WEBVTT - China Stocks Set to Correct After Rally, Says BofA 0:00:00.480 --> 0:00:03.360 Chinese equities are on a tear, and it's led by 0:00:03.360 --> 0:00:08.640 technology breakthroughs like Deep six AI model and BYD's super 0:00:08.680 --> 0:00:15.440 fast charging EV battery are reminders of China's innovation. Today 0:00:15.840 --> 0:00:19.680 we're sitting here and of March, the Hangsang China Enterprises 0:00:19.680 --> 0:00:23.040 Index that tracks mainland equity is listed in Hong Kong, 0:00:23.640 --> 0:00:27.160 is up almost twenty percent this year, ranking it among 0:00:27.280 --> 0:00:28.960 the best performing around the world. 0:00:29.960 --> 0:00:34.000 But we've had false stans before. Some investors are questioning 0:00:34.080 --> 0:00:38.280 whether things have really changed. China's property market remains weak. 0:00:38.600 --> 0:00:42.680 Officials are still struggling with deflation. The pivot to consumption 0:00:42.920 --> 0:00:45.880 to lead growth has yet to bear fruit, and now 0:00:45.920 --> 0:00:51.479 we have the onset of US tariffs. You're listening to 0:00:51.520 --> 0:00:55.440 Age Eccentric from Bloomberg Intelligence. I'm John Lee in Hong Kong. 0:00:55.480 --> 0:00:57.560 And I'm Katydmitriva, also in Hong Kong. 0:00:58.040 --> 0:01:01.080 Today's guest is Winnie Wu. He is the chief China 0:01:01.200 --> 0:01:05.039 equity strategist and co head of China Equity research for 0:01:05.120 --> 0:01:08.119 Bank of America Securities. We need welcome to the show. 0:01:08.560 --> 0:01:11.720 Thank you very much for having me so, Winnie, I 0:01:11.720 --> 0:01:16.160 guess the first question is given the topic, what actually 0:01:16.520 --> 0:01:18.640 is the leading Chinese stocks right now. Why have we 0:01:18.720 --> 0:01:19.600 seen this rally? 0:01:20.319 --> 0:01:23.200 I think the rally to some extent is a continuation 0:01:23.520 --> 0:01:26.319 of last year. Right September October we saw a big 0:01:26.400 --> 0:01:29.040 round of China rally and that was mainly driven by 0:01:29.120 --> 0:01:33.480 the policy pivoting policy stimulus, that people are getting more 0:01:33.480 --> 0:01:37.840 optimistic about China monitary, physical easing, that they're going to 0:01:37.920 --> 0:01:42.679 do more and prioritize growth over other things. But more importantly, 0:01:43.000 --> 0:01:47.160 this year's rally are driven by two additional factors. One 0:01:47.560 --> 0:01:51.520 is the technological breakthrough right Deep Seek clearly was a 0:01:51.600 --> 0:01:56.160 big while to the global investors. That changed a lot 0:01:56.240 --> 0:02:00.200 of the consensus understanding of the future of AI, the 0:02:00.200 --> 0:02:04.440 global competitive landscape of AI, and also the perception of 0:02:04.560 --> 0:02:08.680 whether China's private sector is still competitive and innovative right, 0:02:08.680 --> 0:02:11.800 whether the animal spirit it still exists in China. So 0:02:11.880 --> 0:02:14.400 I think, you know, this technology breakthrough is a very 0:02:14.400 --> 0:02:17.919 big factor. But the other thing is also the understanding 0:02:18.560 --> 0:02:23.440 geopolitics and the so called policy certainty, policy visibility. You know, 0:02:23.480 --> 0:02:26.600 for the past there's a lot of criticism on China 0:02:26.720 --> 0:02:31.400 lack of policy visibility, the lack of policy direction clarity. 0:02:31.880 --> 0:02:35.440 But I think this year actually people feel China's policy 0:02:35.480 --> 0:02:38.640 visibility is better that we know if say, you know, 0:02:38.760 --> 0:02:44.760 consumption deflation, if the export grows, weakens, right, if economy struggles, 0:02:45.080 --> 0:02:48.320 Chinese regulator are going to do more, and they've vowed 0:02:48.440 --> 0:02:51.519 several times, you know, from September October last year to 0:02:51.680 --> 0:02:54.200 January to the reason m PC they said they're going 0:02:54.240 --> 0:02:56.120 to launch more policy to support economies. 0:02:56.120 --> 0:02:57.600 So people actually are getting a bit. 0:02:57.440 --> 0:03:02.040 More confident about the policy put for China, whereas on 0:03:02.080 --> 0:03:05.600 the US side, whether there's tariffs, no tarriffs, ten percent, 0:03:05.680 --> 0:03:10.120 twenty percent, arriffs on what and who is actually quite confusing. 0:03:10.240 --> 0:03:13.600 And also other non tariff barriers, including some of the 0:03:13.720 --> 0:03:16.560 Chip band's export controls, are also leading to a lot 0:03:16.600 --> 0:03:17.280 of confusion. 0:03:17.639 --> 0:03:18.560 Sort of a flip. 0:03:19.000 --> 0:03:21.000 It's a flip from what we've seen in recent or 0:03:21.200 --> 0:03:23.120 past years with US and China than. 0:03:23.280 --> 0:03:26.919 Totally so to that extent, the policy discount on China 0:03:26.960 --> 0:03:30.640 has largely reduced and the equity risk of premium on 0:03:30.760 --> 0:03:34.320 China because of you know, China has no innovation, has 0:03:34.360 --> 0:03:38.160 no future, have no growth in the AI era, that's 0:03:38.200 --> 0:03:39.520 also completely reversed. 0:03:40.240 --> 0:03:43.600 So we have to ask, is this time really different 0:03:43.720 --> 0:03:47.200 for Chinese equities because we've had quite a few false 0:03:47.240 --> 0:03:47.920 starts before. 0:03:48.080 --> 0:03:50.600 Yeah, and we've had false even with the government with 0:03:50.640 --> 0:03:54.480 a certainty. I mean these policies, are they really that certain? 0:03:55.600 --> 0:03:58.440 I mean, I think market always have ups and downs, right, 0:03:58.600 --> 0:04:02.760 And we always say that from equity market perspective, market 0:04:02.880 --> 0:04:05.880 leads fundamental in terms of the GDP cycle, in terms 0:04:05.960 --> 0:04:09.200 of the earning cycle, but it typically leads by a 0:04:09.280 --> 0:04:10.200 couple quotas. 0:04:10.240 --> 0:04:12.160 It doesn't lead by twelve months. 0:04:12.240 --> 0:04:15.960 So from our perspective, the way to evaluate whether this 0:04:16.120 --> 0:04:20.560 rally is sustainable it's always are we seeing the fundamental 0:04:20.560 --> 0:04:24.360 turnaround in the foreseeable future? This time around, I think 0:04:24.360 --> 0:04:28.520 the technological breakthrough is very significant in the sense that 0:04:28.640 --> 0:04:32.080 hopefully it stopped the so called downward spiral that market 0:04:32.120 --> 0:04:34.320 worried about in the past few years. That you know, 0:04:34.640 --> 0:04:37.680 every segment in the economy from local government to big 0:04:37.839 --> 0:04:42.039 corporate to general household or in the sort of deleveraging 0:04:42.120 --> 0:04:45.000 the risking balance sheet recession type of mode. I think 0:04:45.160 --> 0:04:49.680 that deep Seak really helps signal reversal of the sentiment 0:04:49.760 --> 0:04:52.640 of the morale. After the breakthrough of deep Seak, we 0:04:52.720 --> 0:04:56.760 saw local government are getting more pro growth, right, you 0:04:56.800 --> 0:05:00.520 know there's a healthy competition between the higher tiers cities 0:05:00.720 --> 0:05:03.279 like shang Gan. People are asking, hey, why the deep 0:05:03.360 --> 0:05:07.080 Sea Unitary robotics are both based in Haunjo, Why it's 0:05:07.080 --> 0:05:08.960 not changing, why it's not Beijing, why it's not showing 0:05:09.040 --> 0:05:11.599 high So the local government are shifting their focus to 0:05:11.839 --> 0:05:14.960 more on how do we promote future growth? After deep Sea, 0:05:15.040 --> 0:05:18.040 we see the leading internet companies which in the past 0:05:18.120 --> 0:05:21.679 few years we're very much focused on efficiency, games, buy bags, 0:05:22.200 --> 0:05:26.200 increasing playout to now doing capex investing for the future, 0:05:26.240 --> 0:05:31.000 which is very encouraging and even at individual household level. Previously, 0:05:31.400 --> 0:05:36.039 the perception is all the smart young kids or rich 0:05:36.200 --> 0:05:38.320 entrepreneurs are or fleeing. 0:05:37.960 --> 0:05:39.520 Away from China. 0:05:39.600 --> 0:05:44.080 But the breakthrough of deep Sea and Unitary are very encouraging, 0:05:44.200 --> 0:05:46.720 inspiring in the sense that the founder teams are very 0:05:46.760 --> 0:05:50.000 much homegrown talents. Many of the funders never been to 0:05:50.160 --> 0:05:53.479 Western education. So suddenly the smartest kids in the Chinese 0:05:53.520 --> 0:05:56.560 university like Beta, like Picking university like Tin. They see 0:05:56.600 --> 0:05:58.960 a future, right they can do something really cool staying 0:05:59.000 --> 0:06:01.440 in China rather than you know, trying to flee the 0:06:01.440 --> 0:06:04.880 country or just working for the governmental soe s a right. 0:06:05.080 --> 0:06:07.800 So I think you know, this time is different in 0:06:07.800 --> 0:06:12.800 the sense that the technological breakthrough hopefully signals a buttoning 0:06:12.880 --> 0:06:16.800 of the downward spiral and starts a more upward spiral 0:06:16.880 --> 0:06:20.960 going forward. That there's more animal sperit, there's more entrepreneurship, 0:06:21.200 --> 0:06:25.480 there's more appetite for investment. But having said that, technological 0:06:25.520 --> 0:06:28.719 breakthrough is a little bit random in timing, right why 0:06:28.800 --> 0:06:29.520 is it January? 0:06:29.520 --> 0:06:30.520 Why are they not March? 0:06:31.120 --> 0:06:36.880 But the short term impact of this breakthrough broader economy 0:06:37.080 --> 0:06:41.120 on corporate earnings, on the problems we discussed earlier, deflation, 0:06:41.720 --> 0:06:44.840 job employment, in our property market, the short term impacts 0:06:44.920 --> 0:06:46.080 too insignificant. 0:06:46.560 --> 0:06:47.919 That's why when. 0:06:47.800 --> 0:06:51.640 Equity market rallies too hard, when equity market run too 0:06:51.680 --> 0:06:55.080 much ahead of the fundamental, we could still see pullbacks, 0:06:55.160 --> 0:06:58.960 or sometimes significant pullbacks. So I'm not saying that you 0:06:58.960 --> 0:07:01.840 know market wouldn't go back. In fact, our report last 0:07:01.839 --> 0:07:06.159 week we're saying, hey, hcim as said, China rallied thirty 0:07:06.200 --> 0:07:09.360 percent in two months, so investors need to be mindful 0:07:09.440 --> 0:07:13.040 of the potential correction in the future. But having said that, 0:07:13.240 --> 0:07:15.840 our view is still that this is probably a structural 0:07:15.880 --> 0:07:19.120 bull market that we are seeing. The correction dips in 0:07:19.160 --> 0:07:22.560 the structural rally in the next three five year horizon, 0:07:22.720 --> 0:07:23.040 and on. 0:07:23.440 --> 0:07:26.840 The structural part of it, because obviously this has to 0:07:26.880 --> 0:07:31.840 continue if you're betting on Chinese stocks, then I guess 0:07:31.840 --> 0:07:34.320 the question that is, you know, is there enough government 0:07:34.400 --> 0:07:37.160 support behind it, because a lot of it will depend 0:07:37.680 --> 0:07:40.240 on both government support of the sector in general, but 0:07:40.320 --> 0:07:41.120 also consumption. 0:07:41.840 --> 0:07:46.280 Yeah. Absolutely, on the government support side. It appears that 0:07:46.600 --> 0:07:50.560 government is kind of still evaluating the situation. Yes, we 0:07:50.720 --> 0:07:54.200 got ten percent tariffs in February and in March, and 0:07:54.320 --> 0:07:57.800 we might get more in April and April. Second, but 0:07:58.120 --> 0:08:02.520 exactly how is the impact of these terriffs. I think 0:08:02.720 --> 0:08:06.320 this is evaluating because since twenty eighteen, Chinese companies have 0:08:06.480 --> 0:08:10.440 been diversifying away from the US market, right, many have 0:08:10.560 --> 0:08:14.160 been building up factories in Asian market, in Mexico in 0:08:14.280 --> 0:08:17.440 other parts, and they've been you know, exporting more to 0:08:17.720 --> 0:08:21.800 say Middle East, more to other Asian economies, more to you. 0:08:21.720 --> 0:08:25.480 Know, global cuts. So how big. 0:08:25.280 --> 0:08:30.320 Is this terriff impact on China's export and export related activities, 0:08:30.360 --> 0:08:33.840 in terms of manufacturing compacts, in terms of employment. It 0:08:33.880 --> 0:08:36.960 probably still takes a few months to be seen. Also, 0:08:37.200 --> 0:08:40.720 I guess you know, market is expecting this meeting between 0:08:40.760 --> 0:08:44.440 presidents and President Trump, and in the meeting there might 0:08:44.480 --> 0:08:48.360 be more discussion about how the two country can work together, right. 0:08:48.559 --> 0:08:52.200 I think both leaders have kind of indicated that it's 0:08:52.200 --> 0:08:54.400 in the best interest of the two countries to work 0:08:54.440 --> 0:08:58.880 together rather than have a tense relationship. So the upcoming 0:08:58.920 --> 0:09:02.079 meeting between the two leaders will also be very important. 0:09:02.280 --> 0:09:04.760 I think at this stage, you know, from Chinese policy 0:09:04.760 --> 0:09:08.559 maker perspective, it looks like first couple months of micro 0:09:08.720 --> 0:09:13.120 data are fine, right, and property market in fact, in 0:09:13.160 --> 0:09:16.720 the past five months since October last year, was showing 0:09:17.120 --> 0:09:21.200 good trends in terms of better transaction volume, some improvement 0:09:21.360 --> 0:09:25.480 in transaction prices, especially in higher tier cities, and even 0:09:25.520 --> 0:09:29.160 the recent lend auction lens sell were very strong in 0:09:29.240 --> 0:09:33.800 January February, So it doesn't feel like, you know, they're 0:09:33.840 --> 0:09:36.920 in a rush to launch the policies. But as I mentioned, 0:09:37.000 --> 0:09:39.680 this is probably a policy put So if in the 0:09:39.679 --> 0:09:45.280 coming months, let's say, export jobs significantly or activity data 0:09:45.320 --> 0:09:49.720 consumption data jobs significantly, then regulator will probably do more. 0:09:49.960 --> 0:09:53.640 Okay, So you're saying that on the consumption front right now, 0:09:53.720 --> 0:09:57.440 things are looking okay. And they have these this arsenal 0:09:57.559 --> 0:10:01.160 policies in the background that they could deploy if necessary. 0:10:01.600 --> 0:10:04.920 But what about the support for the sector. If the 0:10:04.960 --> 0:10:07.840 stocks are being driven by deep Seek and this tech moment, 0:10:08.360 --> 0:10:10.800 is their government support to back this interest? I mean, 0:10:11.320 --> 0:10:13.839 this is a government that's very happy to intervene in 0:10:13.920 --> 0:10:17.240 private sector. So is that support there to kind of 0:10:17.280 --> 0:10:18.240 keep this rally going. 0:10:19.520 --> 0:10:23.160 I don't think we should beat on government support to 0:10:23.280 --> 0:10:25.920 keep the tech rally going. I don't think that's something 0:10:25.960 --> 0:10:29.280 Gum will do. So I would say generally speaking, China's 0:10:29.280 --> 0:10:33.040 industrial policy has been supporting this hard tech deep tech 0:10:33.160 --> 0:10:38.360 right from you know, semiconductor advanced manufacturing to AID. There 0:10:38.559 --> 0:10:42.120 is a general policy support and there are state fund 0:10:42.440 --> 0:10:45.960 to invest in these related areas. But Deep Seek in 0:10:46.000 --> 0:10:50.040 itself was more of an accident. It's not something to 0:10:50.080 --> 0:10:53.480 plan for, it's not something government policies support it. 0:10:53.160 --> 0:10:54.160 It's it's really the. 0:10:54.120 --> 0:10:57.280 Innovation by a private sector company, which it was not 0:10:57.400 --> 0:11:01.440 so much under radar screen for aio semiconductor or these innovasians. Right, 0:11:01.440 --> 0:11:04.800 it was a quant trading company. So yeah, I mean, 0:11:04.840 --> 0:11:08.520 I think so far the best performing stocks, their success 0:11:08.760 --> 0:11:13.719 are also more because of the bottom up innovation, the competition, 0:11:14.080 --> 0:11:17.440 the market forces. I don't think the support is something 0:11:17.559 --> 0:11:19.240 that will drive the tech value Asia. 0:11:19.280 --> 0:11:20.160 Another leg up. 0:11:21.040 --> 0:11:24.360 Asia Centric is produced by Bloomberg Intelligence, where more than 0:11:24.360 --> 0:11:28.240 five hundred experienced analysts and strategists work around the clock 0:11:28.280 --> 0:11:31.800 to bring you timely, world class research. Our coverage spans 0:11:31.800 --> 0:11:36.120 two hundred market industries, currencies, commodities, and industries, as well 0:11:36.160 --> 0:11:39.160 as over two thousand equities and credits. To learn more 0:11:39.200 --> 0:11:43.400 about Bloomberg Intelligence, visit bi go on the Bloomberg terminal. 0:11:43.960 --> 0:11:46.479 If you like what you're hear, don't forget to subscribe 0:11:46.480 --> 0:11:50.600 and share. I want to draw analogies to the US 0:11:50.679 --> 0:11:54.160 led AI rally and China's AI rally. Now, when chat 0:11:54.200 --> 0:11:57.040 GPT came out, I think two or three years ago. 0:11:58.120 --> 0:12:00.559 A few months later, I remember Nvidia had a bumper 0:12:00.679 --> 0:12:05.640 earnings and then US analysts were raising earnings estimates quite aggressively. 0:12:06.320 --> 0:12:11.000 Now in China's equity driven rally, are we starting to 0:12:11.040 --> 0:12:14.080 see Chinese equity analysts raise estimates. 0:12:14.960 --> 0:12:20.440 Yes, but marginal compared to the type of multiple expansion 0:12:20.559 --> 0:12:24.560 that's expected. Right when I look at our analyst earnings 0:12:24.600 --> 0:12:27.840 result on some of the biggest tech companies, reported result 0:12:28.160 --> 0:12:32.720 is typically earning's upgrade its single digit, but po upgrade 0:12:32.760 --> 0:12:34.880 will be high double digit, so a lot of its 0:12:34.960 --> 0:12:38.600 multiple expansion. So in my recent report, I showed the 0:12:38.720 --> 0:12:42.000 valuation gap between the Magnificent and seven the US big 0:12:42.040 --> 0:12:46.840 tech versus the top ten Chinese tech companies. Beginning of 0:12:46.880 --> 0:12:49.959 the year or end of last year, the Magnificent sevens 0:12:49.960 --> 0:12:53.480 pe multiple were trading at something like one hundred twenty 0:12:53.480 --> 0:12:57.360 one hundred and thirty percent premium to the Chinese tech names. 0:12:57.679 --> 0:13:00.920 Within two three months now the value gap is narrowed 0:13:01.040 --> 0:13:04.240 to only thirty percent, So a lot of the China 0:13:04.400 --> 0:13:07.680 tech rally was more by multiple expansion, not so much 0:13:07.720 --> 0:13:10.480 of earnings. But you know, to be fair, they were 0:13:10.520 --> 0:13:13.439 training at a very depressed valuation multiple to start with. 0:13:13.800 --> 0:13:17.240 Right now and this rally. Do you think that most 0:13:17.280 --> 0:13:20.559 investors caught this rally because it was really quick. If 0:13:20.559 --> 0:13:23.160 you look at Ali Barber's share price, I think it 0:13:23.200 --> 0:13:25.840 went up sort of sixty eighty percent in the space. 0:13:25.600 --> 0:13:26.520 And in two months. 0:13:26.559 --> 0:13:30.560 In two months now, institutional investors, it's pretty much too 0:13:30.640 --> 0:13:33.959 quick to catch this rally. What's your sense? 0:13:34.280 --> 0:13:37.160 Yeah, I mean, I guess you know, hatch fund investors 0:13:37.200 --> 0:13:39.520 probably respond much more quickly. 0:13:39.960 --> 0:13:41.040 I think for long. 0:13:40.880 --> 0:13:44.760 Only investor it is really hard, partly because, like you mentioned, 0:13:44.920 --> 0:13:48.120 the China rally happened very very rapidly, and it's a 0:13:48.320 --> 0:13:51.960 very narrow rally. It's basically a handful of tech stocks 0:13:52.000 --> 0:13:54.560 that's done really really well. I mean even ten cent 0:13:54.640 --> 0:13:57.720 end the performed during the tech rally, and even if 0:13:57.760 --> 0:14:00.560 you overweight China Tech, if you are not in those 0:14:00.600 --> 0:14:03.880 few names that done exceptionally well, you might still end 0:14:03.920 --> 0:14:08.520 up perform. Also, I know some like Greater China Fund 0:14:08.840 --> 0:14:11.800 that would have Taiwanese stocks in the portfolio a right 0:14:12.160 --> 0:14:16.280 TSMC would be one of the big positions again this year, 0:14:16.480 --> 0:14:19.400 unless you are one hundred percent in China Tech, you 0:14:19.440 --> 0:14:22.600 would end up performed again because China alone was the 0:14:22.600 --> 0:14:26.600 best performing market. So I think a lot of investors, 0:14:26.640 --> 0:14:31.320 especially lonely investors, are having a sort of challenging time 0:14:31.440 --> 0:14:34.560 in terms of trying to outperform the rally. But nonetheless, 0:14:34.720 --> 0:14:38.240 China market going up with increasing interest and hopefully more 0:14:38.320 --> 0:14:40.840 fund the inflow is still a good scene for the market. 0:14:41.200 --> 0:14:44.160 Did you feel that energy You were just at a 0:14:44.200 --> 0:14:46.160 tech conference? Was it in Taiwan? 0:14:46.240 --> 0:14:46.480 Yeah? 0:14:46.560 --> 0:14:48.920 Yeah, you're at a Tech Conference in Taiwan. Can you 0:14:49.000 --> 0:14:51.240 kind of take us behind the scenes of that. What 0:14:51.280 --> 0:14:53.680 were people saying, what were they discussing. 0:14:54.120 --> 0:14:58.760 Yeah, so this is our twenty eighth Asian Tech conference, 0:14:59.000 --> 0:15:02.960 and this year we again had nearly record high number 0:15:02.960 --> 0:15:06.320 of investors and corporate attending. So the interest level certainly 0:15:06.400 --> 0:15:09.360 still very very high. I think generally people are still 0:15:09.840 --> 0:15:12.680 very Polish, very confident on the future of AI. Right. 0:15:12.680 --> 0:15:16.040 The deep seek actually kind of democratized the technology so 0:15:16.080 --> 0:15:19.080 that there will be more application signarios, you know, more 0:15:19.120 --> 0:15:22.560 smaller companies are able to leverage AI and have AI demands. 0:15:22.640 --> 0:15:26.120 So there is this general optimism on the future of AI, 0:15:26.440 --> 0:15:30.360 you know, Agente tic Ai, Agi whatever, super AI. But 0:15:30.400 --> 0:15:34.840 on the other side, I think from an equity market perspective. 0:15:34.320 --> 0:15:36.320 They are all more mixed feeling. 0:15:36.160 --> 0:15:40.160 About the stock performance in the sense that whether it's 0:15:40.200 --> 0:15:43.120 the US tech names or Taiwanese tech names, when you 0:15:43.160 --> 0:15:46.840 speak to the corporate the guidance remain very positive, very confident. 0:15:47.360 --> 0:15:48.480 But when I look at their. 0:15:48.440 --> 0:15:52.920 Share prices, share prices actually struggle to suffered suffered from 0:15:53.000 --> 0:15:55.360 multiple de rating, right, which is kind of the opposite 0:15:55.440 --> 0:15:58.600 to the Chinese tech stocks. So at this level what 0:15:58.760 --> 0:16:02.800 do we do right reduce the exposure to US tech 0:16:02.840 --> 0:16:05.880 Taiwanese tech to trade the rally of China tech or 0:16:05.920 --> 0:16:08.320 do we hold on to our position of the US 0:16:08.360 --> 0:16:10.920 taiwan tech. That's really a quite challenging question. 0:16:11.560 --> 0:16:12.320 What's the answer. 0:16:12.760 --> 0:16:15.400 I don't think there's a concise answer, but I would 0:16:15.440 --> 0:16:18.800 say so far based on the past few days sentiment, 0:16:19.200 --> 0:16:21.320 it tend to be let's hold on to our US 0:16:21.320 --> 0:16:23.720 and Taiwanese tack and do not trace the stocks that 0:16:23.840 --> 0:16:27.080 already went up eighty percent in two months. And I 0:16:27.080 --> 0:16:30.600 think the final part of the conference is there's this 0:16:30.840 --> 0:16:36.120 concern about or discussion debate about how countries, especially like 0:16:36.240 --> 0:16:39.960 US China should or can work together in the AI 0:16:40.080 --> 0:16:43.600 era right, because AI brings a lot of opportunities benefit 0:16:43.680 --> 0:16:47.360 but it does bring risks and challenges as well. So 0:16:47.760 --> 0:16:50.920 you know, the two biggest players US and China in 0:16:50.960 --> 0:16:54.840 this changing world, if they can work together in terms 0:16:54.880 --> 0:16:58.720 of managing the risk, setting the standard, cooperate, it will 0:16:58.760 --> 0:17:02.360 probably benefit the broad their human society. On the other side, 0:17:02.680 --> 0:17:05.119 the concern is if the two countries are more in 0:17:05.160 --> 0:17:08.680 a sort of competitive mood rather than working with each other, 0:17:09.359 --> 0:17:13.160 then it might not be the best usage of resources 0:17:13.320 --> 0:17:16.360 might not be the best for promoting innovation and might 0:17:16.359 --> 0:17:19.280 not be the best for managing risks. In fact, one 0:17:19.359 --> 0:17:22.320 of their experts said, managing the risk in AI is 0:17:22.320 --> 0:17:27.120 almost managing like nuclear related risk. Country nation states are 0:17:27.160 --> 0:17:30.080 not your biggest enemy because countries are generally going to 0:17:30.119 --> 0:17:35.280 be responsible of how they use their weapons or resources 0:17:35.359 --> 0:17:39.760 or their powers. The real danger are those like rogue actors, 0:17:40.040 --> 0:17:41.359 right that. 0:17:41.200 --> 0:17:43.920 They could really go on extreme. 0:17:43.600 --> 0:17:47.600 And take advantage or manipulate the capability the powers. So 0:17:47.840 --> 0:17:50.639 the big countries should really work together to prevent the 0:17:50.760 --> 0:17:54.200 risk from these rogue actors rogue players, rather than fighting 0:17:54.240 --> 0:17:55.880 with each other on country level. 0:17:56.720 --> 0:17:58.760 When you wanted to take a step back, sounds like 0:17:58.800 --> 0:18:02.520 you were structurally on China, and that's sort of like 0:18:02.560 --> 0:18:05.040 a medium term view. But you did come out with 0:18:05.080 --> 0:18:08.639 the report recently and you did suggest it could be 0:18:08.800 --> 0:18:10.200 a market correction. 0:18:10.800 --> 0:18:15.800 You explain, yeah, so again, you know, market price is 0:18:15.880 --> 0:18:20.320 reflective earnings and multiple as our earlier conversation went through. 0:18:20.440 --> 0:18:23.720 So far, we see some improvement in earnings in tech 0:18:23.840 --> 0:18:29.840 related names, but there's still broader level many other company sectors, 0:18:29.840 --> 0:18:32.520 their earnings still struggle, and we'll probably see more of 0:18:32.560 --> 0:18:36.160 that in the coming weeks of the earning season, and 0:18:36.240 --> 0:18:41.320 with the uncertainty of terriffs trade wards in the coming quarters, 0:18:41.680 --> 0:18:45.280 things my need to go worse and before the governor 0:18:45.320 --> 0:18:48.760 stepping with bigger stimulars to put the floor and before 0:18:48.800 --> 0:18:51.840 the company further adjust their business model to handle. So 0:18:52.040 --> 0:18:55.960 coming quarters chances are China's nominal GDP growth will still 0:18:56.000 --> 0:19:00.480 struggle and the pressure many corporates earnings were still structural pressure. 0:19:00.720 --> 0:19:05.040 Whereas equity market, inspired by the tech breakthrough inspired by 0:19:05.040 --> 0:19:08.840 the policy, certainty already pricing a lot of positive news 0:19:08.920 --> 0:19:11.520 and had a very sharp rally, to the extent that 0:19:11.680 --> 0:19:15.399 valuation multiple of MSI China Index is now trading at 0:19:15.400 --> 0:19:19.239 twelve times forward pe, which was the previous peak in 0:19:19.400 --> 0:19:22.120 October seventh, last year's level, which was the peak at 0:19:22.400 --> 0:19:26.000 post reopening high in January level January twenty twenty three level. 0:19:26.480 --> 0:19:30.200 So we are a bit cootious that at this valuation multiple, 0:19:30.440 --> 0:19:34.200 which looks fair to us right, good news are being pricing. 0:19:34.400 --> 0:19:38.720 So the policy put the technological breakthrough the potentially structural 0:19:38.880 --> 0:19:42.000 upcycle in the next few years, whereas the near term 0:19:42.119 --> 0:19:45.879 challenges has largely been overlooked in the past couple of 0:19:45.960 --> 0:19:49.680 months and one good news are in the price, bad 0:19:49.720 --> 0:19:53.119 news are not. Then what could potentially come next is 0:19:53.320 --> 0:19:57.600 markets start to pricing these negative news is especially the 0:19:57.680 --> 0:20:01.240 challenging and fundamental things in terms of the macro data, 0:20:01.280 --> 0:20:04.560 in terms of the earning data. And also we are 0:20:04.600 --> 0:20:09.479 facing this event of April second, right, this global reciprocal tariff. 0:20:09.480 --> 0:20:11.119 For what does it mean for China? We still need 0:20:11.160 --> 0:20:14.680 to evaluate. So that's why we would advise the investor 0:20:14.800 --> 0:20:17.120 for the short term to take a more courtious view 0:20:17.359 --> 0:20:20.679 and having the evaluation to wait. Stock market probably need 0:20:20.720 --> 0:20:23.040 to take a pause, wait for the fundamental to catch 0:20:23.119 --> 0:20:26.080 up before the sheer prices can a new highs. 0:20:26.119 --> 0:20:28.880 Again, I'm wondering how much the US in this case 0:20:28.880 --> 0:20:31.840 because you had mentioned this earlier, but this idea of 0:20:31.880 --> 0:20:36.119 the flip in sentiment between certainty in the US versus China, 0:20:36.600 --> 0:20:39.080 and I wonder given the reciprocal tariffs and just tariffs 0:20:39.119 --> 0:20:42.480 in general, and investors looking at the stock market trying 0:20:42.520 --> 0:20:43.840 to figure out what's going on in the US. We've 0:20:43.840 --> 0:20:47.800 seen this erosion of American exceptionalism and the American exceptionalism 0:20:47.880 --> 0:20:50.199 trade and I wonder how much of that might be 0:20:50.240 --> 0:20:52.439 able to create a bit of a buffer and in 0:20:52.480 --> 0:20:55.800 fact help Chinese equities because we've seen that with European 0:20:55.840 --> 0:20:57.800 stocks too. It sounds like everyone is just leave. It's 0:20:57.960 --> 0:21:01.000 there's that sucking sound. Is money leaving the US. 0:21:01.000 --> 0:21:03.080 And I think there was a survey by your firm 0:21:03.119 --> 0:21:05.280 that suggests record money is leaving the US. 0:21:05.480 --> 0:21:08.520 Yes, yeah, I think that played out a year to 0:21:08.680 --> 0:21:12.439 date already to some extent. And that's why the European stocks, 0:21:12.440 --> 0:21:15.760 the China stocks are doing so well. Right the reverse 0:21:15.800 --> 0:21:18.520 of fund flow two years ago in twenty twenty two, 0:21:18.600 --> 0:21:23.440 twenty twenty three, it's about sell China by USAI, selled 0:21:23.520 --> 0:21:27.159 China by Japan, sell China by India. Now, you know, 0:21:27.200 --> 0:21:30.440 when people start to reduce their concentration on US that 0:21:30.560 --> 0:21:33.920 many other markets actually benefit, especially European and China market. 0:21:34.280 --> 0:21:36.520 But having said that, you know, US remains to be 0:21:36.680 --> 0:21:39.840 a very very big part of global investors benchmark. Right 0:21:39.880 --> 0:21:43.280 so within MSAI world, US is still like sixty three 0:21:43.359 --> 0:21:44.120 sixty four. 0:21:43.960 --> 0:21:45.240 Percent of the benchmark. 0:21:45.640 --> 0:21:48.480 China, after the reason of our performance, is still only 0:21:48.760 --> 0:21:52.160 three to four percent of the benchmark. So from any 0:21:52.160 --> 0:21:56.840 global or US investor perspective, it's still essentially critical to 0:21:57.000 --> 0:22:01.040 get the US market right, and after the big sale 0:22:01.040 --> 0:22:04.320 of these US big tax stocks, I think the question 0:22:04.640 --> 0:22:07.840 is at this level, do we continue to sell US 0:22:07.920 --> 0:22:10.720 to long China or do we take away and see 0:22:10.760 --> 0:22:13.840 mode right way to see you know, will the fat 0:22:13.960 --> 0:22:17.920 cut rate in May? And does the federate cut helps 0:22:17.960 --> 0:22:21.280 with the US stock market? Also together with the US 0:22:21.359 --> 0:22:25.159 dollar index, right the DXY we can't from one O 0:22:25.320 --> 0:22:27.760 night to one O five within the first two three 0:22:27.800 --> 0:22:30.400 months of the year. But it looks like dollar index 0:22:30.480 --> 0:22:32.640 is also kind of stable light thing, so that might 0:22:32.680 --> 0:22:36.200 slow down the fund outflow from US to other market. 0:22:36.520 --> 0:22:39.280 But finally, I think our US rategy review is also 0:22:39.280 --> 0:22:42.159 when you sell US equity, you don't necessarily need to 0:22:42.200 --> 0:22:45.560 go to international equities. You might go buy bond or 0:22:45.600 --> 0:22:47.800 you might stay with US money market found. So I 0:22:47.840 --> 0:22:51.960 think the first big wave of money leaving US to 0:22:52.040 --> 0:22:56.359