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Speaker 1: Our guest is Winnie Woo, China equity strategist that be

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Speaker 1: of a securities So, Winnie, we are a daily news show,

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Speaker 1: so we tend to focus on things like the discrepancies

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Speaker 1: in the trade numbers that we saw the National Audit

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Speaker 1: Office conducting this review of the trust industry and even

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Speaker 1: the top leadership in China frustrated with this long development

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Speaker 1: of the semiconductor industry. Stories like that, But I was

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Speaker 1: interested to see that. You say, try to ignore the

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Speaker 1: noise and and think about the long term thematic growth stories.

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Speaker 1: Give me one in particular you like, yeah, um, so

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Speaker 1: from last year we're saying, you know what can be

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Speaker 1: the potential winners and their China's new strategy in terms

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Speaker 1: of you know, energy self reliance, technological self reliance in

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Speaker 1: their circulation. And one of the key thing is the

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Speaker 1: green economy related sectors. Write the ev EV component renewable

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Speaker 1: energy and new material that's alligned to you know, China's

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Speaker 1: commitment to global decype decombanization, and it's important for China's

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Speaker 1: technological leadership and self reliance. When you also say that,

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Speaker 1: the investors that you've been speaking to a quiet bearish

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Speaker 1: where are you kind of telling them to put capital

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Speaker 1: aside from what you just mentioned with some of those

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Speaker 1: renewable energy names. Yeah, um so currently, you know, investors

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Speaker 1: have no visibilities right, whether it's how the COVID situation

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Speaker 1: will evolve, how the property part market will evolve, and

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Speaker 1: including you know, the geopolitical tensions. Um. So, for now,

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Speaker 1: we do think it's a good time to accumulate to

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Speaker 1: the strategic sectors on the lows. Right, So like the

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Speaker 1: green economy is one of the areas, but also like

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Speaker 1: some of the consumer names that could benefit from the

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Speaker 1: post coveral reopening, right the restaurant's, hotels, beer names, we

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Speaker 1: think they are also the defensive beta to participate in

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Speaker 1: the market at this moment. Long term growth is good

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Speaker 1: if you get it, but what if you don't get it.

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Speaker 1: I mean, we're seeing signs now that the Chinese economy

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Speaker 1: is slowing down to maybe around two percent annual growth,

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Speaker 1: may be somewhere in that in that region. What if

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Speaker 1: that stays like that for a considerable period of time

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Speaker 1: or do you say that's not possible. M You know,

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Speaker 1: I think for a long time, as the analyst, we criticize,

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Speaker 1: criticize the China's model of overly credit driven growth. So

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Speaker 1: even in the past they were able to achieve higher

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Speaker 1: rate of growth, the cause of that is probably very

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Speaker 1: high in terms of building up a lot of that leverage,

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Speaker 1: building up to enterprise bubbles. So now that they are

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Speaker 1: pretty committed to this property deleveraging, you know, going forward,

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Speaker 1: even if the growth rate itself is slower, it might

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Speaker 1: be a healthier and more sustainable growth. And I personally

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Speaker 1: think that three to five percent it's more likely to

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Speaker 1: be the range. Consider you know, if you look at

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Speaker 1: the stage of development in other East Asian models like Japan, Korea, Taiwan,

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Speaker 1: you know, after the eight to ten percent, the next

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Speaker 1: stage seems to three to five percent real GDP growth.

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Speaker 1: When it comes to the broader China tech picture, I

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Speaker 1: mean you talked about this being a potential trading valley

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Speaker 1: back in June of the internet sector where a little

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Speaker 1: off those gains that we saw then, But do you

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Speaker 1: still continue to see some hope for the sector and

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Speaker 1: the worst of the crackdown behind it? M Um. I

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Speaker 1: think in terms of China's tightening on internet sector, it's

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Speaker 1: probably a long term, um, a long term campaign that

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Speaker 1: will probably last as long as Internet remains the biggest

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Speaker 1: sector in the economy or in MSA China index. However,

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Speaker 1: you know, in the short term we could see a

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Speaker 1: break in fact in the past a few months. It's

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Speaker 1: less about policy risk on the sector but more about

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Speaker 1: real earnings risk um. And also despite the policy risk,

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Speaker 1: internet remains to be the largest sector, some of the

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Speaker 1: largest most liquid stocks. So I think when the interest

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Speaker 1: on China market comes back, when investbury become risk on,

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Speaker 1: people are very likely to come back to buy these

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Speaker 1: very large index heavy liquid stocks. So again, policy very

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Speaker 1: important in China on a number of levels. That's one

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Speaker 1: big area technology and the Internet. Also property um buyers

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Speaker 1: in China at the moment must be put off by

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Speaker 1: concerns about getting delivery since a lot of the buying

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Speaker 1: is of properties that are to be built. Is you know,

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Speaker 1: do you see any policy solution coming on that front. Yeah,

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Speaker 1: I mean so far, you know, we are seeing the

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Speaker 1: bottom up approach in terms of local government being being

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Speaker 1: in charge of trying to stabilize in their local market.

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Speaker 1: There are a number of different relaxation easing at the

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Speaker 1: local level, whether it's lower down payment, whether it's providing

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Speaker 1: subsidies for tax etcetera. But we'll see whether that's good enough. Right,

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Speaker 1: Clearly market preferred to see better policy clarity or signal

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Speaker 1: from the central government. Right, so top down, you know,

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Speaker 1: more mortgage rate cut, relaxation of the second home mortgage policies,

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Speaker 1: and maybe even a national bill or the FUNCT will

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Speaker 1: help improve the confidence from the market perspective. You talked

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Speaker 1: earlier about the real opinion thing with flat bookings to

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Speaker 1: Hong Kong searching two hundred forty nine percent after that

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Speaker 1: quarantine card, At what point do we see dynamic zero

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Speaker 1: completely eradicated and a complete return when you're expecting a

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Speaker 1: very strong recovery here from both Hong Kong and China. Mm.

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Speaker 1: I think it's hard to see one will be completely abolished.

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Speaker 1: It's probably going to be a gradual process anyway. But

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Speaker 1: I think investors generally hoping that, you know, after the

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Speaker 1: Party Congress, maybe in earlier next year. Right if after this,

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Speaker 1: after this winter flu season, the rest of the world

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Speaker 1: still not going back to the previous social distancing mass

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Speaker 1: commend date and the people getting more comfortable confident with

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Speaker 1: the new COVID varians, um, I think China may feel

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Speaker 1: further be ready to further ease as well, so I

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Speaker 1: would expect the timing to be spring next year. One

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Speaker 1: of the big stories from yesterday was this National Audit

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Speaker 1: Office info from from sources telling us that that they're

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Speaker 1: conducting a review of the trust industry. We haven't talked

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Speaker 1: as much about the shadow banking industry in the past

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Speaker 1: six to nine months, so many other issues, but this

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Speaker 1: one does feed into the stability of the banking sector

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Speaker 1: and overall financial stability. Do you have concerns here? So

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Speaker 1: trust the industry has been the peak, key part of

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Speaker 1: shadow banking and we've been writing on that for the

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Speaker 1: past a decade, and the banking regulator has been tightening

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Speaker 1: that for especially in the past of five six years.

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Speaker 1: So on the positive side, we do see that overall

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Speaker 1: trust that a u M declined significantly. Even the a

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Speaker 1: u M of property trust is now back down to

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Speaker 1: only around one point five one point six trillion by

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Speaker 1: first quoted this year, compared to the banking sector, as said,

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Speaker 1: of like three hundred sixty trillion. It's actually it should

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Speaker 1: be a quite controllable problem. But for some of the

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Speaker 1: trust players that have quite high leverage in terms of

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Speaker 1: a u M equity, we could see problems at individual

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Speaker 1: player level, but I doubt it will translate into a

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Speaker 1: systemic risk. Great to have you on. We need we're trying.

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Speaker 1: Equity Strategist A Bank of Americas Acurities