1 00:00:00,080 --> 00:00:02,840 Speaker 1: Let's say good morning to James Wong, Managing director and 2 00:00:02,920 --> 00:00:07,960 Speaker 1: chief investment officer overseas at LEADS Securities. So I want 3 00:00:07,960 --> 00:00:10,760 Speaker 1: to relate a story that I just saw James Reuter's 4 00:00:10,800 --> 00:00:15,240 Speaker 1: here reporting that Tesla's CEO Elon Musk told employees in 5 00:00:15,280 --> 00:00:18,919 Speaker 1: a in a internal email, don't be bothered by the 6 00:00:18,960 --> 00:00:22,119 Speaker 1: stock market craziness. Long term, I believe very much that 7 00:00:22,200 --> 00:00:25,360 Speaker 1: Tesla will be the most valuable company on Earth. Blah 8 00:00:25,440 --> 00:00:27,800 Speaker 1: blah blah. So I'm just curious if you know. I 9 00:00:27,800 --> 00:00:29,920 Speaker 1: don't want you to comment about Tesla, but are we 10 00:00:29,960 --> 00:00:33,120 Speaker 1: in the midst of stock market craziness here? Uh? In 11 00:00:33,320 --> 00:00:36,159 Speaker 1: Hong Kong. Probably not in the US, And in Hong Kong, 12 00:00:36,200 --> 00:00:39,640 Speaker 1: I think the driving force behind Hong Kong's equity the 13 00:00:39,840 --> 00:00:42,800 Speaker 1: I'll call this the majestic revenge of the lawns on 14 00:00:42,880 --> 00:00:47,040 Speaker 1: Hong Kong equity. It's mainly pushed by UH foreign money 15 00:00:47,240 --> 00:00:49,879 Speaker 1: and UH. I guess the marketcy is China reopening as 16 00:00:49,920 --> 00:00:52,199 Speaker 1: a matter of time instead of a matter of if, 17 00:00:52,320 --> 00:00:55,040 Speaker 1: just like how the markets is bo J's eventual removal 18 00:00:55,080 --> 00:00:58,200 Speaker 1: of that little kink on j g BC at Curve. 19 00:00:58,360 --> 00:01:02,840 Speaker 1: But during this magistic revenge of the loans. For the 20 00:01:02,880 --> 00:01:06,840 Speaker 1: past month and half, southbound southbound money from China has 21 00:01:06,920 --> 00:01:10,120 Speaker 1: been modest at best. We've seen their short positions on 22 00:01:10,240 --> 00:01:14,320 Speaker 1: Hong Kong Index CDFs and mainland Chinese tech giants accumulating 23 00:01:14,360 --> 00:01:17,760 Speaker 1: at a speed faster than usual when foreign money are 24 00:01:17,840 --> 00:01:20,440 Speaker 1: piling up on those stocks, and in fact, we've seen 25 00:01:20,560 --> 00:01:24,320 Speaker 1: foreign money, especially European money, taking active party in Hong Kong, 26 00:01:24,360 --> 00:01:28,440 Speaker 1: active with extreme enthusiasm at every step of the Chinese 27 00:01:28,640 --> 00:01:32,720 Speaker 1: reopening policies being materialized, even when the twenty articles and 28 00:01:32,800 --> 00:01:36,119 Speaker 1: then the ten articles on relaxing COVID restrictions were first 29 00:01:36,520 --> 00:01:39,400 Speaker 1: released and people living in the Greater China area were 30 00:01:39,560 --> 00:01:43,080 Speaker 1: questioning how thoroughly those new rules would be executed and 31 00:01:43,200 --> 00:01:47,720 Speaker 1: thus grew skeptical of their effectiveness. Foreign money never found 32 00:01:47,800 --> 00:01:50,560 Speaker 1: this lack of clarity a problem. So I take it 33 00:01:50,640 --> 00:01:53,000 Speaker 1: from your town. You don't buy this rally now I don't. 34 00:01:53,040 --> 00:01:55,520 Speaker 1: I don't. I don't argue with the momentum. I don't 35 00:01:55,600 --> 00:01:58,040 Speaker 1: argue with the forces that are active in the market. 36 00:01:58,160 --> 00:02:02,720 Speaker 1: But just in terms of fundamental factors, I think we 37 00:02:02,800 --> 00:02:05,280 Speaker 1: are lacking a little bit. It's UH. We can talk 38 00:02:05,280 --> 00:02:10,320 Speaker 1: about the UH. The pandemic status or reopening status here 39 00:02:10,720 --> 00:02:14,880 Speaker 1: in in China, and it's not really that optimistic. With 40 00:02:15,400 --> 00:02:19,200 Speaker 1: the National Health Mission's latest policy turn, the listening of 41 00:02:19,320 --> 00:02:23,120 Speaker 1: COVID restrictions has reached its peak and from what we observed, 42 00:02:23,160 --> 00:02:26,079 Speaker 1: and according to data compiled by by DO, a cluster 43 00:02:26,200 --> 00:02:29,400 Speaker 1: of northern China cities should have reached its peak confirmed 44 00:02:29,480 --> 00:02:33,560 Speaker 1: cases recently. Uh, it's like Boo Ding and n are 45 00:02:33,639 --> 00:02:36,959 Speaker 1: two good examples of people. People's lives getting back to 46 00:02:37,080 --> 00:02:41,200 Speaker 1: normal after fighting through this recent outbreak and unlike people 47 00:02:41,320 --> 00:02:44,200 Speaker 1: avoiding going out for the past month. There are actually 48 00:02:44,280 --> 00:02:47,000 Speaker 1: traffic jams in Beijing right now, but in the southern 49 00:02:47,160 --> 00:02:51,000 Speaker 1: China area and coastal cities like Shanghai and Shinjin, number 50 00:02:51,040 --> 00:02:53,640 Speaker 1: of confirmed cases still on the rise and might reach 51 00:02:53,720 --> 00:02:57,720 Speaker 1: peak James at late January. Yes, James, you talked about 52 00:02:57,760 --> 00:03:00,600 Speaker 1: fundamentals when you took a look at value Asians, they're 53 00:03:00,760 --> 00:03:05,080 Speaker 1: so low. That's just global counterparts, so it won't think 54 00:03:05,160 --> 00:03:08,200 Speaker 1: very much for recovering asset prices, right that is set 55 00:03:08,240 --> 00:03:11,359 Speaker 1: to continue. No, Yeah, but there's this one thing though. 56 00:03:12,639 --> 00:03:15,440 Speaker 1: Throughout the year, foreign money has been the biggest seller 57 00:03:15,560 --> 00:03:18,320 Speaker 1: of all things Chinese, and UH, there is one thing 58 00:03:18,400 --> 00:03:21,639 Speaker 1: that they fared so much, that is common prosperity. And 59 00:03:21,960 --> 00:03:24,840 Speaker 1: in this really we've seen no bad, no one, no 60 00:03:24,960 --> 00:03:28,680 Speaker 1: foreign money mentioning about common prosperity at its entirely. And uh, 61 00:03:28,840 --> 00:03:30,919 Speaker 1: I think I think that the reason that you you, 62 00:03:31,080 --> 00:03:33,200 Speaker 1: you brought up a good point. We are at a 63 00:03:33,360 --> 00:03:37,280 Speaker 1: very low valuation status. And the reason that foreign money 64 00:03:37,360 --> 00:03:40,840 Speaker 1: are piling up on Hong Kong stocks is because they 65 00:03:40,960 --> 00:03:45,120 Speaker 1: are light um positioning for the greater China stocks. Well, 66 00:03:45,120 --> 00:03:48,160 Speaker 1: they're just positioning for a longer term view, right. I 67 00:03:48,280 --> 00:03:51,320 Speaker 1: think it's a shorter term view, because if we look 68 00:03:51,480 --> 00:03:54,560 Speaker 1: longer term common prosperity, it's a thing that no one 69 00:03:54,680 --> 00:03:57,960 Speaker 1: can avoid. And uh, well, that that's if Chijin Pin 70 00:03:58,480 --> 00:04:02,320 Speaker 1: retains power and pushes this policy through after this respite. 71 00:04:02,360 --> 00:04:06,200 Speaker 1: And I guess you're saying that's the more likely outcome, exactly. 72 00:04:06,280 --> 00:04:09,000 Speaker 1: I don't see it turns out any other way just yet. 73 00:04:09,200 --> 00:04:11,200 Speaker 1: So I think this is kind of going on for 74 00:04:11,280 --> 00:04:13,480 Speaker 1: a while. And I think the reason that we see 75 00:04:13,680 --> 00:04:17,800 Speaker 1: foreign money being extremely more optimistic about Chinese stocks and 76 00:04:17,880 --> 00:04:23,039 Speaker 1: Hong Kong stocks then Chinese investors is because well those 77 00:04:23,120 --> 00:04:26,120 Speaker 1: investors live in China and the outcome they are going 78 00:04:26,200 --> 00:04:30,279 Speaker 1: to be facing as a consequence of common prosperity being 79 00:04:30,360 --> 00:04:34,040 Speaker 1: executed is probably more a lot more severe than the 80 00:04:34,160 --> 00:04:37,240 Speaker 1: foreign investors watching on the sidelines. And James, we talk 81 00:04:37,279 --> 00:04:41,600 Speaker 1: about those China bulls. They're betting on Beijing refocusing on 82 00:04:41,720 --> 00:04:45,440 Speaker 1: the economy with a five percent GDP talget for three 83 00:04:45,520 --> 00:04:47,960 Speaker 1: will trying to get there given all the problems is 84 00:04:48,040 --> 00:04:52,679 Speaker 1: seeing right now with its reopening. Yeah, we think the peak, 85 00:04:53,120 --> 00:04:58,280 Speaker 1: the peak for confirmed cases will come late January or 86 00:04:58,440 --> 00:05:04,640 Speaker 1: early February, so the complete resumption of manufacturing activities and 87 00:05:04,880 --> 00:05:08,000 Speaker 1: consumption might come in a second quarter. So I think 88 00:05:08,080 --> 00:05:11,359 Speaker 1: they are very very confident, Like Du has said, they 89 00:05:11,400 --> 00:05:14,200 Speaker 1: are extremely confident that the Chinese is gonna achieve it's 90 00:05:14,240 --> 00:05:18,520 Speaker 1: five percent GDP growth goal. Yes. So it's funny because 91 00:05:18,680 --> 00:05:21,559 Speaker 1: when I first asked you about Elon Musk, the stock 92 00:05:21,640 --> 00:05:24,839 Speaker 1: market craziness that he was talking about was craziness the downside, 93 00:05:25,400 --> 00:05:27,280 Speaker 1: and you actually flipped it and said, well, we have 94 00:05:27,360 --> 00:05:30,880 Speaker 1: craziness in Hong Kong, but it's actually craziness to the upside. 95 00:05:31,320 --> 00:05:35,560 Speaker 1: So point number one is you would sell these gains 96 00:05:36,000 --> 00:05:38,600 Speaker 1: in the in the rally here because you don't think 97 00:05:38,600 --> 00:05:41,360 Speaker 1: they're sustainable. Yeah, I don't. I don't really think it's 98 00:05:41,520 --> 00:05:48,080 Speaker 1: sustainable because we've reached maximum policy overturned on COVID relaxations 99 00:05:48,279 --> 00:05:51,600 Speaker 1: or COVID restriction relaxations, and if we were looking at 100 00:05:51,680 --> 00:05:56,480 Speaker 1: Chinese companies, the upward earnings prohibition for Chinese companies, it's 101 00:05:56,560 --> 00:06:00,120 Speaker 1: at best marginal at this point. So we have not 102 00:06:00,480 --> 00:06:02,920 Speaker 1: really a lot of things policy wise to look forward to, 103 00:06:03,520 --> 00:06:06,800 Speaker 1: and then the fundamentals don't really support such a revenue. 104 00:06:06,839 --> 00:06:10,200 Speaker 1: So that's that's why I think, Uh, this this ready 105 00:06:10,320 --> 00:06:13,280 Speaker 1: that we've observed during the past month and half that 106 00:06:13,560 --> 00:06:17,080 Speaker 1: runs purely on foreign faith might be a little low 107 00:06:17,120 --> 00:06:19,880 Speaker 1: on guess, So I guess the question is how much 108 00:06:19,960 --> 00:06:24,760 Speaker 1: faith you have in the POC. Chinese challenges really can't 109 00:06:24,760 --> 00:06:26,760 Speaker 1: be seen in a vacuum, right, They have to be 110 00:06:26,839 --> 00:06:29,000 Speaker 1: seen against the backdrop of a FED that's pretty much 111 00:06:29,080 --> 00:06:33,160 Speaker 1: laser focused on containing inflation. How far do you think 112 00:06:33,200 --> 00:06:35,880 Speaker 1: the p BOC is willing to go to support the economy. 113 00:06:35,920 --> 00:06:39,880 Speaker 1: How much more liquidity injection are we expecting to see? 114 00:06:39,920 --> 00:06:45,000 Speaker 1: How much triple our cuts will there be likely? Yeah, Well, 115 00:06:45,040 --> 00:06:50,200 Speaker 1: the p BOC has adopted a practice to uh intervene 116 00:06:50,279 --> 00:06:53,279 Speaker 1: the market through open market, open market activities. They don't 117 00:06:53,320 --> 00:06:58,040 Speaker 1: really meddle with the triple are all intersprit that much 118 00:06:58,279 --> 00:07:01,800 Speaker 1: for the past three years, and I think they've learned 119 00:07:01,960 --> 00:07:04,400 Speaker 1: how to do this in a more dedicate way and 120 00:07:04,560 --> 00:07:08,200 Speaker 1: more effective way instead of just moving the interest rates. 121 00:07:08,440 --> 00:07:13,640 Speaker 1: I think they are reluctant to inject liquidity in the future. 122 00:07:13,840 --> 00:07:17,160 Speaker 1: And a good example would be the building out or 123 00:07:17,360 --> 00:07:22,320 Speaker 1: the alleged alleged building out of the Chinese real estates companies. 124 00:07:22,800 --> 00:07:27,760 Speaker 1: You've seen the the p BOC and the other authorities 125 00:07:27,880 --> 00:07:32,440 Speaker 1: coming out with measures that make the whole make the 126 00:07:33,000 --> 00:07:38,440 Speaker 1: whole UH cost of building out those Chinese real estate 127 00:07:38,520 --> 00:07:44,240 Speaker 1: companies UH more market based and UH they rely on 128 00:07:44,360 --> 00:07:47,680 Speaker 1: the banks or on the secondary market financing. They don't 129 00:07:47,680 --> 00:07:50,960 Speaker 1: really you want to use their own money, their own 130 00:07:51,560 --> 00:07:55,120 Speaker 1: state owned assets to do the building outs. So that's 131 00:07:55,200 --> 00:07:58,440 Speaker 1: probably a direction. So you're playing these markets here more 132 00:07:58,520 --> 00:08:01,040 Speaker 1: from the short side or do you have some lungs 133 00:08:01,120 --> 00:08:03,720 Speaker 1: that you like? Yeah, the long so I think the 134 00:08:04,000 --> 00:08:08,600 Speaker 1: UH the sportswear sector in Hong Kong might be UH 135 00:08:09,800 --> 00:08:12,000 Speaker 1: an area that we are looking at, we will we 136 00:08:12,080 --> 00:08:15,360 Speaker 1: are willing to looking at in the future. And UH 137 00:08:15,520 --> 00:08:20,400 Speaker 1: I think the hot pastocks, the food and beverage stocks 138 00:08:20,880 --> 00:08:24,440 Speaker 1: that has been accumulated, that has been pumped up by 139 00:08:24,600 --> 00:08:26,840 Speaker 1: foreign money in the past month and a half is 140 00:08:26,960 --> 00:08:30,560 Speaker 1: a little overvalued. And because we now a lot of 141 00:08:30,640 --> 00:08:33,160 Speaker 1: people in China right now, if they go out to 142 00:08:33,640 --> 00:08:37,600 Speaker 1: to eat hot pot or celebrate Christmas, they were caught warriors. 143 00:08:37,920 --> 00:08:40,520 Speaker 1: So the the consumption is not really going back to 144 00:08:40,640 --> 00:08:44,360 Speaker 1: normal anytime soon, not until next at the next quarter. 145 00:08:44,600 --> 00:08:49,080 Speaker 1: So sell Heidi Law. Yeah, okay, I'd say that. James, 146 00:08:49,280 --> 00:08:51,600 Speaker 1: thank you very much for joining us. James Wong, Managing 147 00:08:51,640 --> 00:08:57,120 Speaker 1: director and ce IO Overseas at Lead Securities, extremely forthright 148 00:08:57,520 --> 00:09:00,079 Speaker 1: in his views and persuasive. James, thank you.