WEBVTT - Day 2 of Xi-Putin Visit 0:00:02.480 --> 0:00:06.800 Bloomberg Audio Studios, podcasts, radio news. 0:00:10.480 --> 0:00:14.280 This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis 0:00:14.280 --> 0:00:17.000 along with Doug Krisner. Join us each day for the 0:00:17.040 --> 0:00:20.440 stories making news and moving markets in the Asia Pacific. 0:00:20.640 --> 0:00:23.080 You can subscribe to the show anywhere you get your 0:00:23.079 --> 0:00:27.040 podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and 0:00:27.080 --> 0:00:28.440 the Bloomberg Business app. 0:00:29.120 --> 0:00:31.840 And now one of our main stories, China and Russia 0:00:31.920 --> 0:00:37.240 promising to intensify cooperation encountering the US. Russian President Putin 0:00:37.440 --> 0:00:40.280 is in Beijing for a state visit. Now, mister Putin 0:00:40.320 --> 0:00:44.480 and Chinese President She have warned of growing nuclear tension 0:00:44.600 --> 0:00:48.440 between their countries and the United States. We spoke earlier 0:00:48.440 --> 0:00:51.800 with JP Morgan Chase CEO Jamie Diamond. He says, despite 0:00:51.880 --> 0:00:56.360 geopolitical tensions, the US needs to engage fully and deeply 0:00:56.440 --> 0:00:57.160 with China. 0:00:57.320 --> 0:00:59.680 China is not a natural eneer of the United States. 0:01:00.120 --> 0:01:03.080 A lot of their own problems. So you know, to me, 0:01:03.160 --> 0:01:05.560 we could work together as best we can and then 0:01:05.600 --> 0:01:08.920 we have common interest climate, anti nuclear. 0:01:08.560 --> 0:01:12.720 Deforation, JP Morgan Chase CEO Jamie Diamond. Now, despite these 0:01:12.760 --> 0:01:16.800 heightened tensions, he is moving with caution in China. By 0:01:16.840 --> 0:01:19.120 the way, he was speaking earlier with Bloomberg's friends in 0:01:19.200 --> 0:01:23.399 Laqua at JP Morgan Chase's Global Markets conference in Paris. 0:01:23.480 --> 0:01:27.319 Brian, let's bring in John Leu, Bloomberg executive editor in 0:01:27.400 --> 0:01:31.200 Beijing for a discussion about this. So, John, I'm curious 0:01:31.360 --> 0:01:34.240 whether or not you know, we see the relationship between 0:01:34.280 --> 0:01:37.759 Russia and China as transactional in nature, that's what many 0:01:37.840 --> 0:01:42.320 analysts say, or one of shared values and warm bonds. 0:01:43.760 --> 0:01:47.160 I think there's I think there's a little bit of both. 0:01:47.280 --> 0:01:50.960 I think there's no denying that the relationship serves both 0:01:51.400 --> 0:01:54.760 China and Russia well. At this point in time. There 0:01:54.840 --> 0:01:57.320 is a long history between these two countries. Part of 0:01:57.360 --> 0:02:03.800 that history was quite tense. There was a conflict back 0:02:03.800 --> 0:02:07.480 in the sixties and seventies between China and Russia. There's 0:02:07.480 --> 0:02:10.480 a long border that the two countries share. More recently, 0:02:10.520 --> 0:02:14.520 I think the fact that both of them have major 0:02:14.600 --> 0:02:17.040 differences with the United States and with the Western general 0:02:17.080 --> 0:02:20.600 that has pushed the two together and has been a 0:02:20.600 --> 0:02:23.200 big reason why the relationship is strengthened in the recent past. 0:02:23.480 --> 0:02:27.200 Is the dependency on one another pretty much balanced, or 0:02:27.560 --> 0:02:30.560 does someone have the upper hand. Let's say, does China 0:02:31.160 --> 0:02:35.880 essentially have the upper hand in this relationship with Russia? 0:02:35.960 --> 0:02:39.639 Economically, China is the much bigger player on the global stage. 0:02:39.760 --> 0:02:43.600 It is technologically and when it comes to electric cars, 0:02:43.639 --> 0:02:45.760 when it comes to batteries, all sorts of these things. 0:02:46.919 --> 0:02:50.320 China is more advanced when it comes to technology and 0:02:50.360 --> 0:02:54.320 know how, and so in this relationship, especially given the 0:02:54.360 --> 0:02:56.840 fact that Russia is essentially cut off from the global 0:02:56.840 --> 0:02:59.519 economy in many ways because of the war in Ukraine, 0:03:00.120 --> 0:03:03.720 has to depend on China. It doesn't really have another choice, 0:03:04.120 --> 0:03:05.840 and so if you look at it from that perspective, 0:03:06.080 --> 0:03:07.960 China has advantages in that relationship. 0:03:08.560 --> 0:03:12.519 Vladimir Putin described a relationship as one of the main 0:03:12.800 --> 0:03:16.720 stabilizing forces in the international arena. Many in the West 0:03:17.040 --> 0:03:20.000 would probably scoffit that a little bit, But what about 0:03:20.040 --> 0:03:20.799 global South. 0:03:22.440 --> 0:03:24.920 I think the global South is I would call it 0:03:25.000 --> 0:03:29.480 sitting on the fence at this moment. Obviously, from mister 0:03:29.520 --> 0:03:34.840 Putin's perspective, the war he's prosecuting. The prosecuting in Ukraine, 0:03:34.840 --> 0:03:40.800 he would argue as legitimate protecting Russian rights. Obviously, there 0:03:40.800 --> 0:03:43.360 are many the United States of the West at large 0:03:43.400 --> 0:03:45.440 who would object to that, who would say no, it 0:03:45.520 --> 0:03:48.600 is he who is the aggressor. I think for the 0:03:48.640 --> 0:03:53.800 Global South, they are more interested in economic development, how 0:03:53.840 --> 0:03:58.480 to improve the living standards of their populations, and this war, 0:03:58.800 --> 0:04:02.880 I think is having some real down side effects that 0:04:02.920 --> 0:04:07.480 are not good for that that effort, and so there 0:04:07.560 --> 0:04:11.040 is a real interest in seeing some way to put 0:04:11.040 --> 0:04:12.000 it into the conflict. 0:04:12.120 --> 0:04:14.440 So if the Global South is sitting on the sidelines, 0:04:14.480 --> 0:04:16.760 and then I think it's basically the European Union and 0:04:16.800 --> 0:04:21.440 the US against China and Russia. I mean, am I 0:04:21.520 --> 0:04:23.359 right in that? And in what is the kind of 0:04:23.360 --> 0:04:27.599 the level of tension that exist? Are we stalemated here 0:04:27.720 --> 0:04:30.560 or is something going to give in one way or 0:04:30.680 --> 0:04:31.000 the other? 0:04:32.240 --> 0:04:34.279 I think the China, the way that I have heard 0:04:34.320 --> 0:04:38.880 the Chinese position on Ukraine described, is sitting on the 0:04:38.920 --> 0:04:43.520 fence but leaning very significantly pro Russia. And so what 0:04:43.560 --> 0:04:47.640 you have seen is China providing rhetorical support, China providing 0:04:47.680 --> 0:04:51.200 things that are dual use technology, so things that have 0:04:51.520 --> 0:04:54.880 a civilian but also potentially a military use. What we 0:04:54.920 --> 0:04:57.560 have not seen is China is not like North Korea 0:04:57.720 --> 0:05:02.160 or Iran, providing weapons for the Russian war effort. And 0:05:02.200 --> 0:05:06.839 so it is I think certainly Putin and she have 0:05:06.880 --> 0:05:09.920 a very strong relationship in Beijing is trying to support Russia, 0:05:10.000 --> 0:05:14.760 does not want to see Russia fall apart. Is it 0:05:14.800 --> 0:05:18.440 is it explicitly US West versus Russia and China. I 0:05:18.480 --> 0:05:20.279 think that's a little bit hard to say at the moment. 0:05:21.240 --> 0:05:23.960 So we know that there's a lot of symbolism at 0:05:24.000 --> 0:05:26.240 play here, and we've talked a little bit about that. 0:05:26.720 --> 0:05:31.200 Also some practical considerations, some contracts signed, some agreements made. 0:05:32.040 --> 0:05:33.680 You know, I don't want to put you on the 0:05:33.680 --> 0:05:35.479 spot and go into a lot of detail on this, 0:05:35.600 --> 0:05:37.760 but if you could just in broad strokes talk a 0:05:37.800 --> 0:05:40.119 little bit about what they are achieved in that area. 0:05:41.160 --> 0:05:46.240 So there, the two economies are becoming ever more integrated, 0:05:46.480 --> 0:05:49.880 and that is partly because they fit because Russia produces 0:05:49.920 --> 0:05:53.000 a lot of energy commodities that China needs in China 0:05:53.040 --> 0:05:56.680 has a lot of consumer manufactured goods that China that 0:05:56.760 --> 0:06:00.000 Russia now needs to import because it cannot from anywhere else, 0:06:00.440 --> 0:06:03.240 and so they fit economically, but also because of the war, 0:06:03.360 --> 0:06:07.559 because Russia is dependent more on China economically than ever before, 0:06:07.600 --> 0:06:10.320 the two countries have become much more integrated so we've 0:06:10.320 --> 0:06:14.159 seen agreements when it comes to agricultural products to AI 0:06:14.440 --> 0:06:17.799 to all sorts of industries, and I think that will continue. 0:06:17.839 --> 0:06:21.200 And you actually heard mister Putin talking about how ninety 0:06:21.240 --> 0:06:23.400 percent of trade between the two countries now is being 0:06:23.440 --> 0:06:27.120 done in ruble and and emphasizing that that now protects 0:06:27.160 --> 0:06:29.279 them against a third country of the United States. 0:06:29.400 --> 0:06:30.960 When it comes to oil, we know that a fair 0:06:30.960 --> 0:06:33.080 amount of oil from Russia is going to China, but 0:06:33.120 --> 0:06:35.200 I don't think we can ignore the fact that a 0:06:35.279 --> 0:06:38.719 lot of Iranian crude has made its way to China 0:06:38.839 --> 0:06:41.279 for refining, and this has been a real source spot 0:06:41.320 --> 0:06:45.200 for the Treasury Department. With the possibility of sanctions being 0:06:45.240 --> 0:06:49.480 imposed on Chinese financial institutions, can you imagine a world 0:06:49.520 --> 0:06:51.320 john where something like that would unfold. 0:06:52.600 --> 0:06:57.400 I think the Chinese financial institutions, especially the big global players, 0:06:57.440 --> 0:07:01.120 have been extremely cautious about how how they deal with 0:07:01.560 --> 0:07:09.000 Russian interest, Russian companies, Iranian companies, any any any entity 0:07:09.080 --> 0:07:12.720 that is sanctioned, because the last thing they want to 0:07:12.720 --> 0:07:16.040 be is cut off from the US dollar markets around 0:07:16.080 --> 0:07:18.520 the world, and that that would be that would be 0:07:18.560 --> 0:07:21.960 extremely harmful to their well being. And so they are 0:07:21.960 --> 0:07:24.240 being very careful. That does not rule out that there 0:07:24.240 --> 0:07:29.360 are some companies in China who are less integrated with 0:07:29.400 --> 0:07:32.840 the global economy and global markets who would take that risk. 0:07:33.920 --> 0:07:36.400 I think this is an ongoing issue and will continue 0:07:36.400 --> 0:07:39.080 to be as long as the United States and China 0:07:39.160 --> 0:07:42.680 cannot agree on what is the what is the best 0:07:42.680 --> 0:07:44.600 way forward for the world at. 0:07:44.520 --> 0:07:47.640 Large, John, I wanted to just spend a minute talking 0:07:47.640 --> 0:07:50.920 about the IMF and its criticism of the United States 0:07:51.560 --> 0:07:56.360 really on a number of levels, surging debt, trade restrictions, 0:07:56.400 --> 0:07:59.200 and some of these policies that are aimed at China 0:07:59.720 --> 0:08:02.960 any in the FED. So I'm curious, you know, the 0:08:02.960 --> 0:08:05.920 the IMF is is basically saying, why can't we all 0:08:05.960 --> 0:08:10.560 get along? Is the IMF mostly in blame with the 0:08:10.680 --> 0:08:13.559 US or does it share some of that blame for China? 0:08:14.680 --> 0:08:18.000 I think I think over the last thirty years, in 0:08:18.040 --> 0:08:20.640 the more recent past, we lived through a period of 0:08:21.720 --> 0:08:27.840 global economic integration of free trade where goods, capital and talent, 0:08:27.920 --> 0:08:30.240 people for the most part, were able to move very 0:08:30.280 --> 0:08:34.319 freely around the world. That is coming to an end, 0:08:34.360 --> 0:08:36.920 and I think that is becoming more obvious by the day. 0:08:37.840 --> 0:08:42.040 And you heard we interviewed Emmanuel Maccron, the President of France, 0:08:42.080 --> 0:08:44.720 and he talked about how now the US is anti 0:08:44.960 --> 0:08:49.880 w World Trade Organization, China's anti World Trade Organization. It's 0:08:49.880 --> 0:08:52.120 only Europe that's still supporting the W two. So I 0:08:52.120 --> 0:08:54.439 think a lot of people are feeling that way that 0:08:55.200 --> 0:08:57.160 what used to be the world order, the way the 0:08:57.200 --> 0:08:59.720 global economy worked, is now changing. And I think the 0:09:00.080 --> 0:09:03.400 mf's complaint about US policy reflects. 0:09:02.960 --> 0:09:06.920 That we have the new president, that of Taiwan that 0:09:06.960 --> 0:09:09.320 will be inaugurated next week, and we know, as you 0:09:09.360 --> 0:09:11.440 said to us the last time we had a chance 0:09:11.480 --> 0:09:13.679 to visit, John, that this is obviously the hot spot 0:09:13.960 --> 0:09:17.040 when you look at US China. Is there something that 0:09:18.200 --> 0:09:22.000 Russia Ukraine has taught China about how to approach a 0:09:22.040 --> 0:09:24.280 situation like Taiwan very quickly? 0:09:25.320 --> 0:09:28.400 I think the Ukraine situation probably is going to make 0:09:28.480 --> 0:09:33.800 Beijing more cautious about any considerations about military options because 0:09:34.160 --> 0:09:36.200 that has not worked out the way that the Russians 0:09:36.360 --> 0:09:38.800 vision that about Vladimir Putin. The vision has not been 0:09:38.840 --> 0:09:43.200 a quick war executed swiftly. And Taiwan, unlike Ukraine, is 0:09:43.200 --> 0:09:46.199 an island, it is protected by the United States. It 0:09:47.240 --> 0:09:50.120 would be a much more challenging proposition than I think 0:09:50.240 --> 0:09:50.959 Ukraine has been. 0:09:52.040 --> 0:09:53.880 John, thanks so much for taking out the time to 0:09:53.920 --> 0:09:57.680 be with us, John Liu, Bloomberg Executive Editor in Beijing. 0:10:04.600 --> 0:10:06.720 Let's get to our guests. An it'sa NIP head of 0:10:06.760 --> 0:10:10.920 fixed income research for Asia at upp I. So we 0:10:10.960 --> 0:10:13.600 had some FED speak today and they hit some familiar 0:10:13.640 --> 0:10:17.079 notes there with higher for longer on rates. The FED 0:10:17.120 --> 0:10:20.040 maybe in a little bit of a tricky position here. 0:10:20.280 --> 0:10:22.640 I want to get your views on this because they 0:10:22.679 --> 0:10:26.240 didn't want to overreact after about three months of harder 0:10:26.280 --> 0:10:29.520 inflation readings. Now we just got a little softer inflation 0:10:29.640 --> 0:10:32.000 reading and they probably will feel some pressure not to 0:10:32.080 --> 0:10:34.680 overreact to this either, so they'll have to kind of 0:10:34.720 --> 0:10:38.560 maintain this positioning of higher for longer for at least 0:10:38.559 --> 0:10:43.680 a time. How does that affect your approach to fixed income? 0:10:44.120 --> 0:10:47.440 Basically, we reckon that the inflation it's going to be 0:10:47.520 --> 0:10:51.080 sticky going forward, even though we see one figure on 0:10:51.160 --> 0:10:53.360 the core CPI which has been seems to be lower. 0:10:53.440 --> 0:10:56.520 But I think for fat themselves one figure may not 0:10:56.679 --> 0:10:59.040 be good enough really to determine the trend. They need 0:10:59.080 --> 0:11:03.360 to monitor more the labor market since showing some sort 0:11:03.360 --> 0:11:06.160 of weakness from the non vane perio number last time. 0:11:06.200 --> 0:11:09.079 But then again, you know, one figure doesn't mean anything, 0:11:09.160 --> 0:11:11.840 So I think FED would be patients and at the 0:11:11.840 --> 0:11:14.760 same time they will monitor the data. What we feel 0:11:14.880 --> 0:11:18.120 would be cut could happen in December this year rather 0:11:18.160 --> 0:11:20.720 than you know, like the market sort of consensus of 0:11:20.760 --> 0:11:23.319 saying July we reckon that. You know, FED would more 0:11:23.440 --> 0:11:27.240 need more time to look at that, so most likely 0:11:27.320 --> 0:11:30.360 there will only be one cut December twenty twenty four. 0:11:30.880 --> 0:11:31.560 Can we talk. 0:11:31.440 --> 0:11:33.840 About China now? There is so much going on there, 0:11:33.960 --> 0:11:36.959 especially where the property market is concerned. One of our 0:11:36.960 --> 0:11:40.679 Bloomberger reporters pushed out a story talking about the government 0:11:40.679 --> 0:11:42.839 in Beijing planning to hold a meeting today with key 0:11:42.880 --> 0:11:46.920 officials to discuss remedies. And today, from what I understand, 0:11:47.120 --> 0:11:48.920 is the day that we're going to have the ultra 0:11:49.000 --> 0:11:51.720 long bonds sold into the market. I think it's about 0:11:51.720 --> 0:11:54.319 one hundred and thirty eight billion. How do you expect 0:11:54.320 --> 0:11:56.960 this sale to go? Well? 0:11:57.520 --> 0:12:01.760 Basically, the the long bonds, Oh, it's more targeting for 0:12:01.880 --> 0:12:05.640 the infrastructure projects. From what we reckon, we reckon, it 0:12:05.760 --> 0:12:09.199 could receive, you know, pretty good response. The main reason 0:12:09.240 --> 0:12:12.040 we'll be there has been sort of like limited supply 0:12:12.160 --> 0:12:15.120 on the long end for a while, so anything that 0:12:15.160 --> 0:12:17.720 put out at the moment would definitely help to set 0:12:17.720 --> 0:12:20.160 the benchmark curve and at the same time, you know, 0:12:20.800 --> 0:12:23.840 for people to be able to invest longer. Talking about 0:12:23.880 --> 0:12:26.840 the property market, the measures that they you know, trying 0:12:26.840 --> 0:12:30.160 to put up, it's basically trying to clear a few things. 0:12:30.240 --> 0:12:32.880 First will be to look at the inventory level, because 0:12:32.920 --> 0:12:35.280 I think that's the top focus that they have. Will 0:12:35.320 --> 0:12:38.400 be sort of lower the inventory level that at the moment. 0:12:39.120 --> 0:12:41.280 The other will be trying to restore the confidence of 0:12:41.320 --> 0:12:46.040 the buyer and also to stabilize the price of the property. 0:12:46.160 --> 0:12:48.360 So I think they need to target it, you know, 0:12:48.440 --> 0:12:51.280 in different ways in order to stabilize the market. But 0:12:51.320 --> 0:12:53.640 at this point we reckon, you know, we still would 0:12:54.080 --> 0:12:57.520 look at what's going on and what's the policy they're 0:12:57.559 --> 0:13:01.280 going to come up. We still reckon that those defaulted 0:13:02.080 --> 0:13:05.400 property developer would still continue with their restructuring because of 0:13:05.440 --> 0:13:07.320 the quidity tight So. 0:13:07.400 --> 0:13:10.880 On the story that we moved about officials meeting with 0:13:10.960 --> 0:13:14.400 various sectors of the market trying to push local governments 0:13:14.440 --> 0:13:17.240 to buy up some of these unsold homes. Obviously the 0:13:17.360 --> 0:13:20.320 developers who are beneficiary in their stocks jumps, what do 0:13:20.320 --> 0:13:22.600 you think about their credit? I mean, is there is 0:13:22.640 --> 0:13:25.360 there sort of a sneaky time to make some money. 0:13:25.120 --> 0:13:29.000 There in a way? I think you know their target 0:13:29.040 --> 0:13:33.160 is basically to clear inventory. At the moment, we still 0:13:33.160 --> 0:13:35.760 need to see what the plans look like. In particular, 0:13:35.840 --> 0:13:38.560 they're saying that they're all they are you going to 0:13:38.640 --> 0:13:42.080 buy from a properly developer at this counter prices? And 0:13:42.120 --> 0:13:44.400 what sort of this counter prices would that have a 0:13:44.440 --> 0:13:47.080 spill over impact to this secondary market as well on 0:13:47.160 --> 0:13:49.719 other properties. So we don't know yet. So we need 0:13:49.760 --> 0:13:51.320 to look at the plan and how it's going to 0:13:51.400 --> 0:13:55.240 fund it through s OE, through LGV. So I think 0:13:55.480 --> 0:13:57.480 there's a lot of questions still on what sort of 0:13:57.480 --> 0:14:00.880 plan they're going to come up equities and bonds. I 0:14:00.880 --> 0:14:03.400 will look at it in a different way because for 0:14:03.679 --> 0:14:07.600 developers who are unable to make payments, those deforce it, 0:14:07.679 --> 0:14:09.920 I think they would still continue with the restructuring. But 0:14:10.040 --> 0:14:13.000 those that have been surviving I think definitely would be 0:14:13.040 --> 0:14:14.960 a good move for them to improve their liquid to 0:14:15.000 --> 0:14:16.440 say so, we get the. 0:14:16.520 --> 0:14:18.080 Data at the top of the hour of the monthly 0:14:18.080 --> 0:14:20.760 activity data for April. I'm wondering if there's a house 0:14:20.920 --> 0:14:25.320 view from UBP on what we're likely to see, especially 0:14:25.360 --> 0:14:26.800 where the consumer is concerned. 0:14:28.360 --> 0:14:30.440 We reckon that it could you know, sort of like 0:14:30.800 --> 0:14:34.560 stabilize a little bit in particular on the consumption side, 0:14:35.080 --> 0:14:38.480 but were not particularly you know, like looking at a 0:14:38.600 --> 0:14:41.720 significant jump in terms of the consumption. But we think 0:14:41.760 --> 0:14:43.480 that it's going to be sort of like you know, 0:14:43.560 --> 0:14:44.520 neutral going forward. 0:14:45.040 --> 0:14:48.360 So we've talked quite a lot about China today. Where 0:14:48.360 --> 0:14:52.200 else in Asia would you see value in credit or 0:14:52.320 --> 0:14:53.400 indeed in sovereigns. 0:14:53.760 --> 0:14:55.960 Well, we have to look at, you know, where the 0:14:55.960 --> 0:14:58.440 fat would go right at the moment, we reckon like 0:14:58.520 --> 0:15:00.640 December will be the time that is going to get 0:15:00.720 --> 0:15:02.840 rigged cut, So fixing income we look at it would 0:15:02.880 --> 0:15:05.640 be more for carrey rather than for capital gain. 0:15:05.880 --> 0:15:06.400 For Asia. 0:15:06.480 --> 0:15:08.680 We like some of the short data Hong Kong corporates, 0:15:08.720 --> 0:15:11.200 some of the local banks here in which they're giving 0:15:11.240 --> 0:15:13.760 you around like six percent yel which is not too bad. 0:15:14.120 --> 0:15:16.440 And we also like some of the Korean corporates and 0:15:16.480 --> 0:15:18.640 also banks, but they are just around like five point 0:15:18.720 --> 0:15:21.480 three five point five percent, which is not too exciting, 0:15:21.520 --> 0:15:23.600 but good for carry. We also like some of the 0:15:23.720 --> 0:15:27.000 Japanese insurance company, but they are a little bit longer integration. 0:15:27.440 --> 0:15:29.960 We still prefer IG three to five years. But then 0:15:30.320 --> 0:15:33.080 one thing that I you know, we recently increase exposure 0:15:33.120 --> 0:15:35.480 with short data high yield because we reckon that credit 0:15:35.520 --> 0:15:37.840 spread would be resilient. So it's you know, would be 0:15:37.840 --> 0:15:39.680 good to look at some of the Indian high yield 0:15:39.680 --> 0:15:40.360 at this stage. 0:15:40.480 --> 0:15:43.920 Okay, Well, Anita, thanks very much, not only for the 0:15:43.960 --> 0:15:46.640 discussion but for coming into our studios here. We appreciate 0:15:46.680 --> 0:15:49.160 it and it's a nip. Head of fixed income research 0:15:49.200 --> 0:15:51.240 for Asia at ubp. 0:15:57.600 --> 0:16:00.800 Our guest is adri Go, a head of set allocation 0:16:01.000 --> 0:16:05.440 for Standard Chartered Wealth Management Group. Audrea joins us from 0:16:05.440 --> 0:16:07.920 the line city of Singapore. Good of you to stop 0:16:07.960 --> 0:16:10.480 by final trading day of the week. A couple of 0:16:10.480 --> 0:16:13.160 things seem to be positive for risk assets right now. 0:16:13.400 --> 0:16:15.840 In the States, I think the market is kind of 0:16:15.920 --> 0:16:19.640 increasingly confident in this idea of a genuine soft landing. 0:16:20.280 --> 0:16:25.360 And from the China side, we're getting indications that officials 0:16:25.400 --> 0:16:28.360 are really kind of trying to address the property problem 0:16:28.360 --> 0:16:34.160 and maybe maybe the economy will feel some sense of fortification. 0:16:34.800 --> 0:16:37.720 Are you apt to belong risk assets right now? 0:16:39.480 --> 0:16:43.040 Yes, we are quite constructive in terms of all week 0:16:43.160 --> 0:16:47.160 to our equity markets relative to bonds. We continue to 0:16:47.200 --> 0:16:50.760 believe that the soft lending narrative is actually very much 0:16:50.880 --> 0:16:54.520 in play, given that even from a US well data 0:16:54.520 --> 0:16:58.080 point has been disappointing in recent months. For example, they 0:16:58.120 --> 0:17:01.120 are few reasonably supportive of not too hot not too 0:17:01.160 --> 0:17:05.000 cold economy that shouldn't figure any additionary heights by the fact, 0:17:05.080 --> 0:17:07.320 for that matter, So if you look at the latest 0:17:07.359 --> 0:17:10.280 industrial production or even sales scrow for that matter, it's 0:17:10.320 --> 0:17:14.080 thought somewhat in April. But having said that, labor markets 0:17:14.119 --> 0:17:16.720 will continue to be charging along quite nicely, so that 0:17:16.840 --> 0:17:19.800 really feeds into the narrative of a soft lending which 0:17:19.800 --> 0:17:23.040 should then support risk assets in our view, and on 0:17:23.119 --> 0:17:25.080 China itself and the cooking of a China is dat 0:17:25.200 --> 0:17:28.480 point is actually starting to improve, nbs being economic surprises 0:17:28.480 --> 0:17:31.720 actually holding up better relative to the US, which is 0:17:31.720 --> 0:17:34.400 why in the short term some funds throw are rotating 0:17:34.400 --> 0:17:36.400 out from the US into China as well. 0:17:38.480 --> 0:17:41.640 I will push back a little not a personal view, 0:17:41.680 --> 0:17:45.639 but just an observation that revenue for some of these 0:17:45.640 --> 0:17:48.880 big companies like Ali, Baba, Tencent, and JD dot Com. 0:17:48.880 --> 0:17:51.480 We're only up around six to seven percent. You know, 0:17:51.560 --> 0:17:54.399 that's a far cry from what those companies used to 0:17:54.400 --> 0:17:57.399 be doing. And in terms of equities in the US, 0:17:57.720 --> 0:17:59.800 you know, we're sort of back to what we thought 0:17:59.800 --> 0:18:02.800 we had before, which is disinflation. We had this spook 0:18:03.240 --> 0:18:05.439 in the first three months, and now we're back to 0:18:06.160 --> 0:18:08.720 something that was already factored into markets. The market's already 0:18:08.760 --> 0:18:11.159 gained a lot, so you know, they're probably not a 0:18:11.160 --> 0:18:14.359 big catalyst from disinflation because we knew it, we planned 0:18:14.359 --> 0:18:16.720 on it, we expected it. And in terms of growth, 0:18:16.840 --> 0:18:19.199 growth looks like it's going to stumble a little bit 0:18:19.240 --> 0:18:22.320 here in the short term. So are you concerned at 0:18:22.320 --> 0:18:25.120 all that, you know, we might actually have a little 0:18:25.119 --> 0:18:29.280 bit of trouble gaining inequities even while the environment seems okay. 0:18:31.320 --> 0:18:34.199 Well, I think there's room for other parts of the 0:18:34.240 --> 0:18:36.560 equity market to catch up, whether is it you know, 0:18:36.640 --> 0:18:39.399 from the US tech broadening out into other parts of 0:18:39.520 --> 0:18:42.159 other sector sectors in the US, or whether is it 0:18:42.200 --> 0:18:44.359 from the US into other parts of the markets, for 0:18:44.400 --> 0:18:47.080 example in China in Asia. So we do see room 0:18:47.160 --> 0:18:49.720 for that to happen if you think about so, I 0:18:49.760 --> 0:18:53.960 think the the fundamental construct behind US equities is really 0:18:53.960 --> 0:18:56.840 solid when we've just been through the firs Q earning 0:18:56.840 --> 0:19:00.760 season and more than tutters of the companies have outperform 0:19:00.800 --> 0:19:04.280 their estimates. And more importantly, we have also seen analysts 0:19:04.359 --> 0:19:06.920 revising up their earliest estimates for this year and into 0:19:07.000 --> 0:19:09.760 next year as well. So that's quite a strong fundamental 0:19:09.800 --> 0:19:13.159 backdrop supporting US equities. Yes, you're right, they could take 0:19:13.160 --> 0:19:14.960 a breeder in the short term because they have done 0:19:14.960 --> 0:19:18.320 pretty well to date so far, which is why in 0:19:18.359 --> 0:19:20.639 the near term we do see some signs of funds 0:19:20.640 --> 0:19:24.000 actually rotating our US which has performed well into some 0:19:24.080 --> 0:19:26.399 of the laggots. And here we talk about China as 0:19:26.400 --> 0:19:30.119 whereas Asia where data point are maybe not as disupporting 0:19:30.119 --> 0:19:33.360 as before but starting to stabilize. But above all, positioning 0:19:33.440 --> 0:19:36.720 is light and they are also quite cheap from evaluation perspective. 0:19:36.320 --> 0:19:41.200 Adre where are you guiding clients right now into what markets? 0:19:42.320 --> 0:19:45.240 So we are still await in terms of the US market. 0:19:45.280 --> 0:19:47.479 So that's our largest or wait that we have. In 0:19:47.520 --> 0:19:50.159 addition to that as well, we are also constructive on 0:19:50.280 --> 0:19:54.199 Japanese aquities and we see the recent consolidation in Japanese 0:19:54.240 --> 0:19:57.280 equities because of a stronger year as a we're buying 0:19:57.320 --> 0:20:00.800 opportunity for investors to consider buying on debs. So those 0:20:00.800 --> 0:20:02.960 are the two key markets that we like. But above 0:20:02.960 --> 0:20:05.720 all we are constructed on global equities as a whole 0:20:05.760 --> 0:20:09.080 because we do see the business cycle continuing and extending, 0:20:09.680 --> 0:20:12.720 given that romanetary policy is probably said to turn easier 0:20:13.200 --> 0:20:15.960 over the last half of this competuvity a year and 0:20:16.000 --> 0:20:18.800 half a goal where it was all about itat heights. 0:20:20.040 --> 0:20:23.639 Yeah, one good thing with this inflation might be a 0:20:23.640 --> 0:20:27.119 lower dollar. I know there's so many inputs in the currencies, 0:20:27.160 --> 0:20:29.560 it's kind of hard to figure these things. But if 0:20:29.560 --> 0:20:32.679 the dollar does weekend, is that particularly good for Asia 0:20:32.840 --> 0:20:35.040 and even more so for Southeast Asia. 0:20:36.680 --> 0:20:40.600 Yeah, certainly there would be one additional catalyst for Asian 0:20:40.640 --> 0:20:44.440 markets China markets to perform is via lower US dollar 0:20:44.480 --> 0:20:46.840 as well as lower a US bord views as well. 0:20:47.119 --> 0:20:49.399 So that normally has a positive effect in terms of 0:20:49.440 --> 0:20:52.360 fund throws into this part of the world. In terms 0:20:52.359 --> 0:20:54.240 of the dollar, this year we have a more of 0:20:54.280 --> 0:20:57.760 a ringebound view because it is an election year and 0:20:57.880 --> 0:21:00.879 depending on the policy to be enlected by the incoming 0:21:01.119 --> 0:21:04.720 new president, the dollar may react quite differently, which is why. 0:21:04.920 --> 0:21:07.480 But this year we actually believe the expect the dollar 0:21:07.560 --> 0:21:09.720 to probably treat in a range until we get more 0:21:09.840 --> 0:21:12.879 charity in terms of what the new policies might be 0:21:12.920 --> 0:21:13.959 from the next president. 0:21:14.640 --> 0:21:17.040 We've been talking a lot on this show about artificial 0:21:17.080 --> 0:21:20.800 intelligence today. How are you feeling about the AI trade 0:21:20.800 --> 0:21:25.119 these days? Is it pretty much stretched so finally that 0:21:25.200 --> 0:21:27.000 there may be limited upside from here? 0:21:28.680 --> 0:21:30.399 No, we're still like the AI trade. We do think 0:21:30.440 --> 0:21:33.720 that there's still room for it to continue. In fact, 0:21:33.760 --> 0:21:36.560 one of the key driver for AI is to really 0:21:36.640 --> 0:21:41.719 enhance productivity for some of the range. Media worker for example, 0:21:41.800 --> 0:21:44.119 mid the market worker for example, which is an area 0:21:44.119 --> 0:21:46.520 which I think is underappreciated by the market because if 0:21:46.520 --> 0:21:48.640