WEBVTT - Mixed End to APAC Trading Week 0:00:03.160 --> 0:00:06.600 Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner. 0:00:06.640 --> 0:00:08.960 As we get set to wrap up the trading week 0:00:09.039 --> 0:00:11.200 in the Apac Region, it's a good time to take 0:00:11.240 --> 0:00:13.480 a look at some of the driving forces. We are 0:00:13.560 --> 0:00:17.880 joined now by Taosha Wang, portfolio manager at Fidelity International. 0:00:18.280 --> 0:00:21.360 Taosha joins us from our studios in Hong Kong. Thanks 0:00:21.400 --> 0:00:23.840 for being with us. Can we begin by getting your 0:00:23.920 --> 0:00:27.360 take on the reaction that you're hearing from a lot 0:00:27.440 --> 0:00:30.000 of the people in the Apac Region clients that you're 0:00:30.040 --> 0:00:33.519 interacting with on the outcome of the US election. What 0:00:33.600 --> 0:00:34.280 has it been like. 0:00:35.560 --> 0:00:39.720 I mean, the red sweet outcome wasn't exactly the expected 0:00:39.760 --> 0:00:43.520 base case. So people are sort of, you know, gathering, 0:00:43.960 --> 0:00:46.320 coming to their conclusion as to what this means from 0:00:46.360 --> 0:00:49.280 the market. And this is happening in the context that 0:00:49.440 --> 0:00:52.800 US exceptionalism is already quite strong, both from a top 0:00:52.840 --> 0:00:55.440 down data perspective as well as from a bottom up 0:00:55.440 --> 0:00:58.480 earning perspective. But I think that you know, with the 0:00:58.560 --> 0:01:04.800 strong mandate for the coming government, the there's greater potential 0:01:04.880 --> 0:01:09.400 for structural reform, which adds to the further upside skill 0:01:09.600 --> 0:01:12.360 to you know, how the US growth story is going 0:01:12.400 --> 0:01:16.200 to pan out. We typically talk about structural reform in 0:01:16.240 --> 0:01:19.240 the emergent market sense. You know, China does structural reform, 0:01:19.280 --> 0:01:23.119 India structural reform. Indonesia do structural reform. But sometimes people 0:01:23.160 --> 0:01:25.800 forget that developed market, a big developed market like the 0:01:25.920 --> 0:01:28.399 US can have structural reform as well. And if you 0:01:28.560 --> 0:01:32.200 mathematically think about you know, government efficiency, which you know 0:01:32.400 --> 0:01:35.840 is being talked about a lot these days, you think about, 0:01:35.880 --> 0:01:40.400 you know, the enumerator is the expenditure, and denominator is GDP, 0:01:40.959 --> 0:01:44.800 and the structural reform should probably worth work on both numbers. 0:01:45.120 --> 0:01:48.640 So it should you know, boost GDP by you know, 0:01:48.720 --> 0:01:52.560 reducing the regulatory red taps, boosting animal spirit, so in 0:01:53.240 --> 0:01:57.600 enlarge the GDP pie, whereas on the enumerator possibly you know, 0:01:57.720 --> 0:02:00.600 reducing some costs here and there, an alating in a 0:02:00.640 --> 0:02:04.400 more sensible way, so I think, and it's hard to 0:02:04.600 --> 0:02:08.720 necessarily gauge the magnitude of that. So that's why we say, 0:02:08.800 --> 0:02:13.120 you know, US exceptionalism continues, but you know, the structural 0:02:13.160 --> 0:02:15.840 reform is most likely upside surprise. 0:02:16.000 --> 0:02:17.800 That's a big part of the story, clearly, But the 0:02:17.800 --> 0:02:20.000 other seems to be the risk that we will have 0:02:20.120 --> 0:02:23.720 persistently high inflation in the US as a result of this. 0:02:23.840 --> 0:02:25.720 I mean that seems to be one of the concerns 0:02:25.720 --> 0:02:28.400 that the bond market has been grappling with right now, 0:02:28.680 --> 0:02:33.239 and the Fed seems to be communicating a slight adjustment. 0:02:33.480 --> 0:02:36.560 Maybe there'll be less aggressive in ease and going forward. 0:02:36.639 --> 0:02:39.480 Do you think that in any way complicates the story? 0:02:40.520 --> 0:02:44.760 Well, certainly. I think inflation has been a very important 0:02:44.760 --> 0:02:47.359 part of you know, the market rhetorics for quite a 0:02:47.400 --> 0:02:52.920 few years. Right now, I think we've decidedly left the 0:02:52.960 --> 0:02:56.000 period in Taiwan inflation was out of control. I mean, 0:02:56.000 --> 0:02:58.959 there's a clear trajectory of inflation coming down to a 0:02:59.040 --> 0:03:01.720 more normalized level, not to two percent, but a non 0:03:01.720 --> 0:03:05.519 normalized level. Looking forward, I think there is a risk 0:03:05.639 --> 0:03:08.480 that you know, stays slightly elevated, but I would say 0:03:08.520 --> 0:03:13.720 the chance of it becomes disorderly is not significant over 0:03:13.800 --> 0:03:15.840 the near term. But yes, I mean, lack of fiscal 0:03:15.840 --> 0:03:17.200 discipline can be a problem. 0:03:17.560 --> 0:03:20.519 A centerpiece of the Trump economic policy is the teriff 0:03:20.560 --> 0:03:24.200 issue that obviously has inflationary implications. But from your point 0:03:24.240 --> 0:03:28.320 of view in Hong Kong, trying to look at opportunities 0:03:28.360 --> 0:03:31.360 in the Asia Pacific against the backdrop of the potential 0:03:31.440 --> 0:03:35.400 for much higher tariffs, how does it shape or reshape 0:03:35.400 --> 0:03:35.880 your thinking? 0:03:36.840 --> 0:03:39.080 I think that is certainly a tail risk to bear 0:03:39.120 --> 0:03:41.360 in mind. I mean, we don't have a crystal ball 0:03:41.440 --> 0:03:44.080 on exactly the shape and form of how the tariff, 0:03:44.400 --> 0:03:47.360 you know, how and when will that tariff take place. 0:03:48.840 --> 0:03:51.760 One of the ways is to actually gain exposure in 0:03:52.120 --> 0:03:57.120 countries that are a little bit more inward focused in 0:03:57.200 --> 0:03:58.480 terms of its capital market. 0:03:58.640 --> 0:04:00.520 Give me a couple of point. I was going to 0:04:00.520 --> 0:04:01.000 ask for an. 0:04:00.960 --> 0:04:07.720 Example, Indonesia in the big domestic market, young population, high 0:04:07.840 --> 0:04:11.080 natural growth rate, and relatively insulated from you know this 0:04:11.720 --> 0:04:14.600 terrriorf impact thats potentially coming out of the US. So 0:04:14.800 --> 0:04:16.720 those are the ways for us to sort of think 0:04:16.760 --> 0:04:20.160 holistically of the you know, the emerging markets in this region. 0:04:20.360 --> 0:04:23.080 You were talking about US exceptionalism. Can we talk about 0:04:23.120 --> 0:04:26.360 a strong dollar? We kind of indicated that the bond 0:04:26.400 --> 0:04:29.480 market's been struggling with what has the potential to be 0:04:29.600 --> 0:04:33.120 maybe stubborn inflation, if we can describe it that way. 0:04:33.760 --> 0:04:37.000 Higher yields have certainly been allowing the dollar to remain 0:04:37.120 --> 0:04:40.800 firm at the expensive currencies in the APEC region. I'm 0:04:40.839 --> 0:04:44.080 curious about your thinking on on the currency component in 0:04:44.120 --> 0:04:44.520 all of this. 0:04:45.279 --> 0:04:48.440 I think it's that higher dollars a direct byproduct or 0:04:48.640 --> 0:04:52.719 direct product of US. It grows exceptionalism because this is 0:04:52.760 --> 0:04:58.120 the reserve currency still of the world. Now. Normally in 0:04:58.160 --> 0:05:01.000 a non reserve currency environment, and you have a country 0:05:01.040 --> 0:05:05.119 where inflation is running truly quite high, that's usually actually 0:05:05.200 --> 0:05:10.040 negative for the for the currency, but US is different. 0:05:10.360 --> 0:05:14.400 How sustainable is this? I mean, the effects tend to 0:05:15.640 --> 0:05:19.320 the effects. Trends tend to hold for take a long 0:05:19.360 --> 0:05:21.839 time to correct. So even if you say, Okay, the 0:05:21.920 --> 0:05:25.800 dollar is too expensive, inflation is very high, and you 0:05:25.880 --> 0:05:28.080 add that dollar strengths on top of it, everything in 0:05:28.080 --> 0:05:30.400 the US is getting really expensive compared to the rest 0:05:30.440 --> 0:05:34.400 of the world. It doesn't necessarily correct itself over a 0:05:34.480 --> 0:05:37.080 short term horizon. So this trend can you continue for 0:05:37.160 --> 0:05:37.719 quite some time? 0:05:38.120 --> 0:05:40.159 Can we talk a little bit about what you perceive 0:05:40.279 --> 0:05:43.839 to be the changes in China and whether or not 0:05:43.880 --> 0:05:48.520 they're going to be effective in regenerating or rejuvenating economic growth. 0:05:48.760 --> 0:05:50.960 I mean, they've been coming out in these kind of 0:05:51.000 --> 0:05:54.560 small incremental stages. We've been getting a lot more in 0:05:54.600 --> 0:05:58.120 a way of clarity. The market seems to be accepting this. 0:05:58.279 --> 0:06:00.600 Maybe there's been a little bit of impacie that there 0:06:00.640 --> 0:06:04.400 hasn't been more more or greater communication. How do you 0:06:04.520 --> 0:06:08.200 understand what's been rolled out by Beijing and the likely 0:06:08.279 --> 0:06:10.520 impact that it's going to have in the economy. 0:06:11.360 --> 0:06:13.600 I think the good news is that we're seeing flows 0:06:13.600 --> 0:06:18.719 of you know, positive policy initiatives. That is so incredibly important. 0:06:19.320 --> 0:06:21.880 I think the economy still needs a lot of support, 0:06:22.200 --> 0:06:25.240 but the repairment is not going to happen overnight. It's 0:06:25.240 --> 0:06:28.039 not like a new policy comes and ban tomorrow. You know, 0:06:28.040 --> 0:06:31.480 earnings goes up. If a business sentiment goes up, everything 0:06:31.520 --> 0:06:35.600 bounces back. It takes time to repair that, to to 0:06:35.760 --> 0:06:38.919 improve that, to regain the strengths in the economy and 0:06:39.040 --> 0:06:42.000 confidence in the business community. And now that we have 0:06:42.040 --> 0:06:46.520 seen a series of positive policy initiatives, we're more watchful 0:06:46.600 --> 0:06:50.000 than ever on. You know, how business community respond to 0:06:50.040 --> 0:06:53.760 that and how does that actually translate into earnings earning guidance. 0:06:54.000 --> 0:06:56.240 Give me the way in which you understand that to 0:06:56.360 --> 0:07:00.200 translate into an investment strategy. What areas of the the 0:07:00.279 --> 0:07:03.799 Chinese market, Let's say, would you be interested in building 0:07:03.839 --> 0:07:04.520 positions in. 0:07:06.040 --> 0:07:09.520 Well, I think there are a lot of that the idios 0:07:09.520 --> 0:07:12.640 in credit. We're focused on the idiosyncratic opportunities there, you know, 0:07:12.680 --> 0:07:16.080 the areas that has For example, you know, we've talked 0:07:16.080 --> 0:07:18.680 about AI as a global trend. I mean, China is 0:07:18.720 --> 0:07:22.239 certainly forced to come up with you know, its own 0:07:23.000 --> 0:07:26.800 solutions at this at this very big trend. So there's 0:07:26.920 --> 0:07:30.320 you know, a large cohorta technology companies working on this 0:07:30.400 --> 0:07:35.160 as well. I mean, the export oriented companies are looking 0:07:35.240 --> 0:07:40.080 for looking to diversify their destination, you know, where the 0:07:40.160 --> 0:07:44.160 product can be and you know, anecdotally AI is helping 0:07:44.200 --> 0:07:47.080 that because previously they're much more focused on the English 0:07:47.120 --> 0:07:52.520 speaking export destinations. But right now you can simultaneously, you know, 0:07:52.800 --> 0:07:55.239 enter a whole lot of different markets in the world 0:07:55.800 --> 0:07:59.000 with the help of you know, language based AI. So really, 0:07:59.080 --> 0:08:02.280 I think we're looking more idiosyncratically, more bottom up at 0:08:02.400 --> 0:08:03.880 you know, companies with good potential. 0:08:04.560 --> 0:08:07.560 Does that extend into kind of the realm of semiconductors? 0:08:07.640 --> 0:08:09.800 Is that what we're talking about? Are you focused more 0:08:09.840 --> 0:08:13.800 on the software side companies that have been putting together 0:08:13.880 --> 0:08:18.360 these artificial intelligence models, which is it is the hardware 0:08:18.480 --> 0:08:20.720 the software side, or maybe it's a combination of both. 0:08:21.360 --> 0:08:23.400 I think it will always have to be a combination 0:08:23.480 --> 0:08:28.560 of both. One of the globally, one of the questions 0:08:28.720 --> 0:08:30.920 about you know, investing area is that you know, there's 0:08:30.960 --> 0:08:33.680 been a lot of investment at the hardware, at the 0:08:33.720 --> 0:08:37.160 semiconductor level, at the data center level, but we're still 0:08:37.480 --> 0:08:41.360 eager to see more applications, you know, new applications and 0:08:41.480 --> 0:08:46.599 solve problems in direct verticals. You know of specific application scenarios, 0:08:46.640 --> 0:08:50.760 some of them very professional, in very professional specific settings. 0:08:51.000 --> 0:08:53.839 So the application really needs to kick in and start 0:08:53.880 --> 0:08:57.680 generating positive free cash flow to enable a sustained sort 0:08:57.679 --> 0:09:00.559 of investment cycle, because if you make mon money, then 0:09:00.600 --> 0:09:03.439 you'll invest more. If you don't make money from application, 0:09:03.880 --> 0:09:06.280 the whole value chain does not sort of does not 0:09:06.400 --> 0:09:08.880 fund itself, then you have a problem of you know, 0:09:09.160 --> 0:09:13.640 investment potentially you know, starting to to to to come 0:09:13.679 --> 0:09:16.040 down a little bit. I think similar. I mean, every 0:09:16.200 --> 0:09:19.920 every country or every business community trying to solve this problem, 0:09:19.960 --> 0:09:22.720 they have to tackle it from the hardware side of 0:09:22.720 --> 0:09:24.719 things as well as the software side of things, So 0:09:24.840 --> 0:09:26.960 meaning both the investment side of things as well as 0:09:27.000 --> 0:09:28.400 the application side of things. 0:09:28.600 --> 0:09:30.760 When you look at the consumer in China right now. 0:09:30.920 --> 0:09:34.160 Are you seeing a resilient consumer maybe that that would 0:09:34.160 --> 0:09:38.000 be leaning into trying to maybe to increase a little 0:09:38.000 --> 0:09:41.600 bit more spending, or are things still too conservative, that 0:09:41.679 --> 0:09:45.560 sentiment is still so weak that maybe that aspect of 0:09:45.600 --> 0:09:48.240 the domestic economy is going to take a while to recover, 0:09:48.360 --> 0:09:51.640 even though parts of the export economy continue to seem 0:09:51.679 --> 0:09:53.439 to be robust. 0:09:53.760 --> 0:09:57.959 I think, I think we need to consider the households 0:09:57.960 --> 0:10:00.920 willingness spent, a willingness to spend from a you know, 0:10:00.960 --> 0:10:03.840 a few perspectives. There's the job market side of things. 0:10:03.880 --> 0:10:07.120 There's also the Wells effect. For example, where housing price 0:10:07.240 --> 0:10:10.120 is going and where the stock market is going, and 0:10:10.280 --> 0:10:12.680 you know, they're moving differ different directions. I mean a 0:10:12.679 --> 0:10:15.640 lot of us might not have might have noticed that. 0:10:15.720 --> 0:10:19.160 You know, there has been a recent and sudden boom 0:10:19.480 --> 0:10:21.640 in the Chinese stock market responding to some of the 0:10:21.679 --> 0:10:24.600 policy initiatives. Right, So that adds to the Weals effect, 0:10:25.000 --> 0:10:27.800 and the housing market needs to be stabilized for people 0:10:27.840 --> 0:10:30.160 to feel a little bit more comfortable because that is 0:10:30.559 --> 0:10:33.600 a big, big part of the overall household balance sheet. 0:10:34.679 --> 0:10:37.560 Interest rate payment, uh, that is also a big part 0:10:37.600 --> 0:10:43.200 of the housing household expenses and also the domestic prices, 0:10:43.280 --> 0:10:45.680 you know, the general living expense. So I think a 0:10:45.720 --> 0:10:49.160 lot of moving parts are at play. I don't think 0:10:49.160 --> 0:10:51.520 there's a sharp it's a net net. I don't think 0:10:51.520 --> 0:10:55.680 there's a sharp rebound in the consumer spending in China 0:10:55.679 --> 0:10:58.800 per se, but that is, you know, taking time to 0:10:58.840 --> 0:10:59.320 play out. 0:11:00.480 --> 0:11:02.840 Thank you so much for making time to chat with us. 0:11:02.840 --> 0:11:06.120 I really enjoyed the conversation with Taosha Wang, portfolio manager 0:11:06.160 --> 0:11:09.760 at Fidelity International, joining us up from Hong Kong here 0:11:09.800 --> 0:11:20.600 on the Daybreak Asia podcast. Welcome back to the Daybreak 0:11:20.600 --> 0:11:24.200 Asia podcast. I'm Doug Prisner. We're tracking market action today 0:11:24.240 --> 0:11:26.440 on this the final day of the trading week in 0:11:26.480 --> 0:11:29.760 the APEC region. And joining me now from our studios 0:11:29.760 --> 0:11:34.160 in Singapore is Mary Nicola, Bloomberg m Live Strategist. You 0:11:34.200 --> 0:11:37.679 and I were talking a moment ago about the dollar 0:11:37.760 --> 0:11:40.360 strength and a lot of the end weakness that's been 0:11:40.440 --> 0:11:44.079 created as a consequence of that. Earlier in the week, 0:11:44.120 --> 0:11:46.280 didn't we break to the week side of one fifty 0:11:46.360 --> 0:11:48.400 six against the greenback, Yeah. 0:11:48.280 --> 0:11:50.840 We did, and then we saw a bit of a 0:11:50.880 --> 0:11:54.640 retlacement because the Central Bank governor came out and said 0:11:55.480 --> 0:11:57.760 from the BOJ, he said that it's hard to predict 0:11:57.800 --> 0:12:00.520 the outcome for the December meeting, so I always put 0:12:00.559 --> 0:12:03.880 December back on the table, which something wasn't even on 0:12:03.920 --> 0:12:07.760 anyone's radar screen at this point. So it looks like 0:12:07.800 --> 0:12:10.800 it's more of a live meeting now and now everyone's 0:12:10.920 --> 0:12:14.600 just looking for ques as to anything from the on 0:12:14.640 --> 0:12:17.920 the wires. Is he going to say something to signal December? 0:12:18.320 --> 0:12:21.479 But the yen is really struggling. The yen is struggling 0:12:21.520 --> 0:12:25.880 to break higher. It's really held back, especially because it's 0:12:25.920 --> 0:12:28.720 been a very strong dollar environment. So you need a 0:12:28.800 --> 0:12:32.200 clearer signal from the BOJ to say, Okay, we're actually 0:12:32.280 --> 0:12:34.160 going to continue normalizing rates. 0:12:34.679 --> 0:12:37.760 So I saw earlier today that we had some inflation 0:12:37.880 --> 0:12:40.800 data for Japan core consumer prices in October up at 0:12:40.840 --> 0:12:43.120 an annual rate of two point three percent, a bit 0:12:43.320 --> 0:12:46.080 above what the market was looking for. But that's not 0:12:46.120 --> 0:12:47.760 going to move the needle, will it? When it comes 0:12:47.840 --> 0:12:49.040 to the BOJ. 0:12:50.160 --> 0:12:53.520 I mean, they keep talking about we're going to change 0:12:53.559 --> 0:12:57.199 policy if our outlook is realized. Your every data point 0:12:57.240 --> 0:13:01.160 brings you closer to that outlook being realized. But in 0:13:01.200 --> 0:13:04.280 many ways they continue to drag their feet, and so 0:13:04.520 --> 0:13:06.960 the market is just getting a little bit impatient. So 0:13:07.400 --> 0:13:10.199 you're seeing that rate differentials, for example, on some of 0:13:10.240 --> 0:13:13.559 the crosses moving in the end's favor, but the yen 0:13:13.920 --> 0:13:17.840 isn't going along with it, and that's because traders aren't 0:13:17.880 --> 0:13:21.440 really fully buying it and they're not fully convinced. Because 0:13:21.720 --> 0:13:25.280 every single time the BOJ comes up with a different excuse, Oh, 0:13:25.320 --> 0:13:28.600 the outlook in the US, Oh, the domestic politics, Oh 0:13:28.679 --> 0:13:31.400 it's now US politics. So there always seems to be 0:13:31.440 --> 0:13:32.880 a reason for it. 0:13:33.360 --> 0:13:35.480 So we can assume then, based on what I'm hearing, 0:13:35.600 --> 0:13:37.959 is that December is not going to be the meeting 0:13:38.000 --> 0:13:41.280 where they hike interest rates? Could January be that meeting? 0:13:42.160 --> 0:13:44.560 January seems to be a little bit more likely. But 0:13:44.640 --> 0:13:46.640 I think a lot of what's happening in the US 0:13:46.679 --> 0:13:49.000 on the political side really muddies the waters for a 0:13:49.040 --> 0:13:53.199 lot of central banks, especially in this region. Not only 0:13:53.240 --> 0:13:56.640 do you have dollar strength, but also the fear of 0:13:57.200 --> 0:14:01.120 more protectionist policies are really coming through. So there's a 0:14:01.120 --> 0:14:04.120 lot of fear on that sense. So for example, Bank 0:14:04.160 --> 0:14:07.240 of Korea next week, they're likely to remain cautious even 0:14:07.280 --> 0:14:11.080 though the expectation was that they would continue cutting, and 0:14:11.120 --> 0:14:14.120 you're going to see a lot of that momentum shifting. 0:14:14.360 --> 0:14:17.200 But if the yen really needs to get a clear 0:14:17.400 --> 0:14:21.320 break and actually break higher, it still needs the BOJ 0:14:21.480 --> 0:14:22.240 to push hard. 0:14:22.680 --> 0:14:24.680 So what does that mean in terms of the equity 0:14:24.720 --> 0:14:25.640 market in Tokyo. 0:14:26.640 --> 0:14:30.520 Yeah, I mean there has been this Obviously, this relationship 0:14:30.840 --> 0:14:36.160 between a weaker yen drives the equity markets higher, especially 0:14:36.240 --> 0:14:39.080 because a lot of the major companies, so let's say 0:14:39.080 --> 0:14:41.760 the top ten by market cap, really do depend on 0:14:41.840 --> 0:14:44.880 the en weakness and they do better, profits do better 0:14:44.920 --> 0:14:48.280 as a result. But also there is a clear sticking 0:14:48.320 --> 0:14:51.480 point for the markets, and that's also because of their 0:14:51.520 --> 0:14:55.360 reliance on the US. So again, these protectionist policies will 0:14:55.360 --> 0:14:58.000 come into play if they actually do come to fruition. 0:14:58.480 --> 0:15:03.240 So you could get a number of headwinds accumulating for 0:15:03.800 --> 0:15:07.960 Japanese equities. Whether it's these protectionist policies or the stronger 0:15:08.160 --> 0:15:11.880 end that will all weigh on the equity markets, especially 0:15:11.880 --> 0:15:14.040 if domestic consumption isn't doing its job. 0:15:14.120 --> 0:15:15.520 I'm going to mix it up a little bit. Can 0:15:15.560 --> 0:15:19.360 we talk about crypto, because today during the New York session, 0:15:19.680 --> 0:15:22.320 we had bitcoin break in above ninety nine thousand for 0:15:22.360 --> 0:15:25.000 the first time. Some of this may have been linked 0:15:25.360 --> 0:15:27.800 to the fact that Gary Gensler, the head of the 0:15:27.840 --> 0:15:31.600 SEC essentially indicated that he is going to be leaving 0:15:31.760 --> 0:15:35.280 on January the twentieth. We know he's talked tough when 0:15:35.280 --> 0:15:39.320 it comes to regulating crypto, and if you can accept 0:15:39.320 --> 0:15:42.400 the fact that with the incoming administration, maybe we get 0:15:42.400 --> 0:15:45.920 an office at the White House that oversees crypto, maybe 0:15:45.920 --> 0:15:48.840 we get a Securities and Exchange Commission chair that is 0:15:48.880 --> 0:15:52.400 a lot more crypto friendly. Is anyone in your neck 0:15:52.440 --> 0:15:55.040 of the woods buying into this rally? Do they believe 0:15:55.120 --> 0:15:55.440 in it? 0:15:56.560 --> 0:15:58.960 I mean, the market is very clear that they buy 0:15:58.960 --> 0:16:01.720 into this rally. I think that's probably the clearest Trump 0:16:01.760 --> 0:16:06.240 trade that we've seen in terms of the expectation of 0:16:06.320 --> 0:16:09.960 deregulation is likely to come through. So, you know, people 0:16:10.000 --> 0:16:13.080 are now talking about one hundred thousand, right, and it 0:16:13.160 --> 0:16:16.960 seemed long ago it seems unattainable, But now it seems 0:16:17.080 --> 0:16:20.720 more than attainable within the very near future. So I 0:16:20.760 --> 0:16:24.320 think there's a lot of support, especially on the hopes 0:16:24.360 --> 0:16:27.840 that deregulation is going to come that there's going to 0:16:27.880 --> 0:16:33.000 be support from this new administration for cryptocurrencies, so it's 0:16:33.000 --> 0:16:35.560 hard to see the end of the rally coming through. 0:16:35.680 --> 0:16:37.360 Before I let you go, I want to ask about 0:16:37.400 --> 0:16:41.400 the view from overseas on the FED. It seems increasingly 0:16:41.440 --> 0:16:44.320 as though the market is backing away from the idea 0:16:44.320 --> 0:16:46.200 that the FED is going to be aggressive, and now 0:16:46.360 --> 0:16:49.840 even a conversation around the fact that maybe the FED 0:16:50.000 --> 0:16:52.160 will be on hold at the December meeting. To the 0:16:52.160 --> 0:16:54.600 point that we were making earlier about dollar strength, this 0:16:54.760 --> 0:16:56.520 is only going to underpin that right. 0:16:56.840 --> 0:16:59.400 Yeah, absolutely, and I think that's what makes it a 0:16:59.400 --> 0:17:03.480 little bit more are difficult for central banks in this region. 0:17:03.520 --> 0:17:06.480 We've already seen it from Bank Indonesia. They've taken on 0:17:06.520 --> 0:17:09.240 a little bit more cautious approach, especially because we've seen 0:17:09.280 --> 0:17:12.960 that their currency has weakened. Bank of Korea next week 0:17:13.000 --> 0:17:16.359 we'll probably toe the same line. So it's about the 0:17:16.400 --> 0:17:19.560 fact that if they take on a cautious approach, everyone 0:17:19.640 --> 0:17:22.560 in this region is going to do the same because 0:17:22.560 --> 0:17:25.680 they're frankly just worried about more currency weakness. 0:17:26.000 --> 0:17:27.760 We'll leave it there, Mary, thank you so much for 0:17:27.760 --> 0:17:29.960 making time. Thank you to chat with us. Mary Nicola 0:17:30.000 --> 0:17:33.360 Bloomberg m Live strategist joining us here on the Daybreak 0:17:33.359 --> 0:17:44.320 Asia podcast from our studios in Singapore. Welcome back to 0:17:44.320 --> 0:17:47.480 the Bloomberg Daybreak Asia Podcast. I'm Doug Prisner. Joining us 0:17:47.520 --> 0:17:50.040 for a look at market action is Chris Zacarelli. He 0:17:50.119 --> 0:17:53.800 is the chief investment officer at north Light Asset Management, 0:17:53.880 --> 0:17:57.119 joining us today from Charlotte, North Carolina. Chris, thanks for 0:17:57.240 --> 0:17:59.480 joining us. One of the things that struck me today 0:17:59.480 --> 0:18:02.000 when you look at market action, the rally that we 0:18:02.119 --> 0:18:05.680 had in small caps, the so called Trump trade seem 0:18:05.800 --> 0:18:08.560 to have resurfaced in a big way. We're talking a 0:18:08.560 --> 0:18:11.320 lot here about pro growth policies. Are you a buyer? 0:18:11.880 --> 0:18:14.680 Yeah, We've been interested in small caps for quite some time, 0:18:14.720 --> 0:18:16.919 and we think there's it is a game changer in 0:18:17.000 --> 0:18:19.720 terms of the red sweep in terms of potentially lower 0:18:20.359 --> 0:18:24.960 less or more regulation, lower taxes, and so we think 0:18:25.000 --> 0:18:27.000 that will benefit a lot of the smaller companies which 0:18:27.000 --> 0:18:28.520 are more levered to the tax code. 0:18:28.760 --> 0:18:30.520 But also as the country looks to be a. 0:18:30.520 --> 0:18:34.640 Little bit more domestically focused and potentially see some headwinds internationally, 0:18:35.000 --> 0:18:38.480 we think small caps will also benefit because predominantly they 0:18:38.480 --> 0:18:40.960 have a lot less sales that are overseas in the 0:18:40.960 --> 0:18:43.320 small cap space versus large caps, is. 0:18:43.280 --> 0:18:45.240 There a risk that a number of these companies may 0:18:45.240 --> 0:18:48.920 be struggling to pay their debt and they may see 0:18:48.960 --> 0:18:52.360 a little bit of subdued earnings growth. Could that potentially 0:18:52.400 --> 0:18:53.679 spoil this trade a little bit? 0:18:53.920 --> 0:18:55.359 Yeah, I mean, I think when you look at the trade, 0:18:55.440 --> 0:18:57.439 you know, obviously, if you're looking at small caps across 0:18:57.440 --> 0:18:59.200 the board, if you look at let's say, the Rustle 0:18:59.280 --> 0:19:01.200 two thousand, you know at least a third of those 0:19:01.240 --> 0:19:04.760 are not profitable. And so you know, for those companies 0:19:04.760 --> 0:19:07.640 which are struggling from a cashlow point of view, absolutely, 0:19:07.680 --> 0:19:10.000 if they have high debt loads and interest rates as 0:19:10.040 --> 0:19:12.520 saying higher for longer, that could be a challenge. 0:19:12.560 --> 0:19:14.680 We definitely think, you know, you have to pick your spots. 0:19:14.760 --> 0:19:17.640 You'll have to look for companies with more manageable debt 0:19:17.680 --> 0:19:20.520 loads or ones that have pushed out their maturity dates, 0:19:20.840 --> 0:19:23.520 as well as companies that are already casual positive, not 0:19:23.560 --> 0:19:27.119 necessarily cash flow positive in the future. So that is 0:19:27.560 --> 0:19:29.200 a possibility for the sector as a whole. 0:19:29.200 --> 0:19:29.760 Absolutely. 0:19:29.840 --> 0:19:32.280 The other thing, obviously that the market's been struggling to 0:19:32.359 --> 0:19:35.560 deal with is what appears to be an adjustment from 0:19:35.600 --> 0:19:39.840 the FED moderating the pace of rate cuts. Maybe we're 0:19:39.880 --> 0:19:43.360 dealing with a situation where higher for longer is going 0:19:43.440 --> 0:19:45.440 to be kind of the mantra, Is that fair? 0:19:46.040 --> 0:19:49.439 I think that's definitely the change that we've seen, you know, 0:19:49.520 --> 0:19:53.000 since the election, the idea that potentially we'll see more inflation. 0:19:53.119 --> 0:19:55.359 Whether that's because pro growth policies will lead to a 0:19:55.400 --> 0:19:58.280 little bit of a hotter economy, or whether tourists get 0:19:58.280 --> 0:20:00.960 introduced next year and that leads to a inflation, there's 0:20:01.000 --> 0:20:03.600 a lot more. I think there's a wider range of 0:20:03.640 --> 0:20:06.080 outcomes at this point in terms of higher and lower. 0:20:06.359 --> 0:20:08.159 And I think, you know, if you're looking at a 0:20:08.200 --> 0:20:11.160 situation where the FED was looking to cut rates pretty 0:20:11.160 --> 0:20:13.200 aggressively last year, and I think if you look even 0:20:13.200 --> 0:20:15.359 at the end of October, maybe there was five or 0:20:15.400 --> 0:20:17.880 six rate cuts priced in. And now when I look 0:20:17.880 --> 0:20:20.600 at my Bloomberg terminal before this interview, you know, using 0:20:20.640 --> 0:20:24.199 the WIIRP function, it's less than three. So I think 0:20:24.240 --> 0:20:26.680 the market's already taken out some of the potential FED 0:20:26.760 --> 0:20:29.919 rate cuts. Obviously that really depends on policy, depends on 0:20:29.960 --> 0:20:32.760 the path of the economy, but for now, I think, 0:20:32.840 --> 0:20:34.760 you know, one big change you can say, at least 0:20:34.760 --> 0:20:37.160 in the last couple of weeks post election, is that 0:20:37.320 --> 0:20:40.399 most people are expecting fewer rate cuts versus even just 0:20:40.640 --> 0:20:41.400 a few weeks. 0:20:41.160 --> 0:20:44.040 Ago, higher for longer rates. Was a big question mark 0:20:44.240 --> 0:20:47.040 over the commercial real estate market, and I was struck 0:20:47.080 --> 0:20:49.280 today by a piece that we had on the Bloomberg Terminal. 0:20:49.560 --> 0:20:53.840 Carson Block was saying that apartment complexes are expected to 0:20:53.840 --> 0:20:57.640 be the next major source of problems in the commercial 0:20:57.640 --> 0:21:01.080 real estate market, particularly in the Sun Belt. Does he 0:21:01.160 --> 0:21:01.960 have a point there? 0:21:02.440 --> 0:21:03.160 I think he does. 0:21:03.200 --> 0:21:05.040 And again, you know, when you're looking at real estate 0:21:05.080 --> 0:21:07.560 in general, and even commercial real estate, you know clearly 0:21:07.760 --> 0:21:11.160 it's a it's a very very broad sector, not just geographically, 0:21:11.200 --> 0:21:14.399 but also the quality of the of the you know, 0:21:14.600 --> 0:21:15.680 of the buildings. 0:21:15.280 --> 0:21:17.320 And so I think just like you're going to see. 0:21:17.119 --> 0:21:20.560 Within within office, I think you'll say the same thing 0:21:20.600 --> 0:21:23.399