WEBVTT - Junheng Li on China Markets (Radio)

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<v Speaker 1>Let's get to June. Hung Lee, founder and CEO at

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<v Speaker 1>Jail Warren Capital. So in terms of timing here, David Kelly,

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<v Speaker 1>a JP Morgan Asset Management says it's now timed by

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<v Speaker 1>stocks and bonds. The sell off has been enough. But

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<v Speaker 1>if you look at the market cap of the Wilshire

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<v Speaker 1>five thousands, that's basically the US stock market, it's about

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<v Speaker 1>thirty seven trillion, and that's hundred and fifty percent of

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<v Speaker 1>g d P. And Warren Buffett has famously said he

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<v Speaker 1>feels more comfortable about eight percent. So what is it?

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<v Speaker 1>Is it time to buy now or still be cautious?

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<v Speaker 1>We remain very cautious. And the UM on Chinese equities,

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<v Speaker 1>I think um if anyone wants to invest in China

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<v Speaker 1>right now, multinationals with exposure to China perhaps is the

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<v Speaker 1>best bet. But even so we think a near term

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<v Speaker 1>COVID risk is still very high. And then you see

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<v Speaker 1>Guandjo new case in Guanjo in New Cases a story,

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<v Speaker 1>and you know all the restrictions are back on again.

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<v Speaker 1>And you know, last last months October um into twentieth

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<v Speaker 1>Party Congress Beijing was kind of impartial lava. And in

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<v Speaker 1>September there was Chando. So it seems like each month

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<v Speaker 1>there will be new hotspot for COVID lavta UM. So

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<v Speaker 1>we don't see any material, meaningful, significant relaxation of a

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<v Speaker 1>zero COVID strategy. So I think even though with that,

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<v Speaker 1>even the central bank continues to loosen monetary policy, pumps

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<v Speaker 1>a liquidity into the market and economy, the velocity of

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<v Speaker 1>the money is holding back the economic recovery. So UM,

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<v Speaker 1>we we see we don't have good visibility as to

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<v Speaker 1>what the normalized economy will be after COVID UM and

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<v Speaker 1>frankly after the new new cabinet started to work uh

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<v Speaker 1>in Q one next year. So um, in the absence

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<v Speaker 1>of a clear visibility of mescycle earnings, UM, of the economy,

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<v Speaker 1>of the public companies we're trying to we're just holding

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<v Speaker 1>back from looking at China directly, all right, So basically

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<v Speaker 1>listen to them when they're saying, look, we are unswervingly

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<v Speaker 1>sticking with COVID zero. What about the property sector though,

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<v Speaker 1>do you think that we've potentially seen a bottom there?

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<v Speaker 1>You saw that huge jump in developer stokes yesterday. Regulators

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<v Speaker 1>expanding financial support there for that sector. But I remember correctly, um,

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<v Speaker 1>the opening in the opening remarks UM other the twentieth

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<v Speaker 1>Party Congress UM they mentioned the ones again homes are

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<v Speaker 1>for living in all for invest So it seems like,

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<v Speaker 1>you know, the central government and s o E s

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<v Speaker 1>are bailing out project by project. But after this restructuring

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<v Speaker 1>or de leverage, um, the s o E property developers

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<v Speaker 1>will play a bigger role in the real estate sectors

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<v Speaker 1>and the non performing or overly lever lever the developers

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<v Speaker 1>will be washed out. And you're certainly showing that you

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<v Speaker 1>are still cautious on the China market story. When we've

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<v Speaker 1>been looking at these capital outflows. What brings that back in?

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<v Speaker 1>Morgan Stanley was saying equities would lead a rebound inflows,

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<v Speaker 1>but what about bond buying? Does that resume at a

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<v Speaker 1>bit of a slower pace? Um. So, like we said

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<v Speaker 1>earlier we discussed the earlier offshore investors remain very cautious

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<v Speaker 1>on China, especially the Chinese equities UM and monitor in

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<v Speaker 1>terms of monetary policy psychost China, the US art divergent. Um.

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<v Speaker 1>The FED is tightening and the PBOC is losening. So um,

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<v Speaker 1>you know, um, we were to see we believe there's

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<v Speaker 1>more downside to reman the US dollar um more downside

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<v Speaker 1>than upside, So in that regard, um, that's another head

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<v Speaker 1>wing for the Chinese equities in Chinese economy in general.

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<v Speaker 1>So yeah, yeah, your argument was pretty cogent that equities

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<v Speaker 1>are not investable in China. Decided to COVID overhang and

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<v Speaker 1>then also some of the other issues with with policy

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<v Speaker 1>and with the property sector. What I'm curious about, though,

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<v Speaker 1>is that you say that the way to play it

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<v Speaker 1>is through multinationals. The issue is I suppose that Boeing

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<v Speaker 1>and Nike and Disney are all companies that have faced

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<v Speaker 1>a lot of headwinds because of some of these same

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<v Speaker 1>policies in China. Would it be better to play Southeast

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<v Speaker 1>Asian companies or European companies that are doing business in

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<v Speaker 1>China or is even that a tricky area. I think

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<v Speaker 1>the current environment is really great for stop kicking. So

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<v Speaker 1>on the broad the broad brush, um, you can argue

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<v Speaker 1>liquidity will be leaving China to our Southeast Asian verzios um.

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<v Speaker 1>You know all those emergent markets, um. But the liquidity

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<v Speaker 1>is not great. So that's why we prefer to play

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<v Speaker 1>China still with multinationals. On on a lo side, as

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<v Speaker 1>well as on the shore side. For example, we very

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<v Speaker 1>much like the idea of the short idea of Tesla

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<v Speaker 1>because effectively, it's a it's a Chinese stock with it's

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<v Speaker 1>more than fifty of the production capacity in China and

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<v Speaker 1>thirty percent of the global shipment coming out of China.

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<v Speaker 1>So and because it's a heavy exposure to China and

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<v Speaker 1>to running b and to the slow economy and to

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<v Speaker 1>geopolitics between US and China, we think it is a

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<v Speaker 1>very interesting stock. So we're trying to look at the

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<v Speaker 1>company by company, and then you know, Nike, on the

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<v Speaker 1>other hand, we believe their substantial upside because you know,

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<v Speaker 1>once the bc I saga is over and the impact

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<v Speaker 1>is gone, uh, the normalize the demand that it continues

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<v Speaker 1>to be very high. UM. So this is a perfect

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<v Speaker 1>environment for stock picks as opposed to macro kind of

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<v Speaker 1>you know, big picture bets. All right, let's talk about

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<v Speaker 1>the currency. We know that a lot of the is

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<v Speaker 1>being due to a dollar strength, but also a lot

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<v Speaker 1>of movement from authorities to try and stabilize the one

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<v Speaker 1>as well, barring, as you say, any major lockdown events.

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<v Speaker 1>Where do we see the un trade? UM? I think um,

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<v Speaker 1>just like I said earlier. UM looks like the central

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<v Speaker 1>bank the government in China continues to losen because in

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<v Speaker 1>the velocity of the money isn't there, So they're trying

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<v Speaker 1>to pump in um as much liquidity into the market,

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<v Speaker 1>into the economy. UH, some in via the infrastructure projects

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<v Speaker 1>and some via you know, the bail else to on

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<v Speaker 1>the unfinished the projects, and some into s O ees.

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<v Speaker 1>So the monetary cycle over there is UH is loosening

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<v Speaker 1>this versus titaning in the US. So we believe UM

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<v Speaker 1>let maybe visa the US dollar will continue to weaken,

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<v Speaker 1>but probably not by a big margin, so probably sideway

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<v Speaker 1>around like seven point two five to seven point five. Okay,

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<v Speaker 1>really quickly, you mentioned Tesla had a good looking profile there.

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<v Speaker 1>What about some of the local makers like Neo and

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<v Speaker 1>Expung and h and the Otto. I think this is

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<v Speaker 1>such an interesting time to look at evs. On the

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<v Speaker 1>one hand, you can argue the regulatory support has given

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<v Speaker 1>such a nice boost to all the EV capacity and

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<v Speaker 1>the productions. On the other hand, the competition is really

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<v Speaker 1>catching up, and that if you are a pure EV player,

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<v Speaker 1>you're only making five thousand to ten thousand cars a

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<v Speaker 1>month and selling that much it is not a real business.

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<v Speaker 1>It's not generally at J. L. Warren Capital