1 00:00:00,080 --> 00:00:02,320 Speaker 1: Let's get to our guest. Puja Malik is with us. 2 00:00:02,480 --> 00:00:07,960 Speaker 1: Puja is partner at Nippoon Capital, joining us from Menlo Park, California. Puja, 3 00:00:08,119 --> 00:00:10,600 Speaker 1: thanks for being with us. Give me a sense of 4 00:00:10,680 --> 00:00:13,440 Speaker 1: what the mood is in Silicon Valley these days. I'm 5 00:00:13,480 --> 00:00:17,240 Speaker 1: looking at the NASTAC composite today, down about two percent. 6 00:00:17,400 --> 00:00:20,360 Speaker 1: We know rates are rising, we know the uh, the 7 00:00:20,400 --> 00:00:22,919 Speaker 1: punishment that a lot of these big cap tech companies 8 00:00:22,960 --> 00:00:27,120 Speaker 1: have suffered as a result of this inflationary environment and 9 00:00:27,480 --> 00:00:30,040 Speaker 1: the rising rate environment. What's the mood in Menlo Park? 10 00:00:31,600 --> 00:00:35,920 Speaker 1: The mood is definitely cautious. By valuations have corrected, We've 11 00:00:36,080 --> 00:00:39,400 Speaker 1: yet to see demand slowdown, and I think that is 12 00:00:39,440 --> 00:00:42,360 Speaker 1: what investors are expecting next year, is to see a 13 00:00:42,400 --> 00:00:45,440 Speaker 1: little bit of a recession driven by a demand slowdown, 14 00:00:45,600 --> 00:00:48,479 Speaker 1: not just by evaluation correction, which is sort of what 15 00:00:48,520 --> 00:00:53,000 Speaker 1: we've seen this year. So, Puja, I mean, is it? Uh? 16 00:00:53,760 --> 00:00:56,520 Speaker 1: Are we seeing transition? Do you think that's gonna last 17 00:00:56,520 --> 00:00:59,080 Speaker 1: for a while? Because so much of Silicon valleys rise 18 00:00:59,320 --> 00:01:02,440 Speaker 1: and all money that just poured in and out of 19 00:01:02,480 --> 00:01:05,679 Speaker 1: it had to do with if you step back the 20 00:01:05,760 --> 00:01:09,560 Speaker 1: macro picture, tons of liquidity. Uh. If there's going to 21 00:01:09,600 --> 00:01:13,120 Speaker 1: be less liquidity down, clearly there is. Does this then 22 00:01:13,319 --> 00:01:17,240 Speaker 1: in some way change the nature of the dynamic of 23 00:01:17,440 --> 00:01:23,479 Speaker 1: investing starting companies, growing companies in Silicon Valley? It's always 24 00:01:23,560 --> 00:01:26,640 Speaker 1: capital for good teams and good opportunities, right, Kathleen. So 25 00:01:26,720 --> 00:01:29,400 Speaker 1: I think that is good to continue, but you will 26 00:01:29,440 --> 00:01:32,240 Speaker 1: not see the same sort of exuberant valuations that you 27 00:01:32,280 --> 00:01:34,319 Speaker 1: did the last couple of years. And you've seen the 28 00:01:34,480 --> 00:01:38,600 Speaker 1: big hedge funds, the big venture films also take mockdowns 29 00:01:38,600 --> 00:01:41,120 Speaker 1: and losses on their books. If you look at the 30 00:01:41,120 --> 00:01:43,480 Speaker 1: publicly invaluable information, you can see the right of that 31 00:01:43,600 --> 00:01:47,120 Speaker 1: soft band, Tiger and other places. So I think the 32 00:01:47,640 --> 00:01:53,560 Speaker 1: pulled back in liquidity is definitely impacting the size of 33 00:01:53,600 --> 00:01:56,000 Speaker 1: what things are getting funded, which is not to say 34 00:01:56,040 --> 00:01:59,920 Speaker 1: the pipeline drives up completely, but definitely more financial discipline 35 00:02:00,000 --> 00:02:02,360 Speaker 1: on the things that get funded. Yes, So I think 36 00:02:02,400 --> 00:02:07,520 Speaker 1: of names like Alphabet, I think of names like meta platforms, 37 00:02:07,560 --> 00:02:11,480 Speaker 1: Apple is in your neighborhood. These are all pretty mature companies. 38 00:02:11,520 --> 00:02:15,160 Speaker 1: They're huge now, obviously, and we've seen the growth over 39 00:02:15,760 --> 00:02:18,720 Speaker 1: recent period. But I'm wondering where we go from here, 40 00:02:18,760 --> 00:02:21,840 Speaker 1: particularly where the new technologies are going to take us. 41 00:02:21,919 --> 00:02:24,640 Speaker 1: And we talk a lot about clean energy. That's just 42 00:02:24,840 --> 00:02:28,120 Speaker 1: one aspect. Talk to me a little bit about what 43 00:02:28,160 --> 00:02:31,600 Speaker 1: you're seeing, not so much in public markets yet, but 44 00:02:31,720 --> 00:02:36,440 Speaker 1: where you're seeing the venture capitalist sniff out opportunities right now? 45 00:02:36,480 --> 00:02:40,320 Speaker 1: What's on your radar in that regard? You know they 46 00:02:40,400 --> 00:02:43,840 Speaker 1: put invest mostly in public equities, but this looking mat review. 47 00:02:43,880 --> 00:02:46,440 Speaker 1: I mean, if you looked at your LinkedIn today, everything 48 00:02:46,560 --> 00:02:50,959 Speaker 1: is about GPT right and AI, regenerative AI. So definitely 49 00:02:51,000 --> 00:02:56,160 Speaker 1: the new buzzword is away from crypto and degenerative AI. 50 00:02:57,200 --> 00:02:59,360 Speaker 1: Having said that, I think as you see the U 51 00:02:59,480 --> 00:03:04,040 Speaker 1: s lowdown next year, Asia emotion markets and definitely China 52 00:03:04,280 --> 00:03:06,480 Speaker 1: is in the huge rebound. So that's been a big 53 00:03:06,520 --> 00:03:10,560 Speaker 1: decoupling story between the US and China this year, but 54 00:03:10,639 --> 00:03:13,760 Speaker 1: even this month or last month. So let's I'm so glad. 55 00:03:13,800 --> 00:03:15,520 Speaker 1: I just was going to turn you in that direction. 56 00:03:15,600 --> 00:03:18,640 Speaker 1: You did it for me because to me, this the 57 00:03:18,720 --> 00:03:21,600 Speaker 1: COVID zero transition that we have just witnessed. I know 58 00:03:21,680 --> 00:03:23,919 Speaker 1: some people are saying, well, yeah, but maybe they'll pull 59 00:03:23,960 --> 00:03:26,160 Speaker 1: back and there could be a rising cases this winter 60 00:03:26,240 --> 00:03:29,399 Speaker 1: and then they'll have the strict again. But my ultimate 61 00:03:29,840 --> 00:03:32,720 Speaker 1: source of authority on. This is Stephen Engel, He's our 62 00:03:32,800 --> 00:03:35,680 Speaker 1: North Asia correspondent. He's worked in China and Hong Kong 63 00:03:35,680 --> 00:03:38,400 Speaker 1: for years, etcetera, etcetera, And he says, this is clearly 64 00:03:38,760 --> 00:03:42,440 Speaker 1: that the government has had to capitulate here after the protests, 65 00:03:42,680 --> 00:03:44,760 Speaker 1: and this is not just a small thing. This is 66 00:03:44,800 --> 00:03:47,840 Speaker 1: a big thing. Do you agree. I do it is 67 00:03:47,880 --> 00:03:51,040 Speaker 1: a big thing because you're seeing confirmation at every level, 68 00:03:51,680 --> 00:03:55,800 Speaker 1: the districts themselves, the cities, whe was Shanghai the latest 69 00:03:55,840 --> 00:04:00,720 Speaker 1: bing Huang Joe lifting curves and restrictions, but so at 70 00:04:00,720 --> 00:04:03,920 Speaker 1: the state levels, and then finally from she Jipping himself. 71 00:04:04,000 --> 00:04:07,640 Speaker 1: I think a more subdued approach towards GOVID zero is 72 00:04:07,680 --> 00:04:10,720 Speaker 1: coming through at every level of the government. So I 73 00:04:10,760 --> 00:04:13,880 Speaker 1: think this is really a reset and a big change 74 00:04:13,920 --> 00:04:16,360 Speaker 1: from what we've been seeing earlier last year, or even 75 00:04:16,440 --> 00:04:18,200 Speaker 1: or yet this year. You know, when you look at 76 00:04:18,640 --> 00:04:21,240 Speaker 1: what has been created by virtue of the pandemic, I 77 00:04:21,279 --> 00:04:24,479 Speaker 1: mean immense human suffering and the loss of life. We 78 00:04:24,560 --> 00:04:27,320 Speaker 1: know that story well. We also know the story of 79 00:04:27,360 --> 00:04:30,200 Speaker 1: the m RNA technology and the vaccines that have become 80 00:04:30,279 --> 00:04:33,599 Speaker 1: highly effective. China is still struggling with that. Away from 81 00:04:33,640 --> 00:04:39,839 Speaker 1: biotechnology are you viewing opportunities in technology that we're really 82 00:04:39,960 --> 00:04:42,320 Speaker 1: kind of catalyzed, if I can use that word, by 83 00:04:42,360 --> 00:04:48,160 Speaker 1: the pandemic. You're right that the amount of humans suffering 84 00:04:48,279 --> 00:04:51,640 Speaker 1: that the virus has taken has been unimaginable, and I 85 00:04:51,680 --> 00:04:54,440 Speaker 1: think China understands this. So to some extent, as you 86 00:04:54,480 --> 00:04:58,040 Speaker 1: see the reopening in China, they have to be learning 87 00:04:58,040 --> 00:05:00,919 Speaker 1: from the experience in Hong Kong and Taiwan and expecting 88 00:05:01,320 --> 00:05:04,040 Speaker 1: a number of cases to go up. But coming back 89 00:05:04,120 --> 00:05:07,520 Speaker 1: to your point about technology and opportunities that we're seeing 90 00:05:08,560 --> 00:05:10,240 Speaker 1: the last few months, I would say, all up to 91 00:05:10,279 --> 00:05:13,080 Speaker 1: this year, we have been very heavily invested in pharma 92 00:05:13,160 --> 00:05:17,080 Speaker 1: companies in China and that trade has worked well. Um, 93 00:05:17,160 --> 00:05:21,360 Speaker 1: we are pivoting somewhat right now, and we're looking towards technology, 94 00:05:21,480 --> 00:05:26,359 Speaker 1: but not necessarily megacaps and not necessarily biotechs. We're looking 95 00:05:26,400 --> 00:05:29,880 Speaker 1: at technology stocks that we think are going to benefit 96 00:05:29,920 --> 00:05:32,840 Speaker 1: from the consumer recovery. Let's look at e M S, 97 00:05:32,920 --> 00:05:35,839 Speaker 1: a G E M S merging markets more broadly, because 98 00:05:36,040 --> 00:05:40,080 Speaker 1: one of the the conditions right now is that their 99 00:05:40,080 --> 00:05:43,960 Speaker 1: inflation rates didn't go as high as say in the US. 100 00:05:44,000 --> 00:05:46,960 Speaker 1: Their rates haven't had to raise rise as much and 101 00:05:47,000 --> 00:05:48,800 Speaker 1: a lot of them are starting to see pick up 102 00:05:48,800 --> 00:05:51,000 Speaker 1: a growth. You look at the manufacturing p M, what 103 00:05:51,040 --> 00:05:55,760 Speaker 1: do you see there for investment opportunities. We like companies, 104 00:05:55,839 --> 00:05:58,479 Speaker 1: countries and companies that are going to benefit from the 105 00:05:58,600 --> 00:06:01,359 Speaker 1: China recovery. So, for example, if you look at the 106 00:06:01,360 --> 00:06:05,279 Speaker 1: Southeast Asian Block what's commonly called the Asian countries, their 107 00:06:05,360 --> 00:06:09,200 Speaker 1: largest trade partner is China. And as you see GDP 108 00:06:09,320 --> 00:06:13,479 Speaker 1: growth recover in China, there are companies specifically in Malaysia, 109 00:06:13,520 --> 00:06:18,560 Speaker 1: for example, the palm oil companies, electronic equipment and lergy 110 00:06:18,600 --> 00:06:21,479 Speaker 1: that have significant exports to China. So there's this set 111 00:06:21,480 --> 00:06:23,960 Speaker 1: of companies in Malaysia that we think are going to benefit. 112 00:06:24,880 --> 00:06:27,599 Speaker 1: And the other very prominent set of companies, of course 113 00:06:27,600 --> 00:06:30,640 Speaker 1: as Thailand. Right, Thailand has been a big investment opportunity 114 00:06:30,800 --> 00:06:33,920 Speaker 1: for Chinese companies, and you're going to see whether it's 115 00:06:33,960 --> 00:06:37,280 Speaker 1: tourism or even manufacturing, you're going to see a spillover 116 00:06:37,360 --> 00:06:40,360 Speaker 1: effect of China reopening on Thailand as well. You know, 117 00:06:40,400 --> 00:06:42,560 Speaker 1: it's interesting, I'm wondering whether or not you're seeing a 118 00:06:42,560 --> 00:06:45,800 Speaker 1: lot of Western companies move out of China. What the 119 00:06:45,800 --> 00:06:49,160 Speaker 1: pandemic has essentially taught them not so much the pandemic, 120 00:06:49,200 --> 00:06:52,960 Speaker 1: but the zero COVID policy, that draconian approach that Beijing 121 00:06:53,000 --> 00:06:55,359 Speaker 1: has taken to try to get this under control. We 122 00:06:55,480 --> 00:06:57,400 Speaker 1: know what it's done to production, we know what it's 123 00:06:57,400 --> 00:07:01,839 Speaker 1: done to supply chains. Where are you seeing American based 124 00:07:01,880 --> 00:07:07,240 Speaker 1: firms relocate their facilities in Asia? And is this do 125 00:07:07,279 --> 00:07:10,200 Speaker 1: you think? Does it represent an opportunity for you to 126 00:07:10,240 --> 00:07:14,920 Speaker 1: put money to work? Yes, and knows. We're definitely starting 127 00:07:14,960 --> 00:07:18,679 Speaker 1: to see supply chains move out of China, but this 128 00:07:18,760 --> 00:07:20,640 Speaker 1: is a move that is going to play out over 129 00:07:20,680 --> 00:07:23,600 Speaker 1: a very very long time. So I think this is 130 00:07:23,640 --> 00:07:26,520 Speaker 1: a ten year plus move. And to your point a 131 00:07:26,520 --> 00:07:28,520 Speaker 1: where where we're seeing it move So we're seeing pockets 132 00:07:28,560 --> 00:07:31,480 Speaker 1: moved to India, where seeing pockets moved to Vietnam. I 133 00:07:31,480 --> 00:07:34,400 Speaker 1: think that is an emerging sort of growth story playing 134 00:07:34,400 --> 00:07:38,760 Speaker 1: out in Vietnam. And having said that, I think Apple 135 00:07:38,880 --> 00:07:41,120 Speaker 1: estimated that would take them ten years to move ten 136 00:07:41,160 --> 00:07:44,600 Speaker 1: percent of their manufacturing out of China. So just a 137 00:07:44,640 --> 00:07:47,800 Speaker 1: reminder to listeners that the piece of this move is 138 00:07:47,800 --> 00:07:51,600 Speaker 1: going to be very slow, slow, but inevitable. I think 139 00:07:51,600 --> 00:07:54,360 Speaker 1: it's safe to say Prussia, it's it's always a pleasure 140 00:07:54,360 --> 00:07:56,360 Speaker 1: to have the chance to spend time with you and 141 00:07:56,400 --> 00:07:59,720 Speaker 1: to benefit from your insight. Puja Malachi is partner at 142 00:07:59,800 --> 00:08:03,760 Speaker 1: NKUN Capitol, joining us from Menlo Park, California.