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Speaker 1: Let's get to our guests now, Isaac Pool, Global CIO

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Speaker 1: at Oriana Financial Services, sitting in my usual seat in

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Speaker 1: the Singapore studio. Great to see you on our on

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Speaker 1: our zoom there, Isaac. I hope you're enjoying the Lion City.

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Speaker 1: Let's start with what we're expecting from, of course, the

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Speaker 1: inflation read and whether or not we reach peak inflation.

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Speaker 1: How do we trade that ahead of the FED decision

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Speaker 1: later this month too. Yeah, I mean, I think we

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Speaker 1: we have reached peak inflation. We've seen we've seen the

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Speaker 1: numbers get to multi decade highs. They've come off last month.

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Speaker 1: This month, we're likely to see headline headline monthly inflation

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Speaker 1: at negative core is trending lower. And uh, and I

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Speaker 1: think that's going to be the case over the rest

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Speaker 1: of this year. That in no way is going to

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Speaker 1: prevent the FED from hiking most likely seventy five basis

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Speaker 1: points this month. It's in no way you're going to

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Speaker 1: prevent them hiking again later this year. But but it

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Speaker 1: does mean that we're getting to the end game for them,

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Speaker 1: and they're getting to their their close to their term

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Speaker 1: or rate where they're going to pour us for a

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Speaker 1: very long period of time and then give themselves some

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Speaker 1: time to gauge where that trend is going for inflation

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Speaker 1: and what does it mean in terms of does the

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Speaker 1: yield curve inversion get deeper? Is the dollar at its

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Speaker 1: peak two I don't think we're going to see the

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Speaker 1: yield curve necessarily get more inverted. At the same time,

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Speaker 1: I don't think we're going to see it steepen either.

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Speaker 1: What what we tend to see at the at the

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Speaker 1: back end, back end of the rate high cycle in

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Speaker 1: the US is the FED pause for a long period

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Speaker 1: of time and for that inversion to persist for quite

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Speaker 1: some period of time. And what you want to keep

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Speaker 1: an eye out is for a really big bull steepening

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Speaker 1: for the two year yield to fall dramatically, because that

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Speaker 1: will be indicating that the market expects a recession. We're

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Speaker 1: a long way away from that yet, so this inversion

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Speaker 1: could persist for twelve months, maybe fourteen or fifteen or

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Speaker 1: eighteen months before we get to that that steepening. We're

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Speaker 1: seeing price pressures and of course global headwinds just really

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Speaker 1: weigh into corporates as well, and that's reflected in the

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Speaker 1: fact that HSBC is saying that they're going to have

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Speaker 1: to materially increase pay. Goldman is looking at job cards.

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Speaker 1: How does this kind of factor into business thinking? Are

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Speaker 1: we expecting to see more of the same as what

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Speaker 1: we heard from Goldman? I think the short answer is yes.

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Speaker 1: We've seen rates hiked dramatically, very very quickly from low levels,

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Speaker 1: and that is going to start to bite into economic growth.

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Speaker 1: And the distinguishing factor here or between consensus and what

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Speaker 1: I think is is that going to cause recession? We

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Speaker 1: think no, but it's certainly going to slow growth. It's

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Speaker 1: going to slow growth back to somewhere around but most

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Speaker 1: likely a bit below trend for for an extended period

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Speaker 1: of time, and and that is going to have an

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Speaker 1: impact on corporates. They are going to see their earnings slow.

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Speaker 1: We don't think they were slow as much as the

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Speaker 1: market is expecting, but it will still be challenging over

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Speaker 1: for them. So Isaac Brian talking there about President Shi

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Speaker 1: Jim King's plan trip to Central Asia, is this a

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Speaker 1: sign that normal see us returning to China? And do

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Speaker 1: we think see things pivot after the Party Congress? I

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Speaker 1: think perhaps it's a very early sign that we're heading

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Speaker 1: in the right direction, but a pivot away from zero

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Speaker 1: COVID policies is going to be I think implemented cautiously

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Speaker 1: and slowly, and maybe it begins with the internal borders

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Speaker 1: reopening and and domestic travel restarting, and then over subsequent

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Speaker 1: months it might reopen to the more international travel. But

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Speaker 1: but but that's certainly not going to happen before the

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Speaker 1: National Congress, and it's probably something for early three. Sorry,

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Speaker 1: we're getting their monthly data dump on Friday as well.

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Speaker 1: I mean, you already think that China is in recession

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Speaker 1: and has been for most of this year. How much

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Speaker 1: kind of further weakness are you expecting to see? And

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Speaker 1: when do we see that rebound? Based on a guess

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Speaker 1: boarders reopening here, Yeah, I mean it's been a pretty

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Speaker 1: ugly year for for the Chinese economy. It is what

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Speaker 1: we would suffires a recession. Most of this year it's

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Speaker 1: been a recession. We're probably getting closer to the end

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Speaker 1: of that than the start of it. Given that a

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Speaker 1: recession might last nine, ten or eleven months. We've been

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Speaker 1: in it for about six months in China, and we

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Speaker 1: are seeing more monetary policy support. There's more to come.

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Speaker 1: There's probably more fiscal policy support, and then the necessary

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Speaker 1: condition for a escape velocity for the Chinese economy is

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Speaker 1: that rolling back of the zero COVID policy. So probably

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Speaker 1: prepare for some week data ongoing over the next few months,

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Speaker 1: and then then at the back end of this year

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Speaker 1: early three that that's when you're really going to see

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Speaker 1: the economy begin to pick up and move out of

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Speaker 1: this recession, and that I think is probably not priced

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Speaker 1: into Chinese equities yet. It's still quite a pessimistic outlook,

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Speaker 1: but but I think the market is waiting to see

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Speaker 1: movement on that zero COVID policy. Open borders is one thing, though,

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Speaker 1: but the property crisis still remains. Is the properties sector

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Speaker 1: or space you would still be cautious on very cautious.

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Speaker 1: I don't think that there's a lot of willingness to

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Speaker 1: to end this by nationalizing the property sector or really

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Speaker 1: waiting in there and and bailing out everybody. I think

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Speaker 1: there will be targeted support, though there's obviously no real

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Speaker 1: desire from from China to allow something that has been

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Speaker 1: a driver of growth collapse. But but this is going

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Speaker 1: to be an issue that will resolve itself, not over weeks,

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Speaker 1: not over months, but probably over years with growth just

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Speaker 1: slowing compared to what we saw pre pandemic, never really

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Speaker 1: returning to the levels of growth we we saw then,

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Speaker 1: but not at the same time being a cause for

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Speaker 1: a collapse in the In the Chinese economy, the reopening

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Speaker 1: theme was very much in focus yesterday with Japan these

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Speaker 1: reports they could ease some of their travel curbs as

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Speaker 1: early as next month. Does that reopening trade still have legs,

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Speaker 1: especially when you look at the weakness of the end Yes,

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Speaker 1: I think it does. I think when you look at

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Speaker 1: the Japanese economy that reopening will be important in supporting

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Speaker 1: the growth. You've got the yen which is very, very weak,

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Speaker 1: and that's that support if it's extremely competitive for its

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Speaker 1: for its global exports. I think that the situation and

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Speaker 1: the set of circumstances for the Japanese equity market about

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Speaker 1: as positive as it's been for some time, and there

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Speaker 1: is some real upside support there. When you look out

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Speaker 1: over you are normally focused in Australia, you're saying that

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Speaker 1: you don't see a recession as the most likely outcome

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Speaker 1: over the next twelve months. When we look at a

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Speaker 1: global picture, we already took the China picture and that

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Speaker 1: could provide upside for Australian equities. Where are you looking

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Speaker 1: at and how did you read? I guess that pivot

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Speaker 1: from RBA Governor Low last week. I think that that

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Speaker 1: was an effort by the RBA to to be as

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Speaker 1: clear as they can to continue to regain the regain

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Speaker 1: their credibility and say, look, we're only need to get

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Speaker 1: to modestly restrictive territory here and then we can hold

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Speaker 1: for a long period of time. And that's a good

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Speaker 1: pushback on on pricing for three sixty plus as a

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Speaker 1: terminal straight I don't think it will get anywhere near there,

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Speaker 1: and and holding it for a long period of time

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Speaker 1: will extend that economic cycle. So when you when you

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Speaker 1: look at ASSI equities, there is some upside there and

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Speaker 1: I think the places to be leaning towards are the

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Speaker 1: ones that have been beaten down really hard pricing in recession,

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Speaker 1: like consumer discretionary, that there's potentially some upside in that

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Speaker 1: area over the next six or twelve months. Isaac Enjoy Singapore,

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Speaker 1: Thanks for coming on. Isazac Pool Global CIO at Oriana

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Speaker 1: Financial Services with us in our Singapore studio here on

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Speaker 1: Bloomberg Deadbreak Asia