WEBVTT - Rahul Chadha on the Markets (Radio)

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<v Speaker 1>Let's get to our guests, right. Heil China is chief

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<v Speaker 1>investment officer at mary as Set Global Investments, joining us

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<v Speaker 1>in our Hong Kong studio. We want to talk about

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<v Speaker 1>your views on investing in Asia and particularly how investable

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<v Speaker 1>China is. But just getting to the broader picture of

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<v Speaker 1>fair officials stressing their commitment to defeating inflation here, how

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<v Speaker 1>much is kind of pipe hike priced in excuse me,

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<v Speaker 1>into markets that we could see another aggressive hike. So

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<v Speaker 1>I think what Fred is on the stub around is

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<v Speaker 1>it's kind of a front end a lot of hikes.

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<v Speaker 1>And that's come because for the last couple of years

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<v Speaker 1>Fred was more worried about deflation than inflation. And look,

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<v Speaker 1>a fair bit of hikes have been frontended. Markets are

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<v Speaker 1>priced in. What markets are now watching is or what

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<v Speaker 1>impact does it have on economic data? So clearly we've

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<v Speaker 1>seen Europe slow down, China slowed down to it's it's

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<v Speaker 1>the U S consumer US business pens which are holding

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<v Speaker 1>on our view is by early two thwenty three valty

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<v Speaker 1>some signs of slow don't over there also, indeed, and

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<v Speaker 1>when each point to the data, the jobs market is

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<v Speaker 1>certainly key as well. We're looking ahead to that a

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<v Speaker 1>d P report and then the key jobs number as well.

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<v Speaker 1>When we start to see a slowdown in the consumer,

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<v Speaker 1>how much does that kind of just add to these

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<v Speaker 1>concerns about a recession. So I think clearly once there

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<v Speaker 1>is a bit of a slowdown, But argue is this

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<v Speaker 1>recission is going to be shallow because unlike the previous cycle,

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<v Speaker 1>which is the two eight cycle, they're not many economic exercis.

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<v Speaker 1>In fact, the problem in the world was that last

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<v Speaker 1>ten years China or invested and the rest of the

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<v Speaker 1>world did not invest. So if at all this this

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<v Speaker 1>slowdown recission happens, I think it's going to be a

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<v Speaker 1>couple of quarters of a shallow cycle. The other key

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<v Speaker 1>issue for investors is what's happening with gear politics, And

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<v Speaker 1>we saw Taiwanese soldiers firing shots toward off these civilian

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<v Speaker 1>drones that were flying close to the islands controlled by

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<v Speaker 1>Taipei near China. When you look at the gear political risk,

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<v Speaker 1>is that just another reason to kind of stay away

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<v Speaker 1>from markets at the moment or are you trying to

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<v Speaker 1>head you? So I think clearly this is this is

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<v Speaker 1>a challenged situation managing money in these times. The tailers

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<v Speaker 1>have become a lot more fat fatter, as they say,

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<v Speaker 1>And I think if one sees some of these risks

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<v Speaker 1>kind of a materializing, one may have to change positions

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<v Speaker 1>very very quickly. But at this point of time, I

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<v Speaker 1>think both sides are mature and I don't see a

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<v Speaker 1>major escalation on this part. All right, Let's get to

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<v Speaker 1>the China story though, because as we're talking about a

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<v Speaker 1>potential pile up of problems, could see it hit to

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<v Speaker 1>the p m s for China. In your view, where

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<v Speaker 1>do you see the most value in that market? Okay, So,

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<v Speaker 1>I think Lady, one thing which we've got to see

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<v Speaker 1>which China, is this relaxation of done with zero COVID

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<v Speaker 1>policy they're following. The hope is that after after the

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<v Speaker 1>Congress meeting in October UM things kind of ease out.

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<v Speaker 1>And we've seen with the new strains of the virus,

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<v Speaker 1>these are more contagious but less fatal um so I

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<v Speaker 1>think the authorities know that. So so they're also opening

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<v Speaker 1>up fairly quickly. So as they relax on this zero COVID,

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<v Speaker 1>as they do a bit of an easy we should

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<v Speaker 1>see some bit of an economic recovery come through. Um,

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<v Speaker 1>the Internet platforms are very very attractive. See longer term

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<v Speaker 1>we've got issues on growth rates China is going to achieve.

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<v Speaker 1>But near term, I think with a strong pent up

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<v Speaker 1>demand coming through once the reopening happens, um these names

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<v Speaker 1>can have a decent upside Alright, So take you like,

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<v Speaker 1>what about the property space. We've stayed away from property space.

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<v Speaker 1>I think I think clearly there are some trading opportunities

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<v Speaker 1>here and there, but the overall builds are going to

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<v Speaker 1>settle at a much lower number UM. So that's that's

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<v Speaker 1>a very tactical space. And I think clearly, with the

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<v Speaker 1>aging population and all those things, that would not be

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<v Speaker 1>a structural story. If you've got to play the value

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<v Speaker 1>part in China, you'd rather do the internet platforms. So

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<v Speaker 1>we're talking about some of your calls, and you said,

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<v Speaker 1>despite cheap valuations, underweight China, but you are overweight India.

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<v Speaker 1>Why it's a story we've liked for the last couple

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<v Speaker 1>of years, and I think the story is clearly coming

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<v Speaker 1>of it. What we've seen being done by the government

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<v Speaker 1>is bearing food. Now, whatever governments done on goods and

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<v Speaker 1>service taxes resulting in higher tax collections. The PLI scheme

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<v Speaker 1>to attract investments is working out and it's a fresh

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<v Speaker 1>economic cycle. So so despite all the noise we've seen

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<v Speaker 1>in the world, the growth continues to surprise positively. Um

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<v Speaker 1>though the markets kind of a done well in recent

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<v Speaker 1>times if you see from the COVID lows. In fact,

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<v Speaker 1>India's outperform other e M significantly. But this is a

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<v Speaker 1>market to buy on depths. Any any correction which comes

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<v Speaker 1>because of energy shocks, we'd be looking to increase. Are

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<v Speaker 1>in the exposure. A lot of their recovery and action

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<v Speaker 1>is being driven by tourism. But when we start to

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<v Speaker 1>look at the spike in energy bills, which you point

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<v Speaker 1>out could derail the fledging recovery, how much a price

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<v Speaker 1>pressures a concern here. So clearly Indian and Asian are

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<v Speaker 1>two kind of regions which will get negatively impacted should

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<v Speaker 1>there be in a spike in energy builts significantly from

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<v Speaker 1>hair but to their advantage. What what these two regions

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<v Speaker 1>are seeing as benefits of a bit of a manufacturing

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<v Speaker 1>move away from China. Um, it's a fresh economic cycle.

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<v Speaker 1>Volutions of corrictits. For some of the growth names or

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<v Speaker 1>internet names which are listed in Asia, these names are

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<v Speaker 1>down seventy percent from heist we saw in the tech

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<v Speaker 1>bubble two thousand's most good companies kind of a bottom

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<v Speaker 1>that down from high. So so for any investors who's

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<v Speaker 1>got a three four year timeframe, UM, they're good knee

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<v Speaker 1>stories in ours and and one market particularly we like

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<v Speaker 1>in our Zender's Vietnam. I think it's an underrated market

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<v Speaker 1>because it's not part of the ms UM, it's not

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<v Speaker 1>that discovered. But look at what you get is great companies,

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<v Speaker 1>good rose, good business models, at early stage of their

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<v Speaker 1>growth and at a fraction of valuations of India. So

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<v Speaker 1>so I think that's a market one as to keep

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<v Speaker 1>an eye out for. Yeah, that economy is powering along us.

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<v Speaker 1>There are a few weeks ago and first time in

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<v Speaker 1>a few years it is completely changing country Vietnam. You're

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<v Speaker 1>also looking at some of the e V battery names

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<v Speaker 1>as well. Tell us, I guess the thought here of

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<v Speaker 1>not only I guess investing in the future, but just

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<v Speaker 1>the fact that we are seeing such a strong demand

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<v Speaker 1>for some of these companies. So I think clearly that's

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<v Speaker 1>where Korea becomes of interest to us. So so it's

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<v Speaker 1>a non consensus kind of UM overweight reasonable exposure. Large

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<v Speaker 1>exposure for US we like in Korea is some of

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<v Speaker 1>the Korean automakers who are also the top three companies

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<v Speaker 1>in EVS largely Evan diamotors and in a group et

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<v Speaker 1>cetera in Europe and US, and then um, there is

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<v Speaker 1>the current EVY battery makers. So what we're going to

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<v Speaker 1>see is a lot of the Korean EVY battery makers

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<v Speaker 1>make in roads into US at the cost of the

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<v Speaker 1>Chinese payers, and I think that's the opportunity. So if

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<v Speaker 1>you look at the scale up for the leading ev

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<v Speaker 1>batterymakers in Korea, it is five to six six their

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<v Speaker 1>current revenues in the coming decade, So I think that's

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<v Speaker 1>a significant growth opportunity. How much is a concern about

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<v Speaker 1>awakening currencies in Asia sort of giving the thought that

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<v Speaker 1>you could see what happened in ninety seven, I mean,

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<v Speaker 1>we're saying these calls that you could see the yen

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<v Speaker 1>towards one forty, and then we've got the PBOC really

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<v Speaker 1>trying to stem the decline in its currency. So I

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<v Speaker 1>think one has to keep that at the back of

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<v Speaker 1>the point. Um that that kind of a ties into

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<v Speaker 1>what we were discussing on a separate note earlier the

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<v Speaker 1>geopolitical conflict and the fatter tail risks in today's world.

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<v Speaker 1>So I think that's where it comes through in currencies.

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<v Speaker 1>With all being so strong, with the US rates being

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<v Speaker 1>at three three to three and a half percent, and

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<v Speaker 1>UM e c B looking to do a eek of

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<v Speaker 1>control bj BJ looking to do eek of control U

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<v Speaker 1>currencies are going to be fairly volatile, and that's something

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<v Speaker 1>one has to keep in mind. The hope here is

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<v Speaker 1>that the policymakers have learned from the mistakes of the past,

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<v Speaker 1>so should there be event like freezing of credit markets,

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<v Speaker 1>they're going to step in very quickly. Not a great

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<v Speaker 1>year so far for Asian stocks, only two months that

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<v Speaker 1>we're in the black and basically the gains that we

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<v Speaker 1>saw in July being wiped out by the losses in August.

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<v Speaker 1>Where do we go for the last four months of

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<v Speaker 1>the year. I think four months are going to be

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<v Speaker 1>fairly ranged bound, but this gives you an opportunity to

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<v Speaker 1>build a portfolio for next three years. UM. The view

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<v Speaker 1>is that we'll see some signs of slowdown in the

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<v Speaker 1>US in the next six to eight months, and that's

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<v Speaker 1>where monetary policy turns neutral and and look, the hope

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<v Speaker 1>is that fits speak does most of the work rather

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<v Speaker 1>than the actual actions, et cetera. And what what we

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<v Speaker 1>have is valuations as a friend. Valuations as a friend.

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<v Speaker 1>It's a um underground kind of a space. So anybody

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<v Speaker 1>who's got a three year time frame, I think next

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<v Speaker 1>six months would give great opportunities to accumulate in the market.

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<v Speaker 1>As they say, not timing. Thank you so much for

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<v Speaker 1>health chat to Chief investment Officer Mary Asset Global Investments,

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<v Speaker 1>joining us in our Hong Kong studio here on Bloomberg

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<v Speaker 1>Dead Raccasion