Speaker 1: Let's bringing our guest and it's and it who's head
Speaker 1: of fixed income research at UBP. So we've we had
Speaker 1: an improvement from the June lows too, about four or
Speaker 1: five days ago. In corporate credit in the United States,
Speaker 1: we had spreads coming in. Seemed like a pretty good environment.
Speaker 1: The one problem with corporate credit in Asia, I would
Speaker 1: think lots of issues, but the strong dollar. How much
Speaker 1: is the strong dollar leading to outflows in UH in
Speaker 1: corporate credit in Asia? Well, basically we've been seeing outfloats
Speaker 1: throughout the year on the emerging market side, including Asia,
Speaker 1: and that's actually it's one of the factors been affecting
Speaker 1: the credit spreads here in Asia. Corporate credit. UM, we've
Speaker 1: been actually seeing moderate to float so far for the
Speaker 1: lost UM a few weeks to about like a month,
Speaker 1: and give a strong dollar, it's going to continue. We
Speaker 1: reckoned that, um, the outfloats would may pick up again. However,
Speaker 1: I think, you know, substantially some of the outdoors has
Speaker 1: been sort of you know, being taken away UM during
Speaker 1: the year, So I would say, um, the movement at
Speaker 1: the moment could be more moderated than before. And that
Speaker 1: definitely you know, UM, you've substantially higher in terms of
Speaker 1: dollar here, it could as an impact, but I think
Speaker 1: it should be sort of moderated going forward. Where's the
Speaker 1: best opportunity that you see right now in Asian corporate credit? Okay? Um,
Speaker 1: given we are still in a writing rate environment, so
Speaker 1: we need to be cautious and defensive in Asia credit.
Speaker 1: So what we are trying to do will we will
Speaker 1: look at high grade names and also focus on the quality.
Speaker 1: The main reason that we go for high grades because
Speaker 1: in writing rate environment, higher credits generally will be more
Speaker 1: affected because some of the issues that would we could
Speaker 1: balance it and they are with higher leverage, so their
Speaker 1: credit spread wordwide don't now because people worry about their earnings. Um.
Speaker 1: At the same time, we'll keep our duration short because
Speaker 1: now we've got an inverted your curve, isn't it like
Speaker 1: the two years is actually higher than ten years and
Speaker 1: people just don't got compensated by taking rids on the
Speaker 1: ten year side. So we we stress the importance of
Speaker 1: short duration. In the corporate credit side. We definitely prefer
Speaker 1: quality names in the corporate perpetual bonds simply because the
Speaker 1: credit differential between senior and corporate perpetual has wide enough,
Speaker 1: which um, we look it looks attractive at the moment. However,
Speaker 1: we will focus on short core dates and also with
Speaker 1: high coupon reset. We're not particularly a big fan of
Speaker 1: fixedful life at the moment, so we prefer the high
Speaker 1: coupon reset in which the issue would have a better
Speaker 1: chance of calling the paper if they need to during
Speaker 1: the core days. So the other things we like. Yeah,
Speaker 1: this is mostly for institutional investors. Retail investors sometimes a
Speaker 1: little bit cut off from access to corporate credit like this.
Speaker 1: Are there e t f s for instance throughout Asia
Speaker 1: that give that access at the moment, they can also
Speaker 1: look at some of the e t F But I
Speaker 1: would say even for individual investor, they do will be
Speaker 1: able to look at some of the corporate credits because
Speaker 1: some of them are actually available in the market. But
Speaker 1: of course, you know, people get minimum something like that. Yeah,
Speaker 1: but of course they can also look at some of
Speaker 1: the gt F funds definitely, Yeah, that's also available and
Speaker 1: also provide them with some sort of diversification as well.
Speaker 1: When we look at what happened yesterday with the cut
Speaker 1: to the LPR from the banks, I mean that was
Speaker 1: very much reflected in the equity market, but perhaps not
Speaker 1: as much in the bond market. Tell us, I guess
Speaker 1: your concerns here about the China property space. Okay, Basically,
Speaker 1: I think at the moment people are still you know,
Speaker 1: need time to restore their confidence in the property market
Speaker 1: because what they are PHAs and would be have been
Speaker 1: you know, various headlines. Some sort of defaultebrates has been
Speaker 1: increasing as well, and people do worry about the restructuring
Speaker 1: process for some of the defaulted issuer. So I think
Speaker 1: at the moment, people still need to see some of
Speaker 1: the measures that the come that come you know, come
Speaker 1: up by the government, whether it would be effective like
Speaker 1: for example, recently, as you mentioned, you know, cutaining of
Speaker 1: all those raids and at the same time they try
Speaker 1: to make sure that some of the presold project could
Speaker 1: be delivered to home by Yes. So I think, you know,
Speaker 1: all these measures are positive, but at the same time,
Speaker 1: people need to monitor closely. I think people need to watch,
Speaker 1: you know, how the restructuring um would be for somewhat
Speaker 1: default to issue us. So I think that would be
Speaker 1: something that people would monitor closely. In looking at you know,
Speaker 1: the big macro picture, we are in a phase coming
Speaker 1: up of quantitative tightening after a long period of quantitative
Speaker 1: easing UM setting aside China, of course, but for the
Speaker 1: most part that that's the case. So well, QT, I mean,
Speaker 1: if QUI pushed people into risky assets, will QT push
Speaker 1: them into a lot safer assets? And what might that be?
Speaker 1: I mean, would it likely be quality stocks or or
Speaker 1: investment grade credit? What? What do you think people would
Speaker 1: be looking at? Cash? Yeah, okay, cash is an alternative,
Speaker 1: But at the same time, people do need to invest
Speaker 1: right because the inflation is also high. It's also coming up.
Speaker 1: So what people should look at would be UM on
Speaker 1: a defensive strategy, go for high grade you know, park
Speaker 1: their money to the short end, and if the market
Speaker 1: turn around then they can always liquidate you know, short
Speaker 1: end uh bonds very easily, and you know, like go
Speaker 1: into something risky. But at the moment, we emphasize on
Speaker 1: the fact that be defensive, go for high grade short data.
Speaker 1: You're saying this rising recession risk, we're looking ahead to
Speaker 1: Jackson Hole. What are you expecting there in terms of
Speaker 1: I guess more of a hawkish statement. Well, okay, at
Speaker 1: this stage, I think you know anything that they talk
Speaker 1: about any indications about inflation, writs of recession. I think
Speaker 1: that would be you know, a very good indicator to
Speaker 1: the investor. Um our house wheel. Basically it's reckoned that
Speaker 1: the reception riceless rising you know in the d M market.
Speaker 1: At the same time, inflation may not peat yet. So
Speaker 1: I think all these will definitely you know, affect the
Speaker 1: sentiment as well as risk appetite from the investor. Okay,
Speaker 1: big question just overall again, you know, we always have
Speaker 1: this nervousness before a FED meeting or in this case
Speaker 1: Jackson hole, does it clear next week after this is done? Well,
Speaker 1: really depending on what you know, fact is going to deliver.
Speaker 1: If they're delivering something that is expected, I guess the
Speaker 1: market would be able to sort of stabilize a bit.
Speaker 1: But if they delivered something that's you know, unexpected or
Speaker 1: being too hockey ish, I think the market you know,
Speaker 1: could um you know, have a different strategy going forward.
Speaker 1: And it's a great heavie with us. Thank you for
Speaker 1: coming into our Hong Kong studio and it's as hip
Speaker 1: as head of Fixed Income Research Asia at UVP with
Speaker 1: us in Hong Kong,