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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Chrisner.

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Speaker 2: Certainly no shortage of celebration going on in the equity

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Speaker 2: market today. After a truce in the US China trade war,

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Speaker 2: we had the S and P rallying by three point

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Speaker 2: three percent. This was after the US and China said

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Speaker 2: they will temporarily lower tariffs on each other's products and

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Speaker 2: they've allocated three months to work toward a broader trade agreement.

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Speaker 2: Here's President Trump.

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Speaker 3: Both sides now agree to reduce the tariffs and posed

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Speaker 3: after April second to ten percent for ninety days as

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Speaker 3: negotiators continue in the largest structural issues. And I want

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Speaker 3: to tell you that a couple of things. First of all,

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Speaker 3: that doesn't include the tariffs center already on that are

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Speaker 3: our tariffs, and it doesn't include tariffs on cars, steel, aluminum,

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Speaker 3: things such as.

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Speaker 2: President Trump speaking earlier at the White House, and in

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Speaker 2: a moment or two, we'll also take a look at

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Speaker 2: the outlook for the Indian equity market. This is after

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Speaker 2: India and Pakistan agreed to a full and immediate ceasefire

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Speaker 2: mediated by the US. I'll be speaking with Peyushmittal, equity

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Speaker 2: analyst at Matthews Asia momentarily, but we begin here in

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Speaker 2: the States. Joining me now is Brian Crowez. He is

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Speaker 2: president and lead portfolio manager at Sharf Investments. He's on

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Speaker 2: the line from Los Gatos, California. Brian, thanks for making

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Speaker 2: time to chat with us. Is this a one day wonder?

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Speaker 2: Do you put a lot of conviction into what we

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Speaker 2: saw in the price action or did this feel a

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Speaker 2: little bit like big short covering.

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Speaker 4: It's a little of both. I mean, the worst case

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Speaker 4: scenario is off the table, and so that's a positive.

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Speaker 4: But you know the art of the deal here. We've

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Speaker 4: taken tarifs up one hundred and forty five percent then

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Speaker 4: to take them back down. Terriffs are still higher than

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Speaker 4: they were six months ago. We still don't know exactly

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Speaker 4: where they're going to land. And at the end of

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Speaker 4: the day, tariffs are a problem for the market, and

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Speaker 4: it seems like they're not going away. If you look

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Speaker 4: at the UK deal, it seemed like ten percent was

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Speaker 4: the floor now and so market's happy because we're not

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Speaker 4: going to have a trade embargo with China, which is

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Speaker 4: what we sort of had with one hundred and forty

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Speaker 4: five percent. But still we're going to have higher tariffs

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Speaker 4: and that's going to be inflationary and bad for the market.

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Speaker 2: Okay, so let's go to the FED next. Right now,

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Speaker 2: the market seems to be pricing in just two rate

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Speaker 2: cuts between now and the end of the year. Is

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Speaker 2: that about right in your view?

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Speaker 1: Yeah?

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Speaker 4: I mean, I'm not even sure. You might not even

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Speaker 4: get any rate cuts unless you get a recession. The

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Speaker 4: reality is, with all the volatility and the tariffs. I mean,

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Speaker 4: you mentioned before earlier, the tenure was up today. If

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Speaker 4: I'm the FED, you know, I got to wait and

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Speaker 4: see what's happening here, because you know, inflation expectations went

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Speaker 4: to the moon, and I'd be worried if I were

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Speaker 4: the FED that you know, you might see inflation coming through,

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Speaker 4: especially because as I just mentioned, tariffs are not going

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Speaker 4: to zero. So you know, I think the Fed's just

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Speaker 4: going to have to be in a weight and see

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Speaker 4: mode and we'll have, you know, see what happens. That

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Speaker 4: it could be that the FED does only do two cuts,

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Speaker 4: or if the volatility continues and we get inflation coming

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Speaker 4: through after these expectations, maybe it's no cuts for the year.

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Speaker 2: So we have a ninety day period for conversations to ensue.

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Speaker 2: Now do you have a sense up until this point

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Speaker 2: who has the upper hand. Did China somehow take advantage

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Speaker 2: of maybe a lot of what President Trump has been

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Speaker 2: hearing from the business community.

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Speaker 4: Oh yeah, I mean China's declaring this is a victory.

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Speaker 4: And I think it is a victory. We were saying

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Speaker 4: a while back. If you look at trade deficits, the

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Speaker 4: counter hand to that is net foreign investments. So for

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Speaker 4: you know, since nineteen seventy one, we've been running ever

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Speaker 4: increasing trade deficits, and the counterhand to that was we,

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Speaker 4: as the United States, we're bringing in lots of foreign capital.

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Speaker 4: If we really were going to take our trade deficit

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Speaker 4: to zero, that would mean capital coming out of the US.

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Speaker 4: You saw that with the bond market rates starting to

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Speaker 4: go up, You saw that with the dollar falling, and

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Speaker 4: so I think that really pushed the administration's hand and

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Speaker 4: made them have to walk back a lot of the

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Speaker 4: policies they were trying to go for. In the end,

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Speaker 4: you know, we went from tradeing bargo to China to

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Speaker 4: now they've got this pause. I think they're seeing it

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Speaker 4: as a victory. You know, we'll see where we land here.

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Speaker 4: But I think the market's sort of told the administration

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Speaker 4: you can't go to zero trade deficits, and this trade

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Speaker 4: war is probably not going to end well for the

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Speaker 4: US if the dollar keeps falling in rate school up.

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Speaker 2: So that said, how are you playing the current market?

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Speaker 4: Well, you know, we still believe that lower risk securities

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Speaker 4: are a better way to be. That's where we've been

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Speaker 4: positioned for a while. You know, names like Heineken that

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Speaker 4: don't have much US exposure but are trading at really

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Speaker 4: cheap multiples and have good growth, even names like Hershey.

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Speaker 4: So some consumer staple names, but some tech look good.

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Speaker 4: I mean Microsoft has you know, just had tremendous quarter.

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Speaker 4: It had come off with some of this tariff nonsense,

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Speaker 4: and ultimately, like, we still think that's one that can

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Speaker 4: keep growing. And it's got insulation not only from tariffs

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Speaker 4: but but economic insulation too because the friends that are

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Speaker 4: pushing the growth of a company like that are still

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Speaker 4: going to be in place. So we still think there's

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Speaker 4: places investors can look, but I'd be a little careful

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Speaker 4: with the potential for a recession coming.

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Speaker 2: So we had the tariff story obviously at the top

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Speaker 2: of the news cycle. Let's not forget what happened in Washington,

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Speaker 2: where the House Tax Committee released a draft plan of

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Speaker 2: a multi trillion dollar tax cut bill. It aims to

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Speaker 2: cut taxes by more than four trillion over the next

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Speaker 2: decade and reduce spending by at least one and a

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Speaker 2: half trillion. To what extent is this tax plan influencing

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Speaker 2: the market right now?

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Speaker 4: There's so much news as we're talking about before, it's

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Speaker 4: hard to parse it apart. Because you also had an

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Speaker 4: executive order which was a major deal for pharmaceutical prices PBM.

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Speaker 4: So you've got all kinds of crosswinds happening just coming

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Speaker 4: rapid fire. At the end of the day, I think

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Speaker 4: that that the budget plan is very important for the market.

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Speaker 4: I think it could be problematic for the bond market

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Speaker 4: if we're going to be running big deficits. And at

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Speaker 4: the end of the day, pro growth tax policies are

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Speaker 4: important to the stock market. So you've got counter winds

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Speaker 4: that which markets are rooting for what. And I think

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Speaker 4: the Republicans have a long road ahead of them to

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Speaker 4: get something done, given that some of them are worried

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Speaker 4: about salt and everyone has their own little thing they're

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Speaker 4: worried about. So we'll just have to see how it

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Speaker 4: plays out. But I think it is important for the market.

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Speaker 4: I think many market participants, such as ourselves are in

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Speaker 4: a wait and see mode before you really make big

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Speaker 4: bets on what's going to come out of Washington.

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Speaker 2: There was a lot of strength in big cap tech

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Speaker 2: in particular. Today a Nasdaq comp was up about four

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Speaker 2: point three percent, and I think the Nasdaq one hundred

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Speaker 2: is back in a bold market. How are you feeling

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Speaker 2: about big cap tech right now?

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Speaker 4: Well, I just mentioned we like Microsoft, but generally speaking,

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Speaker 4: most of big cat tech we don't like. They're still expensive,

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Speaker 4: and one thing that's going to come out of the

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Speaker 4: trade war is potentially still retaliation on some of these

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Speaker 4: large tech companies that are are requiring big markets to

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Speaker 4: play in. So while there's selective ones we like, there's

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Speaker 4: other ones we think are just too expensive relatives of

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Speaker 4: the growth, at least that's our view.

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Speaker 2: How much of that is tied to maybe a little

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Speaker 2: too much enthusiasm where AI is concerned, Yeah.

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Speaker 4: One hundred percent. I mean these stocks have really run

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Speaker 4: high and hard, and some of them are going to

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Speaker 4: benefited from AI and some of them. It's really unclear.

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Speaker 4: I mean, Google could be a beneficiary of AI, but

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Speaker 4: it's also know exidential risk for them, you know, Apple,

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Speaker 4: it's also a potential risk longer term, but in the

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Speaker 4: shorter term they're hoping it gets a pop to iPhone sales.

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Speaker 4: So I think investors are really just put all the

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Speaker 4: good stuff in and pushed all of them up, and

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Speaker 4: just the easy button to hit is buy a big

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Speaker 4: tech But it's not necessarily going to benefit all of

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Speaker 4: them in the same way, and it's not necessarily going

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Speaker 4: to be an undoubted positive because names like Google could

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Speaker 4: actually get disrupted by it.

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Speaker 2: So in the Monday session here in New York, we

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Speaker 2: had the Nasdak Golden Dragon China Index, which obviously met

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Speaker 2: US listed Chinese shares. It was up more than five percent,

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Speaker 2: and this came after a big rally in Hong Kong Monday,

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Speaker 2: where the Hangsang was up about three percent. How are

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Speaker 2: you feeling about opportunities offshore right now, especially in Asia?

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Speaker 4: You know, we think there's good opportunities as there's a

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Speaker 4: big difference between US and international stocks. We're a little

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Speaker 4: bit burned by China because of some of the past

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Speaker 4: policies and it's a little unclear if they're going to

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Speaker 4: be really pro capitalist policies. But outside of there, you know,

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Speaker 4: we like Korea, Japan, Europe, and so we like a

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Speaker 4: lot of international markets. Be a little bit more cautious

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Speaker 4: on China specifically, but there is a big valuation discrepancy

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Speaker 4: between the US and the rest of the world. And

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Speaker 4: you know, one of the things about tariffs in the

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Speaker 4: US is we think that will be a benefit international stocks.

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Speaker 2: So would you be using a day like today in

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Speaker 2: the US where we're up big to kind of reduce

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Speaker 2: your exposure to risk assets in the United States.

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Speaker 4: It depends on what those risk assets are. But yeah,

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Speaker 4: I think in particular, if you've got some of those

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Speaker 4: big tech stocks that could be affected and it made

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Speaker 4: some good money, it's an opportunity to take a little

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Speaker 4: off the table and move into some of these international

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Speaker 4: names I mentioned Heineken, we like Samsung. There's a number

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Speaker 4: of names we think are really good that you could

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Speaker 4: be pivoting into.

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Speaker 2: Brian, it's always a pleasure. Thank you so much for

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Speaker 2: making time to chat with us. Brian Krauez is the

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Speaker 2: president also the lead portfolio manager at Sharf Investments, joining

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Speaker 2: from Los Coatos, California. Here on the Daybreak Asia podcast.

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Speaker 2: Welcome back to the Daybreak Asia Podcast. I'm Doug Krisner.

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Speaker 2: Stocks in both Pakistan and India rallied in the last session.

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Speaker 2: That was after a cease fire agreement between these two nations.

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Speaker 2: Pakistan's major benchmark finished up by more than nine percent

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Speaker 2: and in Mumbai the Nifty to fifty was up about

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Speaker 2: the three point eight percent. Now, both markets have been

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Speaker 2: shaken recently by military clashes on the border between India

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Speaker 2: and Pakistan. Foreign investors had been on a sixteen day

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Speaker 2: buying spree until last Friday. Joining me now for a

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Speaker 2: closer look is Payush Mittal, senior equity research analyst at

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Speaker 2: Matthew's Asia. Payushi is on the line from San Francisco.

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Speaker 2: Good of you to make time to chat with me.

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Speaker 2: Talk to me a little bit about what you've seen

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Speaker 2: developed between India and Pakistan and how that may have

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Speaker 2: changed your view or at least outlook for the region.

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Speaker 1: So as it relates to India and Pakistan. I think

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Speaker 1: the two countries have had a fairly tense relationship over

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Speaker 1: the last seventy five years. They've fought multiple wars and

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Speaker 1: have seen multiple terrorists like situations. But I think over

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Speaker 1: the last many years, while we've seen such incidents play

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Speaker 1: out with with a fair degree of frequency, but we've

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Speaker 1: never really seen the situation in terms of uh it

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Speaker 1: escalating into a warlike situation or a war being fought

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Speaker 1: on back of this. Right So, given that context and

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Speaker 1: given what we've seen over the last twenty five years,

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Speaker 1: you know, I don't think we were in the camp

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Speaker 1: of UH you know, seeing a full blown war, though

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Speaker 1: I would say the situation did get escalated more than

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Speaker 1: we thought. But it's good to see that. You know,

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Speaker 1: cammer heads have prevailed. Both countries you know, have fairly

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Speaker 1: poor populations, so to the extent that they have to

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Speaker 1: fight a continuous war is not going to be good

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Speaker 1: for fiscal deficit on both sides. Right, So in that sense,

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Speaker 1: I think it's it's good that ceasefire was announced and

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Speaker 1: it looks like it's it's business, you know, back to

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Speaker 1: usual in our view, you know, give when what is

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Speaker 1: played out, it really does not change much in terms

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Speaker 1: of you know, the outlook for investments or equity returns

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Speaker 1: in India. India, you know, GDP growth over the last

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Speaker 1: fifteen twenty years on an average has been roughly six

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Speaker 1: to six and a half percent. We continue to think

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Speaker 1: that something that will sustain inflation in India is actually

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Speaker 1: coming down. Oil prices are down, and on back of that,

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Speaker 1: we're seeing central bank actually cut you know rates in

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Speaker 1: the economy, which is again sort of positive for GDP growth.

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Speaker 1: Inflation reduction is also helpful for growth in consumption. So

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Speaker 1: we expect you know, consumption, which has been weak in

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Speaker 1: the economy for the last you know, three or four years,

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Speaker 1: is actually expected to pick up. And then all the

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Speaker 1: global geopolitics situations, I know you might have a separate questions,

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Speaker 1: but it looks like, you know, India is likely going

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Speaker 1: to be a net beneficiary and India should be a

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Speaker 1: bigger part of the global supply change you know, in

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Speaker 1: years to come, and that again should only help with

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Speaker 1: the economic growth and the GDP growth of the.

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Speaker 2: Country, certainly as American companies try to diversify themselves away

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Speaker 2: from the China story. Yes, very much. The India growth

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Speaker 2: story was largely intact until this skirmish last week. And

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Speaker 2: I'm wondering, if you talk about the influx of foreign

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Speaker 2: capital into a market like India, whether that tension between

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Speaker 2: India and Pakistan remains the type of dark cloud that

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Speaker 2: really has the threat to hold back a lot of

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Speaker 2: capital inflow.

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Speaker 1: I certainly don't think so. I think to this to

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Speaker 1: an extent that you know, the event has just recently happened,

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Speaker 1: it is likely to you know, potentially maybe create some

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Speaker 1: weight and watch more in case there is another escalation.

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Speaker 1: But our view is, you know, given the involvement of

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Speaker 1: United States, you know, again, given the opportunity in terms

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Speaker 1: of you know, being a bigger part of supply chain,

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Speaker 1: you know that India has given all the geopolitical tension,

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Speaker 1: I think you know, cooler and calmer heads will prevail.

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Speaker 1: We don't expect any further you know, escalation of the situation,

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Speaker 1: and to that extent as that ceasefire hose piece holes,

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Speaker 1: you know, for a extended period of time, matter of

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Speaker 1: weeks and months going forward, we would fully expect, you know,

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Speaker 1: some of the foreign investments to actually come back to

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Speaker 1: the country.

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Speaker 2: So we can talk about businesses moving into the Indian

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Speaker 2: market or at least expanding there. But before we get there,

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Speaker 2: talk to me a little bit about how you understand

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Speaker 2: the macro, particularly with the inflation story in India.

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Speaker 1: I think the macro situation in India is actually very

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Speaker 1: good right now, given one of the biggest you know,

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Speaker 1: inputs into inflation story in India is actually oil and

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Speaker 1: oil where it is currently around sixty to seventy five.

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Speaker 1: If oil holds in that range, you know, it is

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Speaker 1: it not just helps in bringing down inflation, it is

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Speaker 1: also it also helps in containing the you know, current deficit.

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Speaker 1: You know that India has inflation. The last reported number

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Speaker 1: was three point three four on the CPI side, and

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Speaker 1: anytime you have a number which is below four percent,

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Speaker 1: I think that gives the Central Bank Riserve Bank of

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Speaker 1: India headway or headroom to actually reduce the rates. We've

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Speaker 1: already seen two rate cuts amounting to fifty basis points,

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Speaker 1: and it is our expectation that through the course of

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Speaker 1: remaining calendar year we should expect another fifty basis points

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Speaker 1: and maybe further twenty five basis points in the in

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Speaker 1: the in the three months you know of the first

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Speaker 1: three months of calendar A twenty twenty six, right, so

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Speaker 1: we are looking in moderate inflation, moderate inflation feeding into

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Speaker 1: monetary policy easing. We also are of the view that

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Speaker 1: you know, this is going to feed into lower ten

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Speaker 1: year yields in the country. So current yields are around

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Speaker 1: six forty and that's down almost forty fifty basis points,

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Speaker 1: you know, from what it was earlier in the year.

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Speaker 1: And our view is that you can see another similar

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Speaker 1: forty basis point correction before, you know, down to maybe

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Speaker 1: six percent level before the ten year actually stabilizes. And

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Speaker 1: if it were to play out like that, you know,

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Speaker 1: it'll be one of the lowest rates. Already at six forty,

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Speaker 1: it's one of the lowest rates on the ten year

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Speaker 1: side that the country has seen, and another forty basis

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Speaker 1: point reduction would mean that it's the lowest rates that

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Speaker 1: India has seen, you know, in the last many many years.

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Speaker 2: So you mentioned a moment ago that India you expect

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Speaker 2: India to be a beneficiary of what's been happening in

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Speaker 2: between the US and China. And when you said that,

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Speaker 2: I immediately thought of Apple as an example. Yeah, are

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Speaker 2: there other examples and are they primarily in the technology space?

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Speaker 1: So electronics would be one of the biggest spaces that

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Speaker 1: you're seeing the transition happen. You know, many many different

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Speaker 1: electronics manufacturing companies which are not just on the mobile

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Speaker 1: side or the smartphone side, but also on the laptop

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Speaker 1: side and many other things. Right, So another example would

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Speaker 1: be air conditioner, you know, air conditioners that might be

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Speaker 1: coming into United States which currently possibly are coming from China,

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Speaker 1: and almost all of them are actually coming from China.

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Speaker 1: But India over the last three five years has actually

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Speaker 1: built a fairly large ecosystem of building consumer durables. So

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Speaker 1: ten years back, almost seventy to eighty percent of what

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Speaker 1: goes into a consumer durable in India actually was imported

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Speaker 1: again from China. But over the last three five years,

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Speaker 1: that entire supply chain has gotten localized to where almost

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Speaker 1: eighty to eighty five percent of the bill of material

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Speaker 1: of any consumer durable is actually now locally produced and manufactured.

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Speaker 1: Right as that domestic manufacturing is happening, they are also

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Speaker 1: becoming more and more competitive with Chinese players in order

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Speaker 1: to be able to become a viable supplier for a

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Speaker 1: US company that potentially was buying from China can possibly

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Speaker 1: look at, you know, procuring the same from from India,

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Speaker 1: and with the with the relative difference in the tariffs

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Speaker 1: that we are seeing hopefully likely to prevail between China

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Speaker 1: and India, uh, that you know competitive, that competitiveness of

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Speaker 1: an Indian supplier only increases versus a Chinese company. So

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Speaker 1: beyond just these smartphones, consumer durables is another story, and

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Speaker 1: we are seeing that in you know, many other you know,

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Speaker 1: small small items where that might actually be true.

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Speaker 2: What about barriers to entry for American companies that would

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Speaker 2: like to do business in India? Do you expect the

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Speaker 2: Trump administration to work with Prime Minister Modi to successfully

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Speaker 2: navigate a type of trade agreement where US industries would

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Speaker 2: have a fair shake in India?

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Speaker 1: I I one hundred percent expect that, right, I mean, I

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Speaker 1: think there's been already certain announcements which have been made.

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Speaker 1: For example, on the automotive side. Right in the past,

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Speaker 1: you know, an imported automotive or an imported car was

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Speaker 1: actually taxed or tariff very high, you know, when it

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Speaker 1: was coming from outside. I think those tariffs are coming down.

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Speaker 1: I'm not sure if it will go down to zero,

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Speaker 1: but from what it was maybe one fifty percent, it

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Speaker 1: could likely be slashed down to half or even less

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Speaker 1: than that. Right, So, so certainly I expect, you know,

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Speaker 1: President Trump to negotiate certain things which will help and

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Speaker 1: reduce the barriers for you know, companies in the United

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Speaker 1: States to be able to do business in India.

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Speaker 2: Payush will leave it there. Thank you so much for

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Speaker 2: making time to chat with us. Payushmattel He is senior

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Speaker 2: equity research analyst at Matthews Asia, joining from San Francisco

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Speaker 2: here on the Daybreak Asia podcast. Thanks for listening to

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Speaker 2: today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

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Speaker 2: we look at the story shaping markets, finance, and geopolitics

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Speaker 2: in the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 2: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 2: Join us again tomorrow for insight on the market moves

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Speaker 2: from Hong Kong to Singapore and Australia. I'm Doug Prisoner

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Speaker 2: and this is Bloomberg