicated is that we

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Speaker 1: could see further financial stress ahead collateralized loan obligations. Maybe

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Speaker 1: one market that were cracks are emerging already. Are you

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Speaker 1: seeing signs of stress building? You certainly have seen signs

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Speaker 1: of stress. You've seen obviously typing of financial conditions since

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Speaker 1: the beginning of the year. So over the last week

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Speaker 1: or so, you've seen some easing with obviously the market

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Speaker 1: rally and thebolically coming down, But in general, you're certainly

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Speaker 1: seeing the stress in pockets where you have higher leverage

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Speaker 1: dollar liabilities. If you take the emerging markets complex again,

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Speaker 1: it's probably not in the largest markets, but in the

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Speaker 1: smaller front yeers. You're seeing the pressure given obviously the

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Speaker 1: tightness and liquidity of dollar right now, that's obviously going

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Speaker 1: to continue. So you do see that pocket of stress

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Speaker 1: actually emerging, and I think it will continue as we

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Speaker 1: go into two thousand twenty three. Ni raj I was

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Speaker 1: talking about the situation in China. We're getting indication that

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Speaker 1: regulators there ask banks to report on their ability to

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Speaker 1: make short term obligations. What what is the story here,

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Speaker 1: as you understand it is their financial risk building within

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Speaker 1: the banking system in China. I don't think so. If

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Speaker 1: you look at the data in terms of the banking

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Speaker 1: system right now, you have npls. The last quarter data

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Speaker 1: was still below one point seven percent, and special mentioned

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Speaker 1: loans just shy of two and a quarter. It hasn't

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Speaker 1: changed much, So I don't think it's the issue with

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Speaker 1: regards to risk in the banking system. I think there's

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Speaker 1: obviously a little bit of liquidity management and some pressure

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Speaker 1: on the right side of the market, which is volunteered

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Speaker 1: here given obviously a combination of expectation of the reopening

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Speaker 1: of the economy I've been going into twenty three as

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Speaker 1: well as what you've seen the fiscal push from the

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Speaker 1: government to obviously stem the slowdown that we have seen

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Speaker 1: from a microeconomic perspective. So I think it's less of

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Speaker 1: the banking system issue right now. It's more around of

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Speaker 1: at lead some of the push required for supporting the

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Speaker 1: growth as we're going to the year. In the next year,

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Speaker 1: let's turn our attention to South Korea because the b

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Speaker 1: OK is going to be meeting in the next week.

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Speaker 1: There's some debate as to the magnitude of the next

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Speaker 1: grade hike. There's a lot of inflationary pressure building in

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Speaker 1: in the South Korean economy, but there's also some problems

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Speaker 1: in the credit markets. There. Give me your sense of

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Speaker 1: what is unfolding in South Korea right now and the

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Speaker 1: risk that the b OKA cannot overtighten. So overall, when

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Speaker 1: you think about the structure of the economy in terms

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Speaker 1: of the demographics, the inflation longer term trajectory, not just

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Speaker 1: the current pressure you seek on the system, as well

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Speaker 1: as the household debt level, I do believe that the

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Speaker 1: Bank of Korea cannot continue to tighten for too long

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Speaker 1: all the way to follow the thread, and to some extent,

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Speaker 1: in fact, we'll see the rolling over of inflam ation

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Speaker 1: has we go into next year and potential for the

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Speaker 1: Bank of Korea to go from the tightening to a

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Speaker 1: neutral to potentially an accommodative policy. So I think we

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Speaker 1: are at potentially the pivotal point in Korea from a

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Speaker 1: rates other policy are getting close to the pivotal point

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Speaker 1: in the policy side right now. It's very interesting because

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Speaker 1: they were one of it was one of the first

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Speaker 1: central banks to begin tightening coming out of the situation

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Speaker 1: following the pandemic where inflation was really running rampant. And

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Speaker 1: I'm curious too if if what you're saying holds and

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Speaker 1: the BOK begins to pivot and the FED remains resilient

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Speaker 1: in its effort to fight inflation. What is that divergence

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Speaker 1: create for markets? So, first of all, the divergence obviously

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Speaker 1: will play through the exchange rate markets, but just to

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Speaker 1: be very clear, I think it will be a challenging

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Speaker 1: situation for in general Asian central banks to pivot towards easy.

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Speaker 1: The FED is actually on the hiking path. So what

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Speaker 1: you do need as a precondition for Asian central banks

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Speaker 1: so provo to wor easing is at least effect going

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Speaker 1: on a poble. So I don't think we are there

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Speaker 1: as yet, and hence I think that they wore is

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Speaker 1: still probably sometime in the next few quarters. But you

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Speaker 1: will see obviously some of that link through the effect markets.

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Speaker 1: So I'm curious in terms of an investment strategy, if

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Speaker 1: you're going to put money to work in bond markets

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Speaker 1: right now, on the bed that rates are going to

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Speaker 1: eventually come down, how do you want to be positioned

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Speaker 1: across the curve? So right now I would still stick

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Speaker 1: with the short end of the curve. I still believe

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Speaker 1: we are in a rising great environment. Obviously, the markets

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Speaker 1: have been going back and forth between the inflation risk

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Speaker 1: and the recession risk. Given the comments you've heard from

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Speaker 1: the threat speakers as well as the potential for the

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Speaker 1: fect to keep going. I would still be cautious or

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Speaker 1: underway duration in the local market ten Asia, as well

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Speaker 1: as in the U or the rest of the developed market,

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Speaker 1: and potentially take a more of a longer duration. You're

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Speaker 1: probably going into the next couple of quarters as we

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Speaker 1: start to see the stabilization in the rates wall in

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Speaker 1: the developed market. That's what we're looking for, stabilization in

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Speaker 1: the rates market. Near Rage. Thank you so much for

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Speaker 1: being with us near rag Seth, head of Asian credited

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Speaker 1: Black Rock, joining from Singapore here on Daybreakcasia