WEBVTT - Weak US Jobs Data Fuels Fed Cut Bets

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News.

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<v Speaker 2>Welcome to the Bloomberg Daybreak Asia Podcast. I'm Charlie Pell

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<v Speaker 2>Doug Prisoners off. This week it is shaping up to

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<v Speaker 2>be a risk on day in the Asia Pacific week.

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<v Speaker 2>Jobs date out of the US on Wednesday is helping

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<v Speaker 2>to lock in expectations of a FED racout this month.

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<v Speaker 2>Coming up. We get some market perspective from Timothy Moe,

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<v Speaker 2>chief APEC Regional equity strategist at Goldman Sachs. But we

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<v Speaker 2>begin in the States, where treasuries bounce back after a

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<v Speaker 2>slide that put the thirty year yield close to five percent.

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<v Speaker 2>All eyes now turned to Friday's US jobs report, one

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<v Speaker 2>of the last key data points before the Fed's quiet

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<v Speaker 2>period next week. For more, we heard from Audrey Go,

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<v Speaker 2>head of asset Allocation at Standard Chartered Wealth Management Group.

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<v Speaker 2>She spoke with Bloomberg TV's Paul Allen and April Hon

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<v Speaker 2>on the Asia trade.

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<v Speaker 3>Audrey, good to see you. Let's start off.

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<v Speaker 4>By what we're seeing in the long end on bonds

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<v Speaker 4>and this debate that is underway. Is this ball or

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<v Speaker 4>bears deepening and how much further are we going to

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<v Speaker 4>see on.

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<v Speaker 5>This well thanks for having me. I think we expect

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<v Speaker 5>the long end to remain reasonably well anchored. So if

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<v Speaker 5>we look at the range that we're looking at for

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<v Speaker 5>the US thirty year treasury bond use, we are looking

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<v Speaker 5>at the range of between the say four point eight

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<v Speaker 5>we're our five point one percent, And if we look

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<v Speaker 5>at the latest jobs opening data that will release overnight

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<v Speaker 5>as well, we have basically continued to see moderation continued

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<v Speaker 5>moderation in jobs market, where the number of vacancies which

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<v Speaker 5>is available has struck to a ten month flow, and

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<v Speaker 5>we've also seen the vacancy to unemployment ratio, for example,

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<v Speaker 5>a drop below one for the first time since Train

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<v Speaker 5>twenty one. So what this means is now there are

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<v Speaker 5>more unemployed workers than there are vacants, and to us,

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<v Speaker 5>that's likely to continue to weigh on bond use over

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<v Speaker 5>a longer term basis. Notwithstanding that we are seeing some

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<v Speaker 5>short term spike at the moment in terms of the

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<v Speaker 5>long end where the Treasury is concerned.

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<v Speaker 3>What is all this going to mean for the dollar argery,

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<v Speaker 3>So for.

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<v Speaker 5>The dollar wise, I think we wouldn't be surprised if

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<v Speaker 5>there were to be you know, some mild strengthening in

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<v Speaker 5>the dollar in the very short term because of concern

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<v Speaker 5>over physical risks fysical pressure among major central banks, not

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<v Speaker 5>just in the US but globally in the Euro area

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<v Speaker 5>as well. But I think again over a six to

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<v Speaker 5>twelve months horizon, given that the fat we're expecting them

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<v Speaker 5>to deliver the rate cuts starting in September again and

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<v Speaker 5>maybe another to the tree rate cuts for the next

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<v Speaker 5>twelve months or so, we don't expect that to likely

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<v Speaker 5>to add pressure in terms of the dollar for a

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<v Speaker 5>dollar to be biased, or we could trajectory over twelve

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<v Speaker 5>months horizon, But again then they're not looking for massive

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<v Speaker 5>weweakening because economic data is still holding up recently well,

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<v Speaker 5>and if we were to look at US economic surprises,

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<v Speaker 5>those are largely neutral right but still reasonably in a

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<v Speaker 5>recently positive territory. So no measure shift from a dollar perspective,

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<v Speaker 5>and really our advised investors is to treat the range

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<v Speaker 5>in terms of bone YU where it comes to bond investors,

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<v Speaker 5>and then from a dollar as well, largely range bound

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<v Speaker 5>as well, maybe with a slight weakening bias.

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<v Speaker 4>In spite of the relative dollar weakness we are seeing.

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<v Speaker 3>The yen can't seem to catch a break. What is

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<v Speaker 3>your sense of where we go from here?

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<v Speaker 5>I think EOG needs to strike a very delicate balance

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<v Speaker 5>because on one end, if you look economic data Japan,

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<v Speaker 5>Japanese inflation is clearly above two percent target roses three

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<v Speaker 5>percent or three percent. Actually prices are part sticky, we're

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<v Speaker 5>just also improving. So they are clearly pressed in terms

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<v Speaker 5>of the need to normalize the monetary policy. But at

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<v Speaker 5>the same time, with all the uncertainty for your regards

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<v Speaker 5>to one use as well as long end as well

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<v Speaker 5>as you know, trade tensions with the US as well,

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<v Speaker 5>I think they need to strike a relatively balancing act

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<v Speaker 5>in terms of not unrestling the market. So for now

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<v Speaker 5>we are expecting them to really to largely stay pad

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<v Speaker 5>in the upcoming September policy meeting. But over the next

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<v Speaker 5>one year horizon we are probably we are biased to

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<v Speaker 5>believe that they will be likely to continue hiking interestrate,

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<v Speaker 5>maybe delivering one great height or maybe even two over

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<v Speaker 5>the next plogment's horizon.

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<v Speaker 6>Audrey, A lot of asset prices are looking fairly elevated

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<v Speaker 6>at the moment.

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<v Speaker 2>Where are you adding to positions?

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<v Speaker 5>So for us it remains a powerfolding for US, but

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<v Speaker 5>given that the US equity markets have also scaled new

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<v Speaker 5>high together with global equities, we are biased to believe

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<v Speaker 5>that the markets are probably due for consolidation as it

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<v Speaker 5>stands for now, and if there were to be any

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<v Speaker 5>pullback in equity market, we are more We prefer to

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<v Speaker 5>add within the Asian ex Shapen region know to be

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<v Speaker 5>China as well, and China equities has also been doing

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<v Speaker 5>quite well, being one of the better performers years to

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<v Speaker 5>data as well. But even compare evaluations between China as

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<v Speaker 5>well as Asian relatives to global equities, these do treat

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<v Speaker 5>a relative discount and also buffeted or supported by tailwinds

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<v Speaker 5>from our buyers from a weaker years dollar and potentially

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<v Speaker 5>moderate moderate, slightly lower in terms of one use or

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<v Speaker 5>range dances of one use, and those are the factors

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<v Speaker 5>that tend to be quite supportive. Where Asian markets China

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<v Speaker 5>equities arekincerned given a week of dollar till weed, which

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<v Speaker 5>also allows center banks in this part of the world

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<v Speaker 5>to really think about, you know, easy policies to you know,

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<v Speaker 5>continue to support and pushing their economy as well.

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<v Speaker 6>We always talk a little bit more about Chinese equities

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<v Speaker 6>because we're seeing very strong buying. We're also seeing rec

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<v Speaker 6>what borrowing to fuel purchases, and opinion seems to be

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<v Speaker 6>somewhat divided on how sustainable the raally is how do

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<v Speaker 6>you view things?

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<v Speaker 5>So we are change equities and policy tail wings aside.

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<v Speaker 5>We're also seeing some improvement and properate earnings. I think importantly,

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<v Speaker 5>I think we have seen some shift and sentimental where

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<v Speaker 5>consumers household are starting to maybe take up their maturing

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<v Speaker 5>deposites or cash foldings and starting to really put them

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<v Speaker 5>into the equity markets, which is really unseen over the

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<v Speaker 5>last maybe three years or so, given the really poor

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<v Speaker 5>sentiment around that. So on the back of that, we've

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<v Speaker 5>actually seen increased in accounts opening inpropriges in China. We've

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<v Speaker 5>also started to see some decline in cash deposits be

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<v Speaker 5>in the bank as well, and those also signs that

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<v Speaker 5>tells us that some of these liquidity momentum related trade

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<v Speaker 5>in China can continue. But obviously, you know, I think

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<v Speaker 5>shortened there a little overboard, so our preference is really

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<v Speaker 5>for investors to really look to enter them on pullback,

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<v Speaker 5>and valuations have also risen to about maybe above average

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<v Speaker 5>one Dad dish above their five years average as well,

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<v Speaker 5>so net network for pullback before re entering to the market.

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<v Speaker 4>Audrey, what are some of the risks that you think

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<v Speaker 4>at this point markets are underappreciating.

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<v Speaker 5>I think, for one will be I think key will

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<v Speaker 5>be maybe another flare out and treat tension because I

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<v Speaker 5>think people are expecting TAKO to prosist, and I think

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<v Speaker 5>that in itself is quite unpredictable because we wouldn't know

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<v Speaker 5>what might be some of the new policy developments or

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<v Speaker 5>rhetorics that may be up from the Trum administration. So so

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<v Speaker 5>that's one key risk that I think people maybe underappreciating.

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<v Speaker 5>And second or host of first inflation. Then we've also

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<v Speaker 5>recently seen a great high in terms of goal price

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<v Speaker 5>as well, and clearly from it as a location perspective

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<v Speaker 5>for our advisor investors is given these risks which are

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<v Speaker 5>still quite about out there, we will also hold a

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<v Speaker 5>poor allocation to go, which is one of the key

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<v Speaker 5>diversified for portfolios.

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<v Speaker 6>Before we let you go, Audrey, I just want to

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<v Speaker 6>get your thoughts also on some of the assaults that

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<v Speaker 6>we've seen on fed independence with her from a number

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<v Speaker 6>of voices today, the former Treasury Secretary Larry Summer's warning

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<v Speaker 6>of a credibility crisis. Even the governors of the Bank

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<v Speaker 6>of Thailand and Bank of England weighing in on this

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<v Speaker 6>as well. But at what point do you see the

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<v Speaker 6>market start to worry about this? Where's the timeline and

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<v Speaker 6>the threshold for the same sort of tantrum that we

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<v Speaker 6>saw over US trade policy.

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<v Speaker 5>I think it we were to see even more traum

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<v Speaker 5>normally into the Federal Reserve Government Board, I think that

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<v Speaker 5>might be a key risk for the market to maybe

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<v Speaker 5>decidedly turn more worrism on fat independence. I think for

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<v Speaker 5>now it is a risk that is lurking in the background,

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<v Speaker 5>but all from a setup of the board is still

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<v Speaker 5>reasonably i would say independent, but of course subject to

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<v Speaker 5>who the new nominees may be, and also whether Trump

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<v Speaker 5>may be successful in removing Government Cook from the Council

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<v Speaker 5>as well. So that's really quite a key development for

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<v Speaker 5>investory watching. But for now it seems that investors seems

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<v Speaker 5>to be, you know, striking that off and seeing that

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<v Speaker 5>as a background risk more than a key significant risk

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<v Speaker 5>for asset prices.

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<v Speaker 6>All right, Audrey, go ahead of asset allocation at standard

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<v Speaker 6>Chat of Wealth Management group. Thanks so much for joining us.

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<v Speaker 2>Welcome back to the Daybreak Asia podcast. I'm Charlie Peloton.

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<v Speaker 2>This week for Doug Chrisner, we go next to Hong Kong,

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<v Speaker 2>where Goldman Sachs in augural Asia Leaders Conference is underway.

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<v Speaker 2>It was there that we heard from Timothy Moe, Goldman's

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<v Speaker 2>chief APAC regional equity strategist. He shared his market outlook

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<v Speaker 2>during a sit down with Bloomberg's April Hong.

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<v Speaker 4>Okay, let's start with what seems to be on a

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<v Speaker 4>lot of investors' minds, the curve steepening.

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<v Speaker 3>How is that likely to affect Asia stocks using.

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<v Speaker 1>Well, generally a steeper Yeel curve is better for stocks,

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<v Speaker 1>And in particular, what matters is the way that the

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<v Speaker 1>Yeel curve steepens, and what we're expecting is this so

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<v Speaker 1>called bull steepening, which means that the short end of

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<v Speaker 1>the curve goes down, so you basically have the curve steepening.

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<v Speaker 1>But because rates are getting lower at the at the

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<v Speaker 1>short end of the curve, we've done some statistical work

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<v Speaker 1>on this and what we can see is that when

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<v Speaker 1>you've got lower short us rates, short end us rates,

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<v Speaker 1>which of course we expect with the upcoming FED meeting,

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<v Speaker 1>we think the FED will start cutting again, and we

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<v Speaker 1>think there will be three cuts this year and then

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<v Speaker 1>two more in the each quarter next year. That that,

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<v Speaker 1>combined with the softer dollar, which we think will be

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<v Speaker 1>the result in part rates coming down more than Asian rates,

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<v Speaker 1>is typically a favorable backdrop for Asian stocks, particularly for

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<v Speaker 1>markets like Korea, Taiwan, Hong Kong and the Philippines.

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<v Speaker 3>What about Japan, though, we saw how those.

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<v Speaker 4>Banks really got hammered yesterday.

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<v Speaker 3>How bad is the.

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<v Speaker 4>Much higher in global DM yields on the long end

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<v Speaker 4>potentially going to be for their bond books typically?

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<v Speaker 1>Well, I want to break that down into two bits.

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<v Speaker 1>So higher rates in Japan should be good for the banks.

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<v Speaker 1>In fact, that's one of the reasons why we do

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<v Speaker 1>like we do like banks because obviously, when rates are

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<v Speaker 1>at the very low levels that they were in the

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<v Speaker 1>yeal curve control, then the bank's earnings and margins were very,

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<v Speaker 1>very compressed. So when you've got rates rising from a

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<v Speaker 1>low absolute level and you also have a steeping of

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<v Speaker 1>the eal curve, that typically a very very favorable environment

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<v Speaker 1>for banks. That's the reason why banks have done well.

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<v Speaker 1>I think with regard to the steeping along end of

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<v Speaker 1>the curve, then there's some concerns about are there signals

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<v Speaker 1>there about Japan's fiscal ability to repay It's a large

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<v Speaker 1>amount of borrowing toch about four hundred percent debt to GDP,

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<v Speaker 1>and so I think that that has taken some of

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<v Speaker 1>the edge off the banks which had done well previously.

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<v Speaker 1>So I think it's a bit of a reason for

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<v Speaker 1>banks to have some profit taking, but overall, we still

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<v Speaker 1>are favorable on the Japanese banks.

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<v Speaker 4>Do you see this as potentially a risk for markets

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<v Speaker 4>that are more bank heavy, such as Australia?

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<v Speaker 1>Generally yes, I mean, so we're more cautious banks. If

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<v Speaker 1>you look at our sector allocations, we generally are more

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<v Speaker 1>in favor of, for example, the technology space, which obviously

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<v Speaker 1>plays into the AI theme and so forth, some of

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<v Speaker 1>the deeper cyclicals, and also some of the more defensive

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<v Speaker 1>stocks that have higher yields. That's generally been how we're

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<v Speaker 1>deployed in the environment that we're expecting where short end

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<v Speaker 1>rates are coming down, that's generally not as favorable for banks.

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<v Speaker 1>And then if you unpact that, you see that some

0:12:08.679 --> 0:12:11.359
<v Speaker 1>of the industries that are very bank heavy, like Indonesia,

0:12:11.400 --> 0:12:13.480
<v Speaker 1>where the banking sector is over sixty percent of the

0:12:13.520 --> 0:12:19.400
<v Speaker 1>MCAI Indonesia Index. Tight liquidity domestically as well as the

0:12:19.720 --> 0:12:22.360
<v Speaker 1>rate environment that I just described is typically not good

0:12:22.400 --> 0:12:24.840
<v Speaker 1>for their profitability. And so if you've got to constrain

0:12:24.840 --> 0:12:27.360
<v Speaker 1>a profitability for the banks there and the sixty percent

0:12:27.360 --> 0:12:29.160
<v Speaker 1>of the index, that generally put some weight on the

0:12:29.160 --> 0:12:31.839
<v Speaker 1>index overall. So we're underweight Indonesia. I part is the

0:12:31.880 --> 0:12:32.600
<v Speaker 1>consequence of that.

0:12:33.280 --> 0:12:34.680
<v Speaker 3>Just picking out your point there.

0:12:34.880 --> 0:12:39.000
<v Speaker 4>Indonesia also in the past week seems to be reflecting

0:12:39.040 --> 0:12:42.000
<v Speaker 4>these other risks are reminder of the risks and the ems.

0:12:42.280 --> 0:12:44.400
<v Speaker 3>How do you view that market overall?

0:12:44.480 --> 0:12:48.360
<v Speaker 1>Well, as I said, we've been underweight there, and obviously

0:12:48.360 --> 0:12:52.160
<v Speaker 1>there's been political tension and demonstrations and so forth which

0:12:52.200 --> 0:12:54.600
<v Speaker 1>have been weighing on the market. We actually think from

0:12:54.640 --> 0:12:56.560
<v Speaker 1>a fixed income standpoint, a good deal of that is

0:12:56.600 --> 0:12:58.840
<v Speaker 1>priced and if things come down as they appear to

0:12:58.840 --> 0:13:03.160
<v Speaker 1>be doing, then there is some opportunity to receive rates,

0:13:03.160 --> 0:13:05.720
<v Speaker 1>which which basically means to take a more constructive view

0:13:06.000 --> 0:13:09.160
<v Speaker 1>on faxed income. But still, when we stack Indonesia up

0:13:09.200 --> 0:13:12.959
<v Speaker 1>against the rest of the region in terms of earning's

0:13:13.000 --> 0:13:18.000
<v Speaker 1>growth and uncertainty about domestic domestic environment. We think they

0:13:18.000 --> 0:13:20.560
<v Speaker 1>are better alternatives, particularly in North Asia where we're overweight

0:13:20.640 --> 0:13:24.480
<v Speaker 1>China both A and H, overweight Korea, and overweight Japan.

0:13:24.760 --> 0:13:27.000
<v Speaker 1>And I would note that those for those three markets

0:13:27.280 --> 0:13:29.920
<v Speaker 1>have done particularly well this year. The spread between them

0:13:29.920 --> 0:13:32.480
<v Speaker 1>and some of the poor performing markets, which includes Indonesia

0:13:32.480 --> 0:13:34.520
<v Speaker 1>which is another the worst performing market in the region,

0:13:34.720 --> 0:13:37.320
<v Speaker 1>is over forty percentage points this year, which is double

0:13:37.400 --> 0:13:41.359
<v Speaker 1>what the sixteen seventeen percent return on the MASCI indexes

0:13:41.559 --> 0:13:42.040
<v Speaker 1>year today.

0:13:42.679 --> 0:13:45.360
<v Speaker 4>And you see further room to run on the liquidity

0:13:45.559 --> 0:13:47.040
<v Speaker 4>driven rally on the mainland.

0:13:47.320 --> 0:13:48.320
<v Speaker 2>Yes we do, Yes, we do.

0:13:48.400 --> 0:13:49.360
<v Speaker 3>Are well.

0:13:49.400 --> 0:13:51.520
<v Speaker 1>We just raised our CSI three hundred target from forty

0:13:51.520 --> 0:13:53.920
<v Speaker 1>five hundred and forty nine hundred, and that's about you know,

0:13:54.640 --> 0:13:57.320
<v Speaker 1>load of mid teens upside from here, even after gaining

0:13:57.360 --> 0:14:00.400
<v Speaker 1>eleven percent in the last month, in seventeen percent to date.

0:14:00.920 --> 0:14:03.000
<v Speaker 1>And we've had a lot of questions with investors, particularly

0:14:03.040 --> 0:14:07.360
<v Speaker 1>about our conference here, our Asian Leader conference, regarding you know,

0:14:07.480 --> 0:14:10.080
<v Speaker 1>is the aclidity is the liquidity run has it gone

0:14:10.080 --> 0:14:13.400
<v Speaker 1>too far? We have a tool of developed which is

0:14:13.440 --> 0:14:17.200
<v Speaker 1>a retail sentiment barometer which includes eleven to fifteen different

0:14:17.320 --> 0:14:21.400
<v Speaker 1>indicators all about how liquidity and retail sentiment is performing

0:14:21.440 --> 0:14:24.760
<v Speaker 1>on shore, and that suggests that, yes, retail sentiment has elevated,

0:14:24.960 --> 0:14:27.880
<v Speaker 1>but it's nowhere near the extremes that we saw, for example,

0:14:27.880 --> 0:14:30.040
<v Speaker 1>ten years ago, in twenty fifteen, or even in some

0:14:30.080 --> 0:14:32.240
<v Speaker 1>of the recent spikes in the market. So we still

0:14:32.240 --> 0:14:35.520
<v Speaker 1>think that the market's not overextended here and is further

0:14:35.560 --> 0:14:35.920
<v Speaker 1>to run.

0:14:36.640 --> 0:14:37.440
<v Speaker 3>Is it also.

0:14:37.200 --> 0:14:40.080
<v Speaker 4>Partly to do with how policy risk in China has

0:14:40.120 --> 0:14:44.360
<v Speaker 4>been compressed and perhaps partly to do with how the

0:14:44.440 --> 0:14:48.120
<v Speaker 4>Chinese leadership the optics surrounding the stock market.

0:14:48.280 --> 0:14:50.880
<v Speaker 3>Do you think that is also potentially a driver here?

0:14:51.240 --> 0:14:54.480
<v Speaker 1>That's very much part of an input to our thought process.

0:14:54.560 --> 0:14:56.800
<v Speaker 1>I mean, for example, when Teaching Ping met in February

0:14:56.840 --> 0:14:59.720
<v Speaker 1>with all the tech leaders, that clearly signaled a shift

0:14:59.720 --> 0:15:04.800
<v Speaker 1>in terms of the perhaps more repressive attitude towards private enterprises.

0:15:05.120 --> 0:15:07.360
<v Speaker 1>We did a big series of reports a month or

0:15:07.400 --> 0:15:12.040
<v Speaker 1>so ago basically calling for the sort of rejuvenation of

0:15:12.240 --> 0:15:15.800
<v Speaker 1>the private owned sector, which is obviously is dominated in

0:15:15.840 --> 0:15:17.880
<v Speaker 1>marketcap terms by many of the tech companies.

0:15:18.240 --> 0:15:19.600
<v Speaker 2>We really very much like these.

0:15:19.600 --> 0:15:22.040
<v Speaker 1>We have a group of stocks you called the prominent ten,

0:15:22.280 --> 0:15:25.640
<v Speaker 1>which we very much favor, and that is part of

0:15:25.680 --> 0:15:28.760
<v Speaker 1>our constructive view of partic on China, h shares, the offshore,

0:15:28.880 --> 0:15:29.600
<v Speaker 1>the offshore stocks.

0:15:29.640 --> 0:15:32.120
<v Speaker 4>What about the policy risk that's coming out of the US.

0:15:32.240 --> 0:15:35.160
<v Speaker 4>We've seen in the past week for those Chinese weave

0:15:35.160 --> 0:15:38.160
<v Speaker 4>as for the chip names in Asia, they're getting revolved.

0:15:38.280 --> 0:15:39.640
<v Speaker 3>How big of a risk are you seeing?

0:15:39.680 --> 0:15:42.280
<v Speaker 1>Well, I mean, this is part of the more fraud

0:15:42.320 --> 0:15:45.600
<v Speaker 1>geopolitical backdrop that we that we find ourselves in. And

0:15:46.040 --> 0:15:48.760
<v Speaker 1>one of the ways that we find to translate that

0:15:49.160 --> 0:15:54.120
<v Speaker 1>backdrop of elevated tension globally is to favor the defense

0:15:54.160 --> 0:15:56.320
<v Speaker 1>spending theme. This is a theme that we've liked for

0:15:56.400 --> 0:15:58.880
<v Speaker 1>well over two years. It's not more popular, it's done

0:15:58.960 --> 0:16:01.400
<v Speaker 1>very very well. We have two baskets on this. It's

0:16:01.720 --> 0:16:05.480
<v Speaker 1>a core Asia Asia defense and aerospace basket as well

0:16:05.480 --> 0:16:07.880
<v Speaker 1>as the defense supply chain, and those are forty to

0:16:07.880 --> 0:16:10.200
<v Speaker 1>fifty percent this year. So we very much like this theme.

0:16:10.280 --> 0:16:13.280
<v Speaker 1>Think it's a long term, five year, ten year structural trend.

0:16:13.680 --> 0:16:16.200
<v Speaker 1>Short term that might be a little bit overextended, but

0:16:16.360 --> 0:16:18.720
<v Speaker 1>in the longer run, we think that it's a theme

0:16:18.760 --> 0:16:19.520
<v Speaker 1>to remain engaged in.

0:16:19.760 --> 0:16:21.280
<v Speaker 3>Short term overall, in the region.

0:16:21.400 --> 0:16:24.720
<v Speaker 4>We've also seen Asia extra pan how they've climbed from

0:16:24.720 --> 0:16:27.280
<v Speaker 4>the April lows. Should we be bracing for some form

0:16:27.280 --> 0:16:28.920
<v Speaker 4>of a correction if so, win Well.

0:16:28.760 --> 0:16:31.920
<v Speaker 1>Thanks using the question, Because we just introduced a new

0:16:31.960 --> 0:16:36.240
<v Speaker 1>tool we call RADAR, which stands for Regional Asia Drawdown

0:16:36.360 --> 0:16:40.520
<v Speaker 1>Risk Model, and it basically is a probabilistic regression model

0:16:40.600 --> 0:16:43.920
<v Speaker 1>that assesses whether there might be some risk of a

0:16:43.960 --> 0:16:45.359
<v Speaker 1>pullback in markets.

0:16:45.000 --> 0:16:45.920
<v Speaker 2>Of varying degrees.

0:16:46.240 --> 0:16:48.800
<v Speaker 1>And the punchline is that after the market, as you

0:16:48.880 --> 0:16:51.360
<v Speaker 1>just said, the broader Regional Index is rallied over thirty

0:16:51.360 --> 0:16:54.640
<v Speaker 1>percent from the April lows without any really any meaningful

0:16:54.640 --> 0:16:56.720
<v Speaker 1>pullback just you know, not even five percent, just two

0:16:56.760 --> 0:17:00.600
<v Speaker 1>three percent pullback at the max, and various momentum indicators

0:17:00.640 --> 0:17:04.000
<v Speaker 1>being a bit stretched, and also valuations going from over

0:17:04.040 --> 0:17:07.960
<v Speaker 1>a sanitary deviation cheap to a sanitation ridge. We think

0:17:08.000 --> 0:17:10.520
<v Speaker 1>that the markets to probably overdo some sort of a

0:17:10.600 --> 0:17:11.879
<v Speaker 1>digestion of those gains.

0:17:12.119 --> 0:17:13.360
<v Speaker 3>Typically September is.

0:17:13.280 --> 0:17:15.200
<v Speaker 1>A week month or the weakest month of the year.

0:17:15.440 --> 0:17:16.200
<v Speaker 2>So if you pulled all.

0:17:16.080 --> 0:17:17.840
<v Speaker 1>That together, it says there might be a risk of

0:17:17.880 --> 0:17:20.440
<v Speaker 1>a bit of an air pocket in markets. But then

0:17:20.480 --> 0:17:22.240
<v Speaker 1>we think that would allow investors to set up for

0:17:22.320 --> 0:17:25.520
<v Speaker 1>what's typically a stronger fourth quarter. So our call here

0:17:25.600 --> 0:17:27.800
<v Speaker 1>is the markets have done very well, they might pull

0:17:27.840 --> 0:17:28.600
<v Speaker 1>back a little bit.

0:17:28.520 --> 0:17:31.480
<v Speaker 2>Here to varying degrees. Korea has already pulled back.

0:17:31.320 --> 0:17:33.600
<v Speaker 1>About five percent or so, and then we think it

0:17:33.640 --> 0:17:35.200
<v Speaker 1>sets us up for good running at the end of

0:17:35.200 --> 0:17:35.520
<v Speaker 1>the year.

0:17:35.640 --> 0:17:39.439
<v Speaker 4>Okay, so watch the month of September. How should we

0:17:39.640 --> 0:17:40.200
<v Speaker 4>be hedging?

0:17:40.960 --> 0:17:42.240
<v Speaker 2>Well, we have some suggestions.

0:17:42.280 --> 0:17:44.440
<v Speaker 1>Not all investors can do this, but if you look

0:17:44.440 --> 0:17:48.200
<v Speaker 1>at volatility that's gone down, the implied volatility for derivative

0:17:49.640 --> 0:17:53.000
<v Speaker 1>contracts or derivative instruments, So whether it's in the form

0:17:53.040 --> 0:17:55.760
<v Speaker 1>of a short data put or maybe a put spread,

0:17:56.560 --> 0:17:58.720
<v Speaker 1>we think that that is a sort of tactical way

0:17:59.320 --> 0:18:02.119
<v Speaker 1>as an overlay for investors who can do that to

0:18:02.160 --> 0:18:05.200
<v Speaker 1>protect some of the downstide risking their portfolio, stay engaged

0:18:05.440 --> 0:18:07.680
<v Speaker 1>and be able to position into what we think will

0:18:07.720 --> 0:18:09.560
<v Speaker 1>be a better fourth quarter run for the end of

0:18:09.600 --> 0:18:09.920
<v Speaker 1>the year.

0:18:10.160 --> 0:18:13.639
<v Speaker 4>Tim, always a pleasure, always amazing, great to have your insights.

0:18:14.000 --> 0:18:14.960
<v Speaker 3>Thank you so much.

0:18:15.080 --> 0:18:19.520
<v Speaker 4>Tim no Is, Chief afat Regional equity strategist at Goldman sach.

0:18:23.040 --> 0:18:26.400
<v Speaker 2>Thanks for listening to today's episode of the Bloomberg Daybreak

0:18:26.560 --> 0:18:29.919
<v Speaker 2>Asia Edition podcast. Each weekday, we look at the story

0:18:30.000 --> 0:18:34.359
<v Speaker 2>shaping markets, finance, and geopolitics in the Asia Pacific. You

0:18:34.359 --> 0:18:38.479
<v Speaker 2>can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

0:18:38.600 --> 0:18:41.600
<v Speaker 2>or anywhere else you listen. Join us again tomorrow for

0:18:41.760 --> 0:18:45.240
<v Speaker 2>insight on the market moves from Hong Kong to Singapore

0:18:45.640 --> 0:18:49.400
<v Speaker 2>and Australia. I'm Doug Prisoner and this is Bloomberg