1 00:00:02,480 --> 00:00:06,840 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,680 --> 00:00:12,840 Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. 3 00:00:12,920 --> 00:00:15,440 Speaker 2: You can join Brian Curtis and myself for the stories, 4 00:00:15,480 --> 00:00:18,560 Speaker 2: making news and moving markets in the APAC region. You 5 00:00:18,640 --> 00:00:21,480 Speaker 2: can subscribe to the show anywhere you get your podcast 6 00:00:21,560 --> 00:00:24,919 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 7 00:00:24,960 --> 00:00:26,120 Speaker 2: Bloomberg Business app. 8 00:00:27,360 --> 00:00:29,720 Speaker 3: China has announced that it will be holding a briefing 9 00:00:29,880 --> 00:00:34,120 Speaker 3: on Saturday morning on fiscal policy. The State Council says 10 00:00:34,159 --> 00:00:37,680 Speaker 3: that the Finance Minister will be introducing moves to strengthen 11 00:00:37,760 --> 00:00:41,640 Speaker 3: fiscal policy, so industrials will be expecting some tangible news. 12 00:00:41,720 --> 00:00:44,040 Speaker 3: Joining us now in our studios as Dan ten Kate 13 00:00:44,320 --> 00:00:48,440 Speaker 3: Bloomberg Asia Eco goov Executive editor. So we know there's 14 00:00:48,479 --> 00:00:52,400 Speaker 3: the potential for some disappointment, Dan, but this is actually 15 00:00:52,479 --> 00:00:56,160 Speaker 3: the Finance Ministry and along with the State Council, this 16 00:00:56,240 --> 00:00:59,200 Speaker 3: is where you would get this kind of information. Are 17 00:00:59,280 --> 00:01:02,120 Speaker 3: we expecting money which from the minister and if so, 18 00:01:02,400 --> 00:01:04,440 Speaker 3: what will some of the details likely be. 19 00:01:05,480 --> 00:01:10,600 Speaker 4: Yeah, well, certainly the markets are anticipating real stimulus, some 20 00:01:10,680 --> 00:01:14,400 Speaker 4: concrete measures, some actual money. We didn't get that earlier 21 00:01:14,480 --> 00:01:16,959 Speaker 4: this week with the NDARC, And as you mentioned, the 22 00:01:17,040 --> 00:01:21,840 Speaker 4: NDRC wouldn't be the body the Chinese agency that would 23 00:01:22,600 --> 00:01:26,240 Speaker 4: necessarily give you those hard details. So the Finance Minister 24 00:01:26,520 --> 00:01:29,920 Speaker 4: is the one in the Chinese system who can deliver 25 00:01:30,000 --> 00:01:34,040 Speaker 4: on that. And you know, the market swings that we've 26 00:01:34,080 --> 00:01:37,600 Speaker 4: seen indicate that there's a real urge to see something 27 00:01:37,680 --> 00:01:40,280 Speaker 4: concrete to keep this rally going. 28 00:01:40,600 --> 00:01:43,160 Speaker 2: Right now, the way we understand things is that the 29 00:01:43,200 --> 00:01:46,360 Speaker 2: growth targets remain intact. Could that change? Do you think 30 00:01:46,400 --> 00:01:47,560 Speaker 2: in any meaningful way? 31 00:01:48,920 --> 00:01:53,240 Speaker 4: Well, pretty much they are. You know, the NDRC, which 32 00:01:53,240 --> 00:01:56,400 Speaker 4: is China's economic planner, they did indicate that they were 33 00:01:56,440 --> 00:02:00,280 Speaker 4: on target to hit that GDP target of about four 34 00:02:00,320 --> 00:02:03,880 Speaker 4: point eight percent. The real problem with Chin China's economy 35 00:02:03,960 --> 00:02:07,280 Speaker 4: right now is these deflationary pressures. So even if you 36 00:02:07,400 --> 00:02:11,040 Speaker 4: hit five percent real growth, if you have deflation of 37 00:02:11,080 --> 00:02:14,360 Speaker 4: one percent, your nominal growth is not growing and so 38 00:02:14,600 --> 00:02:18,480 Speaker 4: overall your economy isn't really moving. In fact, prices are 39 00:02:18,560 --> 00:02:22,160 Speaker 4: just declining and people are getting poorer essentially, So that 40 00:02:22,280 --> 00:02:25,840 Speaker 4: number needs to be put into context in that sense, 41 00:02:25,880 --> 00:02:29,120 Speaker 4: and what economists are looking for is something to get 42 00:02:29,480 --> 00:02:31,880 Speaker 4: the private sector moving again and to get a bit 43 00:02:31,960 --> 00:02:35,640 Speaker 4: of inflation to get investment going and to kind of 44 00:02:35,680 --> 00:02:39,440 Speaker 4: reverse this decline that we've seen, to prevent this sort 45 00:02:39,440 --> 00:02:44,760 Speaker 4: of Japan style deflation that could really eat gains in 46 00:02:44,840 --> 00:02:45,799 Speaker 4: wealth over time. 47 00:02:46,960 --> 00:02:49,400 Speaker 3: It seems urgent from a market point of view, and 48 00:02:49,440 --> 00:02:53,600 Speaker 3: it may seem urgent from consumers who are disappointed, and 49 00:02:53,639 --> 00:02:56,400 Speaker 3: of course the authorities don't want people out in the streets. 50 00:02:56,760 --> 00:02:58,959 Speaker 3: But we just had a guest on that said, you know, 51 00:02:59,160 --> 00:03:02,000 Speaker 3: maybe expect a little little bit more patience here. The 52 00:03:02,040 --> 00:03:04,760 Speaker 3: authorities don't want these kind of rapid gains that we've 53 00:03:04,800 --> 00:03:07,360 Speaker 3: seen in markets, So I wonder if investors are getting 54 00:03:07,400 --> 00:03:09,680 Speaker 3: themselves a little bit too far out over their skis. 55 00:03:10,560 --> 00:03:14,519 Speaker 4: Yeah, there's definitely a mismatch between official thinking in Beijing 56 00:03:14,880 --> 00:03:18,600 Speaker 4: and investors at the moment. And you know, volatility is 57 00:03:18,600 --> 00:03:21,080 Speaker 4: something that Chinese authorities never really like that. What they 58 00:03:21,120 --> 00:03:23,960 Speaker 4: would prefer is just kind of a slow and steady 59 00:03:24,320 --> 00:03:26,720 Speaker 4: climb up to the top. But you know, with the 60 00:03:28,000 --> 00:03:31,320 Speaker 4: big headlines flying on the Bloomberg terminal, et cetera, the 61 00:03:31,360 --> 00:03:33,840 Speaker 4: big market swings that we're used to in the world today, 62 00:03:34,600 --> 00:03:36,760 Speaker 4: that's just not the case. And we've seen you know, 63 00:03:36,800 --> 00:03:39,400 Speaker 4: a thirty percent jump over the past couple of Weeks's 64 00:03:39,600 --> 00:03:42,120 Speaker 4: that's getting way ahead of your skis in some sense 65 00:03:42,160 --> 00:03:43,960 Speaker 4: for what the authorities can deliver. 66 00:03:44,200 --> 00:03:46,440 Speaker 2: So we're just coming back from the Golden Week holiday. 67 00:03:46,480 --> 00:03:48,920 Speaker 2: Have we been able to look at any high frequency 68 00:03:49,000 --> 00:03:53,040 Speaker 2: data to see how consumers were behaving in that period. 69 00:03:54,360 --> 00:03:57,640 Speaker 4: Yeah, there, you know the consumers, it's not as much 70 00:03:57,680 --> 00:03:59,520 Speaker 4: as you would want. And I think that that's kind 71 00:03:59,520 --> 00:04:03,400 Speaker 4: of the problem here, is that the Chinese consumer is 72 00:04:03,480 --> 00:04:07,400 Speaker 4: not delivering in a way that is really going to 73 00:04:07,760 --> 00:04:11,280 Speaker 4: make people of confidence in China's growth at the moment. 74 00:04:11,680 --> 00:04:15,400 Speaker 4: And that's you know, we're seeing people just tighten their 75 00:04:15,400 --> 00:04:19,640 Speaker 4: belts across the board. We've seen, you know, bankers having 76 00:04:19,680 --> 00:04:22,479 Speaker 4: to give up bonuses, we've seen salary cuts, We've seen 77 00:04:23,240 --> 00:04:30,560 Speaker 4: prices following, restaurants giving details or deals on food and basics. So, 78 00:04:32,040 --> 00:04:36,160 Speaker 4: you know, Chinese people right now, they are very cautious 79 00:04:36,200 --> 00:04:40,000 Speaker 4: on spending. You know, the hope from the government was 80 00:04:40,080 --> 00:04:43,520 Speaker 4: in part that the stock market gains would make people 81 00:04:43,560 --> 00:04:47,000 Speaker 4: feel a bit richer and help this elusive concept of 82 00:04:47,400 --> 00:04:51,160 Speaker 4: confidence in the consumer. But you know that is fleeting. 83 00:04:51,200 --> 00:04:54,320 Speaker 4: As we've seen, markets can rise and they can fall 84 00:04:54,440 --> 00:04:55,640 Speaker 4: very quickly as well. 85 00:04:55,640 --> 00:04:57,919 Speaker 3: Dan, it's a little tricky because it seemed like, you know, 86 00:04:57,960 --> 00:05:01,200 Speaker 3: this has been such a long period of declient since 87 00:05:01,400 --> 00:05:04,000 Speaker 3: twenty twenty one, that you needed sort of a shock 88 00:05:04,040 --> 00:05:08,000 Speaker 3: in all moment, and then when you get it, then 89 00:05:08,360 --> 00:05:10,839 Speaker 3: you know when the response is so dramatic that you 90 00:05:10,839 --> 00:05:12,840 Speaker 3: feel that authorities want to go a little bit slower. 91 00:05:13,080 --> 00:05:14,960 Speaker 3: You can kind of feel their pain a little bit. 92 00:05:15,800 --> 00:05:20,000 Speaker 3: You would think that just incremental announcements of positive moves 93 00:05:20,000 --> 00:05:22,919 Speaker 3: on the market would be what the doctor ordered. And 94 00:05:22,960 --> 00:05:25,520 Speaker 3: we did get a little bit more this morning, in 95 00:05:25,560 --> 00:05:29,560 Speaker 3: addition to the announcement about the fiscal stimulus coming via 96 00:05:29,680 --> 00:05:33,800 Speaker 3: the Finance Minister, about the PBOC and its swamp facility 97 00:05:33,880 --> 00:05:39,040 Speaker 3: to start app accepting applications today from funds and insurance 98 00:05:39,080 --> 00:05:44,800 Speaker 3: companies and securities where these institutions can borrow against their 99 00:05:44,800 --> 00:05:47,360 Speaker 3: holdings and can buy backstock and that sort of thing. 100 00:05:47,839 --> 00:05:52,440 Speaker 3: Is this something that you're getting positive vibes from from investors? 101 00:05:52,760 --> 00:05:56,279 Speaker 4: Well, definitely, the moves on from the Chinese authorities, particularly 102 00:05:56,320 --> 00:05:59,479 Speaker 4: the PBOC to cut rates and that monetary stimulus and 103 00:05:59,560 --> 00:06:04,800 Speaker 4: to signal like support for stocks in general have have 104 00:06:05,000 --> 00:06:07,760 Speaker 4: been seen as positive signals. But I think what people 105 00:06:07,800 --> 00:06:11,679 Speaker 4: are waiting for is this fiscal firepower from the government, 106 00:06:11,720 --> 00:06:13,760 Speaker 4: and that has yet to come, and that's why there 107 00:06:13,800 --> 00:06:16,920 Speaker 4: was some disappointment earlier this week, and that's why there's 108 00:06:17,040 --> 00:06:20,279 Speaker 4: high hopes for this weekend that the Finance minister will deliver. 109 00:06:20,560 --> 00:06:24,560 Speaker 2: You mentioned earlier the possibility of China kind of mirroring 110 00:06:24,640 --> 00:06:27,800 Speaker 2: what happened in Japan over three decades beginning in the 111 00:06:27,839 --> 00:06:30,960 Speaker 2: late nineteen eighties early nineteen nineties. Do you think that's 112 00:06:31,160 --> 00:06:33,640 Speaker 2: underneath I mean, the fear of that kind of outcome 113 00:06:33,720 --> 00:06:38,520 Speaker 2: really underneath the motivation for a lot of the stimulus 114 00:06:38,520 --> 00:06:39,080 Speaker 2: that we have seen. 115 00:06:40,360 --> 00:06:43,920 Speaker 4: Yeah, the Chinese authorities have definitely studied the case in Japan, 116 00:06:44,000 --> 00:06:46,400 Speaker 4: and there's a lot of different views about whether China 117 00:06:46,480 --> 00:06:49,560 Speaker 4: is actually heading there or not. There's some key differences 118 00:06:49,600 --> 00:06:53,200 Speaker 4: among them. The fact that China is not as wealthy 119 00:06:53,240 --> 00:06:55,880 Speaker 4: as Japan was back in the day. Some acconas will 120 00:06:55,880 --> 00:07:01,040 Speaker 4: tell you that makes China's situation even potentially worse. But 121 00:07:01,279 --> 00:07:03,560 Speaker 4: what we're seeing more broadly from China is that they're 122 00:07:03,560 --> 00:07:09,120 Speaker 4: trying to deflate the property bubble while also maintaining some 123 00:07:09,320 --> 00:07:13,640 Speaker 4: growth in these bigger sectors like evs and solar panels 124 00:07:13,840 --> 00:07:17,160 Speaker 4: and kind of new energy type of stuff. And that's 125 00:07:17,160 --> 00:07:20,400 Speaker 4: why you see these dueling narratives about how China's domestic 126 00:07:20,440 --> 00:07:23,160 Speaker 4: economy is falling off a cliff. But at the same time, 127 00:07:23,280 --> 00:07:25,440 Speaker 4: China is taking over the world on all these major 128 00:07:26,240 --> 00:07:30,600 Speaker 4: manufacturing things and increasing trade tensions all around the globe. 129 00:07:30,640 --> 00:07:33,960 Speaker 4: And so that's really the conundrum is here, is how 130 00:07:34,000 --> 00:07:37,080 Speaker 4: do they successfully land the plane there and get back 131 00:07:37,080 --> 00:07:38,000 Speaker 4: to stable growth. 132 00:07:38,360 --> 00:07:42,080 Speaker 3: The Polar Bureau has pledged to stop housing market declines. 133 00:07:42,640 --> 00:07:44,840 Speaker 3: How would you assess the progress on that front? 134 00:07:46,000 --> 00:07:48,360 Speaker 4: They still have more to do. I mean, the measures 135 00:07:48,360 --> 00:07:51,520 Speaker 4: that they've released to buy unsold housing in particular have 136 00:07:51,680 --> 00:07:54,440 Speaker 4: not really caught fire yet, so there's a lot of 137 00:07:54,520 --> 00:07:56,760 Speaker 4: room to expand that we might hear more about that 138 00:07:57,360 --> 00:08:00,840 Speaker 4: on Saturday. What we're very clear on is that the 139 00:08:00,840 --> 00:08:06,720 Speaker 4: authorities view the drag on property sector as really too much. 140 00:08:06,760 --> 00:08:09,560 Speaker 4: It's kind of they do want to deflate the property sector, 141 00:08:09,600 --> 00:08:12,040 Speaker 4: but they don't want it dragging on GDP so much. 142 00:08:12,080 --> 00:08:14,240 Speaker 4: So all the gains that you're seeing in these other 143 00:08:14,320 --> 00:08:17,320 Speaker 4: sectors are being way offset. So the view is, okay, 144 00:08:17,400 --> 00:08:19,920 Speaker 4: if you could put a if you could stop the 145 00:08:19,920 --> 00:08:23,320 Speaker 4: bleeding on the property sector, not necessarily even boosted that much, 146 00:08:23,360 --> 00:08:28,240 Speaker 4: but just stop the downward spiral, then you could stabilize 147 00:08:28,280 --> 00:08:30,960 Speaker 4: the economy and the GDP number will look. 148 00:08:30,920 --> 00:08:34,439 Speaker 2: Better very quickly. Dan, do you think there's the possibility 149 00:08:34,480 --> 00:08:36,959 Speaker 2: that China could scale back a little bit on its 150 00:08:37,000 --> 00:08:40,920 Speaker 2: defense spending to have more ammunition u pun intended to 151 00:08:41,040 --> 00:08:43,760 Speaker 2: apply on the overall economy. 152 00:08:44,720 --> 00:08:49,720 Speaker 4: It's unlikely they would. I mean, they haven't really significantly 153 00:08:49,760 --> 00:08:53,240 Speaker 4: boosted defense spending as a proportion of GDP over the years, 154 00:08:53,240 --> 00:08:56,719 Speaker 4: and China's expenditures on defense are very opeque anyway, so 155 00:08:56,720 --> 00:08:59,920 Speaker 4: it would be very difficult to tell whether if they're 156 00:09:00,040 --> 00:09:02,160 Speaker 4: in fact doing that speakin. 157 00:09:01,960 --> 00:09:05,920 Speaker 3: With yeah, Dan, Thanks very much, Dan ten K, Bloomberg 158 00:09:06,000 --> 00:09:15,640 Speaker 3: Asia Eco Gov Executive Editor. Let's get to our guest, 159 00:09:15,679 --> 00:09:19,520 Speaker 3: you Ting Shao, macro strategists at State Street Global Markets. 160 00:09:20,559 --> 00:09:23,280 Speaker 3: You think there are a lot of headwinds or rather 161 00:09:23,360 --> 00:09:26,480 Speaker 3: tailwinds for US equities At the moment. It seems to 162 00:09:26,520 --> 00:09:30,920 Speaker 3: be telling a pretty positive story, but the valuations are high. 163 00:09:31,000 --> 00:09:33,640 Speaker 3: That seems to be one of the biggest blocks. If 164 00:09:33,679 --> 00:09:37,280 Speaker 3: history is your guide, you might not feel very comfortable 165 00:09:37,400 --> 00:09:41,199 Speaker 3: at these levels. So how do we justify these these 166 00:09:41,280 --> 00:09:44,280 Speaker 3: levels of valuation? Right? 167 00:09:44,840 --> 00:09:47,800 Speaker 1: So, I think given where we are in the US 168 00:09:47,800 --> 00:09:51,240 Speaker 1: equity space, there's still a lot of i think positivity 169 00:09:51,440 --> 00:09:56,720 Speaker 1: from the investor sentiment perspective, given that we are still 170 00:09:56,760 --> 00:09:59,360 Speaker 1: in this world where you know, earnings might quite a 171 00:09:59,400 --> 00:10:02,199 Speaker 1: bit and or the US said, you know, earning still 172 00:10:02,280 --> 00:10:04,880 Speaker 1: look to be quite resilient, and now that you are 173 00:10:05,320 --> 00:10:10,680 Speaker 1: entering this support of recounting cycle that overall is a 174 00:10:10,800 --> 00:10:13,719 Speaker 1: very friendly environment for equity. So even though you know, 175 00:10:13,800 --> 00:10:16,960 Speaker 1: valuation looks a bit a bit stressed, you don't really 176 00:10:16,960 --> 00:10:20,240 Speaker 1: see signs of things start to crack. So there's really not, 177 00:10:20,760 --> 00:10:23,040 Speaker 1: in our views, a lot of reasons to pull back 178 00:10:23,040 --> 00:10:23,920 Speaker 1: from this point. 179 00:10:24,320 --> 00:10:26,679 Speaker 2: Let's talk a little bit about China. It's hard to 180 00:10:26,880 --> 00:10:30,280 Speaker 2: ignore the amountain of stimulus measures that the government has 181 00:10:30,360 --> 00:10:34,400 Speaker 2: unveiled recently and the enthusiasm short lived as it may 182 00:10:34,440 --> 00:10:38,080 Speaker 2: have been in the equity space long term. Now are 183 00:10:38,360 --> 00:10:42,240 Speaker 2: you positive on China? Do you believe that this stimulus 184 00:10:42,320 --> 00:10:44,600 Speaker 2: is represents a pivot point. 185 00:10:46,080 --> 00:10:49,240 Speaker 1: Yeah. I think what we've seen so far is definitely 186 00:10:49,360 --> 00:10:54,000 Speaker 1: showing there is a sense of urgency from authorities, and 187 00:10:54,120 --> 00:10:56,600 Speaker 1: it is a bit of a pivot point when it 188 00:10:56,600 --> 00:10:59,640 Speaker 1: comes to you know, the last year and a half 189 00:10:59,720 --> 00:11:02,959 Speaker 1: of these meal measures we've seen versus what we've seen 190 00:11:03,600 --> 00:11:08,840 Speaker 1: this time around of more coordinated, more comprehensive combination policies 191 00:11:09,240 --> 00:11:13,240 Speaker 1: to really at least, you know, stabilize the sentiment, arrest 192 00:11:13,520 --> 00:11:16,560 Speaker 1: the weakening momentum. So I think to really achieve the 193 00:11:16,600 --> 00:11:19,640 Speaker 1: growth target at this point for the year, it's really 194 00:11:20,240 --> 00:11:22,640 Speaker 1: we are well in line to achieve that, but you know, 195 00:11:22,720 --> 00:11:26,920 Speaker 1: looking beyond that, we still need to see more, uh, 196 00:11:26,960 --> 00:11:29,880 Speaker 1: you know, data to really confirm on the macro side, 197 00:11:30,320 --> 00:11:33,760 Speaker 1: things that are recovering, especially from consumers and on real 198 00:11:33,840 --> 00:11:36,600 Speaker 1: estate side as well. So I think fiscal policy is 199 00:11:36,600 --> 00:11:39,360 Speaker 1: going to help, uh, you know, to really make this 200 00:11:40,000 --> 00:11:44,319 Speaker 1: rally more sustainable and really translate more into recovery on 201 00:11:44,360 --> 00:11:47,120 Speaker 1: the macro side. Of course, we will have the Ministry 202 00:11:47,160 --> 00:11:50,600 Speaker 1: of Finance briefing. It's upcoming this Saturday, so you know, 203 00:11:50,720 --> 00:11:53,040 Speaker 1: more details to be revealed by then. 204 00:11:53,559 --> 00:11:55,560 Speaker 3: Do you think that that's kind of a make or 205 00:11:55,600 --> 00:12:00,240 Speaker 3: break moment in that there was some disappointment after the NDRs. See, 206 00:12:00,280 --> 00:12:02,480 Speaker 3: you know, we know that that that's not the the 207 00:12:02,640 --> 00:12:05,640 Speaker 3: uh uh the source perhaps of new stimulus and the 208 00:12:05,640 --> 00:12:09,840 Speaker 3: Ministry of Finance actually is, but it seems like investors, 209 00:12:09,960 --> 00:12:12,320 Speaker 3: you know, they may be if if this, if they don't, 210 00:12:12,559 --> 00:12:15,360 Speaker 3: if he doesn't deliver on Saturday, you wonder what might. 211 00:12:15,240 --> 00:12:20,080 Speaker 1: Happen right right, There is definitely quite a bit of 212 00:12:20,120 --> 00:12:23,079 Speaker 1: disappointment out of the d r C briefing, where you know, 213 00:12:23,200 --> 00:12:26,440 Speaker 1: market was very excited going into it, hoping there's more 214 00:12:26,880 --> 00:12:29,600 Speaker 1: you know, to come after the Golden wik Holiday. Of course, 215 00:12:30,160 --> 00:12:33,080 Speaker 1: so I think to understand, you know, you do need 216 00:12:33,240 --> 00:12:35,880 Speaker 1: more as the people have it arguing on the physical side, 217 00:12:35,920 --> 00:12:39,319 Speaker 1: there needs, you know, to be done on the measures. 218 00:12:39,760 --> 00:12:41,880 Speaker 1: But I think whether it will be to make it 219 00:12:42,000 --> 00:12:44,400 Speaker 1: or break in a moment, we probably wouldn't be that 220 00:12:44,400 --> 00:12:48,000 Speaker 1: extreme because I think one thing that when need to 221 00:12:48,080 --> 00:12:51,320 Speaker 1: keep in mind is from the authority's perspective, they don't 222 00:12:51,360 --> 00:12:54,439 Speaker 1: necessarily want to think to see things moving too quickly 223 00:12:54,480 --> 00:12:57,960 Speaker 1: in one direction or the other. The very massive rally 224 00:12:58,000 --> 00:13:01,880 Speaker 1: we've seen, you know, does show that, you know, there 225 00:13:02,000 --> 00:13:05,800 Speaker 1: is this very entrenched parish underweight in the Chinese space, 226 00:13:05,840 --> 00:13:07,719 Speaker 1: which is why you see a lot of the shortcovering 227 00:13:08,400 --> 00:13:10,760 Speaker 1: you know, the rally into it. But they don't necessarily 228 00:13:10,840 --> 00:13:13,360 Speaker 1: want to see things going up twenty thirty percent in 229 00:13:13,440 --> 00:13:15,839 Speaker 1: the you know, in a span of one week and 230 00:13:15,960 --> 00:13:18,920 Speaker 1: that's not really sustainable, not very healthy either. 231 00:13:19,440 --> 00:13:21,720 Speaker 2: What is the house view, it's stayed straight on Chinese 232 00:13:21,800 --> 00:13:22,680 Speaker 2: equities right now. 233 00:13:24,080 --> 00:13:27,520 Speaker 1: We are neutral at this point. We were underweight going 234 00:13:27,559 --> 00:13:30,000 Speaker 1: into the simials measure, and I think for a lot 235 00:13:30,040 --> 00:13:32,200 Speaker 1: of people that's similar views as well. I think that 236 00:13:32,240 --> 00:13:34,800 Speaker 1: they've definitely surprised to the upside when it comes to 237 00:13:35,320 --> 00:13:38,200 Speaker 1: the overall combination of measures. But in our views, you know, 238 00:13:38,360 --> 00:13:41,400 Speaker 1: we think at the moment, you know, to chase the rally, 239 00:13:41,480 --> 00:13:44,800 Speaker 1: you need to see more. But you know, they have 240 00:13:44,960 --> 00:13:47,680 Speaker 1: done quite a bit and that is warranted adopt great 241 00:13:47,800 --> 00:13:49,320 Speaker 1: from underway to neutral. 242 00:13:50,000 --> 00:13:51,839 Speaker 3: The other one that's a little tricky to figure out 243 00:13:52,080 --> 00:13:55,040 Speaker 3: is the Japan market. The nick A is pushing forty 244 00:13:55,120 --> 00:13:59,360 Speaker 3: thousand again. Now it seems like there's been a little 245 00:13:59,360 --> 00:14:01,400 Speaker 3: bit of pressure on the BOJ and so the BOJ 246 00:14:01,559 --> 00:14:04,720 Speaker 3: has pulled back on normalizing just yet. But do you 247 00:14:04,760 --> 00:14:06,920 Speaker 3: have a positive view on Japan or not so much? 248 00:14:08,679 --> 00:14:12,240 Speaker 1: I think on the BOJ MITRO policy side, you know, 249 00:14:12,280 --> 00:14:14,160 Speaker 1: we think even though they're taking a bit of a 250 00:14:14,200 --> 00:14:18,680 Speaker 1: pause on the monetary policy normalization, the crucial matter is 251 00:14:18,800 --> 00:14:21,680 Speaker 1: we are still in this world where Japan is the 252 00:14:21,720 --> 00:14:24,800 Speaker 1: outlier with energy tenk space which is still on the 253 00:14:24,880 --> 00:14:28,640 Speaker 1: hiking paths when everyone else has started to cut, so 254 00:14:28,680 --> 00:14:32,360 Speaker 1: that you know, looking ahead, we are likely to get 255 00:14:32,400 --> 00:14:34,920 Speaker 1: more you know normalization, whether it's the end of this 256 00:14:35,000 --> 00:14:38,440 Speaker 1: year or heading into next year, because inflation is coming back, 257 00:14:38,560 --> 00:14:40,800 Speaker 1: you know, even though growth is not that strong at 258 00:14:40,800 --> 00:14:44,280 Speaker 1: the moment, there's definitely signs of inflation start to come 259 00:14:44,320 --> 00:14:47,120 Speaker 1: back to Japan and becoming more sustainable in the system. 260 00:14:47,200 --> 00:14:51,320 Speaker 1: So that does warrant the further normalization of policy and 261 00:14:51,840 --> 00:14:53,720 Speaker 1: a higher rate than that where we are at the 262 00:14:53,720 --> 00:14:57,120 Speaker 1: moment as the terminal. So for the currency side, as 263 00:14:57,160 --> 00:14:59,800 Speaker 1: a result of that, we are you know, in a 264 00:14:59,840 --> 00:15:02,080 Speaker 1: case and that we think potentially there could be more 265 00:15:02,160 --> 00:15:04,280 Speaker 1: strengths that coming into the end. So as a result 266 00:15:04,320 --> 00:15:07,120 Speaker 1: of that, you know that is going to you know, 267 00:15:07,360 --> 00:15:10,960 Speaker 1: both a little bit less well for the equity space, 268 00:15:11,000 --> 00:15:12,840 Speaker 1: and also you know, keep in mind you also have 269 00:15:13,120 --> 00:15:16,920 Speaker 1: quite a lot of this money that potentially can be 270 00:15:17,000 --> 00:15:20,280 Speaker 1: repatriated back into the Japan market once you start to 271 00:15:20,280 --> 00:15:23,800 Speaker 1: see JGB picking up and restart to go up, so 272 00:15:23,840 --> 00:15:26,320 Speaker 1: that there can be some rotation in that aspect as well. 273 00:15:26,960 --> 00:15:28,920 Speaker 3: All right, you think, thanks very much for joining us, 274 00:15:28,920 --> 00:15:32,680 Speaker 3: You team Shao, macro strategist at State Street Global Markets, 275 00:15:38,920 --> 00:15:41,440 Speaker 3: a closely look at markets. The next three days could 276 00:15:41,440 --> 00:15:44,600 Speaker 3: be very very interesting in Hong Kong and China. Joining 277 00:15:44,680 --> 00:15:48,320 Speaker 3: us now is Paul Dobson, Bloomberg Executive Editor for Asia 278 00:15:48,360 --> 00:15:52,600 Speaker 3: Markets in our studios in Singapore. So we had this 279 00:15:52,640 --> 00:15:57,680 Speaker 3: announcement yesterday that the Finance Ministry will address the public 280 00:15:57,760 --> 00:16:01,960 Speaker 3: on Saturday morning and we'll talk about strengthening fiscal policy. 281 00:16:02,080 --> 00:16:05,480 Speaker 3: So that's one very big thing. Also today, as of today, 282 00:16:05,520 --> 00:16:08,920 Speaker 3: the PBOC has set up this swap facility to allow 283 00:16:09,360 --> 00:16:13,480 Speaker 3: insurance companies and securities firms and funds to borrow to 284 00:16:13,520 --> 00:16:18,080 Speaker 3: get liquidity against their holdings to buy back shares. And 285 00:16:18,320 --> 00:16:21,880 Speaker 3: if you're looking for something that is tangible in the market, 286 00:16:21,960 --> 00:16:24,040 Speaker 3: I mean a lot of stimulus will help the economy, 287 00:16:24,040 --> 00:16:26,840 Speaker 3: but is it tangible in markets? This swap facility could 288 00:16:26,840 --> 00:16:29,560 Speaker 3: be tangible in markets. Paul, So, I guess the question 289 00:16:29,680 --> 00:16:32,960 Speaker 3: is are we at a turning point here in interpreting 290 00:16:33,000 --> 00:16:34,760 Speaker 3: how serious they are about stimulus? 291 00:16:35,760 --> 00:16:35,920 Speaker 2: Hi? 292 00:16:36,040 --> 00:16:40,240 Speaker 5: Hi that, Brian, I think it's the right question. I 293 00:16:40,240 --> 00:16:41,960 Speaker 5: don't know if I have a good answer for you, 294 00:16:42,040 --> 00:16:44,240 Speaker 5: because we still don't have enough details. And that's what 295 00:16:44,280 --> 00:16:47,760 Speaker 5: the streets is really crying out for now. We heard 296 00:16:47,800 --> 00:16:51,400 Speaker 5: from policymakers over the past few days saying they're willing 297 00:16:51,440 --> 00:16:54,680 Speaker 5: to listen to the markets in the marketplace. What companies want, 298 00:16:55,520 --> 00:16:58,680 Speaker 5: what people and traders and investors need, What they need 299 00:16:58,800 --> 00:17:03,560 Speaker 5: is more finds. They're stimulus not just to support the market, 300 00:17:03,560 --> 00:17:06,119 Speaker 5: but to support the underlying economy, to bring back that 301 00:17:06,160 --> 00:17:09,960 Speaker 5: consumer confidence to revive the property market. And we have 302 00:17:10,119 --> 00:17:12,760 Speaker 5: seen some signs and hints and clues as to it, 303 00:17:13,000 --> 00:17:15,200 Speaker 5: but really what we want to know is how big 304 00:17:15,280 --> 00:17:18,199 Speaker 5: is this package going to be, How extensive is it 305 00:17:18,280 --> 00:17:21,240 Speaker 5: going to be in order for people to really be 306 00:17:21,359 --> 00:17:25,120 Speaker 5: to convince and to carry on buying into this massive 307 00:17:25,680 --> 00:17:28,359 Speaker 5: upswing that we've seen over the past few weeks of 308 00:17:28,440 --> 00:17:31,919 Speaker 5: trading around the holiday. So that's where the market is 309 00:17:31,960 --> 00:17:35,560 Speaker 5: so nervous right now. It's very interesting to see that 310 00:17:35,640 --> 00:17:37,760 Speaker 5: this briefing is going to take place on a Saturday 311 00:17:38,080 --> 00:17:40,600 Speaker 5: while markets are closed. Maybe that keeps things a little 312 00:17:40,640 --> 00:17:43,840 Speaker 5: bit calmer for them to give those announcements and make 313 00:17:43,840 --> 00:17:47,159 Speaker 5: sure that they're properly explained. But the market is still 314 00:17:47,400 --> 00:17:49,600 Speaker 5: wondering whether we will actually get any figures from that, 315 00:17:49,680 --> 00:17:52,679 Speaker 5: whether it's the Finance Ministry, that is the right place 316 00:17:52,720 --> 00:17:56,480 Speaker 5: to to announce those numbers which are so crucial on 317 00:17:56,520 --> 00:17:57,800 Speaker 5: which people are waiting to hear. 318 00:17:58,119 --> 00:18:01,040 Speaker 2: Poll as you know, I mean, has been stuck in 319 00:18:01,080 --> 00:18:03,880 Speaker 2: this deflationary trap for some time. But I'm wondering whether 320 00:18:04,000 --> 00:18:06,199 Speaker 2: or not historically you can look at a period of 321 00:18:06,240 --> 00:18:10,080 Speaker 2: time and maybe make an analogy. Is there a time 322 00:18:10,240 --> 00:18:15,800 Speaker 2: when regulators' authorities in Beijing essentially through everything and the 323 00:18:15,880 --> 00:18:19,359 Speaker 2: kitchen sink at the problem to try to pivot and 324 00:18:19,800 --> 00:18:23,760 Speaker 2: turn a very bad sentiment into something that is a 325 00:18:23,760 --> 00:18:24,640 Speaker 2: lot more positive. 326 00:18:25,720 --> 00:18:29,439 Speaker 5: Yeah, I mean, yeah, there's a track record of it. 327 00:18:29,520 --> 00:18:32,679 Speaker 5: And I think people are almost as worried about how 328 00:18:32,800 --> 00:18:35,560 Speaker 5: that has led to a kind of overheating of the 329 00:18:35,600 --> 00:18:38,080 Speaker 5: markets that then turned into a bubble that then burst 330 00:18:38,520 --> 00:18:42,520 Speaker 5: as they are about the possibility of under delivery, which 331 00:18:42,560 --> 00:18:44,919 Speaker 5: is what has been the theme over the last few years. 332 00:18:45,280 --> 00:18:48,680 Speaker 5: So you know, think about some of those previous stimulus 333 00:18:48,680 --> 00:18:52,359 Speaker 5: bursts that we've seen going way back into the early 334 00:18:52,400 --> 00:18:56,000 Speaker 5: part of this millennium, and some of the booms and 335 00:18:56,040 --> 00:18:58,719 Speaker 5: bus cycles that we've seen so throw in the kitchen 336 00:18:58,800 --> 00:19:02,840 Speaker 5: sink at it will nearly are all going for you know, 337 00:19:03,160 --> 00:19:06,080 Speaker 5: growth based on exports and that kind of thing, old 338 00:19:06,840 --> 00:19:10,359 Speaker 5: old Willstonmias building white elephant projects. That's not really what 339 00:19:10,400 --> 00:19:13,320 Speaker 5: people want to see. Yes, it will provide that temporary 340 00:19:13,359 --> 00:19:17,199 Speaker 5: sugar rush, but it's not going to be sustainable. And okay, 341 00:19:17,240 --> 00:19:20,560 Speaker 5: so speculators will rush in and jump onto the bandwagon 342 00:19:20,600 --> 00:19:23,960 Speaker 5: and push those asset prices higher. But what the rest 343 00:19:23,960 --> 00:19:26,560 Speaker 5: of the world. What you know, international investors, you've taken 344 00:19:26,600 --> 00:19:29,040 Speaker 5: their money out of China over the past few years, 345 00:19:29,080 --> 00:19:31,840 Speaker 5: want to see is more of a conviction to long 346 00:19:31,920 --> 00:19:36,520 Speaker 5: term economic reform and growth, not just in terms of manufacturing, 347 00:19:36,520 --> 00:19:39,040 Speaker 5: which has been extremely successful, but also in terms of 348 00:19:39,760 --> 00:19:42,720 Speaker 5: consumer and pushing that narrative. 349 00:19:43,400 --> 00:19:46,000 Speaker 3: Well, Paul, the market seems a little out of step 350 00:19:46,080 --> 00:19:49,000 Speaker 3: with what the economy has produced over the past three 351 00:19:49,080 --> 00:19:52,119 Speaker 3: or four years because we've seen such a huge dark 352 00:19:52,200 --> 00:19:55,919 Speaker 3: cloud over over markets in China that you know, you 353 00:19:56,000 --> 00:19:58,919 Speaker 3: have a situation where for Hong Kong, for instance, Hangsing 354 00:19:59,000 --> 00:20:02,720 Speaker 3: Index down from more than thirty one thousand, creating down 355 00:20:02,760 --> 00:20:06,560 Speaker 3: around the fifteen sixteen thousand level, the CSI three hundred, 356 00:20:06,600 --> 00:20:08,520 Speaker 3: you know, down in the three thousands when it was 357 00:20:08,840 --> 00:20:12,040 Speaker 3: well up over fifty five hundred at one point. So 358 00:20:12,720 --> 00:20:14,840 Speaker 3: it does seem that, you know, a lot of this 359 00:20:14,920 --> 00:20:16,920 Speaker 3: is self inflicted. I mean, they came out with some 360 00:20:17,119 --> 00:20:21,680 Speaker 3: very very powerful anti private sector policies over the past 361 00:20:21,680 --> 00:20:23,880 Speaker 3: three years, and maybe this is just a little bit 362 00:20:24,080 --> 00:20:25,680 Speaker 3: kind of writing the ship a bit. 363 00:20:26,880 --> 00:20:29,920 Speaker 5: Yes, yeah, writing the ship a little bit. The valuations 364 00:20:29,920 --> 00:20:32,880 Speaker 5: are still relatively low, even after the rally that we've 365 00:20:32,920 --> 00:20:36,440 Speaker 5: seen in the past few weeks. I think that that's 366 00:20:36,480 --> 00:20:42,880 Speaker 5: really the key to their longer term trajectory. So much 367 00:20:42,880 --> 00:20:45,680 Speaker 5: of our reporting over the last year year and a 368 00:20:45,720 --> 00:20:49,760 Speaker 5: half has been about international investors, you know, US pension funds, 369 00:20:49,800 --> 00:20:54,240 Speaker 5: index trackers, emerging market investors looking at ways of reducing 370 00:20:54,280 --> 00:20:58,359 Speaker 5: their holdings of China, lowering the benchmark waiting that they're 371 00:20:58,480 --> 00:21:02,520 Speaker 5: using to follow China in emerging market indexes, or just 372 00:21:02,720 --> 00:21:07,320 Speaker 5: you know, kind of deciding that it's too risky and 373 00:21:07,359 --> 00:21:10,720 Speaker 5: you know, taking holdings all the way to zero. If 374 00:21:10,880 --> 00:21:13,720 Speaker 5: China wants to bring that international money back, it's got 375 00:21:13,720 --> 00:21:17,320 Speaker 5: to create a much more stable regulatory framework, much more reliable, 376 00:21:17,600 --> 00:21:20,920 Speaker 5: and much more long term for that sustainable investment flow 377 00:21:20,960 --> 00:21:21,520 Speaker 5: to come back here. 378 00:21:21,680 --> 00:21:24,920 Speaker 3: Yeah, and to get consumers feeling at least a little 379 00:21:24,960 --> 00:21:28,000 Speaker 3: bit comfortable for spending their hard earned dollars. Paul, thanks 380 00:21:28,040 --> 00:21:30,680 Speaker 3: so much for joining us. Paul Dobson, Bloomberg Executive Editor 381 00:21:30,720 --> 00:21:31,720 Speaker 3: for Asia Markets. 382 00:21:34,680 --> 00:21:37,600 Speaker 2: This has been the Bloomberg Daybreak Asia podcast, bringing you 383 00:21:37,680 --> 00:21:40,800 Speaker 2: the stories making news and moving markets in the Asia Pacific. 384 00:21:41,280 --> 00:21:44,400 Speaker 2: Visit the Bloomberg Podcast channel on YouTube to get more 385 00:21:44,440 --> 00:21:48,040 Speaker 2: episodes of this and other shows from Bloomberg. Subscribe to 386 00:21:48,080 --> 00:21:51,879 Speaker 2: the podcast on Apple, Spotify, or anywhere else you listen, 387 00:21:51,960 --> 00:21:55,040 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 388 00:21:55,080 --> 00:21:56,160 Speaker 2: Bloomberg Business app.