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Speaker 1: Let's bring in Mark Matthews Marcus our guest. He is

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Speaker 1: head of Asia research at Julius Bear on the line

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Speaker 1: from Singapore. I think we got to talk about what's

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Speaker 1: going on in China, don't you, Mark? I mean right away,

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Speaker 1: it seems as though we've made not only a hard turn,

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Speaker 1: but it would appear that there's no going back. Is

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Speaker 1: are we reading too much into this? I don't think

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Speaker 1: we are, doug. I think this is much better than

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Speaker 1: what anybody in the market had expected. And in fact,

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Speaker 1: after those protests which started around two weeks ago, most

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Speaker 1: political analysts, most experts on Chinese politics, said we were

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Speaker 1: going to get a big crackdown and that didn't happen.

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Speaker 1: So I think there's a few things to be said.

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Speaker 1: One thing is they need a more comprehensive plan. This

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Speaker 1: whole thing seems to be done willy nilly, and it's

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Speaker 1: up to each city to decide. And uh so it's

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Speaker 1: very messy. Um. Then again, if I remember the reopening

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Speaker 1: after OVID in various other parts of the world, it

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Speaker 1: was not dissimilar. Um. And then how do the authorities

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Speaker 1: deal with the inevitable outbreaks? Um, that's another question. And

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Speaker 1: how to how to consumers and businesses react to to

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Speaker 1: this new environment that that they you know, it's been

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Speaker 1: a long time since they could operate freely, so how

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Speaker 1: are they going to react to getting COVID? How are

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Speaker 1: they going to react to getting vaccines? So all that

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Speaker 1: I think is in front of us. But I just

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Speaker 1: think back to my own experience here in Singapore um

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Speaker 1: where they were very tough frankly until about eight months ago,

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Speaker 1: and then they suddenly lifted it all. They just got

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Speaker 1: rid of all the border controls and the mask wearing

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Speaker 1: and everything, and it took a couple of months, but

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Speaker 1: we're basically back to normal now here. And I think

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Speaker 1: China can achieve that too, Hey, Mark, Steve Angel here.

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Speaker 1: You know, China does work a little bit differently than

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Speaker 1: the rest of the world. Is we've seen, I mean,

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Speaker 1: there's been false dawns on the reopening of China that before.

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Speaker 1: What should the investors take be on this time around,

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Speaker 1: given that there there could be risk that these moves

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Speaker 1: coming just so quickly after those protests were simply to

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Speaker 1: mollify the protesters, and that COVID zero is still going

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Speaker 1: to be in place, especially as you alluded to the

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Speaker 1: winter COVID season could be bad. Steve, I actually think

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Speaker 1: you know a lot more about China than me, so

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Speaker 1: I should give you an answer. I'd rather hear what

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Speaker 1: you think. But no, I think that they it looks

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Speaker 1: to me, and I have no inside information on this.

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Speaker 1: I just think it looks like they've made a big decision. Um.

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Speaker 1: And all the things I see coming out of China

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Speaker 1: point to that. I mean I remember seeing something somebody

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Speaker 1: posted on Twitter over the weekend the Guang Joe Tower,

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Speaker 1: the Canton Tower, the tallest building in Guang Joe and

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Speaker 1: a big sign of the top saying your your own

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Speaker 1: health is your own personal responsibility. Um. So I think

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Speaker 1: this is a real change. And I don't think they're

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Speaker 1: going to back down. Okay, so if we risk they do,

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Speaker 1: but I don't think they will. Okay, Let's let's kind

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Speaker 1: of work from that basis. Then do you put money

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Speaker 1: to work now in China? I mean in an aggressive way?

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Speaker 1: Or do you want to dip your toe into the water.

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Speaker 1: I think you do. I think Hong Kong is still

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Speaker 1: very battered and cheap. It's on point eight times book

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Speaker 1: and it was as low as point six five. But

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Speaker 1: I don't think the hang sent should be below one time,

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Speaker 1: so I think there's twenty percent upside in Hong Kong

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Speaker 1: at least, and I think that could happen very quickly.

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Speaker 1: It could happen before the end of this year. Mark globally,

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Speaker 1: how are you looking at what the FED might do

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Speaker 1: or might not do. I mean that that unexpected services

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Speaker 1: reading gave some you know, wind in the sales of

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Speaker 1: those who as saying that inflation is still pretty strong

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Speaker 1: and that the FED is going to tackle it at

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Speaker 1: all costs. Well, that's right, Stephen. And you add the

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Speaker 1: strong wage growth that came out on Friday for November.

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Speaker 1: But I think it's a good thing that the service

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Speaker 1: side of the economy is strong, that wages are rising,

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Speaker 1: because it means if there is a recession, which of

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Speaker 1: course a lot of models suggest there will be in

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Speaker 1: the United States, that it will be a mild one.

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Speaker 1: So um, I actually view both those data points as positives.

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Speaker 1: And in Powell's speech last week that he gave on Wednesday,

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Speaker 1: I believe he talked about inflation expectations for the first

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Speaker 1: time since August twenty twenty, because since August twenty twenty,

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Speaker 1: he's been telling us that they can't forecast inflation in

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Speaker 1: this environment and they have to rely on hard data.

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Speaker 1: So the fact that he's talking about expectations again, I

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Speaker 1: think it's very encouraging, and I think it means they're

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Speaker 1: not going to wait for that elusive two percent before

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Speaker 1: they pause him, before they stopped Mark, You've been around

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Speaker 1: markets for a long time, and I'm wondering whether or

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Speaker 1: not this notion of inflation remain ng at elevated levels

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Speaker 1: for some time, it maybe at risk of coming undone,

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Speaker 1: and that there is a perhaps some probability that we

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Speaker 1: could see a sharp drop in the level of inflation.

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Speaker 1: I mean, maybe the China reopening is a part of

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Speaker 1: that story. Maybe we get some shift in the winds

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Speaker 1: of war in Ukraine in the new year. Could we

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Speaker 1: see a sharp deceleration, an abrupt deceleration in the rate

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Speaker 1: of inflation. Dog, You're making it sound like I was

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Speaker 1: around back in the early eighties, which I was. I

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Speaker 1: was in high school, but I used to go down

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Speaker 1: and visit my uncle, who was a stockbroker, and I

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Speaker 1: would hear the fouless language that he and his colleagues

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Speaker 1: would use to describe. Let's dispense with the language, give

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Speaker 1: me the model does it well, I won't give you

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Speaker 1: the language, but I'll just say yes, we are much

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Speaker 1: more optimistic than the consensus. We think inflation is going

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Speaker 1: to really cool down fast. We're looking for about three

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Speaker 1: three and a half by this time next year. And actually,

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Speaker 1: if you plug in the current market data for the

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Speaker 1: rental market in the United States, the core CPI would

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Speaker 1: be about three, not six percent. So we all know

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Speaker 1: that the rents are coming down very fast in America

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Speaker 1: and uh, intuitively that's going to show up in the

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Speaker 1: pc and the CPI readings. I come back to the

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Speaker 1: China opening up story. Doesn't that potentially stoke inflation commodity inflation? Yeah,

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Speaker 1: you think so, um, but we actually see a large

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Speaker 1: surplus of oil um that we think is enough to

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Speaker 1: counteract that they have lots of coal in China, and

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Speaker 1: I don't think they're gonna risk uh their recovery if

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Speaker 1: they really are going to get a strong economic recovery,

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Speaker 1: which by the way, I should say, I think it's

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Speaker 1: not going to happen overnight and it will take them

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Speaker 1: a while, uh to get back, you know, to where

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Speaker 1: they were before. So anyway, long story short, we think

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Speaker 1: commodities go lower, not higher, and um, we think there's

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Speaker 1: more than enough of them around the Yes, energy. Speaking

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Speaker 1: of energy, it's curious. I think Reuter's was reporting earlier

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Speaker 1: in the week that Si Jinping is headed to Saudi

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Speaker 1: Arabia and he will arrive in Ri odd on the seventh,

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Speaker 1: which I think is in about a day from now,

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Speaker 1: and ostensibly to talk about the energy situation, Mark thirty

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Speaker 1: seconds less than that fifteen Give me your best idea

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Speaker 1: for a trade today Hong Kong. I think Hong Kong

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Speaker 1: has got a lot more to go. It's still trading

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Speaker 1: at distress prices, and it should not be. Before the

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Speaker 1: protests in twenty nineteen, it had never gone below one

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Speaker 1: time's book, even in the Asian crisis, even in stars,

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Speaker 1: even in the global financial crisis. UM, I think that's

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Speaker 1: the best place right. Mark Matthews says, by Hong Kong.

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Speaker 1: Thanks Mark. Mark is the head of Asia research at

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Speaker 1: Julius Barrett. Joining us here on day Break Asia