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Speaker 1: This podcast is brought to you by HKX, Asia's ETF marketplace. Well,

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Speaker 1: you'll find a gateway to liquidity and a diverse selection

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Speaker 1: of opportunities across asset classes, sectors, and themes in Asia

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Speaker 1: and beyond. Search HKX to learn more.

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Speaker 2: Good morning, good afternoon, good evening, and good.

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Speaker 3: Night wherever in this vast, beautiful planet you're joining us from.

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Speaker 2: Thank you for making time.

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Speaker 3: Welcome to Tiger Money, a Bloomberg podcast about things investing

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Speaker 3: with a twist on exchange traded funds in Asia and beyond.

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Speaker 3: I'm one of your hosts, David and Glass, a Chief

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Speaker 3: Markets editor for the Asia Pacific at Bloomberg TV, and

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Speaker 3: I'm also the host of The China Show.

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Speaker 2: And Michael pilot Is.

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Speaker 4: I'm Rebeccason, head of Asia Pacific ETF Research at Bloomberg Intelligence.

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Speaker 3: And just keep in mind this conversation is strictly non confidential. Rebecca,

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Speaker 3: our guest today, perhaps doesn't need an introduction, but why not.

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Speaker 4: For those that may not know how Hong is the

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Speaker 4: chief economist and partner of Grow Investment, a Chinese based

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Speaker 4: hedge fund, Director of China Chief Economists Forum, ad Junk,

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Speaker 4: Professor of the People's University and is a passionate wine

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Speaker 4: drinker and his favorite drink is muy Thai. But today

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Speaker 4: we're going to talk about the September effect, as historically

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Speaker 4: September has been the worst performing month in the year.

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Speaker 4: And with that, let's bring in how Hank. Thank you

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Speaker 4: so much for joining us on Tiger Money.

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Speaker 5: Yeah, it's great to be here.

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Speaker 3: Yeah, how I wanted to start off by just picking

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Speaker 3: your brain. Where you think the economic recovery is. Are

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Speaker 3: things better off compared to six months ago? And what

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Speaker 3: six months ago better than the previous six months? Where

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Speaker 3: do you think we are in this recovery.

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Speaker 6: We're still at the bottom, you know, struggling, trying to

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Speaker 6: find the bottom and trying to rise from the issues. Now,

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Speaker 6: as you can see, the Chinese consumer is rolling over.

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Speaker 6: They are saving like this no tomorrow, so the bank

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Speaker 6: balance in the banking system is surging. And then at

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Speaker 6: the same time, if you look at the social retail growth,

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Speaker 6: it's anemic at about two percent. So as a result,

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Speaker 6: you don't see much price pressure in the Chinese consumer sector,

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Speaker 6: and yet deflational repressure in the upstream sectors. I think

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Speaker 6: the only sector that has been doing well is the

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Speaker 6: exploding sector, right, So Chinese making red cut trade surplass,

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Speaker 6: you know, taking all the US dollars into the US

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Speaker 6: dollar reserve. And also the Chinese manufacturing sector seems to

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Speaker 6: be raising eyebrows of the Western observice regarding the overcapacity

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Speaker 6: over investment issues.

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Speaker 3: Yeah, now you mentioned a few things, right. There's no inflation,

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Speaker 3: there's very lackluster consumer spending. There is still a travel

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Speaker 3: that's going on of course domestically, but there are no

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Speaker 3: price pressures. And we see that in recent earnings and

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Speaker 3: not just talking about this quarter. Recent quarter earnings that

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Speaker 3: you know, a lot of these companies have been cutting prices,

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Speaker 3: giving promotions, protecting their margins instead of growing revenues. And

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Speaker 3: I'm wondering what you think is the crux of that.

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Speaker 3: If there was one reason why you think consumers don't

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Speaker 3: have the same amount of confidence as they have in

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Speaker 3: previous years, what would you point to.

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Speaker 6: I think it's the expectation for employment stability, right, so

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Speaker 6: you can see, you know, the existing employment in the industries,

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Speaker 6: in many of the industries is actually in you know, falling.

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Speaker 6: You know, many people don't have the job securities as

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Speaker 6: they used to have, and Also, you know, there's like

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Speaker 6: every year you have fifteen million new fresh grads entering

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Speaker 6: the job market as far as we can tell. You

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Speaker 6: know that like almost half of the graduate students from

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Speaker 6: last year didn't find employment until now, right, so now

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Speaker 6: you're adding another fifteen So you can see the unemployment situation,

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Speaker 6: especially amongst the younger generation, is quite severe. So I

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Speaker 6: think as a result, you know, it's creating a headache

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Speaker 6: and also it's creating a sense of insecurity in the

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Speaker 6: Chinese population.

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Speaker 3: Yeah, I remember the most recent I think a few

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Speaker 3: weeks ago, they released a monthly employment numbers. The National

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Speaker 3: Bureau Statistics are are press briefing right after the release,

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Speaker 3: and one of the things they mentioned was because it's seasonality, right,

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Speaker 3: it's the time of the year when you're getting college

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Speaker 3: graduates hitting the market and there's not enough absorption that's

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Speaker 3: going on in the labor market. So the other question

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Speaker 3: that keeps coming up all the time is why aren't

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Speaker 3: policy makers, at least on the surface, doing more. Why

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Speaker 3: isn't there a more apparent sense of urgency or is

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Speaker 3: there but they just have a different toolbox to deal

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Speaker 3: with the current problem.

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Speaker 2: What is it?

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Speaker 6: Yeah, Well, there's so many reasons, but it's phenomenon. I

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Speaker 6: think number one is that because right now, to me,

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Speaker 6: different ministries are doing their wrong things. You know, the

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Speaker 6: Housing Ministry is trying to prevent a further property crash,

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Speaker 6: the PBOC is cutting interest rate by ten bibs at

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Speaker 6: a time, and the Ministry of Finance is trying to

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Speaker 6: catch up on.

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Speaker 5: The chessary issue.

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Speaker 6: And because we issue substantially less chessary in the first

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Speaker 6: half of this year, so it seems to me that

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Speaker 6: you know, different ministries are doing different things and there's

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Speaker 6: a lack of coord invation there. And I think secondly,

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Speaker 6: you know, because what we're seeing right now is more

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Speaker 6: structural than cyclical. Right so all these things is a

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Speaker 6: result of years of overinvestment under consumption and also years

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Speaker 6: of excessive investment in the property sector. So right now,

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Speaker 6: because the property price picked out at about twenty twenty

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Speaker 6: one and now we're entering the bubble bursting phase. And

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Speaker 6: so I think as a result, you know, as you

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Speaker 6: can see, the pressure on job security, the pressure on

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Speaker 6: consumer confidence, and also the pressure on the entire economy

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Speaker 6: is palpable.

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Speaker 5: So as you can see right now.

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Speaker 6: The real estate investment, which used to be the pillar

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Speaker 6: of the Chinese growth has been replaced by manufacturing investment,

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Speaker 6: and that is causing substantial over capacity in the manufacturing

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Speaker 6: sector as well.

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Speaker 3: Okay, you opened up a lot of doors there. I

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Speaker 3: want to pick up on one of the initial points

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Speaker 3: that you brought up, and I think it's probably the

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Speaker 3: most important in my opinion. The savings rate has gone

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Speaker 3: up effectively. The amount of deposits that are piling up

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Speaker 3: in China's banking sector has just kept going up. That

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Speaker 3: we thought we would see a draw down when things

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Speaker 3: reopened from COVID zero, and then it kept going up, right,

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Speaker 3: And maybe partly because people are not buying homes, maybe

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Speaker 3: something else. Maybe it's a combination of both. Some people

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Speaker 3: say it's a crisis we're seeing in China because people

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Speaker 3: are not spending. But if the money's there, how how

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Speaker 3: can we call it a crisis. They're just not spending it,

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Speaker 3: you know, compared to crisis that we see in other

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Speaker 3: countries where there is no money backs have no credit

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Speaker 3: to extend, this one is actually not as bad compared

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Speaker 3: to the GFC.

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Speaker 5: For example.

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Speaker 6: Yeah, that's mostly true, David, That's mostly true. I mean

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Speaker 6: the savings in the banking system now reached three hundred

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Speaker 6: and fifty trillion yard, right, which is just substantial by

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Speaker 6: any stander. But then at the same time you have

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Speaker 6: to look at the family's spalance and also the potential

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Speaker 6: liabilities they're facing. For example, Rand one of the hartest

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Speaker 6: topics in China is about how you get enough for

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Speaker 6: your retirement and what age can you retire, you know,

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Speaker 6: because the Social Security Fund seems to be having a

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Speaker 6: little bit of trouble meeting the liabilities requirements. So I

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Speaker 6: think as a result, people are saving you there is

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Speaker 6: a risk out of risk conversion, not because you have money,

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Speaker 6: but because they're saving for potential needs and also for

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Speaker 6: the lack of social security net. And I think this

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Speaker 6: is the area that it's begging for reforms. And in

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Speaker 6: the reason third prenum, we're hearing some noises that were

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Speaker 6: yet to see concrete steps moving along.

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Speaker 3: It is a very complex problem, right, I mean, it

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Speaker 3: wasn't too long ago, what forty years max, that China

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Speaker 3: was a completely different economy, right, So things progressed quite

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Speaker 3: rapidly in one part of the economy. Maybe some of

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Speaker 3: the aspects like the social safety not to your point,

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Speaker 3: haven't quite seen the same structure. I think it's called sigene, right,

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Speaker 3: the fore funds you mentioned, Different ministries are doing different things.

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Speaker 3: My question to you is have we just not weighted enough?

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Speaker 3: Like is this just too big of a ship that

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Speaker 3: can turn in six months? In other words, looking at

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Speaker 3: the current cocktail of support measures, where do you think

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Speaker 3: this economy will be in three years time?

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Speaker 5: Wow? I don't know.

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Speaker 6: Just now I mentioned that in the challenges that we're

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Speaker 6: facing are not cyclical. They're turning into a sort of

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Speaker 6: a secular downtrend. Right, So in a sense that to

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Speaker 6: re engineer, to restart this engine you need to firstually

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Speaker 6: reform the social security net, increase job security, increase the

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Speaker 6: pay level, Increase the take home pay of your workers

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Speaker 6: as a percentage GDP so that people can actually have

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Speaker 6: money to spend, and so in so doing then you

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Speaker 6: can manage to change the savings pattern and also propensity

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Speaker 6: to consume, so that you know, we can re engineer

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Speaker 6: this economy to be less dependent on investment and more

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Speaker 6: sort of dependent on consumer consumption. We've been calling for

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Speaker 6: a sort of an economic restructuring since like two thousand

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Speaker 6: and six, I think, so there was like almost twenty

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Speaker 6: years ago, so back then, you know, if you can

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Speaker 6: still remember, right, So, they want to re engineer Chinese

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Speaker 6: economy into a consumption based economy because they believe that

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Speaker 6: by being a consumption based economy, the volatility in the

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Speaker 6: Chinese economy would go away because you know, the consumer

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Speaker 6: inevitably can be more stable, right Right, So then for

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Speaker 6: some reason, you know, after twenty years.

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Speaker 5: We're back to the old past.

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Speaker 6: We're investing like the snow tomorrow in creating access capacity

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Speaker 6: in industries and exporting like the snow tomorrow and rely

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Speaker 6: on on foreign demand for Chinese goods to export US

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Speaker 6: out of trouble. This clearly is not sustainable, right. So

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Speaker 6: obviously we've seen our foreign trade partners, you know, imposing

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Speaker 6: tariffs on Chinese exports, and I'll be surprised to see

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Speaker 6: more to come as the US election unfolds. So I

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Speaker 6: think right now, because much of the challenges and not

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Speaker 6: cyclic co then even if you do you know, say

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Speaker 6: consumption coupon or text cards and et cetera, et cetera,

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Speaker 6: it's not going to change the structure of the economy

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Speaker 6: and therefore it's not going to solve your problem.

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Speaker 4: So we know that the Chinese national team or the

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Speaker 4: Sovereign Wealth Fund has been purchasing a lot of ETFs

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Speaker 4: this year, specifically to support the market. For the first

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Speaker 4: time ever, Mainland China ranked second by inflows globally at

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Speaker 4: one hundred and five billion dollars. US is ranked first

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Speaker 4: with six hundred billion. But we've seen Chinese ETFs hitting

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Speaker 4: the top ten funds for ETFs globally. So for instance,

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Speaker 4: we have Hua Tai, Pine Bridge Efund, China AMCCSI three hundred,

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Speaker 4: all getting massive inflows. Do you think this is sustainable?

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Speaker 4: And how much do you think the regulators will pour

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Speaker 4: into ETFs? What are your thoughts around this?

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Speaker 6: Yeah, we're at twenty eight hundred right now. Right, So,

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Speaker 6: when I first got back to China from Wall Street

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Speaker 6: like fifteen years ago, it was recent thousand, so we

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Speaker 6: actually lowered it fifteen years ago. Every year, you know,

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Speaker 6: we have this protection of three thousand poonds raging in

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Speaker 6: the Chinese market. But then for some reason we felt

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Speaker 6: again earlier this year. If you remember, there was a

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Speaker 6: corn quick in the Chinese market. Is so back then

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Speaker 6: because of a severely created crisis in the smaller cab

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Speaker 6: segment of the market, and also because the national team

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Speaker 6: was buying the big caps like the Snow Tomorrow, basically

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Speaker 6: destroy all the market neutral strategy or the alpha strategy

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Speaker 6: or the effective corn strategy in the market. So it

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Speaker 6: creates a huge sort of a downward spiro when selling

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Speaker 6: pressure in the Chinese market back then, and then the

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Speaker 6: market sort of stabilized at around twenty six hundred ones.

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Speaker 6: All the leverage has been destroyed since then, we're starting

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Speaker 6: from a clean shited paper. And then because of the

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Speaker 6: lequ of buying, because of there's so much probes going

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Speaker 6: on in the fund management industry, right, so they are

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Speaker 6: trying to ask the fund managers to pay back the

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Speaker 6: salary and bonuses. They're investigating on the heads of some

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Speaker 6: of the fund management companies for corruption and for other

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Speaker 6: illicited activities, et cetera, et cetera. So imagine in this environment,

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Speaker 6: who would be focusing on their work, right, So people

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Speaker 6: would be like so busy trying to figure a way out.

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Speaker 6: So I think as a result, you know, the fun

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Speaker 6: performance has been appalling. So I think buying ETF has

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Speaker 6: been one of the ways to sort of support the

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Speaker 6: overall in this level. Because back in twenty fifteen, when

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Speaker 6: the national team was trying to rescue the market, it

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Speaker 6: chose to buy some very small cab and without much liquidity,

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Speaker 6: without much trading volume. And so the problem with such

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Speaker 6: approach is that you know, firstly, you create very erratic

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Speaker 6: price response in these smaller cab names, and then secondly,

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Speaker 6: you know, it's very easy for some of the people

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Speaker 6: who are in the national team to front run these

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Speaker 6: kind of executions, and indeed there was like persecutions later

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Speaker 6: on for people who actually did the fund running. So

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Speaker 6: this time around they sort of changed strategy so they

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Speaker 6: to buy the index fund rather than buying individual stocks,

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Speaker 6: because the index funds comprise of larger cap stocks. So

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Speaker 6: you can see right the breath in the Chinese market

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Speaker 6: is very very narrow, is the worst in the global

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Speaker 6: markets ranking. So you see a handful of megacab stocks

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Speaker 6: rising up, for example, the Chinese banks, which shouldn't be

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Speaker 6: rised at the time of property crisis. You know, all

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Speaker 6: the names with the China World in their company names.

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Speaker 6: Those megacab names are rising. But then at the same time,

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Speaker 6: thousands of stocks keep making a low and that's the

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Speaker 6: reality of the market. So I think just now you

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Speaker 6: mentioned that you know, there's a huge fund inflow into

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Speaker 6: the Chinese et apps. It is because of the national

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Speaker 6: team's buying efforts. And I think this year the amount

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Speaker 6: of money they spent buying the ed apps is actually

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Speaker 6: substantially higher than the money they spending back in twenty

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Speaker 6: fifteen when they try to rescue the market from a

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Speaker 6: bubble burst.

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Speaker 4: How much more do you expect them to buy?

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Speaker 6: They would be keep buying. I wouldn't be surprised to see,

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Speaker 6: you know, because it's needed right so, because if you

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Speaker 6: talk to people in the domestic market, wow, you know,

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Speaker 6: the pessimism is so palpable that people just refuse to

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Speaker 6: buy stocks right now. So you can see from the

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Speaker 6: trade volume, the trading volume is like so low. The

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Speaker 6: active trading account is for the first time in history

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Speaker 6: below fifty million. All of these is telling you that,

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Speaker 6: you know, the market is very pessimistic and people are

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Speaker 6: unwilling to take any risk in the stock market.

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Speaker 2: If they will continue to buy.

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Speaker 3: And by the way, I don't know how much you're

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Speaker 3: actually spending, Rebecca, you might have some insight actually, and

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Speaker 3: how big the budget so far has been to keep

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Speaker 3: the market from falling.

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Speaker 2: But is this an unlimited pit of resources.

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Speaker 3: Guys that they that they have at their disposal to

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Speaker 3: at least put a floor underneath the market.

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Speaker 4: So our estimate is that the national team can buy

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Speaker 4: as much as one hundred billion by your end. They're

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Speaker 4: currently at sixty six billion. This is US dollars, yes, okay,

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Speaker 4: sixty six billion. And what we've noticed is that they

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Speaker 4: have started to buy not only the large cap but

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Speaker 4: also the small caps to diversify so that all of

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Speaker 4: the etf issuers benefit from this. But how what are

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Speaker 4: your thoughts on this? Do you think one hundred billion

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Speaker 4: is low about right?

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Speaker 6: Even though the trading volume is dying out in the

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Speaker 6: dominion Chinese market, we're still talking about a couple of

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Speaker 6: hundred billion Chinese yan a day. So if you buy

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Speaker 6: one hundred billion US dollars a day, they just like

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Speaker 6: the days of transaction in the Chinese market. And also

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Speaker 6: I understand the branching out to the smaller cap names.

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Speaker 6: You know, they did the same thing back in Factruary, right,

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Speaker 6: because back in February they bought the megacab first and

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Speaker 6: then they destroy all the leverage. And also you know,

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Speaker 6: people were forced out of their smaller cab position. And

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Speaker 6: because of the market lack of liquidity, people couldn't sell.

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Speaker 6: People couldn't sell, and so they creates a huge crash

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Speaker 6: in the smaller cap names as well. So I think

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Speaker 6: the modern area at this stage and I think, you know,

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Speaker 6: one hundred billion US dollars by the end of this

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Speaker 6: year maybe far from being enough.

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Speaker 3: Okay, So what do you think will create the conditions

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Speaker 3: for a sustainable market, Because I imagine it's more than

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Speaker 3: fixing the economy. There probably needs to be some reforms

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Speaker 3: we need to see in the market itself, you know,

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Speaker 3: the piping and regulation and other things.

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Speaker 2: So where should we start.

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Speaker 6: There has to be a fundamental reconstruction of confidence. If

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Speaker 6: you remember back in April, between April to and of May,

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Speaker 6: for two months, there was a decent rally in the

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Speaker 6: Chinese mind, very good rally. Ah So there was thirty

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Speaker 6: percent up in the Hands and Index and also fifty

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Speaker 6: percent up in the Hands and Tech Index. And for

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Speaker 6: those two months, the Chinese economy isn't doing much right.

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Speaker 6: You can even argue that the fundamental is actually worsening

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Speaker 6: during those months, But yet the Chinese market had a

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Speaker 6: decent rally. So what that is telling us that you know,

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Speaker 6: even though you're facing all these challenges and structural issues

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Speaker 6: that can't be fixed in one go. But as long

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Speaker 6: as people see hope, then you know, people would actually

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Speaker 6: come back to the market.

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Speaker 5: So back then there was whispering in the.

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Speaker 6: Market that you know, there was a new housing fund

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Speaker 6: being set up, so they're going to use these government's

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Speaker 6: money to buy up all these excess housing and use

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Speaker 6: them as economy housing for lower income people. So people

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Speaker 6: were excited back then. And also you know, there was

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Speaker 6: seems to be a genuine effort to sort of re

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Speaker 6: establish the friendship with our trading partners, most importantly the

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Speaker 6: US et cetera, et cetera. So I think as a result,

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Speaker 6: because of the perception has changed, and therefore there was

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Speaker 6: a decent technical rebound during those two months. So I

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Speaker 6: wouldn't be surprised to see, you know, if we could

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Speaker 6: sort of instill the confidence back to the economy, also

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Speaker 6: relaxed the environment, you know, less censorship, I think things

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Speaker 6: would turn dramatically better.

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Speaker 3: I remember also, right before that rally took place, I

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Speaker 3: think it started in April, was they changed the guy

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Speaker 3: at the top of the CSRC right wu chingh A, Yeah, well,

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Speaker 3: the butcher of the brokers is what he was called, right,

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Speaker 3: because he was very strict. I think it was in

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Speaker 3: the mid two thousands when he was last in a

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Speaker 3: similar position, and a lot of people that we talked to,

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Speaker 3: including yourself, if I remember, correctly pointed to that being

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Speaker 3: a pivotal point. Just because the market is in a

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Speaker 3: bear market, it doesn't mean people are not making money, right.

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Speaker 3: You know, there are tactical trades that you can put

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Speaker 3: in place, and people are making some money, maybe even

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Speaker 3: decent money. But to your point, we need to step

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Speaker 3: away from this being a tactical or a trader's market.

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Speaker 3: And what do you think the path is for China

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Speaker 3: to take its market and move it away from being

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Speaker 3: just a trader's market. I don't say avoid it completely

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Speaker 3: to being something akin to the US equity market, where

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Speaker 3: you know, you have allocations, you have market cap, you

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Speaker 3: have fun flows along with of course a part you know,

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Speaker 3: part of the US equity market is also a trader's market,

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Speaker 3: Like how do we get from point A to point B? There?

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Speaker 5: Wow, there's a I don't know, the change market.

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Speaker 2: It's about what would you like to see?

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Speaker 6: Yeah, well, protection of private property strong recognition of property rights. Uh,

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Speaker 6: you know, get rid of frauds in the listing market,

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Speaker 6: geary of the frauds in the listing process, severe punishment

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Speaker 6: for security frauds, et cetera, et cetera.

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Speaker 5: You know they're doing that now though, yes, I know.

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Speaker 6: But then, as you can see, the incentive system here

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Speaker 6: is not quite right. So the incentive system here is

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Speaker 6: that if you do something wrong, I punish you, but

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Speaker 6: if you do it right, there's no reward. Then therefore,

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Speaker 6: you know, people are not willing to take any risk.

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Speaker 5: Right.

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Speaker 6: So, if I were a CSRC chairman, you know, make

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Speaker 6: sure that nothing goes wrong in the stock market. So

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Speaker 6: I would ask the national team to buy. I would

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Speaker 6: try to quell any volatility that arives in the marketplace.

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Speaker 6: I will get rid of the IPO listing process because

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Speaker 6: there's still so much fraud in the listening process. You know,

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Speaker 6: I'll do all those things. So in so doing, I

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Speaker 6: get rid of all the trading activities in the marketplace.

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Speaker 6: And as as such, then I get rid of all

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Speaker 6: the volatility because there's no trading, there's no buying selling before,

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Speaker 6: there's no trading, and therefore there's no volatility in the

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Speaker 6: marketplace all right. So essentially this seems to be the

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Speaker 6: approach that many of the other ministries are taken. For example,

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Speaker 6: the PBOC is shortening the chess Rey bonds to avoid

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Speaker 6: the bond bubble, you know, because the bond bubble can

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Speaker 6: be destabilizing for the bond market. You know because in

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Speaker 6: the back, yeah, many of the commercial banks are the

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Speaker 6: biggest bondholder of the Chinese Chasury bonds. And then the

395
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Speaker 6: Ministry of Finance is issuing less chess reponds behind the schedule.

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Speaker 6: Now it's way behind the schedule, et cetera, et cetera.

397
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Speaker 6: So as you can see, like people are just trying

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Speaker 6: to do the minimum to get by. There's no incentive

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Speaker 6: for them to work hard to get the reward. There's

400
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Speaker 6: only incentive for them to avoid the penalty in this system.

401
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Speaker 6: So how would the system work?

402
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Speaker 5: I don't know.

403
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Speaker 6: You raise a very granted and challenging question to answer,

404
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Speaker 6: and I think my answer here only touch the surface

405
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Speaker 6: of that. For the past thirty years, Chinese market has

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Speaker 6: gone a long way from an occasionally market with you know,

407
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Speaker 6: thirty stocks listed in the Shanghads Stock exchange to now

408
00:21:18,359 --> 00:21:21,080
Speaker 6: more than five thousand stocks trading on the stock exchange,

409
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Speaker 6: and the derivatives that you can trade with. There's index future,

410
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Speaker 6: there's index option, and you can even short sell some

411
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Speaker 6: of the Chinese stocks and also of your mainage Chinese investors.

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Speaker 6: You can mesage the Hong Kong market to the connect program.

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Speaker 6: So the Chinese market has.

414
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Speaker 5: Gone a long way.

415
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Speaker 6: So I think right now, of all the stuff that

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Speaker 6: I mentioned just now, the most urgent task for the

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Speaker 6: authority is to change incentive in this system to let

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Speaker 6: people take more risk, to give them the courage to

419
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Speaker 6: take risk, rather than you know, instill fear in them

420
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Speaker 6: to avoid taking any risk so that they don't get

421
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Speaker 6: pin on us.

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Speaker 3: Right, But there's a different still between treating something like

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Speaker 3: a casino and incentivizing risk in that sense, yes, and

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Speaker 3: creating a rational marketplace, which you know in many cases

425
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Speaker 3: actually to your point, right, there is so many products

426
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Speaker 3: in this market that you know, people in the West

427
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Speaker 3: don't really understand. They barely understand the complexities of the

428
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Speaker 3: Chinese equity market and how far it's actually come from

429
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Speaker 3: way back. Okay, let me put a very simple question

430
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Speaker 3: to you, what is the most popular investment in China

431
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Speaker 3: these days? Where would you put your money. What's the recommendation.

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Speaker 6: Because I run a domestic funds in the Chinese market,

433
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Speaker 6: in the middle market as well, what I'm saying is

434
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Speaker 6: that my clients are buying cash management products. That shows that,

435
00:22:42,240 --> 00:22:45,560
Speaker 6: you know, the risk aversion in the system is very,

436
00:22:45,720 --> 00:22:49,879
Speaker 6: very high, and across the industry there's much redemption from funds.

437
00:22:49,960 --> 00:22:53,960
Speaker 6: You know, people refuse to put funds in risky investments anymore.

438
00:22:54,000 --> 00:22:57,000
Speaker 6: And also people I get increased about, you know, how

439
00:22:57,040 --> 00:23:00,520
Speaker 6: to invest overseas. Right so, right now, it seems to

440
00:23:00,560 --> 00:23:04,320
Speaker 6: me that you know, people are more averse to investing

441
00:23:04,320 --> 00:23:06,920
Speaker 6: in the mainland Chinese market and then more inclined to

442
00:23:07,200 --> 00:23:10,160
Speaker 6: invest in the overseas market, especially the US market.

443
00:23:11,720 --> 00:23:16,360
Speaker 1: This podcast is brought to you by HKX Asia's ETF marketplace,

444
00:23:16,840 --> 00:23:19,679
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445
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446
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Speaker 1: to global search HKX to learn more.

447
00:23:28,119 --> 00:23:30,760
Speaker 4: So let's talk about the US market and the rest

448
00:23:30,800 --> 00:23:32,880
Speaker 4: of the world, because we've seen a lot of influce

449
00:23:32,920 --> 00:23:34,639
Speaker 4: going into the US. You know, tech has done very

450
00:23:34,760 --> 00:23:37,560
Speaker 4: very well. India for instance, has seen twelve billion dollars

451
00:23:37,600 --> 00:23:39,720
Speaker 4: worth of influence and some are saying that India is

452
00:23:39,760 --> 00:23:43,000
Speaker 4: going to replace China from an asset allocation standpoint.

453
00:23:43,040 --> 00:23:45,359
Speaker 6: What's your thought on this, Well, if you look at

454
00:23:45,400 --> 00:23:49,320
Speaker 6: the reason MSCI rebalancing of the Emerging Market Index, you know,

455
00:23:49,359 --> 00:23:52,000
Speaker 6: the Chinese stocks, a couple of them got kicked out.

456
00:23:52,720 --> 00:23:54,480
Speaker 6: So as a result, you know, the weight of the

457
00:23:54,600 --> 00:23:58,119
Speaker 6: Chinese market in the Emerging Market Index has been decreased,

458
00:23:58,280 --> 00:24:01,359
Speaker 6: and therefore, subsequently you expect some from the outflow to

459
00:24:01,520 --> 00:24:04,960
Speaker 6: other index components. So yeah, I wouldn't be surprised to

460
00:24:05,000 --> 00:24:07,920
Speaker 6: see Indias taking some of the weights from.

461
00:24:07,880 --> 00:24:08,680
Speaker 5: The Chinese market.

462
00:24:09,119 --> 00:24:10,679
Speaker 6: But then at the same time, if you look at

463
00:24:10,720 --> 00:24:14,359
Speaker 6: the Indian market, it's puzzling to me, you know, because

464
00:24:14,359 --> 00:24:16,560
Speaker 6: I know that David has been around for a long time,

465
00:24:16,680 --> 00:24:19,800
Speaker 6: so back in twenty fifteen, actually, you know, during the bubble.

466
00:24:20,040 --> 00:24:22,040
Speaker 2: Nine years ago. You make it seem what I've been

467
00:24:22,080 --> 00:24:22,439
Speaker 2: here for.

468
00:24:26,320 --> 00:24:28,760
Speaker 3: Market show of the electricity, you know, you make it

469
00:24:28,840 --> 00:24:31,159
Speaker 3: seem like I was here during you know, when the

470
00:24:31,280 --> 00:24:32,280
Speaker 3: light bulb was invented.

471
00:24:32,320 --> 00:24:36,000
Speaker 6: But yes, yes, yes, yeah, because the Chinese market is

472
00:24:36,040 --> 00:24:38,000
Speaker 6: only thirty years old, right, so you've been here for

473
00:24:38,119 --> 00:24:41,040
Speaker 6: more than ten years, which makes you a veteran. I

474
00:24:41,119 --> 00:24:45,280
Speaker 6: still remember, you know, back in twenty fifteen, I was

475
00:24:45,440 --> 00:24:49,400
Speaker 6: discussing with David about how the Chinese soft bubble was bursting.

476
00:24:50,119 --> 00:24:52,920
Speaker 6: Even back then, you don't feel the same level of

477
00:24:53,160 --> 00:24:55,760
Speaker 6: pessimism in the marketplace. And back then, you know one

478
00:24:55,800 --> 00:24:58,520
Speaker 6: of the major running stories that you know, the MSCR

479
00:24:58,640 --> 00:25:01,440
Speaker 6: is going to rebalancing more and more Chinese style is

480
00:25:01,480 --> 00:25:04,000
Speaker 6: going to get into the system, and therefore in China

481
00:25:04,400 --> 00:25:08,000
Speaker 6: as a major emerging market should take fifty or even

482
00:25:08,080 --> 00:25:10,760
Speaker 6: more than fifty percent of the index weight. That was

483
00:25:10,960 --> 00:25:13,800
Speaker 6: the story back then. But right now it seems to

484
00:25:13,920 --> 00:25:18,200
Speaker 6: be sort of unraveling. And obviously you know, India is

485
00:25:18,280 --> 00:25:21,600
Speaker 6: the darling of the day. But then India these days

486
00:25:21,880 --> 00:25:26,480
Speaker 6: is exhibiting quite a bit of similarity as the Chinese

487
00:25:26,560 --> 00:25:29,240
Speaker 6: market back then in twenty fifteen, during the bubble years,

488
00:25:30,000 --> 00:25:34,720
Speaker 6: there are much retail investors participating in the stock rally,

489
00:25:34,800 --> 00:25:37,200
Speaker 6: and actually I was told that the foreigners actually backing out.

490
00:25:37,800 --> 00:25:41,400
Speaker 6: And also in terms of the earnings multiple, I think

491
00:25:41,400 --> 00:25:44,680
Speaker 6: it's trading it close to thirty times earnings, which is

492
00:25:44,840 --> 00:25:48,040
Speaker 6: very high as well. So to me, it's exhibiting a

493
00:25:48,160 --> 00:25:51,400
Speaker 6: classic sign of bubble. So I would be surprised to see,

494
00:25:51,480 --> 00:25:55,480
Speaker 6: you know, India would be an immediate replacement or immediate

495
00:25:55,520 --> 00:25:59,440
Speaker 6: substitute to the Chinese space. And despite all the sort

496
00:25:59,480 --> 00:26:02,080
Speaker 6: of passive and the cctivities that we discussed just now,

497
00:26:02,480 --> 00:26:06,119
Speaker 6: there's still plenty of opportunities in China, especially now the

498
00:26:06,240 --> 00:26:08,000
Speaker 6: valuation is so depressed.

499
00:26:08,480 --> 00:26:11,080
Speaker 3: Right just to bring up a point because how you

500
00:26:11,160 --> 00:26:12,800
Speaker 3: know so I think a few weeks ago we were

501
00:26:12,880 --> 00:26:13,880
Speaker 3: joined on the show.

502
00:26:13,920 --> 00:26:15,800
Speaker 2: Rebecca by east Spring.

503
00:26:16,000 --> 00:26:17,520
Speaker 3: East Spring and I'm not going to name the name,

504
00:26:17,560 --> 00:26:19,760
Speaker 3: but eaes Spring Investments came on the show and they

505
00:26:19,800 --> 00:26:23,239
Speaker 3: said exactly what hall Long just mentioned India right now,

506
00:26:23,320 --> 00:26:26,480
Speaker 3: particularly when you look at small caps and the valuations

507
00:26:26,520 --> 00:26:28,880
Speaker 3: you're getting there. So large caps are about twenty twenty

508
00:26:28,960 --> 00:26:32,000
Speaker 3: five times you go down the market cap scale and

509
00:26:32,119 --> 00:26:33,720
Speaker 3: you go all the way up to about forty forty

510
00:26:33,800 --> 00:26:37,040
Speaker 3: five times, if not fifty sixty times earnings when you

511
00:26:37,119 --> 00:26:40,680
Speaker 3: look at the small caps, and that guest that we

512
00:26:40,760 --> 00:26:44,200
Speaker 3: had on the TV show said, it reminds me exactly

513
00:26:44,920 --> 00:26:49,119
Speaker 3: of the Shanghai composite in that massive ascent back in

514
00:26:49,320 --> 00:26:50,840
Speaker 3: how do you remember this two thousand and six, two

515
00:26:50,840 --> 00:26:53,960
Speaker 3: thousand and seven, Yes, where we went from fifteen hundred

516
00:26:54,040 --> 00:26:56,040
Speaker 3: to I think six thousand. I was mad classroom back

517
00:26:56,040 --> 00:26:57,879
Speaker 3: then in China, and then it crashed all the way

518
00:26:57,920 --> 00:26:58,959
Speaker 3: back down to two thousand.

519
00:27:00,000 --> 00:27:02,600
Speaker 2: How do we get to a point of market maturity?

520
00:27:02,640 --> 00:27:03,080
Speaker 2: I guess right.

521
00:27:03,160 --> 00:27:07,480
Speaker 3: So, if you're a dollar investor, what confidence would you

522
00:27:07,680 --> 00:27:11,840
Speaker 3: have to look at a market, even like India or

523
00:27:11,960 --> 00:27:15,080
Speaker 3: China and leave a permanent allocation since we're talking what

524
00:27:15,200 --> 00:27:18,680
Speaker 3: the proper allocations are in ems? Or does it just

525
00:27:18,800 --> 00:27:21,800
Speaker 3: make sense for fund managers out there? And sorry, I'm

526
00:27:21,800 --> 00:27:24,959
Speaker 3: going on a round here to do purely China strategies

527
00:27:25,400 --> 00:27:29,000
Speaker 3: or a purely India strategy or an em X China

528
00:27:29,200 --> 00:27:31,200
Speaker 3: x India strategy. I don't know, Like, what are you

529
00:27:31,200 --> 00:27:31,720
Speaker 3: guys hearing?

530
00:27:31,960 --> 00:27:33,959
Speaker 6: Yeah, well, I think it still pays to look at

531
00:27:34,000 --> 00:27:36,600
Speaker 6: it from a global perspective, and I think the Chinese

532
00:27:36,640 --> 00:27:39,040
Speaker 6: market is by you know, being sold off as it

533
00:27:39,160 --> 00:27:42,159
Speaker 6: is right now and people are very pessimistic. It is

534
00:27:42,200 --> 00:27:44,840
Speaker 6: still very I think it's the cheapest market in the world,

535
00:27:45,080 --> 00:27:47,240
Speaker 6: and also it's the second largest market in the world,

536
00:27:48,160 --> 00:27:51,360
Speaker 6: so it's placed in the global market cannot be ignored.

537
00:27:51,960 --> 00:27:56,080
Speaker 6: It's an important and systemic, significant force. But then at

538
00:27:56,119 --> 00:27:58,560
Speaker 6: the same time, you know, as we discussed just now,

539
00:27:58,640 --> 00:28:01,560
Speaker 6: there's much to be changed for this market to function again,

540
00:28:02,200 --> 00:28:05,280
Speaker 6: and therefore investing in the Chinese market can be a

541
00:28:05,520 --> 00:28:08,440
Speaker 6: longer term task, a longer term challenge for many of

542
00:28:08,520 --> 00:28:12,320
Speaker 6: the global investors. I think specifically for India, it's a

543
00:28:12,400 --> 00:28:15,359
Speaker 6: different issue. It's a timing question, you know, whether this

544
00:28:15,880 --> 00:28:18,840
Speaker 6: is the right time to get into this market as

545
00:28:18,840 --> 00:28:22,000
Speaker 6: as opposed to where the India is the market to

546
00:28:22,080 --> 00:28:24,720
Speaker 6: be for the long run. I think both India and

547
00:28:24,960 --> 00:28:28,920
Speaker 6: China are systemically important and therefore they are longer term

548
00:28:29,480 --> 00:28:32,920
Speaker 6: investment opportunities for global investor. But then I think in

549
00:28:33,000 --> 00:28:35,120
Speaker 6: the near term though in the very near term, though,

550
00:28:35,400 --> 00:28:38,480
Speaker 6: I think China offers more investment appeal from a value

551
00:28:38,520 --> 00:28:40,480
Speaker 6: perspective than the Indian market.

552
00:28:41,840 --> 00:28:45,920
Speaker 4: So for our listeners, the MSCI Emerging Market Index has

553
00:28:46,040 --> 00:28:50,040
Speaker 4: China allocating a weight of twenty two percent, India at

554
00:28:50,120 --> 00:28:54,360
Speaker 4: twenty percent, Taiwan nineteen. That's close South Korea at twelve.

555
00:28:54,520 --> 00:28:57,400
Speaker 4: So China and India really neck and neck in terms

556
00:28:57,440 --> 00:29:00,880
Speaker 4: of an acid allocation across the broad based But if

557
00:29:00,920 --> 00:29:05,640
Speaker 4: we shift geared to Japan, Japan has seen phenomenal influence

558
00:29:05,680 --> 00:29:08,840
Speaker 4: this year eleven billion NIK two to five is up

559
00:29:09,120 --> 00:29:11,640
Speaker 4: more than fifteen percent year to date. Do you think

560
00:29:11,880 --> 00:29:15,920
Speaker 4: Japan's strong equity performance is sustainable and do you think

561
00:29:15,920 --> 00:29:18,120
Speaker 4: there's more risk than opportunities there?

562
00:29:19,080 --> 00:29:22,440
Speaker 5: It depends on your view on the yen carry train?

563
00:29:22,680 --> 00:29:24,680
Speaker 3: Oh wait, is that purely Are you saying that's a

564
00:29:24,760 --> 00:29:26,720
Speaker 3: purely currency play? What's happening in Japan?

565
00:29:27,320 --> 00:29:29,240
Speaker 6: Well, some people will argue that it's not right. So

566
00:29:29,360 --> 00:29:31,800
Speaker 6: I was told there's some you know, shareholder reform, you know,

567
00:29:31,920 --> 00:29:34,640
Speaker 6: the shareholders demanding more say in the voting, et cetera,

568
00:29:34,640 --> 00:29:35,000
Speaker 6: et cetera.

569
00:29:35,080 --> 00:29:36,480
Speaker 5: But I think it's just a mirage.

570
00:29:37,040 --> 00:29:40,720
Speaker 6: If you look at if you ask an average Japanese person,

571
00:29:40,840 --> 00:29:43,520
Speaker 6: you ask him or her whether he's or her life

572
00:29:44,000 --> 00:29:47,920
Speaker 6: has been improved during this phenomenal stock market boom. I

573
00:29:48,040 --> 00:29:51,080
Speaker 6: think theianza is a resounding note. So people are paying more,

574
00:29:51,760 --> 00:29:55,280
Speaker 6: Things are substantially more expensive. Chiapan is good for the

575
00:29:55,320 --> 00:29:58,640
Speaker 6: foreign travelers, but really bad for the domestic Japanese consumer.

576
00:29:59,280 --> 00:30:01,240
Speaker 5: Even the the Japanese.

577
00:30:00,880 --> 00:30:05,920
Speaker 6: Expert surplus is actually having a deficit despite a very cheap,

578
00:30:06,120 --> 00:30:08,920
Speaker 6: historically cheap yen. So what that is telling me that,

579
00:30:09,040 --> 00:30:11,720
Speaker 6: you know, the cheap yen, it's more a speculative instrument

580
00:30:12,360 --> 00:30:16,000
Speaker 6: rather than a vehicle rather than sort of a beneficient

581
00:30:16,080 --> 00:30:18,800
Speaker 6: force for the Japanese economy. So I think right now,

582
00:30:19,000 --> 00:30:21,000
Speaker 6: you know, because of the reasons out of I think

583
00:30:21,440 --> 00:30:24,680
Speaker 6: in early August, because of the crash, I think the

584
00:30:24,800 --> 00:30:30,720
Speaker 6: Tokyo Stock Exchange was trading at about fourteen fifteen times.

585
00:30:30,520 --> 00:30:31,200
Speaker 5: I can't remember.

586
00:30:31,320 --> 00:30:35,320
Speaker 6: Yeah, so the valuation becomes more reasonable. So I think

587
00:30:35,480 --> 00:30:38,240
Speaker 6: that kind of level. You know, there's still investment value

588
00:30:38,280 --> 00:30:40,880
Speaker 6: in it, because everything has a price. But if you

589
00:30:40,920 --> 00:30:43,440
Speaker 6: ask me, you know, whether the Germanese economy has turned

590
00:30:43,520 --> 00:30:47,720
Speaker 6: fundamentally better, then I would have my reservations.

591
00:30:49,000 --> 00:30:51,440
Speaker 2: Okay, I guess we can save this next idea.

592
00:30:51,440 --> 00:30:54,200
Speaker 3: I'm about to bring up another podcast because there seems

593
00:30:54,200 --> 00:30:56,959
Speaker 3: to be complex since we're putting Japan together with China. Right,

594
00:30:57,080 --> 00:31:00,680
Speaker 3: is China headed in the direction of Japan? Yeah, years ago,

595
00:31:02,280 --> 00:31:03,680
Speaker 3: But I think we're going to open up a kind

596
00:31:03,720 --> 00:31:06,600
Speaker 3: of worms there. We don't have enough time to really

597
00:31:06,720 --> 00:31:08,880
Speaker 3: because that's a very nuanced story too. Right, So in

598
00:31:09,120 --> 00:31:12,400
Speaker 3: many ways they're the same, but there are subtle differences there.

599
00:31:12,520 --> 00:31:15,200
Speaker 6: Yeah, because the Japanese was reached, you know, when the

600
00:31:15,240 --> 00:31:17,840
Speaker 6: bubble burst, but the Chinese is not yet rich and

601
00:31:17,960 --> 00:31:18,920
Speaker 6: the bubble is bursting.

602
00:31:19,560 --> 00:31:20,400
Speaker 5: That's a huge difference.

603
00:31:20,440 --> 00:31:22,480
Speaker 6: And also, you know, if you look at the population

604
00:31:22,680 --> 00:31:26,440
Speaker 6: age of the Chinese population is aging rapidly. So I

605
00:31:26,520 --> 00:31:28,640
Speaker 6: think that is a huge challenge, not just for the

606
00:31:28,680 --> 00:31:31,360
Speaker 6: housing sector, but also you know, for social security, for

607
00:31:31,400 --> 00:31:32,959
Speaker 6: all the stuff that we discussed just now.

608
00:31:33,040 --> 00:31:37,400
Speaker 3: Going forward, So let's say in this trading at twenty

609
00:31:37,480 --> 00:31:40,360
Speaker 3: two times earnings, let's just say the SMP is trading

610
00:31:40,400 --> 00:31:43,240
Speaker 3: at about the same, if not slightly below, but we're

611
00:31:43,240 --> 00:31:45,680
Speaker 3: getting pulled higher by you know, a single stock and

612
00:31:45,760 --> 00:31:48,360
Speaker 3: video right trading at thirty eight times. Japan is somewhere

613
00:31:48,360 --> 00:31:52,480
Speaker 3: in between. You have Hong Kong benchmarks as a representation

614
00:31:52,600 --> 00:31:54,920
Speaker 3: of the China story, trading at nine times earnings.

615
00:31:55,000 --> 00:31:55,120
Speaker 6: Right.

616
00:31:55,800 --> 00:32:01,080
Speaker 3: So you said there's some extreme opportunities available now if

617
00:32:01,200 --> 00:32:01,800
Speaker 3: China turns.

618
00:32:02,240 --> 00:32:04,040
Speaker 2: Looking at valuations in China, that's right.

619
00:32:04,520 --> 00:32:08,560
Speaker 3: If allocations snap back to pre bear market levels, that's

620
00:32:08,600 --> 00:32:11,400
Speaker 3: a big return, right, So pick your index out if

621
00:32:11,440 --> 00:32:14,320
Speaker 3: you had to buy China. Now, if I buy into

622
00:32:15,040 --> 00:32:18,800
Speaker 3: that thesis, what's the index I buy among the many

623
00:32:19,680 --> 00:32:23,080
Speaker 3: indexes that I have available going along on China?

624
00:32:23,960 --> 00:32:25,400
Speaker 5: The Chinese Bawn index.

625
00:32:30,720 --> 00:32:33,560
Speaker 6: You didn't name that index, which has been doing very

626
00:32:33,640 --> 00:32:37,280
Speaker 6: well this year insistently. Yes, yeah, and it's perceived as

627
00:32:37,320 --> 00:32:39,720
Speaker 6: a safe haven for a large amount of money to

628
00:32:39,840 --> 00:32:44,240
Speaker 6: park in there. If we purely look at the valuation multiple, yeah,

629
00:32:44,320 --> 00:32:50,200
Speaker 6: you know, China has indisputably lowest valuation multiple. But then

630
00:32:50,240 --> 00:32:52,480
Speaker 6: at the same time, you know, because as a fund manager,

631
00:32:52,560 --> 00:32:55,360
Speaker 6: you still have to time your entry. So right now,

632
00:32:55,400 --> 00:32:57,920
Speaker 6: you know, China is very, very cheap, and I think

633
00:32:57,960 --> 00:33:02,000
Speaker 6: it's the biggest contrarian story of the year because nobody

634
00:33:02,080 --> 00:33:04,720
Speaker 6: wants this as for some reason except the national team,

635
00:33:05,120 --> 00:33:09,800
Speaker 6: all right, So it's a huge contrarian play here, all right.

636
00:33:09,840 --> 00:33:12,000
Speaker 6: But then you need the courage and also you need

637
00:33:12,080 --> 00:33:15,360
Speaker 6: the right timing to get back into this market right now.

638
00:33:16,240 --> 00:33:18,680
Speaker 6: I am not entirely sure it's the right time to

639
00:33:18,720 --> 00:33:20,880
Speaker 6: get back in just yet. But then there are other

640
00:33:21,280 --> 00:33:23,920
Speaker 6: investment opportunities in the Chinese market place you can look at.

641
00:33:24,480 --> 00:33:26,600
Speaker 6: And then at the same time, you know, for the

642
00:33:26,680 --> 00:33:30,080
Speaker 6: other three markets that you mentioned just now, Japan, US

643
00:33:30,320 --> 00:33:33,320
Speaker 6: and India, And obviously you know, we like the US

644
00:33:33,440 --> 00:33:36,200
Speaker 6: market for now because earning is very very strong. You know,

645
00:33:36,280 --> 00:33:40,000
Speaker 6: this earning season is actually stronger than the last earning season.

646
00:33:40,360 --> 00:33:42,800
Speaker 6: All of these companies are turning out really good results.

647
00:33:43,280 --> 00:33:47,680
Speaker 6: The market breast is broadening, the liquidity condition is rising,

648
00:33:48,080 --> 00:33:51,720
Speaker 6: and also the physical deficit is continuing. So that make

649
00:33:52,160 --> 00:33:56,040
Speaker 6: the US market a bit more attractive from a timing perspective,

650
00:33:56,400 --> 00:33:58,520
Speaker 6: despite a very high valuation.

651
00:33:59,520 --> 00:34:01,120
Speaker 2: How a big picture question for you.

652
00:34:02,000 --> 00:34:05,440
Speaker 3: You work on Wall Street, right, you speak with international media,

653
00:34:05,560 --> 00:34:08,200
Speaker 3: you come on Bloomberg and some of our peers. You

654
00:34:08,320 --> 00:34:11,520
Speaker 3: teach in China, so you understand the market. What do

655
00:34:11,719 --> 00:34:16,640
Speaker 3: you think the West doesn't get about China? What is

656
00:34:16,719 --> 00:34:20,840
Speaker 3: the biggest misconception you hear that you constantly need to

657
00:34:20,960 --> 00:34:21,560
Speaker 3: push back on.

658
00:34:22,520 --> 00:34:26,440
Speaker 6: M the Chinese mentality of working hard and saving hard.

659
00:34:26,920 --> 00:34:28,759
Speaker 6: I think it's very difficult to understand, you know, because

660
00:34:28,760 --> 00:34:31,000
Speaker 6: it's a culture thing is it's been passed down for

661
00:34:31,200 --> 00:34:33,960
Speaker 6: generations ever since we're here. You know, we've talked to

662
00:34:34,120 --> 00:34:36,319
Speaker 6: work very hard and save very hard for rainy days.

663
00:34:36,719 --> 00:34:39,239
Speaker 6: And so I don't think the Chinese saving phenomenon and

664
00:34:39,400 --> 00:34:42,120
Speaker 6: as a result, the overinvestments phenomenon is going to go

665
00:34:42,160 --> 00:34:46,440
Speaker 6: away because of the tariffs. I think that's a huge misconception.

666
00:34:46,680 --> 00:34:50,360
Speaker 6: You know, this is a sort of a structural peculiarity

667
00:34:50,520 --> 00:34:53,640
Speaker 6: that cannot be fixed by teriffs and by all these

668
00:34:54,040 --> 00:34:57,560
Speaker 6: you know, trade wars and stuff. So I think if

669
00:34:57,760 --> 00:35:00,640
Speaker 6: people understand that, then you know, people would sort of

670
00:35:00,760 --> 00:35:04,600
Speaker 6: thing differently, because for some of the foreign investors that

671
00:35:04,600 --> 00:35:07,080
Speaker 6: I talked to, you know, they seem to be seeing

672
00:35:07,239 --> 00:35:11,120
Speaker 6: the Chinese over investment in the manufacturing industry as an

673
00:35:11,239 --> 00:35:14,640
Speaker 6: action with malicious purpose for some reason. For example, Donald

674
00:35:14,640 --> 00:35:16,439
Speaker 6: Trump and say, oh wow, you know, the Chinese guys

675
00:35:16,440 --> 00:35:18,880
Speaker 6: are trying to read us off, you know, stealing our jobs,

676
00:35:18,960 --> 00:35:19,640
Speaker 6: blah blah blah.

677
00:35:19,680 --> 00:35:20,120
Speaker 5: But it's not.

678
00:35:20,760 --> 00:35:24,000
Speaker 6: This is a global structural phenomenon. The Chinese safe very

679
00:35:24,040 --> 00:35:28,040
Speaker 6: hard and the US consumer spending really really hard. Right,

680
00:35:28,120 --> 00:35:32,200
Speaker 6: So it's because of this coupling relationship sort of give

681
00:35:32,320 --> 00:35:35,520
Speaker 6: rise to the global structure these days, and it's not

682
00:35:35,680 --> 00:35:38,960
Speaker 6: going to go away anytime soon. So once people understand that,

683
00:35:39,040 --> 00:35:42,080
Speaker 6: you know, people may change their attitudes and their approach

684
00:35:42,360 --> 00:35:43,480
Speaker 6: to resolve this issue.

685
00:35:43,840 --> 00:35:45,600
Speaker 3: You brought up a very good point there, So you know,

686
00:35:45,680 --> 00:35:48,800
Speaker 3: when some of the noise we hear, and we know

687
00:35:48,920 --> 00:35:51,400
Speaker 3: this because we cover politics, right, and part of your

688
00:35:51,480 --> 00:35:54,520
Speaker 3: job powers allocating resources is to see through the politics.

689
00:35:54,560 --> 00:35:56,920
Speaker 3: You know, what is as an example, you brought up

690
00:35:56,920 --> 00:35:58,920
Speaker 3: what is Donald Trump saying that it's probably not.

691
00:35:59,000 --> 00:36:00,200
Speaker 5: True, right.

692
00:36:00,560 --> 00:36:04,080
Speaker 3: My question, if I could clarify that too, is for

693
00:36:04,200 --> 00:36:10,360
Speaker 3: the sophisticated investor that sees through the political noise that

694
00:36:10,400 --> 00:36:13,560
Speaker 3: we hear from Donald Trump about destroying jobs and all

695
00:36:13,600 --> 00:36:18,920
Speaker 3: these other things. Are there misconceptions among smart sophisticated investors

696
00:36:19,640 --> 00:36:22,239
Speaker 3: about China that you think are misguided?

697
00:36:23,200 --> 00:36:27,719
Speaker 6: Uh? The smart guys who also has a misconception about China?

698
00:36:28,280 --> 00:36:28,440
Speaker 5: Mm?

699
00:36:29,080 --> 00:36:32,840
Speaker 3: Yeah, the people who sit on a massive portfolio. I

700
00:36:32,920 --> 00:36:35,520
Speaker 3: think smart as a relative term, but people who sit

701
00:36:35,600 --> 00:36:39,480
Speaker 3: in a massive portfolio, because I imagine they don't make

702
00:36:39,520 --> 00:36:42,160
Speaker 3: a decision simply based on and again to use the

703
00:36:42,200 --> 00:36:48,840
Speaker 3: Trump example, simply based on Donald Trump thinks China slated jobs.

704
00:36:48,719 --> 00:36:49,200
Speaker 1: In the US.

705
00:36:49,400 --> 00:36:51,399
Speaker 6: That's why I'm taking my time to you know, thinks

706
00:36:51,440 --> 00:36:54,040
Speaker 6: for you know, how best to answer your question. I

707
00:36:54,080 --> 00:36:58,040
Speaker 6: think another misconception is that China is very difficult to change,

708
00:36:58,200 --> 00:37:02,120
Speaker 6: very reluctant to change, you know, it's almost recalcitrant to change.

709
00:37:02,680 --> 00:37:07,160
Speaker 6: But in actual effect, China can be quite pliable. So

710
00:37:07,320 --> 00:37:08,920
Speaker 6: as you can see right the way we come out

711
00:37:08,960 --> 00:37:12,320
Speaker 6: of the COVID lockdown in a very dramatic fashion. I

712
00:37:12,400 --> 00:37:15,200
Speaker 6: think the Chinese culture has a sort of a trading mentality.

713
00:37:15,600 --> 00:37:18,680
Speaker 6: So if something doesn't work, it will change. Even if

714
00:37:19,080 --> 00:37:24,080
Speaker 6: some thoughts are very well in changing the system, if needed,

715
00:37:24,200 --> 00:37:25,120
Speaker 6: it can be changed as well.

716
00:37:25,520 --> 00:37:25,640
Speaker 5: Right.

717
00:37:25,680 --> 00:37:28,200
Speaker 6: So that's how we get through the cultural revolution, how

718
00:37:28,239 --> 00:37:30,040
Speaker 6: we gets through the COVID lockdown, how it gets through

719
00:37:30,160 --> 00:37:32,960
Speaker 6: a lot of difficulties in the past, and also we

720
00:37:33,080 --> 00:37:35,920
Speaker 6: got our reform and open and continue to reform.

721
00:37:35,680 --> 00:37:36,879
Speaker 5: And open to this day.

722
00:37:37,280 --> 00:37:39,400
Speaker 6: So I think, you know, that's probably one of the

723
00:37:40,000 --> 00:37:42,640
Speaker 6: misconceptions from the smartest guys in the room. They think that,

724
00:37:42,719 --> 00:37:46,000
Speaker 6: you know, the Chinese century is over, yeah, and there's

725
00:37:46,040 --> 00:37:47,520
Speaker 6: no more opportunities in China.

726
00:37:47,560 --> 00:37:50,319
Speaker 5: It's so untrue, you know, because if you look at.

727
00:37:50,520 --> 00:37:53,680
Speaker 6: How the Chinese TVs and the Chinese solar, the new

728
00:37:53,880 --> 00:37:57,680
Speaker 6: energy industry that rise to the status to enjoy these

729
00:37:57,760 --> 00:38:01,759
Speaker 6: days now less than street years ago, the Chinese car

730
00:38:02,120 --> 00:38:05,759
Speaker 6: industry is still having a trade deficit. Now, I think

731
00:38:05,800 --> 00:38:08,560
Speaker 6: the Chinese car in terms of value added is the

732
00:38:08,920 --> 00:38:12,080
Speaker 6: highest in the world. And also the Chinese evs in

733
00:38:12,239 --> 00:38:15,080
Speaker 6: terms of number, it's actually larger than I think larger

734
00:38:15,080 --> 00:38:18,160
Speaker 6: than toyotanel right now. So that is telling you that

735
00:38:18,480 --> 00:38:22,040
Speaker 6: there's a lot of potential that can be unearthed in

736
00:38:22,120 --> 00:38:24,400
Speaker 6: the Chinese system, so I would say that, you know,

737
00:38:24,480 --> 00:38:26,000
Speaker 6: for people who lost hope in.

738
00:38:26,040 --> 00:38:27,880
Speaker 5: The Chinese marketing. Also the Chinese economy.

739
00:38:28,200 --> 00:38:30,759
Speaker 6: Look at the history in the past forty years, the

740
00:38:30,960 --> 00:38:33,680
Speaker 6: Chinese economy has gone a long way. In the past

741
00:38:33,680 --> 00:38:36,440
Speaker 6: three years, some of the Chinese industries have gone a

742
00:38:36,480 --> 00:38:39,680
Speaker 6: long way, and they're showing you the potential and the

743
00:38:39,800 --> 00:38:43,240
Speaker 6: willingness for China to evolve and make it better tomorrow.

744
00:38:44,120 --> 00:38:46,120
Speaker 4: Okay, So moving on to the fun questions. If you

745
00:38:46,200 --> 00:38:48,319
Speaker 4: were to buy a Chinese EV car, which one would

746
00:38:48,320 --> 00:38:48,480
Speaker 4: it be?

747
00:38:48,760 --> 00:38:52,840
Speaker 2: Wow, don't say Tesla please.

748
00:38:54,360 --> 00:38:57,000
Speaker 5: It's making Shanghai. It's making in Shanghai. Test Lia is

749
00:38:57,040 --> 00:38:58,760
Speaker 5: making Shanghai vs only.

750
00:38:58,640 --> 00:39:01,520
Speaker 4: Four thy five hundred US in China, so it's very cheap.

751
00:39:02,160 --> 00:39:06,120
Speaker 5: Yeah. Actually, these days there's many of the MPVs.

752
00:39:06,320 --> 00:39:08,719
Speaker 6: There is also evs made in China, so they come

753
00:39:08,800 --> 00:39:11,680
Speaker 6: with you know, massagere the B and O sound system

754
00:39:12,160 --> 00:39:16,400
Speaker 6: and also the in car, a huge cinematic display, off

755
00:39:16,480 --> 00:39:19,879
Speaker 6: screen stuff like that, and I think it was very impressive.

756
00:39:20,400 --> 00:39:21,680
Speaker 5: So there are many many choices.

757
00:39:21,840 --> 00:39:24,520
Speaker 6: I mean, I don't want to be appearing endorsing a

758
00:39:24,600 --> 00:39:28,640
Speaker 6: particular plan, but I've written so many Chinese TVs that

759
00:39:28,760 --> 00:39:31,240
Speaker 6: I'm very impressed by the interior design.

760
00:39:31,480 --> 00:39:32,840
Speaker 4: All right, you're going to pick a car based on

761
00:39:32,960 --> 00:39:36,880
Speaker 4: interior design? Favorite color white white. Yes, we noticed that

762
00:39:36,960 --> 00:39:39,520
Speaker 4: whenever you appear on TV you always wear a red tie.

763
00:39:40,040 --> 00:39:45,239
Speaker 6: Yes, why because yes, for good luck. Red is an

764
00:39:45,320 --> 00:39:48,279
Speaker 6: auspicious color in the Chinese s culture. So in the

765
00:39:48,360 --> 00:39:50,239
Speaker 6: Chinese New Year, you know, you hang out this red

766
00:39:50,280 --> 00:39:52,799
Speaker 6: color stuff, You hang out red packets to your kids,

767
00:39:53,080 --> 00:39:55,319
Speaker 6: and you send out red envelopes to your mom's as

768
00:39:55,400 --> 00:39:59,160
Speaker 6: well as in red is auspicious in the Chinese salt market.

769
00:39:59,400 --> 00:40:03,160
Speaker 6: It's the sim for rising stock price. So I always

770
00:40:03,239 --> 00:40:04,279
Speaker 6: choose to wear a red tie.

771
00:40:04,360 --> 00:40:06,560
Speaker 3: That's a good point. People don't know that red actually

772
00:40:06,680 --> 00:40:09,439
Speaker 3: means up when you look at charts in China. Right, Okay,

773
00:40:09,520 --> 00:40:12,160
Speaker 3: how you said you're not going to endorse any brand,

774
00:40:12,239 --> 00:40:14,760
Speaker 3: but I think you'll make an exception to this next question.

775
00:40:15,239 --> 00:40:21,239
Speaker 3: You mentioned red, right, Yeah, the finest red wine or

776
00:40:22,239 --> 00:40:23,840
Speaker 3: the finest Chinese.

777
00:40:23,520 --> 00:40:28,640
Speaker 6: Liquor malth Thaie, there's no competition, especially the fifty year

778
00:40:28,640 --> 00:40:33,600
Speaker 6: old Maltie, fifty year old male tie, so smooth, so smooth,

779
00:40:34,000 --> 00:40:35,560
Speaker 6: So when you drink you can put a little bit

780
00:40:35,600 --> 00:40:38,359
Speaker 6: of saffron in your wine glasses and then the one

781
00:40:38,400 --> 00:40:43,800
Speaker 6: would change into a deep sort of crimson chocolatey carameulish color.

782
00:40:44,239 --> 00:40:46,319
Speaker 6: Your man, your head, a seep you know it has

783
00:40:46,360 --> 00:40:49,239
Speaker 6: a seffron favor and a fifty year old east that

784
00:40:49,440 --> 00:40:50,640
Speaker 6: is melting in your mouth.

785
00:40:51,000 --> 00:40:52,319
Speaker 5: It's just phenomenal.

786
00:40:52,600 --> 00:40:55,040
Speaker 6: And I think after a very long day, you know,

787
00:40:55,120 --> 00:40:57,359
Speaker 6: you light up a cigar and then you're having one

788
00:40:57,400 --> 00:40:59,320
Speaker 6: of those you make your day complete.

789
00:40:59,560 --> 00:41:03,880
Speaker 5: We've done that. Actually, yes, there we go.

790
00:41:04,480 --> 00:41:07,759
Speaker 4: We'll have to end our podcast with about time next time,

791
00:41:08,280 --> 00:41:11,759
Speaker 4: but thank you so much for joining us. How Tiger Money.

792
00:41:12,040 --> 00:41:12,759
Speaker 4: We've learned a lot.

793
00:41:12,960 --> 00:41:16,200
Speaker 3: I had time, Yeah, and looks like this is just

794
00:41:16,320 --> 00:41:19,080
Speaker 3: episode one of a series with how long. Thank you

795
00:41:19,200 --> 00:41:21,520
Speaker 3: so much for all our listeners. This is Tiger Money,

796
00:41:21,840 --> 00:41:25,040
Speaker 3: a Bloomberg podcast about investing funds in financial markets in

797
00:41:25,120 --> 00:41:27,239
Speaker 3: Asia and beyond. If you like what you hear, please

798
00:41:27,280 --> 00:41:30,040
Speaker 3: do not forget to subscribe, to like, and to share.

799
00:41:30,160 --> 00:41:31,000
Speaker 2: Until next time.

800
00:41:31,080 --> 00:41:34,880
Speaker 3: You can find us inside the Bloomberg terminal or on LinkedIn.

801
00:41:34,960 --> 00:41:37,600
Speaker 3: We look forward to hearing from all of you. This

802
00:41:37,800 --> 00:41:40,160
Speaker 3: podcast was produced by Clara che