WEBVTT - Mainland China Markets Reopen 0:00:02.200 --> 0:00:06.000 This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis, 0:00:06.000 --> 0:00:08.720 along with Doug Krisner join us each day for the 0:00:08.760 --> 0:00:12.160 stories making news and moving markets in the Asia Pacific. 0:00:12.360 --> 0:00:15.560 You can subscribe to the show anywhere you get your podcasts, 0:00:15.720 --> 0:00:18.840 and always on Bloomberg Radio, the Bloomberg Terminal, and The 0:00:18.880 --> 0:00:22.639 Bloomberg Business. James Mager joins us Bloomberg Senior reporter in 0:00:22.760 --> 0:00:26.319 Beijing for the reopening of the China markets and a 0:00:26.360 --> 0:00:29.880 deeper look at the Chinese economy. James, it seems like 0:00:29.920 --> 0:00:32.120 a little bit of a damp squib this morning. The 0:00:32.120 --> 0:00:35.519 CSI three hundred only up about two tenths of one percent. 0:00:35.840 --> 0:00:38.320 One can only imagine there's still a lot of skepticism 0:00:38.400 --> 0:00:41.800 about the durability of the recovery in China and perhaps 0:00:41.880 --> 0:00:45.239 a little disappointment on the PBOC actions on Sunday. 0:00:45.360 --> 0:00:49.640 Your take, I think that's correct. We did see a 0:00:49.640 --> 0:00:52.760 big rebound in consumers spending over the holidays. Lots of 0:00:52.760 --> 0:00:57.080 people were traveling, the largest number of people traveling since 0:00:57.120 --> 0:01:01.279 at least twenty nineteen. So, you know, this is good 0:01:01.400 --> 0:01:05.160 news in that people were concerned, but it's not great 0:01:05.240 --> 0:01:07.600 news that you know, people went home for the holidays. 0:01:07.680 --> 0:01:09.200 You know, that's what you should expect them to do. 0:01:09.600 --> 0:01:12.440 And so the fact that, you know, there was a 0:01:12.480 --> 0:01:13.880 lot of hope that this might mean that there would 0:01:13.880 --> 0:01:15.120 be a recovery in the stock market, but I think 0:01:15.120 --> 0:01:17.320 people are looking through this and looking at the broader 0:01:17.360 --> 0:01:19.320 economic challenges which is not going to be fixed by 0:01:19.720 --> 0:01:23.120 one strong holiday season. And you know, you see, the 0:01:23.600 --> 0:01:26.000 halling market is still in a slump. As you said, 0:01:26.000 --> 0:01:28.920 the PBOC didn't actually do anything over the weekend. We 0:01:29.000 --> 0:01:31.880 may see some action and interest rates tomorrow. With the LPR, 0:01:32.480 --> 0:01:35.800 there is expectation that that will actually be cut, especially 0:01:35.800 --> 0:01:37.600 if you see a cut in the five year LPR, 0:01:37.640 --> 0:01:40.040 that would be that would be beneficial for home loan or 0:01:40.080 --> 0:01:44.480 people wanted to take out new mortgages. But I think, yeah, 0:01:44.520 --> 0:01:48.080 markets have reacted very you weekly so far today to 0:01:48.640 --> 0:01:50.400 this data, and I think that's you. 0:01:50.400 --> 0:01:52.920 Know, James, I think you know what you mentioned about 0:01:52.920 --> 0:01:56.960 the five year LPR, and that's almost in essence part 0:01:56.960 --> 0:01:59.760 of the problem, because even the expectation is going to 0:01:59.760 --> 0:02:01.400 cut five basis. 0:02:01.000 --> 0:02:06.080 Points, right, I mean, yeah, I think nothing, that is nothing, 0:02:06.160 --> 0:02:09.920 and you know, there's still quite high. Real rates are 0:02:10.040 --> 0:02:12.320 very high because China is inflation right now. So even 0:02:12.320 --> 0:02:13.840 if you were to cut rates to zero, people will 0:02:13.880 --> 0:02:18.440 still be paying a positive rate on their on their mortgages. So, 0:02:19.320 --> 0:02:22.919 you know, the expectations for action are very much in 0:02:22.960 --> 0:02:25.080 the government's court, and all the things that we're seeing, 0:02:25.120 --> 0:02:26.760 all the things that've been done so far this year 0:02:27.080 --> 0:02:29.840 and last year have been sort of around the around 0:02:29.880 --> 0:02:32.840 the margins very small, and you know, it's unclear to 0:02:32.880 --> 0:02:36.680 me what exactly would be enough. Can the PBOC, Can 0:02:36.680 --> 0:02:39.000 the government actually do enough to really turn this around 0:02:39.000 --> 0:02:41.720 and to totally change the narrative, But at least so far, 0:02:41.760 --> 0:02:43.880 they haven't done anywhere near enough to as you know, 0:02:43.960 --> 0:02:46.960 to to fix what the unhappiness that stock investor has 0:02:47.040 --> 0:02:47.839 been showing. 0:02:47.919 --> 0:02:50.880 To say nothing of the deflationary pressures that are happening 0:02:50.880 --> 0:02:54.080 across the entire economy. So we were talking a moment 0:02:54.080 --> 0:02:57.480 ago about this uptick and consumer spending during the holiday. 0:02:58.080 --> 0:03:00.440 What do we know about the prices that can consumers 0:03:00.480 --> 0:03:03.800 were paying in this period relative to a year ago. 0:03:05.760 --> 0:03:08.680 I mean, inflation is inflation is negative right now, consumer 0:03:08.680 --> 0:03:14.359 installationia is negative. Business producer prices are very falling a lot, 0:03:14.560 --> 0:03:18.079 and I think the big drivers for that. Food prices 0:03:18.120 --> 0:03:21.440 are down, food demand is weak. You also obviously demand 0:03:21.440 --> 0:03:25.920 for a production for construction goods and these kinds of 0:03:25.919 --> 0:03:28.200 things is also very weak. So people are paying less 0:03:28.200 --> 0:03:30.399 than they were a year ago. So that probably means 0:03:30.400 --> 0:03:33.960 that spending was even greater, like actual people were buying more, 0:03:34.240 --> 0:03:35.920 but they were just paying less for it than they were. 0:03:36.240 --> 0:03:39.360 But you know, this is still not a great situation 0:03:39.400 --> 0:03:39.760 to be in. 0:03:40.440 --> 0:03:44.240 Yeah, that was exactly my next point, which that's a 0:03:44.240 --> 0:03:46.320 little bit of comfort, but really not much in the 0:03:46.400 --> 0:03:50.839 larger scheme of things that units are Probably volume is up, 0:03:50.840 --> 0:03:53.000 but prices still down. 0:03:53.920 --> 0:03:56.560 Correct, I mean, so box office was up for example, 0:03:56.560 --> 0:03:58.840 but again I mean, you know, the last four years 0:03:58.880 --> 0:04:01.520 of being the box officer is shut in twenty twenty, 0:04:01.520 --> 0:04:04.840 so you know, the people wondn't go to the movies 0:04:04.840 --> 0:04:08.000 early in twenty twenty two because everyone had COVID, and 0:04:08.040 --> 0:04:09.960 so to the comparison to say, great, but the box 0:04:09.960 --> 0:04:11.480 office is really good this year. It's the strongest it's 0:04:11.520 --> 0:04:14.000 been in years. Is really really poor comparison, and it's 0:04:14.840 --> 0:04:17.520 not actually strong, it's just strong compared to the very 0:04:17.560 --> 0:04:19.640 lean years we've been having over the last few years, 0:04:19.720 --> 0:04:23.520 especially twenty twenty, twenty twenty, then again and then twenty 0:04:23.560 --> 0:04:26.440 twenty two, twenty tway three was a little the last, 0:04:26.720 --> 0:04:29.360 you know, the one we've just had is better, but 0:04:29.560 --> 0:04:30.719 it's not incredibly strong. 0:04:31.120 --> 0:04:34.000 So if we're trying to improve sentiment. You've talked about 0:04:34.200 --> 0:04:37.520 the interest rate picture. We've also talked about how a 0:04:37.520 --> 0:04:42.360 weak equity market tends to negatively impact investor psychology. We 0:04:42.480 --> 0:04:44.520 talked earlier in the show today about the fact that 0:04:44.520 --> 0:04:47.240 maybe the national team will step in and do more buying, 0:04:47.800 --> 0:04:51.520 particularly of the ETF space. Is there anything that you 0:04:51.560 --> 0:04:54.320 have heard in your travels and reporting on the economy 0:04:54.320 --> 0:04:57.640 and markets in China, anything that you've heard that is 0:04:57.839 --> 0:05:02.200 perhaps a novel policy prescription that perhaps can turn this around. 0:05:03.160 --> 0:05:05.280 It's not a policy prescription per se, but I think 0:05:05.360 --> 0:05:07.800 the interesting thing that I saw over the holidays was 0:05:07.839 --> 0:05:12.320 that secondhand home sales really were quite strong. And you 0:05:12.360 --> 0:05:14.640 saw last year actually the amount of money going to 0:05:14.640 --> 0:05:17.240 the second hand home market was larger than the primary 0:05:17.279 --> 0:05:19.160 the new home market for the first time I think 0:05:19.200 --> 0:05:21.680 on record, And so I think what's happening is that 0:05:21.839 --> 0:05:24.920 people are you know, people are rightly concerned if they 0:05:24.960 --> 0:05:26.840 buy a new home it won't be delivered. They'll pay 0:05:26.839 --> 0:05:28.599 a bunch of money, they'll take it a mortgage, and 0:05:28.640 --> 0:05:31.000 then the company that's meant to give them to sell 0:05:31.000 --> 0:05:33.440 them the home to build the home will go bankrupt 0:05:33.440 --> 0:05:35.520 and they won't get their house. Yeah, but if you 0:05:35.520 --> 0:05:37.720 buy a secondhand home, there's much more demand for that, 0:05:37.839 --> 0:05:39.960 and prices are falling a lot and fall a lot, 0:05:40.080 --> 0:05:41.760 much more of the secondary market than they have with 0:05:41.800 --> 0:05:43.800 the primary markets. That the government is making sure that 0:05:43.880 --> 0:05:46.640 primary prices at fall, So secondary home sales are actually 0:05:46.640 --> 0:05:47.200 doing pretty well. 0:05:47.200 --> 0:05:49.400 Okay, we'll leave it there. Always a pleasure, James, thanks 0:05:49.440 --> 0:05:52.599 for making time for James Meger from our bureau in 0:05:52.640 --> 0:05:54.720 Beijing here on Debreak Casual. 0:06:04.080 --> 0:06:06.360 Well. Joining us now in the studios in Hong Kong 0:06:06.640 --> 0:06:09.800 is Jason Lloyd, who's head of APAC Equity and Derivative 0:06:09.800 --> 0:06:14.440 Strategy at BNP Parrabad. Jason, thanks for coming on into 0:06:14.520 --> 0:06:18.120 our studios here. So we had this holiday news really 0:06:18.120 --> 0:06:20.560 on Friday morning from the state media, and we saw 0:06:20.560 --> 0:06:22.640 a huge bounce in Hong Kong, so we know that 0:06:23.000 --> 0:06:26.080 there's some energy there. But Hong Kong is not exactly 0:06:26.160 --> 0:06:29.440 domestic China. Hangksng index is up two and a half percent. 0:06:29.480 --> 0:06:32.200 When we look at the futures this morning trading in Singapore, 0:06:32.200 --> 0:06:35.279 we don't see a huge bounce at all. Is caution 0:06:35.839 --> 0:06:38.520 going to end up being the byword even for domestic 0:06:38.560 --> 0:06:39.520 trading in China? 0:06:40.080 --> 0:06:42.279 Well, thanks for having me on the show today, Brian. 0:06:42.279 --> 0:06:44.800 As you mentioned earlier, I think over the weekend you 0:06:44.880 --> 0:06:48.560 have seen the PBOC did not change its policy rate, 0:06:48.839 --> 0:06:51.200 and I think some of the capital injection may have 0:06:51.240 --> 0:06:54.000 been a little bit modest compared to market expectations. So 0:06:54.160 --> 0:06:56.760 that's certainly is one side of the story. I think 0:06:56.800 --> 0:06:58.200 the other side of the story is that when you 0:06:58.279 --> 0:07:02.160 look at the travel data, while it's very encouraging on 0:07:02.279 --> 0:07:05.080 a percentage in terms of number of trips, I think 0:07:05.120 --> 0:07:07.400 if you look at it from a glass half empty perspective, 0:07:07.440 --> 0:07:10.520 then some of the poor average number may have been 0:07:10.520 --> 0:07:13.840 a little bit doesn't follow the same kind of magnitude. 0:07:13.960 --> 0:07:16.160 So I can understand that the market will want you to 0:07:16.200 --> 0:07:18.000 look at it from a more negative the lens if 0:07:18.040 --> 0:07:20.560 they choose to. I think at this moment, what is 0:07:20.600 --> 0:07:24.880 more important for us, it's the forward looking policy measures. Yes, 0:07:25.160 --> 0:07:28.000 looking forward, I think the LPR decision tomorrow will be 0:07:28.000 --> 0:07:30.520 an important one, but also I think the market will 0:07:30.520 --> 0:07:33.040 look forward to the so called two Session where the 0:07:33.120 --> 0:07:36.040 National People Congress will meet and they will issue some 0:07:36.080 --> 0:07:38.200 of the growth target. That will give the market a 0:07:38.200 --> 0:07:40.320 little bit more visibility for the rest of the year. 0:07:40.360 --> 0:07:43.200 So, Jason, what's the house view at Benprepa about right 0:07:43.240 --> 0:07:45.080 now on the Chinese equity market? 0:07:45.800 --> 0:07:46.160 Sure? 0:07:46.520 --> 0:07:48.720 Our view is that we maintain a neutral stance on 0:07:48.760 --> 0:07:51.640 the overall equity market. The main reason is because if 0:07:51.640 --> 0:07:53.800 you look at the price action over the past twelve 0:07:53.840 --> 0:07:57.680 to eighteen months, it has been extremely sensitive to policies, 0:07:58.040 --> 0:08:01.360 and so far we haven't had enough policy clarity in 0:08:01.440 --> 0:08:05.400 terms of how much commitment the government wants to really 0:08:05.520 --> 0:08:08.600 stimulate growth. Because I think over the recent months there's 0:08:08.600 --> 0:08:11.600 been a lot of discussion regarding is the government really 0:08:11.640 --> 0:08:14.000 willing to commit to a five percent growth? It is 0:08:14.120 --> 0:08:16.720 likely that we'll see a scenario where the government issue 0:08:16.720 --> 0:08:19.200 an official target of five percent, but then the market 0:08:19.200 --> 0:08:22.080 will question what are the credible policy package that can 0:08:22.120 --> 0:08:23.720 get us there? So I think that is why we 0:08:23.840 --> 0:08:27.360 maintain a neutral stand. That being said, oh sorry, go ahead, no, 0:08:27.360 --> 0:08:30.000 no you go. Sure, that being said, we do see 0:08:30.040 --> 0:08:34.240 a little bit more thematic opportunities. So beyond the index level, 0:08:34.480 --> 0:08:38.600 we start to see things, for example, like buybacks and dividends, 0:08:39.160 --> 0:08:41.800 and even some of the ETF purchases are starting to 0:08:41.920 --> 0:08:44.280 take hold. And this is part of a much longer 0:08:44.320 --> 0:08:47.920 path of capital market structural reform that we think can 0:08:48.000 --> 0:08:50.640 be a lot more interesting over the medium to long term. 0:08:50.920 --> 0:08:53.839 So it seems like investors, on the one hand, might 0:08:53.880 --> 0:08:56.360 be saying they're not happy with policy, and you just 0:08:56.480 --> 0:09:01.439 expressed some concerns about policy making. Is really that some 0:09:01.480 --> 0:09:05.320 of these if looked through the prism of long term planning, 0:09:05.679 --> 0:09:08.200 might be quite sound, but that they're just being rushed 0:09:08.280 --> 0:09:11.000 through too much in the short term and that is 0:09:11.120 --> 0:09:12.320 disrupting markets. 0:09:13.000 --> 0:09:15.680 I think that's a very fair question, because if you 0:09:15.720 --> 0:09:18.000 look back at what happened over the past six weeks, 0:09:18.360 --> 0:09:21.680 feeling much longer because of the price action. But if 0:09:21.720 --> 0:09:25.040 you recall that the narrative starting into twenty twenty four 0:09:25.400 --> 0:09:27.760 is that twenty twenty three was a very challenging year. 0:09:28.280 --> 0:09:31.120 Starting in twenty twenty four, there will be more policy action. 0:09:31.280 --> 0:09:34.520 Hopefully we grow better from a low base. I think 0:09:34.559 --> 0:09:38.280 to start the year there was relatively limited discussion regarding 0:09:38.320 --> 0:09:41.680 the actual policy support and if you recall back in January, 0:09:41.720 --> 0:09:46.640 the PBUC also did not change its interest rate, despite 0:09:46.679 --> 0:09:48.840 the fact that there's been a lot of pre communication 0:09:48.920 --> 0:09:51.080 heading into that event. So I think that really triggered 0:09:51.480 --> 0:09:54.000 the beginning of this kind of downward spiral in sentiment 0:09:54.280 --> 0:09:57.079 and really took the government and some of the stay 0:09:57.080 --> 0:10:00.839 back funds a lot of effort to stay the market 0:10:00.880 --> 0:10:03.360 sentiment heading into the Chinese New Year. So I would say, 0:10:03.440 --> 0:10:06.440 right now we are gradually resetting the expectation, just back 0:10:06.440 --> 0:10:07.320 to the start of the year. 0:10:07.679 --> 0:10:09.960 So if you're moving away, let's forget the indexes for 0:10:10.000 --> 0:10:13.640 a moment. If your tactical on selected names, I'm wondering 0:10:13.679 --> 0:10:16.400 about the hedging strategies that you're using, because I note 0:10:16.920 --> 0:10:19.240 that you're not only the head of the equity side, 0:10:19.240 --> 0:10:22.480 but the derivative side as well. So is it almost 0:10:23.000 --> 0:10:26.080 necessary that you put some type of derivative strategy on 0:10:26.120 --> 0:10:28.600 top of any kind of equity trade if you're playing China. 0:10:29.400 --> 0:10:31.960 Sure, that's a great question. In fact, when we look 0:10:31.960 --> 0:10:35.839 at our client interaction from a derivative standpoint, clients are 0:10:35.920 --> 0:10:39.320 very active when it comes to China related derivative both 0:10:39.320 --> 0:10:41.760 for the domestic market as well as the Hong Kong 0:10:41.800 --> 0:10:44.400 listed market. On the domestic side, I think some of 0:10:44.440 --> 0:10:47.080 your colleagues may have reported in recent weeks that the 0:10:47.120 --> 0:10:50.240 futures were trading at a steep discount compared to its 0:10:50.280 --> 0:10:53.680 fair value, which attracted quite a bit of attention from 0:10:53.760 --> 0:10:56.040 global investor in terms of how do you take advantage 0:10:56.160 --> 0:10:59.000 of some of those mispricing on the Hong Kong side. 0:10:59.040 --> 0:11:01.440 If you look at the options market on each CI, 0:11:01.559 --> 0:11:05.040 for example, you will notice that despite that bearish sentiment 0:11:05.080 --> 0:11:07.840 to start the year, the relative pricing between calls and 0:11:07.840 --> 0:11:10.480 puts are still quite skewed to the other side, meaning 0:11:10.480 --> 0:11:13.200 that investor are willing to spend little bit of premium 0:11:13.360 --> 0:11:17.200 to capture the upside risk without risking the entire principle. 0:11:17.240 --> 0:11:20.439 So I think we feel that investor want to have 0:11:20.520 --> 0:11:23.320 something on on the upside just in case, because one 0:11:23.360 --> 0:11:26.000 of the lessons from twenty twenty three is that despite 0:11:26.120 --> 0:11:29.000 the general downward trend, there has been three or four 0:11:29.160 --> 0:11:32.320 episodes of very concentrated five to ten percent rally and 0:11:32.400 --> 0:11:35.160 so we have seen the derivetic position in reflecting those 0:11:35.240 --> 0:11:36.960 kinds of opportunistic trading. 0:11:37.800 --> 0:11:40.440 Yeah, that's pretty interesting. So the skew a little bit 0:11:40.480 --> 0:11:42.880 to puts on China, but the skew a little bit 0:11:42.880 --> 0:11:45.679 toward calls on Hong Kong. Is that effectively what you said? 0:11:46.360 --> 0:11:48.240 I think that seems to be the case when we 0:11:48.280 --> 0:11:51.320 look at the relative pricing on a volatility on the 0:11:51.400 --> 0:11:53.400 China side. It's more has to do with the fact 0:11:53.440 --> 0:11:56.600 that you have a very big supply demand imbalance on 0:11:56.679 --> 0:11:59.320 the future, especially when it comes to the small micap indicies, 0:11:59.559 --> 0:12:04.440 which created a rather unusual miss pricing opportunities for investor 0:12:04.520 --> 0:12:05.320 to take advantage of. 0:12:05.920 --> 0:12:08.040 One of the things we've been talking about recently has 0:12:08.120 --> 0:12:10.600 been on the part of the national team building larger 0:12:10.640 --> 0:12:15.680 positions in whether it's ETFs or you know, straight vanilla equities. 0:12:15.760 --> 0:12:19.040 Do you think there's a real risk if the national 0:12:19.080 --> 0:12:22.040 team were to take on, you know, additional positions in 0:12:22.120 --> 0:12:23.000 the market. 0:12:23.880 --> 0:12:26.440 Sure. I think that is one of the big questions 0:12:26.480 --> 0:12:28.720 that a lot of investors are asking at the moment 0:12:28.760 --> 0:12:32.360 because historically the so called national team they tend to 0:12:32.480 --> 0:12:35.600 behave in a relatively opaque manner. I think the most 0:12:35.600 --> 0:12:37.960 recent example that was very high profile is back in 0:12:38.000 --> 0:12:42.320 twenty fifteen twenty sixteen, where a group of a national 0:12:42.360 --> 0:12:44.920 team as well as security House group together to try 0:12:44.920 --> 0:12:46.600 to rescue the market, but the result was a little 0:12:46.600 --> 0:12:49.000 bit mixed. I think this time around what is different 0:12:49.080 --> 0:12:51.880 is in terms of the vehicle of choice. Back in 0:12:51.880 --> 0:12:55.240 twenty fifteen twenty sixteen, there was a lot more stockpicking involved, 0:12:55.360 --> 0:12:57.760 whereas this time around it seems that they are focusing 0:12:57.800 --> 0:13:00.760 on ETF. So perhaps their learning some of their experience 0:13:00.760 --> 0:13:03.160 from other central banks over the recent years in terms 0:13:03.200 --> 0:13:05.920 of how to stabilize the market. And I will note 0:13:05.920 --> 0:13:09.480 that the Central Waging which is the unit that purchased 0:13:09.520 --> 0:13:12.600 those fund publicly, actually made two announcements over the past 0:13:12.640 --> 0:13:15.640 six months. So back in October twenty third they simply 0:13:15.679 --> 0:13:18.320 mentioned that we have been starting to buy ETF, but 0:13:18.440 --> 0:13:21.800 they issue another statement on February six which had three 0:13:21.840 --> 0:13:24.160 key points. They say they will expand the scope of 0:13:24.240 --> 0:13:27.800 the underlier, they will intensify the buying, and they will 0:13:27.840 --> 0:13:30.640 also continue to stabilize the market. So this seems to 0:13:30.640 --> 0:13:33.840 suggest that they have now evolving their mandate compared to 0:13:33.840 --> 0:13:37.240 a few months ago. And I think the challenge to 0:13:37.480 --> 0:13:39.640 gauge that is that, unlike some of the other central 0:13:39.640 --> 0:13:42.520 banks where they actually have daily or weekly disclosure, the 0:13:42.720 --> 0:13:45.960 buying from the Central waging or some of the related parties. 0:13:46.000 --> 0:13:48.760 You can only see from the etfun flow perspective, and 0:13:48.800 --> 0:13:51.240 you can only infer what they are doing, and so 0:13:51.280 --> 0:13:52.960 I think that is the difference. 0:13:53.040 --> 0:13:55.760 Jason. We've always tried to read policy in China, but 0:13:55.840 --> 0:13:58.679 that was more from the standpoint of where the government 0:13:58.760 --> 0:14:03.599 was deploying capital. Now it's almost like it's policy considerations. 0:14:03.800 --> 0:14:05.720 You know, who do they like and who don't they like. 0:14:06.040 --> 0:14:09.160 Maybe that's a little kind of crude, but when you 0:14:09.200 --> 0:14:12.080 see what happened with Ali Baba and ten said, who 0:14:12.080 --> 0:14:13.679 are some of the new players that may be in 0:14:13.760 --> 0:14:15.720 favor of policymakers. 0:14:16.400 --> 0:14:18.720 I think that is indeed one of the challenges when 0:14:18.720 --> 0:14:21.080 they look at Chinese equity market. I understand that. I 0:14:21.080 --> 0:14:22.760 think a lot of the media have pointed out the 0:14:22.760 --> 0:14:24.920 fact that the Hong Kong China market is down forty 0:14:24.960 --> 0:14:27.440 fifty percent from this recent peak. A big part of 0:14:27.480 --> 0:14:30.640 that is due to these crackdown in select industry. So 0:14:30.680 --> 0:14:32.360 if we look into twenty twenty four, one of the 0:14:32.360 --> 0:14:35.560 new phrases, I think Bloomberg also reported that is so 0:14:35.600 --> 0:14:38.560 called high quality growth. Now there's no official definition of 0:14:38.600 --> 0:14:42.080 high quality growth, but our interpretation that it involves in 0:14:42.040 --> 0:14:46.320 the high tech supply chain self sustainability type of investments. 0:14:46.320 --> 0:14:47.760 So in that sense, I think a lot of the 0:14:48.240 --> 0:14:50.640 renewable energy supply chain, a lot of the so called 0:14:50.680 --> 0:14:54.840 high tech capital equipment, they will continue to benefit. And 0:14:54.880 --> 0:14:56.760 I think that is one of our investment fsis is 0:14:56.760 --> 0:15:00.600 that while the overall economy may remain under pressure, you 0:15:00.680 --> 0:15:03.360 have the subset of what we call upstream and midstream 0:15:03.360 --> 0:15:07.320 industry that will likely benefit from these kind of government policy. 0:15:07.720 --> 0:15:08.640 That's great stuff. 0:15:08.680 --> 0:15:11.040 Really thanks a lot, Jason for coming into our studios. 0:15:11.080 --> 0:15:14.320 We appreciate it. On early Monday morning, Jason Ley, head 0:15:14.320 --> 0:15:26.320 of APAC Equity and Derivative Strategy at BNP Parabot. Joining 0:15:26.400 --> 0:15:29.920 us is our colleague Paul Dobson Bloolberg, Executive editor for 0:15:30.160 --> 0:15:33.680 Asian Markets. So a lot of attention on China today, 0:15:34.000 --> 0:15:38.040 at least a day or two to shine in the sun. 0:15:38.080 --> 0:15:42.720 I suppose it's like this. I mean, the China spending 0:15:42.760 --> 0:15:46.160 up from pre pandemic levels gets your attention, but so 0:15:46.240 --> 0:15:49.560 does the slow down in FDI and all the other 0:15:49.680 --> 0:15:53.280 ills of the economy. And we're not seeing other markets 0:15:53.320 --> 0:15:55.320 really all that buoyant this morning. How do you read 0:15:55.320 --> 0:15:56.400 the mood at the moment. 0:15:56.200 --> 0:15:59.560 Paul, Yeah, I would say that the mood is the 0:15:59.720 --> 0:16:04.720 main markets reopen, should be cautiously optimistic. Perhaps we had 0:16:04.720 --> 0:16:08.080 a better week last week in the offshore markets, the 0:16:08.120 --> 0:16:10.960 ADRs in the US and the Hong Kong gages as well, 0:16:11.560 --> 0:16:15.080 which boats well. And I think that the economic data, 0:16:15.480 --> 0:16:18.040 the real time economic data that we have on spending 0:16:18.080 --> 0:16:23.200 and travel seems relatively benign and positive. Ah And that 0:16:23.400 --> 0:16:26.640 really is the thing that it's needed more than anything 0:16:26.640 --> 0:16:29.720 else to turn around the economy right now, a recovery 0:16:29.840 --> 0:16:35.000 or a rebuilding of consumer confidence. Now, this is a 0:16:35.080 --> 0:16:37.920 very small step, and you know, it may have been 0:16:37.920 --> 0:16:40.760 a particularly good reason a particularly good year for many 0:16:40.760 --> 0:16:43.960 other reasons as well, but nonetheless it does give some hope, 0:16:44.040 --> 0:16:46.080 and so you would expect that there would be some 0:16:46.680 --> 0:16:49.160 pretty good gains at the start. But let's see how 0:16:49.240 --> 0:16:50.960 much follow through we get through the rest of the 0:16:50.960 --> 0:16:54.280 week once that sort of initial philip is done and dusted. 0:16:54.160 --> 0:16:56.600 And if there is follow through, whether it's lasting. You know, 0:16:56.680 --> 0:16:58.200 going into the weekend, there was a little bit of 0:16:58.240 --> 0:17:01.600 speculation that perhaps I realized that this was not the 0:17:01.640 --> 0:17:06.880 mainstream bet, that maybe the PBOC would tweak its key 0:17:07.000 --> 0:17:11.800 policy rate as a way of incentivizing people maybe to 0:17:12.280 --> 0:17:14.840 take on a little bit more risk. That didn't happen. 0:17:15.080 --> 0:17:17.960 The one year policy loan rate was held at two 0:17:17.960 --> 0:17:20.399 and a half percent. But what we're learning now is 0:17:20.440 --> 0:17:23.560 that maybe the big banks in China will cut rates 0:17:23.600 --> 0:17:25.200 in the coming week. Do you think that's likely. 0:17:26.560 --> 0:17:29.080 It seems like it's a possibility. It was certainly mentioned 0:17:29.119 --> 0:17:32.400 in the local media the official media today is being 0:17:32.720 --> 0:17:36.680 a potential thing that we will see happen. They created 0:17:36.720 --> 0:17:39.520 some space recently with chripple R cuts to open a 0:17:39.520 --> 0:17:43.240 little bit of room for banks to lower those rates further. 0:17:44.000 --> 0:17:45.879 So that's in the cars. I think on both of 0:17:45.920 --> 0:17:51.560 these measures or metrics, what's quite important is that limited 0:17:51.640 --> 0:17:55.800 room that there is in which the authorities have to 0:17:55.880 --> 0:18:00.639 operate with the loan prime rate in the bank rates. 0:18:00.880 --> 0:18:03.360 You know, bank margins are already under quite a lot 0:18:03.359 --> 0:18:05.680 of pressure, so there's only so far and so much 0:18:05.720 --> 0:18:08.320 that they can do with the MLF that we had 0:18:08.359 --> 0:18:11.840 at the weekend. The concern is that they would trigger 0:18:11.880 --> 0:18:14.560 more currency weakness or more capital outflows, and that's something 0:18:14.600 --> 0:18:17.120 that they also want to avoid. So in both cases, 0:18:17.160 --> 0:18:20.159 the space is reasonably tight and there needs to be 0:18:20.400 --> 0:18:23.520 a strong case or a compelling reason to do more. 0:18:23.600 --> 0:18:25.359 We just did have that chip all our cut and 0:18:25.359 --> 0:18:27.400 that's supposed to be helping, and so I guess they'll 0:18:27.400 --> 0:18:29.160 want to watch and see how that feeds through into 0:18:29.200 --> 0:18:30.440 the economy before. 0:18:30.280 --> 0:18:33.360 Well, and the apparent pickup, the apparent pickup in spending 0:18:33.680 --> 0:18:37.240 indicates things are working even without a cut in interest rate. 0:18:37.359 --> 0:18:41.640 So I suppose one could read some caution is okay there, 0:18:41.920 --> 0:18:44.199 and what we're talking about with the stock market gains 0:18:44.200 --> 0:18:47.600 today would be mostly domestic. I would think foreign investors 0:18:47.640 --> 0:18:52.280 remain pretty jaded about China, although you do see pockets 0:18:52.280 --> 0:18:55.600 of interest. I'm kind of curious about whether or not 0:18:56.640 --> 0:19:01.600 there's a way to read this that perps because Japan, 0:19:02.200 --> 0:19:04.239 you know, has seen such gains and the US has 0:19:04.240 --> 0:19:07.320 seen such gains that maybe just maybe a little bit 0:19:07.320 --> 0:19:08.919 of foreign money might take a. 0:19:08.960 --> 0:19:14.880 Punt as possible. But the overwhelming sort of mood from 0:19:14.920 --> 0:19:18.360 the international community is that there are those better opportunities elsewhere. Right, 0:19:18.400 --> 0:19:21.000 like you said, Japan looks great, India looks great, the US. 0:19:21.160 --> 0:19:23.280 Why would you put your money anywhere else right now 0:19:23.320 --> 0:19:26.000 when the technocs are going so crazy unless you're looking 0:19:26.040 --> 0:19:29.160 at the relative valuations, So it might be the sort 0:19:29.160 --> 0:19:32.760 of longer term investors that are keener in some ways, 0:19:32.800 --> 0:19:35.760 and yet with so much policy uncertainty still there and 0:19:35.880 --> 0:19:40.159 the growth outlook looking you know, still longer term, pretty 0:19:41.920 --> 0:19:47.720 modest by recent standards, and that disinflationary impulse still hanging 0:19:47.720 --> 0:19:50.320 over the market as well, there are reasons why international 0:19:50.359 --> 0:19:52.639 investors are concerned. And that's what we've seen in the 0:19:52.760 --> 0:19:57.040 FDI numbers are the the you know, kind of spending 0:19:57.160 --> 0:20:02.480 by businesses basically into the economy shrunk continually for several 0:20:02.520 --> 0:20:04.520 years now, the lowest in thirty years, and I think 0:20:04.560 --> 0:20:06.679 that's more of a sign of kind of you know, 0:20:06.720 --> 0:20:10.600 the US general retrenchment from China's markets in general, sort 0:20:10.640 --> 0:20:13.720 of stay away mentality. So yes, of course there'll be 0:20:13.760 --> 0:20:16.120 some suspecative deflows that would like to try and jump 0:20:16.160 --> 0:20:18.440 on any big moves that we see, but like you said, 0:20:18.480 --> 0:20:21.760 I think the domestic investor is the key player here 0:20:21.800 --> 0:20:22.280 at the moment. 0:20:22.520 --> 0:20:24.639