1 00:00:00,120 --> 00:00:02,840 Speaker 1: So I guess this half hour is Amy she Patrick, 2 00:00:03,000 --> 00:00:05,720 Speaker 1: head of Income Strategies at Pandel Group, to talk about 3 00:00:05,760 --> 00:00:08,200 Speaker 1: the latest on the markets, And I mean, I just 4 00:00:08,200 --> 00:00:10,360 Speaker 1: want to start with the price action that we're seeing 5 00:00:10,440 --> 00:00:13,880 Speaker 1: in Hong Kong and Shanghai at the moment, declines again, 6 00:00:13,960 --> 00:00:19,760 Speaker 1: although fairly modest considering the situation with COVID twenty seven 7 00:00:19,800 --> 00:00:25,240 Speaker 1: thousand new cases. Markets adapting to this new reality. Absolutely, 8 00:00:25,280 --> 00:00:28,920 Speaker 1: I think the markets are still on high from you know, 9 00:00:28,960 --> 00:00:32,959 Speaker 1: the list of new measures announced by Beijing that they 10 00:00:33,000 --> 00:00:36,199 Speaker 1: will be trying to lift the most stringent of the 11 00:00:36,200 --> 00:00:39,960 Speaker 1: COVID measures from here forth. I also think that you know, 12 00:00:40,320 --> 00:00:45,080 Speaker 1: much much like um, how the West, you know, found 13 00:00:45,120 --> 00:00:48,080 Speaker 1: different ways of opening up. Australia did it very differently 14 00:00:48,080 --> 00:00:51,640 Speaker 1: to various parts of Europe and the US. China is 15 00:00:51,640 --> 00:00:54,680 Speaker 1: finding its own way and it's been termed in China 16 00:00:54,840 --> 00:00:57,000 Speaker 1: is you know, a way of crossing the river by 17 00:00:57,040 --> 00:01:01,440 Speaker 1: touching the stones. So you know, obviously haveing um. Now 18 00:01:01,720 --> 00:01:05,399 Speaker 1: death's starting to appear and also rising UM as a 19 00:01:05,480 --> 00:01:08,680 Speaker 1: consequence of these rising COVID numbers is not a good thing. 20 00:01:08,720 --> 00:01:11,319 Speaker 1: But we've yet to see what that tolerance threshold of 21 00:01:11,360 --> 00:01:14,399 Speaker 1: Beijing is so Amy, let's talk a little bit. Oh 22 00:01:14,440 --> 00:01:16,160 Speaker 1: it's Dug by the way in New York. Glad that 23 00:01:16,200 --> 00:01:18,600 Speaker 1: you could join us on the program. Let's talk about 24 00:01:18,600 --> 00:01:22,400 Speaker 1: the macro view away from COVID, specifically, give me your 25 00:01:22,480 --> 00:01:25,840 Speaker 1: sense of how you're reading the mainland economy right now. 26 00:01:26,880 --> 00:01:29,360 Speaker 1: You know, um a lot has been talked about these 27 00:01:29,440 --> 00:01:32,160 Speaker 1: COVID measures, but what I think has been more important 28 00:01:32,360 --> 00:01:35,120 Speaker 1: is the long list of measures that have been released 29 00:01:35,280 --> 00:01:39,160 Speaker 1: to direct lending more at the property space. Now. As 30 00:01:39,200 --> 00:01:41,640 Speaker 1: we know, the Chinese cycle and the global economic cycle 31 00:01:41,720 --> 00:01:45,000 Speaker 1: is very dependent on how the Chinese property sector does. 32 00:01:45,600 --> 00:01:50,040 Speaker 1: And so far, you know, this very prolonged episode of 33 00:01:50,080 --> 00:01:54,600 Speaker 1: self inflicted pain, self inflicted property deleveraging has really been 34 00:01:54,640 --> 00:01:57,520 Speaker 1: what's been holding the Chinese economy back. But I was 35 00:01:57,560 --> 00:02:01,600 Speaker 1: surprised to see that the list of stimulus is um 36 00:02:01,640 --> 00:02:05,320 Speaker 1: you know, targeting the lending of from the banks to 37 00:02:05,480 --> 00:02:09,320 Speaker 1: the property developers to either consolidate within their space or 38 00:02:09,440 --> 00:02:12,760 Speaker 1: rather to just get the money together to complete projects 39 00:02:12,800 --> 00:02:14,760 Speaker 1: that have been started and have been hanging for a 40 00:02:14,800 --> 00:02:18,239 Speaker 1: long time. This year is in effect another sort of 41 00:02:18,360 --> 00:02:20,919 Speaker 1: property stimulus that's happening in China right now. It's different 42 00:02:20,919 --> 00:02:23,640 Speaker 1: from what we've seen before. But at the same time, 43 00:02:23,840 --> 00:02:27,400 Speaker 1: it probably means that for now the low in Chinese 44 00:02:27,440 --> 00:02:31,840 Speaker 1: yields for this cycle has been seen very quickly. You 45 00:02:31,919 --> 00:02:35,000 Speaker 1: also have to remember that ultimately the government's going to 46 00:02:35,040 --> 00:02:37,639 Speaker 1: back stop the property sector. How bad can it realistically 47 00:02:37,639 --> 00:02:41,880 Speaker 1: get just in twenty seconds, Like the government hasn't been 48 00:02:41,919 --> 00:02:44,160 Speaker 1: back to back stopping the property sector. Defaults have been 49 00:02:44,240 --> 00:02:47,239 Speaker 1: running rampant, absolutely, and I think they're very much willing 50 00:02:47,280 --> 00:02:49,520 Speaker 1: to let a lot of a lot of defaults go. 51 00:02:50,040 --> 00:02:52,160 Speaker 1: My twenty second view or my ten second view from 52 00:02:52,160 --> 00:02:55,560 Speaker 1: here on is that the government wants consolidation in this sector, 53 00:02:55,600 --> 00:02:57,519 Speaker 1: and they ultimately want to take back control of this 54 00:02:57,600 --> 00:03:00,640 Speaker 1: sector because having had it been and being private hands 55 00:03:00,680 --> 00:03:03,919 Speaker 1: for the last decade or more has reaped no good 56 00:03:03,960 --> 00:03:06,519 Speaker 1: results for them. And Amy, I mentioned a moment ago 57 00:03:06,680 --> 00:03:10,040 Speaker 1: the US dollar weakening, although there is a relative term 58 00:03:10,160 --> 00:03:12,920 Speaker 1: at the moment, but weakening it is. I'm just wondering 59 00:03:12,960 --> 00:03:15,680 Speaker 1: what your outlook is for the greenback over the coming 60 00:03:15,720 --> 00:03:19,320 Speaker 1: weeks and what the implications I here for EM is 61 00:03:19,360 --> 00:03:23,920 Speaker 1: it emerging markets time to shine? Great question, Paul, So, 62 00:03:24,080 --> 00:03:26,680 Speaker 1: I think that the dollar is having a bit of 63 00:03:26,680 --> 00:03:29,280 Speaker 1: a response. Obviously, we've had quite a lot of gains 64 00:03:29,280 --> 00:03:33,440 Speaker 1: in the green back so far this year. Um, but 65 00:03:33,480 --> 00:03:35,320 Speaker 1: I think over the course of the next few months 66 00:03:35,480 --> 00:03:38,560 Speaker 1: you will see some more challenges to the more global 67 00:03:38,600 --> 00:03:41,640 Speaker 1: growth outlook. So yesterday, for example, you saw the flash 68 00:03:41,680 --> 00:03:45,560 Speaker 1: exports numbers out of career showing that they're down once again. Um. 69 00:03:46,160 --> 00:03:49,880 Speaker 1: You know, disappointing versus expectations and semi conducts is once 70 00:03:49,880 --> 00:03:52,520 Speaker 1: again becoming a big drag. This is a really good 71 00:03:52,600 --> 00:03:55,600 Speaker 1: lead indicator for the shape that the global trade cycle, 72 00:03:55,640 --> 00:03:57,200 Speaker 1: in the global that kind of excycle as a whole 73 00:03:57,320 --> 00:03:59,440 Speaker 1: is going. And as we know, the dollar tends to 74 00:03:59,480 --> 00:04:02,640 Speaker 1: be counter cyclical, so it tends to rise when the 75 00:04:02,640 --> 00:04:05,960 Speaker 1: economy isn't doing well and full when the economy does. 76 00:04:06,360 --> 00:04:09,640 Speaker 1: And for emerging markets, exactly as you said, Paul, when 77 00:04:09,800 --> 00:04:12,280 Speaker 1: the dollar is in an up trend, it is generally 78 00:04:12,520 --> 00:04:16,680 Speaker 1: a backdrop of tightening financial conditions for emerging economies. Well, 79 00:04:16,720 --> 00:04:18,800 Speaker 1: the other thing that I think we can take away 80 00:04:18,960 --> 00:04:22,240 Speaker 1: from the trade data for South Korea is that the 81 00:04:22,320 --> 00:04:25,400 Speaker 1: exports going to China were very disappointing, and we know 82 00:04:25,520 --> 00:04:28,320 Speaker 1: that the economy there is struggling. Whether it is just 83 00:04:29,000 --> 00:04:32,719 Speaker 1: all about these zero COVID policy Um, I'm sure that 84 00:04:32,839 --> 00:04:37,120 Speaker 1: people across the country are feeling exceptionally fatigued by this. 85 00:04:37,320 --> 00:04:39,880 Speaker 1: There's the problem with the property market, We're well aware 86 00:04:39,880 --> 00:04:43,000 Speaker 1: of that. Give me your outlook for for the credit 87 00:04:43,040 --> 00:04:46,320 Speaker 1: markets on the main land and whether we're now seeing 88 00:04:46,760 --> 00:04:51,080 Speaker 1: much greater risk of of default. Uh So, I don't 89 00:04:51,080 --> 00:04:54,240 Speaker 1: think the risk of default has is going to escalate 90 00:04:54,440 --> 00:04:57,360 Speaker 1: from what we've seen. In fact, twenty two has been 91 00:04:57,360 --> 00:05:00,120 Speaker 1: a year of default escalation for for Chinese credit, it 92 00:05:00,440 --> 00:05:03,280 Speaker 1: especially in the high your property set right, so I 93 00:05:03,320 --> 00:05:05,800 Speaker 1: think in the coming months you will continue to get 94 00:05:06,240 --> 00:05:08,960 Speaker 1: the bad names defaulting. What I am more worried about 95 00:05:09,160 --> 00:05:12,880 Speaker 1: is that the sector spread of what has been defaulting 96 00:05:12,880 --> 00:05:15,440 Speaker 1: in China has started to creep a little bit broader 97 00:05:15,480 --> 00:05:18,360 Speaker 1: than just property. So it remains to be seen how 98 00:05:18,600 --> 00:05:21,719 Speaker 1: high Beijing's tolerances for that, because that has the potential 99 00:05:21,760 --> 00:05:25,359 Speaker 1: to lead to something more systemic about credit on shore, 100 00:05:25,440 --> 00:05:28,080 Speaker 1: just like we've seen, for example, in South Korea over 101 00:05:28,120 --> 00:05:31,440 Speaker 1: the last month or so. But my outlook for the 102 00:05:31,520 --> 00:05:34,320 Speaker 1: Chinese economy is probably a little bit too stage. From here, 103 00:05:34,720 --> 00:05:36,960 Speaker 1: I think that the market is right to look forward 104 00:05:37,040 --> 00:05:39,599 Speaker 1: to the lifting of zero COVID and the China China 105 00:05:39,640 --> 00:05:43,000 Speaker 1: opening up trade, but going into winter it's unrealistic to 106 00:05:43,040 --> 00:05:46,279 Speaker 1: expect them to open up massively, and especially with rising 107 00:05:46,320 --> 00:05:48,760 Speaker 1: COVID cases as you're seeing now. What they're doing now 108 00:05:48,839 --> 00:05:50,760 Speaker 1: is putting in place the measures that will allow them 109 00:05:50,800 --> 00:05:52,680 Speaker 1: to open up more fully once the way they gets 110 00:05:52,680 --> 00:05:55,400 Speaker 1: a bit warmer over there. But more importantly, what I 111 00:05:55,440 --> 00:05:58,320 Speaker 1: was speaking about to pull earlier, about the lifting of 112 00:05:58,680 --> 00:06:01,159 Speaker 1: UM some of the really severe restrictions against the property 113 00:06:01,160 --> 00:06:04,200 Speaker 1: sector more to get the construction happening again will be 114 00:06:04,240 --> 00:06:07,920 Speaker 1: a boon to the Chinese economy UM from probably Q 115 00:06:08,120 --> 00:06:12,680 Speaker 1: two onwards. So my near term outlook is no better 116 00:06:12,720 --> 00:06:14,680 Speaker 1: than it has been for the last six months, but 117 00:06:15,000 --> 00:06:17,360 Speaker 1: my medium term outlook is looking a little bit better. 118 00:06:18,360 --> 00:06:20,279 Speaker 1: Just in terms of credit, we heard from the South 119 00:06:20,360 --> 00:06:23,520 Speaker 1: Korean finance minister today saying, you know, he's closely watching 120 00:06:23,560 --> 00:06:28,080 Speaker 1: the credit market there but doesn't see a liquidity shock. 121 00:06:28,360 --> 00:06:32,880 Speaker 1: Is that your view? Um? You know, I think that 122 00:06:32,960 --> 00:06:36,360 Speaker 1: it doesn't benefit any policymaker, a regulator to really talk 123 00:06:36,400 --> 00:06:40,280 Speaker 1: about there there being the risk of you know, financial instability. 124 00:06:40,680 --> 00:06:43,599 Speaker 1: And clearly when most central bankers are still on the 125 00:06:43,600 --> 00:06:46,720 Speaker 1: path of tightening, they want to dismiss as much as possible, 126 00:06:46,800 --> 00:06:48,800 Speaker 1: or play down as much as possible the risk of 127 00:06:48,920 --> 00:06:52,760 Speaker 1: financial instability in the economy. But quite frankly, I think 128 00:06:53,040 --> 00:06:56,760 Speaker 1: right now, because fighting inflation is everybody's priority. Um you know, 129 00:06:56,800 --> 00:06:59,000 Speaker 1: the RBA probably to a slightly lesser extent, but it 130 00:06:59,080 --> 00:07:01,960 Speaker 1: is still the priority for our essential bank. It just 131 00:07:02,040 --> 00:07:04,599 Speaker 1: means that you can't really pay that much lip service 132 00:07:04,640 --> 00:07:07,760 Speaker 1: to this idea of financial instability. What I do think 133 00:07:07,839 --> 00:07:11,160 Speaker 1: is that for the first time in decades, you're getting 134 00:07:11,200 --> 00:07:15,280 Speaker 1: synchronized central bank tightening, and that leads to liquidity tidening globally. 135 00:07:15,880 --> 00:07:18,640 Speaker 1: All right, And in terms of synchronized tightening, we'll hear 136 00:07:18,640 --> 00:07:21,040 Speaker 1: from the Bank of Korea tomorrow expected to raise rates 137 00:07:21,040 --> 00:07:24,280 Speaker 1: by another twenty five basis points. Amy she Patrick, head 138 00:07:24,280 --> 00:07:26,920 Speaker 1: of income Strategies at Pandel Group, thanks so much for 139 00:07:27,000 --> 00:07:27,480 Speaker 1: joining us.