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Speaker 1: Let's get to our guest, Joshua Crab out of Asia

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Speaker 1: Pacific Equities at Robico. Joshua, these are really interesting times.

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Speaker 1: We had the worst first half since I think four

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Speaker 1: so we discounted a lot. I think everyone and her

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Speaker 1: brother knows that the Fed still has work to do. Uh.

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Speaker 1: And most of the commentators coming on are ultra cautious

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Speaker 1: and and they're almost scolding the market for rebounding a

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Speaker 1: little here. But markets are forward looking maybe six to

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Speaker 1: nine months, and apparently they see slightly better times ahead.

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Speaker 1: Are they mistaken? In your view? Oh? I think this

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Speaker 1: is you know, this is a question that is probably

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Speaker 1: going to be thrown to and fro for some time

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Speaker 1: over the next few months. To be honest, you know, again,

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Speaker 1: you know, we have we have a sort of a

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Speaker 1: debate about whether you know, it's too hot in inflation

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Speaker 1: or whether we're going to slip back into some goldilocks

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Speaker 1: where the FED stucks tightening, or we slept back into recession.

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Speaker 1: And I think, you know, to be honest, I think

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Speaker 1: it's been very difficult for everyone to know. I do

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Speaker 1: think what's the Joshua Crab view? Well, my view is

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Speaker 1: that I think that you know, that the focus is

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Speaker 1: going to change from this this you know, debate over

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Speaker 1: peak inflation UM, and I think that's where the focus

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Speaker 1: has been. I think we're gonna start hearing a lot

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Speaker 1: more and a lot more thinking around where core is. Clearly,

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Speaker 1: energy prices are going to come off at some point

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Speaker 1: and that is going to bring the headline down. But

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Speaker 1: the question is with with the core sort of sitting

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Speaker 1: at sort of north of five percent and you know,

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Speaker 1: ten years of sitting at three, the real question is

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Speaker 1: going to be where does that settle and where the

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Speaker 1: right point is going to be. I think the most

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Speaker 1: important thing for the markets, which I think is the

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Speaker 1: question you're really asking me here UM is going to

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Speaker 1: be around? Is going to be around at the company

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Speaker 1: level and earnings. You know, we've clearly seen, you know,

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Speaker 1: in the earnings so far out of the US that

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Speaker 1: sales have been okay, but some of the earnings have

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Speaker 1: been a little bit lackluster. And I think this is

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Speaker 1: the real question about what inflation means is the ability

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Speaker 1: of companies to pass this on to the customers. And

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Speaker 1: it's the demand destruction that may go with that, and

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Speaker 1: that's what we're going to really see over the next

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Speaker 1: few quarters is the consumers absorbed this and then the

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Speaker 1: quid pro quo of that is if they can, how

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Speaker 1: much of that is going to feed into wages? Um,

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Speaker 1: you know, and that along with with rental prices is

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Speaker 1: what's really that key question around you know, core inflation. Yeah,

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Speaker 1: rental prices hitting everyone. When we're talking about the potential

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Speaker 1: receding inflationary pressures, though, what about in terms of the

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Speaker 1: pace of the dollars game, do you think that might

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Speaker 1: have peaked? I mean, for me, look, I think you know,

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Speaker 1: I'm an equities person, but clearly it's had it's had

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Speaker 1: a it's had a very strong run. And bringing it

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Speaker 1: back to this part of the world where we've seen

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Speaker 1: things like the end sell off for over aggressively on

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Speaker 1: the back of that, I think it will slow down

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Speaker 1: if we go back, you know, eight months ago and

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Speaker 1: everyone thought there wasn't any inflation out there. You know,

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Speaker 1: everyone said it's going to be transitory. That that mindset

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Speaker 1: has clearly changed. Now those expectations have changed. Um, you know,

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Speaker 1: the curve is gonna you know, I think the debate

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Speaker 1: is going to continue. I think it probably had pulled

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Speaker 1: back a little bit too far when everyone thought in

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Speaker 1: the first quarter we're gonna start seeing rate cuts again. Um,

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Speaker 1: And I think you know that's going to have to

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Speaker 1: come back into sort of questions that you told us

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Speaker 1: about a month ago that if you don't get into

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Speaker 1: these markets, you could be a little too late because

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Speaker 1: markets are preemptive. Is that still your view? What kind

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Speaker 1: of further upside could you see from some of these

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Speaker 1: Chinese stocks that have been battered over the past six weeks. Yeah,

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Speaker 1: I think there's always to two things to consider when

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Speaker 1: you're trying to make money, and the first one is

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Speaker 1: the valuation starting point. Now you know, clearly the Chinese

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Speaker 1: markets have got down to valuations we haven't seen for

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Speaker 1: a very long time, and in that's it's the opportunity. Um. Now,

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Speaker 1: I think we saw the low in the offshore market

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Speaker 1: sort of in March this year, and we've sort of

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Speaker 1: been bouncing around, you know, supposed to rebound around that

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Speaker 1: sort of a little bit above that level since now

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Speaker 1: you know, clearly we haven't seen you know, stimulus, we

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Speaker 1: haven't seen dramatic moves in the real estate market in China,

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Speaker 1: and as a result, we haven't seen sort of like

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Speaker 1: you know, you know, like a strong rebound at this point. Um,

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Speaker 1: you know, my view is still the same. I think

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Speaker 1: you know, it is a very very cheap market. There

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Speaker 1: is a lot of value there. Um, you know, having

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Speaker 1: having some of the right exposures. You know in that market,

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Speaker 1: you know, if your patient will will will reward you

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Speaker 1: at a certain point. But I think you know, again,

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Speaker 1: you do need to have some patients. And that's why

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Speaker 1: you know, I guess you know the other side of

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Speaker 1: this is trying to find markets where you think they

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Speaker 1: You are not sort of reliant on that, and that's

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Speaker 1: why we quite like the Asian markets. Policy has not

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Speaker 1: been your friend in China for about the past eighteen months,

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Speaker 1: and it's been tempting over the past couple of weeks

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Speaker 1: too to start to think that we've moved beyond that

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Speaker 1: other than COVID policy. But it seems like some of

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Speaker 1: the policy adjustments on on tech and in some other

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Speaker 1: areas have cooled off. But but now we see the

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Speaker 1: PBOC is looking to drain liquidity and just because of

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Speaker 1: a slightly higher inflation reading, Um, are you comfortable with

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Speaker 1: policy coming out of China in order to deploy money there?

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Speaker 1: I mean, again, I come back to the point I mean,

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Speaker 1: you can sort of focus on what's happening at at

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Speaker 1: the margin. But you know, I come back to, you know,

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Speaker 1: fairly simple things. Politicians in most parts of the world,

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Speaker 1: you know, sort of help to account by the general

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Speaker 1: living standards. Right. So if you have policies that are

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Speaker 1: tight for too long, um, you know, then then you know,

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Speaker 1: like people tend to get a little bit you know, upset,

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Speaker 1: and then you tend to have some loosening at some point, um.

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Speaker 1: And I think that Look, clearly, inflation is an issue

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Speaker 1: around around the world, and we've seen how far you know,

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Speaker 1: like it took the FED and some of the moves

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Speaker 1: that took them to presumably get ahead of the curve

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Speaker 1: or in line with that. And I think you know

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Speaker 1: what you're seeing from the PBOC are saying, look, we

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Speaker 1: don't want to be in a similar situation, um, so

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Speaker 1: we're going to try and manage that a little bit earlier.

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Speaker 1: So yeah, it's a headwind, um. But again, you know,

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Speaker 1: the point I would make is when you do see

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Speaker 1: noise around this, you don't see the lurch down in

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Speaker 1: market because that valuation support is already in. Let's go

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Speaker 1: back to your call on and you say Indonesia, Vietnam.

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Speaker 1: I was in Vietnam on the weekend. I was in

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Speaker 1: Indonesia about a month ago. I know you and Brian

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Speaker 1: don't want to hear that because you're still stuck with

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Speaker 1: those border policies in Hong Kong. But I mean these

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Speaker 1: are two nations that you wouldn't even know the pandemic

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Speaker 1: had occurred. So is this all on the reopening theme? Yeah? Look,

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Speaker 1: I mean I think it's it's a little bit big

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Speaker 1: a picture than that. If if we sort of go

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Speaker 1: back a few years ago, you know, because of increasing

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Speaker 1: wage costs in places like China, people were looking to

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Speaker 1: develop their supply chains in other countries. Vietnam, Indonesia are

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Speaker 1: good sort of you know examples of that. COVID comes

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Speaker 1: along all that investments that stops basically, you know a

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Speaker 1: lot of these people basically lose their jobs, the consumption

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Speaker 1: falls off off the face of the earth, and everything

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Speaker 1: goes into a stall. We will roll forward a few

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Speaker 1: years and what's happened is, you know, all that investment

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Speaker 1: that people wanted to put in, now people are trying

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Speaker 1: to frontload and get that back in there. Secondly, because

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Speaker 1: of you know, the geopolitics, supply chain disruptions, etcetera. People

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Speaker 1: want to do even more of that. So but then

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Speaker 1: when we consider what's happening there is that money is

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Speaker 1: going on the ground. These are people who get it.

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Speaker 1: They get their jobs, you know, they consume immediately. They

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Speaker 1: don't save it like we see in the Western world,

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Speaker 1: and that you see a big consumption boom on the

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Speaker 1: back of it. So we think that's you know, it's

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Speaker 1: it's a great long term structural story. What's your number

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Speaker 1: one car at the moment um? You know, Again, it's

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Speaker 1: one of those sort of you know, sort of difficult

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Speaker 1: ones at the moment because I think things like you

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Speaker 1: need to need and in Vietnam have actually done very well,

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Speaker 1: um in recent times. And that's why I think you

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Speaker 1: always have to be you know a little bit sort

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Speaker 1: of you know, mind mindful around you know, when you

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Speaker 1: when you take sort of advantage of these things. But again, look,

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Speaker 1: I still think they're great structural stories. We spoke a

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Speaker 1: little bit earlier about sort of you know, China being

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Speaker 1: an opportunity and the other one that you know that

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Speaker 1: we quite like actually some of the industrial companies in Japan,

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Speaker 1: um you know, like this is an area where the

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Speaker 1: weekend is a good tail wind for for some of

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Speaker 1: those companies. Josh, you are always great to have your insights.

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Speaker 1: Thank you, Happy Friday. Josh you a Crabhead of Asia

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Speaker 1: Pacific Equities at Rebecco in our Hong Kong studio. For

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Speaker 1: US here