1 00:00:00,120 --> 00:00:02,200 Speaker 1: Let's get to our guests now. Mark Matthews is head 2 00:00:02,200 --> 00:00:04,840 Speaker 1: of Asian Research at Julius Baer, also in Singapore joining 3 00:00:04,880 --> 00:00:06,960 Speaker 1: us this morning. So we are looking ahead to the 4 00:00:07,040 --> 00:00:10,120 Speaker 1: f o MC decision Wednesday, and we have seen bond's 5 00:00:10,200 --> 00:00:12,559 Speaker 1: drop ahead of that. Is that a warning that perhaps 6 00:00:13,119 --> 00:00:17,840 Speaker 1: bases point hike is not fully pressed in Oh, juliet 7 00:00:17,880 --> 00:00:22,279 Speaker 1: I think that it will depend, particularly on the press 8 00:00:23,400 --> 00:00:27,120 Speaker 1: release and the Q and A that Jerome pell does 9 00:00:27,400 --> 00:00:32,240 Speaker 1: after the meeting, and the tone of you know, how 10 00:00:32,280 --> 00:00:36,760 Speaker 1: they see inflation um, and whether they're going to be 11 00:00:36,840 --> 00:00:39,200 Speaker 1: data dependent. I think that even if they just say 12 00:00:39,240 --> 00:00:43,000 Speaker 1: something like we're more data dependent now UM, that will 13 00:00:43,080 --> 00:00:46,519 Speaker 1: be enough for the market to expect a deceleration in 14 00:00:47,240 --> 00:00:50,760 Speaker 1: the rate high trajectory come December and beyond. Because it's 15 00:00:50,840 --> 00:00:53,559 Speaker 1: very clear if you look under the hood, even if 16 00:00:53,560 --> 00:00:56,000 Speaker 1: the headline number is still stuck up at eight point two, 17 00:00:56,720 --> 00:01:01,800 Speaker 1: that inflation is coming down. Inflation coming down, and potentially 18 00:01:01,840 --> 00:01:05,760 Speaker 1: some of these recession warnings are worries waning somewhat. What's 19 00:01:05,760 --> 00:01:08,880 Speaker 1: the likelihood that we could see I guess, a shallow 20 00:01:09,120 --> 00:01:14,880 Speaker 1: economic downturn in well, we're not forecasting enormous amount of 21 00:01:14,880 --> 00:01:18,360 Speaker 1: growth in America next year. I think we're looking at 22 00:01:18,440 --> 00:01:21,760 Speaker 1: maybe half a percent, but that's not a recession, and 23 00:01:22,200 --> 00:01:27,880 Speaker 1: wages are rising, especially for lower income categories. Companies are 24 00:01:27,959 --> 00:01:31,920 Speaker 1: on shoring UM, and I think that trend will definitely continue. 25 00:01:32,000 --> 00:01:36,040 Speaker 1: There's jobs being created in America today that literally haven't 26 00:01:36,080 --> 00:01:40,400 Speaker 1: existed for the last three decades. So it's not you know, um, 27 00:01:40,560 --> 00:01:44,440 Speaker 1: computer programmers or barristas anymore. These are factory jobs, and 28 00:01:44,520 --> 00:01:49,840 Speaker 1: the consumer is remarkably robust. So UM, there could be 29 00:01:49,880 --> 00:01:53,000 Speaker 1: a recession to your point. If there is, we think 30 00:01:53,000 --> 00:01:56,560 Speaker 1: it will be shallow. And the SMP down in excess 31 00:01:56,560 --> 00:01:59,840 Speaker 1: of so far this year, already reflects that. Alright. What 32 00:01:59,880 --> 00:02:02,640 Speaker 1: about the gains though, that we've seen across October, an 33 00:02:02,640 --> 00:02:05,280 Speaker 1: incredible month for US stocks. Is this the start of 34 00:02:05,320 --> 00:02:07,680 Speaker 1: a bear market rally or is you're putting it perhaps 35 00:02:07,720 --> 00:02:10,480 Speaker 1: more let's get excited as we head into December at 36 00:02:10,520 --> 00:02:14,400 Speaker 1: the Santa Claus rally that we're seeing. Yes, it is 37 00:02:14,480 --> 00:02:17,360 Speaker 1: the latter, Juliet in our opinion. And what we found 38 00:02:17,440 --> 00:02:20,880 Speaker 1: is that, um, I'll have to be a little technical here, 39 00:02:21,000 --> 00:02:27,680 Speaker 1: Friday one, and then Monday fourth and Tuesday, So last 40 00:02:27,720 --> 00:02:32,919 Speaker 1: week basically, uh, there were three very strong consecutive days 41 00:02:33,040 --> 00:02:34,960 Speaker 1: up two and a half percent, and then one and 42 00:02:35,000 --> 00:02:37,400 Speaker 1: a half and one and a half perspectively, that's only 43 00:02:37,480 --> 00:02:43,920 Speaker 1: happened twelve times since nineteen and all twelve of those instances, 44 00:02:43,919 --> 00:02:47,799 Speaker 1: twelve months later the market was up on average by 45 00:02:47,880 --> 00:02:51,160 Speaker 1: two percent. We don't think it will be different this time. 46 00:02:51,680 --> 00:02:54,800 Speaker 1: We think the bottom was three weeks ago. And um, 47 00:02:54,880 --> 00:02:57,480 Speaker 1: this is no longer a bear market. So we're hearing 48 00:02:57,720 --> 00:03:00,480 Speaker 1: JP Morgan's Marko Klonovitch saying that the current liberal interest 49 00:03:00,560 --> 00:03:02,520 Speaker 1: rate hiking cycle is nearing an end. We talked about 50 00:03:02,520 --> 00:03:04,400 Speaker 1: the FED. The Bank of Canada had a smaller rate 51 00:03:04,480 --> 00:03:07,240 Speaker 1: hike last week. Do we see the ABBA feed that 52 00:03:07,320 --> 00:03:11,400 Speaker 1: narrative today as well, Yes, we do, Juliet. And to 53 00:03:11,560 --> 00:03:14,119 Speaker 1: quote Bob Dylan, you don't have to be a weatherman 54 00:03:14,200 --> 00:03:16,680 Speaker 1: to know which way the wind is blowing. In fact, 55 00:03:16,680 --> 00:03:18,800 Speaker 1: it started with the r b A back in the 56 00:03:18,840 --> 00:03:21,480 Speaker 1: beginning of October. They were the first of the big 57 00:03:21,520 --> 00:03:25,480 Speaker 1: central banks too to become less um uh, you know, 58 00:03:25,840 --> 00:03:28,480 Speaker 1: hawkish and more dubsh and and then we got the 59 00:03:28,520 --> 00:03:31,200 Speaker 1: Bank of Canada and the Bank of England will be 60 00:03:31,240 --> 00:03:34,680 Speaker 1: this Thursday. That's important, And and the Europeans like to 61 00:03:34,720 --> 00:03:37,880 Speaker 1: say that these they call them Anglo sacks and central banks, 62 00:03:37,920 --> 00:03:39,720 Speaker 1: and they like to say they kind of act as 63 00:03:39,760 --> 00:03:41,960 Speaker 1: a loose pack, and I think they're actually right. So 64 00:03:42,000 --> 00:03:44,280 Speaker 1: if the r b A and the b O E 65 00:03:44,520 --> 00:03:47,360 Speaker 1: and the BOC are all moving that way, then I 66 00:03:47,400 --> 00:03:50,240 Speaker 1: think it's a pretty pretty good guests that the FED 67 00:03:50,280 --> 00:03:53,960 Speaker 1: will do the same. When we look at Asian equities, though, 68 00:03:54,000 --> 00:03:56,160 Speaker 1: we were talking about that very solid rally that we 69 00:03:56,200 --> 00:03:58,280 Speaker 1: saw in October from the U S. The m s 70 00:03:58,280 --> 00:04:01,160 Speaker 1: c I Asia Pacific INDEXO was down about two and 71 00:04:01,160 --> 00:04:04,760 Speaker 1: that was following that twelve percent in September. What happens, 72 00:04:04,800 --> 00:04:07,880 Speaker 1: particularly amidst a dollar moves for Asian equities heading into 73 00:04:07,880 --> 00:04:12,120 Speaker 1: the latter part of the year, Um well, I think 74 00:04:12,120 --> 00:04:15,840 Speaker 1: the dollar is peeking out, and it might not happen 75 00:04:16,080 --> 00:04:18,640 Speaker 1: today or tomorrow, but I think over the next few 76 00:04:18,640 --> 00:04:21,440 Speaker 1: months it will. And the main reason is that two 77 00:04:21,480 --> 00:04:23,840 Speaker 1: thirds of the dollar index is the Euro and their 78 00:04:23,839 --> 00:04:28,040 Speaker 1: inflation is higher than the inflation rate in the United States. 79 00:04:28,040 --> 00:04:32,000 Speaker 1: The Eurozone inflation for UH September came out last night 80 00:04:32,040 --> 00:04:36,200 Speaker 1: at ten point seven percent, So eventually the European Central 81 00:04:36,240 --> 00:04:39,640 Speaker 1: Bank will have to raise rates at a faster trajectory 82 00:04:39,720 --> 00:04:42,320 Speaker 1: than the Federal Reserve because the Fed has done most 83 00:04:42,400 --> 00:04:45,800 Speaker 1: of the heavy lifting this year, and therefore we're looking 84 00:04:45,880 --> 00:04:50,039 Speaker 1: for the euro to stabilize and and start rising around 85 00:04:50,080 --> 00:04:53,320 Speaker 1: January of next year UM. And if that's the case, 86 00:04:53,360 --> 00:04:55,440 Speaker 1: the dollar is going to stop going up and and 87 00:04:55,480 --> 00:04:58,440 Speaker 1: I think that would be a tail wind for Asian 88 00:04:58,480 --> 00:05:01,200 Speaker 1: markets if the dollar is no longer rising, because they're 89 00:05:01,880 --> 00:05:04,760 Speaker 1: very long inverse correlation, as I'm sure you well know 90 00:05:05,320 --> 00:05:09,120 Speaker 1: with the dollar chucker over Hong Kong GDP report in 91 00:05:09,240 --> 00:05:12,440 Speaker 1: China's October p M, i's broadly tumbling into contraction. To 92 00:05:13,120 --> 00:05:16,320 Speaker 1: how much further the weakness story is that when we're 93 00:05:16,320 --> 00:05:21,800 Speaker 1: starting to see more opening up across other Asian economies, well, 94 00:05:21,880 --> 00:05:24,760 Speaker 1: I just saw yesterday that in Macau they've gone into 95 00:05:24,839 --> 00:05:27,159 Speaker 1: a kind of well they have to get COVID tests 96 00:05:27,160 --> 00:05:29,680 Speaker 1: for three days and one of the big casinos is lockdown. 97 00:05:29,680 --> 00:05:32,000 Speaker 1: So I don't see any obvious light at the end 98 00:05:32,000 --> 00:05:33,919 Speaker 1: of the tunnel, which is too bad, because all the 99 00:05:34,400 --> 00:05:36,640 Speaker 1: great and the good of the financial industry or in 100 00:05:36,680 --> 00:05:38,720 Speaker 1: Hong Kong this week, or at least most of them, 101 00:05:38,720 --> 00:05:41,360 Speaker 1: and if it really is Hong Kong's coming out party. 102 00:05:41,440 --> 00:05:43,360 Speaker 1: Then it needs to do more than just host the 103 00:05:43,400 --> 00:05:47,359 Speaker 1: CEO CEOs. It needs to lift the mobility restrictions. But 104 00:05:47,360 --> 00:05:49,120 Speaker 1: I think it's kind of caught in between a rock 105 00:05:49,160 --> 00:05:51,559 Speaker 1: and a hard place, and so is so is China, 106 00:05:51,600 --> 00:05:54,600 Speaker 1: and so is Micau. So I don't really see the 107 00:05:54,720 --> 00:05:56,240 Speaker 1: light at the end of the tunnel as much as 108 00:05:56,279 --> 00:05:59,000 Speaker 1: I'd like to. And in the absence of that, I 109 00:05:59,000 --> 00:06:03,599 Speaker 1: think economic act of it will remain very low in China. 110 00:06:04,120 --> 00:06:06,320 Speaker 1: And let's look about to finally that the oil industry 111 00:06:06,360 --> 00:06:08,640 Speaker 1: as well. We're talking earlier about President Biden saying he'll 112 00:06:08,640 --> 00:06:11,919 Speaker 1: seek to impose higher taxes on oil companies that record 113 00:06:12,240 --> 00:06:15,760 Speaker 1: wind filled profits without reinvesting in production. But oil has 114 00:06:15,800 --> 00:06:18,440 Speaker 1: extended losses ahead of the FED as well. And this 115 00:06:18,480 --> 00:06:20,680 Speaker 1: is all about the global economic slowdown. Where where does 116 00:06:20,760 --> 00:06:22,920 Speaker 1: crew trade when you've got it around eighty six still 117 00:06:23,000 --> 00:06:27,160 Speaker 1: is about currently well, actually that's exactly our forecast twelve 118 00:06:27,200 --> 00:06:29,280 Speaker 1: months from now, we're looking for about eight to eight 119 00:06:29,440 --> 00:06:32,000 Speaker 1: five dollars a barrel. And so you know, you have 120 00:06:32,120 --> 00:06:35,400 Speaker 1: all of the geopolitical tensions. I was eavesdropping on your 121 00:06:35,440 --> 00:06:38,080 Speaker 1: conversations earlier about Ukraine, but at the same time you 122 00:06:38,160 --> 00:06:42,680 Speaker 1: have a very big supply response from many countries in 123 00:06:42,720 --> 00:06:46,080 Speaker 1: the world UM, which are sort of marginal producers because 124 00:06:46,080 --> 00:06:49,440 Speaker 1: they're making good money at this price. And as much 125 00:06:49,480 --> 00:06:52,880 Speaker 1: as OPEC says they're going to be cutting productions starting 126 00:06:53,720 --> 00:06:57,680 Speaker 1: November UM, which is this month, isn't it In reality 127 00:06:58,760 --> 00:07:01,880 Speaker 1: a lot of those OPEC country are not producing even 128 00:07:01,920 --> 00:07:04,839 Speaker 1: close to their quotas now, so the actual production cut 129 00:07:04,880 --> 00:07:06,880 Speaker 1: we think will be more like a million dollars a day, 130 00:07:06,880 --> 00:07:09,400 Speaker 1: which isn't very much, all right, Mark, always a pleasure, 131 00:07:09,400 --> 00:07:11,720 Speaker 1: Thank you. Mark Matthews, head of Asia Research at Julius 132 00:07:11,760 --> 00:07:14,000 Speaker 1: Baer on the line from Singapore and yes here in 133 00:07:14,040 --> 00:07:17,240 Speaker 1: Asia it is the first of November this year is flying, 134 00:07:17,400 --> 00:07:17,440 Speaker 1: but