Speaker 1: Our guest is Puja Maleek, partner at Nippon Capital. Put
Speaker 1: you by my account, depending on what you look at.
Speaker 1: We've had six two percent rallies in a day this year,
Speaker 1: and we're still in the midst of a bear market.
Speaker 1: We're down about twenty three odd percent or so if
Speaker 1: you look at major benchmarks. But the thing is that
Speaker 1: one of these days, one of these will find some traction.
Speaker 1: My guesses were not here yet, But what's your what's
Speaker 1: your analysis? Hi, good morning, and thank you for having me.
Speaker 1: I agree with you. I think these are bear market rallies.
Speaker 1: The first set of rallies were definitely driven by shot covering,
Speaker 1: and you saw it a lot of that globally as
Speaker 1: well as in Asia. This current rally that you're seeing
Speaker 1: in China since late yesterday and possibly today is being
Speaker 1: driven by the government announcing measures to support the market,
Speaker 1: either directly auto mutual funds and changes in policies and
Speaker 1: encouraging companies to do buy backs, et cetera. I think
Speaker 1: that these rallies are more likely shot lived because eventually
Speaker 1: the market will look through to earnings before they can
Speaker 1: be a sustained Rather, I was gonna say, I mean
Speaker 1: obviously we're going to look at earnings as well. But
Speaker 1: with regards to some of the support that we are
Speaker 1: expecting to see from authorities, because people were a little
Speaker 1: disappointed from the Congress, what further supporter are you expecting it?
Speaker 1: And I guess what kind of moves can we see
Speaker 1: in China's economy given we're all a little bit on
Speaker 1: tenter hooks that the third quarter GDP was delayed, right
Speaker 1: and you know, the academic research shows that when companies
Speaker 1: delayed reporting is generally a bad sign they have bad
Speaker 1: news to report, and the same probably transfers over to
Speaker 1: governments as well. But coming back to your question, what
Speaker 1: signs can we expect to see from the government, I
Speaker 1: think we could see more direct buying by the national
Speaker 1: team itself, but more likely, I think we're likely to
Speaker 1: see continued stimulus helping the property market, helping chip companies,
Speaker 1: helping green economy, but also sectors like pharma that will
Speaker 1: enable this common prosperity dream to come through. So I
Speaker 1: think we's a sustained set of measures, but unfortunately for
Speaker 1: the market, I don't think it's all going to come
Speaker 1: as a big package on one day. Your analysis of
Speaker 1: President she's speech. You know, there was obviously a lot
Speaker 1: in there that could be deemed as somewhat negative for markets,
Speaker 1: So there was some that could be seen as positive.
Speaker 1: But net net, in terms of policy, is policy going
Speaker 1: to be our friend going forward or our enemy. It's
Speaker 1: going to depend on which sector you're investing in. So
Speaker 1: I think the megacap text dooks. There's still a ton
Speaker 1: of policy uncertainty. Even though she very clearly said that
Speaker 1: innovation from technology is going to drive growth, it's not
Speaker 1: necessarily clear that it's going to come from the megacap stocks.
Speaker 1: It's more likely going to come from the very hardware
Speaker 1: software intense midcaps that the government is going to support,
Speaker 1: as opposed to ten cent Ali Baba bay Do, where
Speaker 1: the government is still wide about consolidation of power. On
Speaker 1: the other hand, there will be sectors that the government
Speaker 1: will support. Um. You know, we talked about that right,
Speaker 1: renewables being one, for my being another, and I think
Speaker 1: eventually property as well. We'll get government support, maybe not
Speaker 1: right now, but over the next six or twelve months.
Speaker 1: So as we've seen with this Bloomberg economic projections, the
Speaker 1: chance of a US recession next year, but as Brian
Speaker 1: alluded to Bank of America as Brian moynihan says, consumer
Speaker 1: showing little weakness. Is the consumer enough to kind of
Speaker 1: buffer a very strong economic downturn? Juliet, I think the
Speaker 1: fact that the U. S. Consumer is still strong is
Speaker 1: just a sign that that shoe hasn't dropped us yet.
Speaker 1: I think this is more of a timing thing because
Speaker 1: given where inflation is, you know, still close to at
Speaker 1: some point we will likely see calculation from the U. S.
Speaker 1: Consumer um and you see this in markets as well.
Speaker 1: Right Emerging markets are down almost for from their peak
Speaker 1: in February one, but the world and the US is
Speaker 1: down only six over that time period. Definitely, the strength
Speaker 1: of the consumer has helped, but I don't think we
Speaker 1: can count on that continuing over the next twelve months.
Speaker 1: Can you make the case that inflation has already turned
Speaker 1: but because of the lag defect, particularly of owner's equivalent rent,
Speaker 1: which is not really rents paid by people, but it's
Speaker 1: more like looking at property prices, and they have come down.
Speaker 1: We already know that. Can we assume that you know
Speaker 1: that somewhere in the next little period you're going to
Speaker 1: see a big downturn in inflation. Uh, and you might
Speaker 1: as well try to get out in front of it.
Speaker 1: I doubt that because in the US inflation is being
Speaker 1: driven by oil prices energy and by food inflation, and
Speaker 1: both of those issues still persist. Brian oil is still
Speaker 1: at ninety dollars. You saw pack announced the cunt recently,
Speaker 1: and the agricultural supply chain is still very constrained. So
Speaker 1: unless we don't see those two issues resolving, I don't
Speaker 1: see how inflation comes down. I wanted to get your thoughts.
Speaker 1: You've touched on emerging markets there, but where you're seeing
Speaker 1: significant opportunities for out performance. I know in the notes
Speaker 1: you've you've given us you've touched on Korea and Brazil.
Speaker 1: What are you saying? I think the real story in
Speaker 1: emerging markets is the dispersion. So Korea is down forty five,
Speaker 1: and Korea is really a high data play geared to
Speaker 1: the global economy, and so today you're seeing, for example,
Speaker 1: the castag bounce back up two percent, just in line
Speaker 1: with the US, and so Korea is just a high
Speaker 1: beta recovery play. I think it's still early to buy Korea.
Speaker 1: I would wait to see more signs of a global
Speaker 1: recovery before getting into Korea. But coming back to the
Speaker 1: real point and dispersion. While Korea is down, for Indonesia
Speaker 1: is down only four percent, and Brazil is up. And
Speaker 1: a lot of this performance differential is based on differences
Speaker 1: in expected EPs growth. So the way we're seeing opportunity
Speaker 1: is in stocks that are domestically oriented in resilience sectors,
Speaker 1: quasi monopoly situations, and structural growth. So a good example is,
Speaker 1: you know a stock we've wanted for a long time
Speaker 1: called Al Hamadi Holding, which is a hospital operator in
Speaker 1: Saudi Arabia benefiting from COVID recovery as people are coming
Speaker 1: back to the hospital for elective procedures, and so very
Speaker 1: domestically oriented stock, resilience sector, healthcare, quasi monopoly and structural growth.
Speaker 1: So that stock, for example, is up fifty year to
Speaker 1: date Juliet And that dispersion is the opportunity in the air.
Speaker 1: So what will we see move first? There will be
Speaker 1: the dollar, for instance, or will it be bond yields
Speaker 1: coming down to give us a sign that a lot
Speaker 1: of the pressure that's being um you know, voisted on
Speaker 1: the global economy will ease. That's a good question because
Speaker 1: as we look to next year, That's something we're thinking
Speaker 1: about as well, which is what is the catalyst going
Speaker 1: to be for a recovery. And the catalysts can be earnings,
Speaker 1: so when you start seeing, you know, earnings bounce back,
Speaker 1: and of course the market will price that maybe six
Speaker 1: months ahead of time. All the other catalysts can be
Speaker 1: um regulatory political news either from China or a FED
Speaker 1: pivot as well, right when you start seeing signs of
Speaker 1: the FED slowdown. However, we're not seeing any of those
Speaker 1: catalysts as yet, so I think we're in this wildtile
Speaker 1: market for a while. Bran Pud are great to have
Speaker 1: your insights. Thanks for joining us on Daybreak Asia. Pujamaliks,
Speaker 1: partner at Nippon Capital, joining us from Menlo Park, California,
Speaker 1: here on Bloomberg Daybreak Asia