WEBVTT - Pooja Malik on the Markets (Audio)

0:00:00.080 --> 0:00:04.480
<v Speaker 1>Our guest is Puja Maleek, partner at Nippon Capital. Put

0:00:04.519 --> 0:00:07.200
<v Speaker 1>you by my account, depending on what you look at.

0:00:07.600 --> 0:00:11.520
<v Speaker 1>We've had six two percent rallies in a day this year,

0:00:12.039 --> 0:00:14.520
<v Speaker 1>and we're still in the midst of a bear market.

0:00:14.560 --> 0:00:17.840
<v Speaker 1>We're down about twenty three odd percent or so if

0:00:17.880 --> 0:00:21.440
<v Speaker 1>you look at major benchmarks. But the thing is that

0:00:21.520 --> 0:00:24.360
<v Speaker 1>one of these days, one of these will find some traction.

0:00:25.160 --> 0:00:27.560
<v Speaker 1>My guesses were not here yet, But what's your what's

0:00:27.560 --> 0:00:31.960
<v Speaker 1>your analysis? Hi, good morning, and thank you for having me.

0:00:32.159 --> 0:00:34.879
<v Speaker 1>I agree with you. I think these are bear market rallies.

0:00:35.240 --> 0:00:38.280
<v Speaker 1>The first set of rallies were definitely driven by shot covering,

0:00:38.760 --> 0:00:40.680
<v Speaker 1>and you saw it a lot of that globally as

0:00:40.680 --> 0:00:44.760
<v Speaker 1>well as in Asia. This current rally that you're seeing

0:00:44.800 --> 0:00:49.599
<v Speaker 1>in China since late yesterday and possibly today is being

0:00:49.680 --> 0:00:53.560
<v Speaker 1>driven by the government announcing measures to support the market,

0:00:53.680 --> 0:00:57.080
<v Speaker 1>either directly auto mutual funds and changes in policies and

0:00:57.160 --> 0:01:01.080
<v Speaker 1>encouraging companies to do buy backs, et cetera. I think

0:01:01.080 --> 0:01:04.200
<v Speaker 1>that these rallies are more likely shot lived because eventually

0:01:04.200 --> 0:01:07.560
<v Speaker 1>the market will look through to earnings before they can

0:01:07.600 --> 0:01:10.160
<v Speaker 1>be a sustained Rather, I was gonna say, I mean

0:01:10.200 --> 0:01:11.959
<v Speaker 1>obviously we're going to look at earnings as well. But

0:01:12.040 --> 0:01:14.440
<v Speaker 1>with regards to some of the support that we are

0:01:14.600 --> 0:01:17.080
<v Speaker 1>expecting to see from authorities, because people were a little

0:01:17.160 --> 0:01:20.840
<v Speaker 1>disappointed from the Congress, what further supporter are you expecting it?

0:01:20.920 --> 0:01:22.600
<v Speaker 1>And I guess what kind of moves can we see

0:01:22.640 --> 0:01:25.440
<v Speaker 1>in China's economy given we're all a little bit on

0:01:25.480 --> 0:01:29.720
<v Speaker 1>tenter hooks that the third quarter GDP was delayed, right

0:01:29.760 --> 0:01:32.640
<v Speaker 1>and you know, the academic research shows that when companies

0:01:32.720 --> 0:01:36.200
<v Speaker 1>delayed reporting is generally a bad sign they have bad

0:01:36.240 --> 0:01:38.920
<v Speaker 1>news to report, and the same probably transfers over to

0:01:39.040 --> 0:01:43.480
<v Speaker 1>governments as well. But coming back to your question, what

0:01:43.600 --> 0:01:45.800
<v Speaker 1>signs can we expect to see from the government, I

0:01:45.880 --> 0:01:48.400
<v Speaker 1>think we could see more direct buying by the national

0:01:48.480 --> 0:01:51.960
<v Speaker 1>team itself, but more likely, I think we're likely to

0:01:52.080 --> 0:01:57.040
<v Speaker 1>see continued stimulus helping the property market, helping chip companies,

0:01:57.280 --> 0:02:04.520
<v Speaker 1>helping green economy, but also sectors like pharma that will

0:02:04.680 --> 0:02:08.320
<v Speaker 1>enable this common prosperity dream to come through. So I

0:02:08.320 --> 0:02:11.280
<v Speaker 1>think we's a sustained set of measures, but unfortunately for

0:02:11.320 --> 0:02:12.880
<v Speaker 1>the market, I don't think it's all going to come

0:02:12.880 --> 0:02:17.280
<v Speaker 1>as a big package on one day. Your analysis of

0:02:17.760 --> 0:02:20.760
<v Speaker 1>President she's speech. You know, there was obviously a lot

0:02:20.880 --> 0:02:24.600
<v Speaker 1>in there that could be deemed as somewhat negative for markets,

0:02:24.639 --> 0:02:27.359
<v Speaker 1>So there was some that could be seen as positive.

0:02:27.440 --> 0:02:30.480
<v Speaker 1>But net net, in terms of policy, is policy going

0:02:30.520 --> 0:02:34.600
<v Speaker 1>to be our friend going forward or our enemy. It's

0:02:34.600 --> 0:02:37.600
<v Speaker 1>going to depend on which sector you're investing in. So

0:02:38.120 --> 0:02:41.480
<v Speaker 1>I think the megacap text dooks. There's still a ton

0:02:41.560 --> 0:02:45.919
<v Speaker 1>of policy uncertainty. Even though she very clearly said that

0:02:46.080 --> 0:02:49.160
<v Speaker 1>innovation from technology is going to drive growth, it's not

0:02:49.240 --> 0:02:52.880
<v Speaker 1>necessarily clear that it's going to come from the megacap stocks.

0:02:53.240 --> 0:02:56.160
<v Speaker 1>It's more likely going to come from the very hardware

0:02:56.160 --> 0:02:59.240
<v Speaker 1>software intense midcaps that the government is going to support,

0:02:59.280 --> 0:03:02.680
<v Speaker 1>as opposed to ten cent Ali Baba bay Do, where

0:03:02.720 --> 0:03:06.360
<v Speaker 1>the government is still wide about consolidation of power. On

0:03:06.400 --> 0:03:08.400
<v Speaker 1>the other hand, there will be sectors that the government

0:03:08.400 --> 0:03:11.040
<v Speaker 1>will support. Um. You know, we talked about that right,

0:03:11.320 --> 0:03:14.680
<v Speaker 1>renewables being one, for my being another, and I think

0:03:14.680 --> 0:03:18.000
<v Speaker 1>eventually property as well. We'll get government support, maybe not

0:03:18.160 --> 0:03:20.600
<v Speaker 1>right now, but over the next six or twelve months.

0:03:20.880 --> 0:03:24.040
<v Speaker 1>So as we've seen with this Bloomberg economic projections, the

0:03:24.160 --> 0:03:27.280
<v Speaker 1>chance of a US recession next year, but as Brian

0:03:27.320 --> 0:03:30.560
<v Speaker 1>alluded to Bank of America as Brian moynihan says, consumer

0:03:30.639 --> 0:03:34.320
<v Speaker 1>showing little weakness. Is the consumer enough to kind of

0:03:34.360 --> 0:03:39.840
<v Speaker 1>buffer a very strong economic downturn? Juliet, I think the

0:03:39.880 --> 0:03:42.200
<v Speaker 1>fact that the U. S. Consumer is still strong is

0:03:42.280 --> 0:03:44.640
<v Speaker 1>just a sign that that shoe hasn't dropped us yet.

0:03:45.280 --> 0:03:47.280
<v Speaker 1>I think this is more of a timing thing because

0:03:47.320 --> 0:03:51.360
<v Speaker 1>given where inflation is, you know, still close to at

0:03:51.400 --> 0:03:55.160
<v Speaker 1>some point we will likely see calculation from the U. S.

0:03:55.200 --> 0:03:58.160
<v Speaker 1>Consumer um and you see this in markets as well.

0:03:58.240 --> 0:04:01.400
<v Speaker 1>Right Emerging markets are down almost for from their peak

0:04:01.440 --> 0:04:04.920
<v Speaker 1>in February one, but the world and the US is

0:04:04.960 --> 0:04:08.600
<v Speaker 1>down only six over that time period. Definitely, the strength

0:04:08.640 --> 0:04:11.360
<v Speaker 1>of the consumer has helped, but I don't think we

0:04:11.400 --> 0:04:14.520
<v Speaker 1>can count on that continuing over the next twelve months.

0:04:15.400 --> 0:04:18.360
<v Speaker 1>Can you make the case that inflation has already turned

0:04:18.480 --> 0:04:21.880
<v Speaker 1>but because of the lag defect, particularly of owner's equivalent rent,

0:04:22.320 --> 0:04:25.159
<v Speaker 1>which is not really rents paid by people, but it's

0:04:25.200 --> 0:04:28.760
<v Speaker 1>more like looking at property prices, and they have come down.

0:04:28.800 --> 0:04:32.320
<v Speaker 1>We already know that. Can we assume that you know

0:04:32.400 --> 0:04:35.640
<v Speaker 1>that somewhere in the next little period you're going to

0:04:35.760 --> 0:04:39.800
<v Speaker 1>see a big downturn in inflation. Uh, and you might

0:04:39.839 --> 0:04:41.240
<v Speaker 1>as well try to get out in front of it.

0:04:42.880 --> 0:04:45.240
<v Speaker 1>I doubt that because in the US inflation is being

0:04:45.320 --> 0:04:49.440
<v Speaker 1>driven by oil prices energy and by food inflation, and

0:04:49.480 --> 0:04:52.400
<v Speaker 1>both of those issues still persist. Brian oil is still

0:04:52.440 --> 0:04:55.080
<v Speaker 1>at ninety dollars. You saw pack announced the cunt recently,

0:04:55.480 --> 0:04:58.680
<v Speaker 1>and the agricultural supply chain is still very constrained. So

0:04:58.880 --> 0:05:02.440
<v Speaker 1>unless we don't see those two issues resolving, I don't

0:05:02.440 --> 0:05:06.239
<v Speaker 1>see how inflation comes down. I wanted to get your thoughts.

0:05:06.240 --> 0:05:08.479
<v Speaker 1>You've touched on emerging markets there, but where you're seeing

0:05:08.480 --> 0:05:11.760
<v Speaker 1>significant opportunities for out performance. I know in the notes

0:05:11.839 --> 0:05:14.400
<v Speaker 1>you've you've given us you've touched on Korea and Brazil.

0:05:14.480 --> 0:05:17.840
<v Speaker 1>What are you saying? I think the real story in

0:05:17.880 --> 0:05:21.360
<v Speaker 1>emerging markets is the dispersion. So Korea is down forty five,

0:05:21.880 --> 0:05:25.479
<v Speaker 1>and Korea is really a high data play geared to

0:05:25.520 --> 0:05:28.480
<v Speaker 1>the global economy, and so today you're seeing, for example,

0:05:28.520 --> 0:05:31.640
<v Speaker 1>the castag bounce back up two percent, just in line

0:05:31.680 --> 0:05:34.680
<v Speaker 1>with the US, and so Korea is just a high

0:05:34.760 --> 0:05:38.599
<v Speaker 1>beta recovery play. I think it's still early to buy Korea.

0:05:39.160 --> 0:05:41.120
<v Speaker 1>I would wait to see more signs of a global

0:05:41.160 --> 0:05:43.919
<v Speaker 1>recovery before getting into Korea. But coming back to the

0:05:43.960 --> 0:05:48.320
<v Speaker 1>real point and dispersion. While Korea is down, for Indonesia

0:05:48.520 --> 0:05:52.080
<v Speaker 1>is down only four percent, and Brazil is up. And

0:05:52.120 --> 0:05:55.960
<v Speaker 1>a lot of this performance differential is based on differences

0:05:56.000 --> 0:06:00.279
<v Speaker 1>in expected EPs growth. So the way we're seeing opportunity

0:06:00.120 --> 0:06:04.760
<v Speaker 1>is in stocks that are domestically oriented in resilience sectors,

0:06:05.120 --> 0:06:09.919
<v Speaker 1>quasi monopoly situations, and structural growth. So a good example is,

0:06:10.040 --> 0:06:11.719
<v Speaker 1>you know a stock we've wanted for a long time

0:06:12.240 --> 0:06:15.240
<v Speaker 1>called Al Hamadi Holding, which is a hospital operator in

0:06:15.279 --> 0:06:19.040
<v Speaker 1>Saudi Arabia benefiting from COVID recovery as people are coming

0:06:19.080 --> 0:06:22.280
<v Speaker 1>back to the hospital for elective procedures, and so very

0:06:22.320 --> 0:06:28.640
<v Speaker 1>domestically oriented stock, resilience sector, healthcare, quasi monopoly and structural growth.

0:06:28.680 --> 0:06:31.080
<v Speaker 1>So that stock, for example, is up fifty year to

0:06:31.200 --> 0:06:35.240
<v Speaker 1>date Juliet And that dispersion is the opportunity in the air.

0:06:36.720 --> 0:06:39.279
<v Speaker 1>So what will we see move first? There will be

0:06:39.320 --> 0:06:42.000
<v Speaker 1>the dollar, for instance, or will it be bond yields

0:06:42.040 --> 0:06:45.600
<v Speaker 1>coming down to give us a sign that a lot

0:06:45.600 --> 0:06:49.560
<v Speaker 1>of the pressure that's being um you know, voisted on

0:06:50.120 --> 0:06:54.160
<v Speaker 1>the global economy will ease. That's a good question because

0:06:54.160 --> 0:06:56.240
<v Speaker 1>as we look to next year, That's something we're thinking

0:06:56.320 --> 0:06:59.200
<v Speaker 1>about as well, which is what is the catalyst going

0:06:59.240 --> 0:07:03.480
<v Speaker 1>to be for a recovery. And the catalysts can be earnings,

0:07:03.520 --> 0:07:05.760
<v Speaker 1>so when you start seeing, you know, earnings bounce back,

0:07:05.800 --> 0:07:09.000
<v Speaker 1>and of course the market will price that maybe six

0:07:09.040 --> 0:07:11.880
<v Speaker 1>months ahead of time. All the other catalysts can be

0:07:12.160 --> 0:07:16.080
<v Speaker 1>um regulatory political news either from China or a FED

0:07:16.160 --> 0:07:18.240
<v Speaker 1>pivot as well, right when you start seeing signs of

0:07:18.320 --> 0:07:21.880
<v Speaker 1>the FED slowdown. However, we're not seeing any of those

0:07:22.000 --> 0:07:24.360
<v Speaker 1>catalysts as yet, so I think we're in this wildtile

0:07:24.440 --> 0:07:27.160
<v Speaker 1>market for a while. Bran Pud are great to have

0:07:27.160 --> 0:07:29.760
<v Speaker 1>your insights. Thanks for joining us on Daybreak Asia. Pujamaliks,

0:07:29.800 --> 0:07:33.360
<v Speaker 1>partner at Nippon Capital, joining us from Menlo Park, California,

0:07:33.440 --> 0:07:35.440
<v Speaker 1>here on Bloomberg Daybreak Asia