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Speaker 1: Let's get to our guess now. Kinder Law is chief

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Speaker 1: at China equity strategist at Goldman Sex with us in

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Speaker 1: our Hong Kong studio. We have only got to just

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Speaker 1: over a month left of the year, Kinja, and you're

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Speaker 1: already getting Nomura lowering their forecast for China's economic growth

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Speaker 1: for this year and next. How much of a worry

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Speaker 1: is it when you see those pictures at the Fox

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Speaker 1: complaint of protests that China's COVID zero strategy is very

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Speaker 1: much hampering growth here. Yeah, thanks Juliet, and it's great

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Speaker 1: to be here now. Um, I think it's fair to

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Speaker 1: say that the rising COVID cases and the corresponding um

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Speaker 1: COVID restrictions have put quite meaningful parishes on the on

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Speaker 1: the economy as a whole. Now, if you look at

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Speaker 1: our full year forecast for this year, we are only

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Speaker 1: looking at three pc growth for Chinese gdp UM. But

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Speaker 1: I think the picture will look substantially better going into

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Speaker 1: two thousand twenty three. Our current forecasts four point five

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Speaker 1: for the full year, assuming that the re opening impulse

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Speaker 1: will start to kick in in the second half of

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Speaker 1: next year. So just to terrify, we think that trying

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Speaker 1: to we started, we opened, or relax gradually relax is

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Speaker 1: COVID serial strategy or policy starting in second quarter, So

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Speaker 1: that's a that's a big delta. Yeah, it's going to

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Speaker 1: be a long and protracted, possibly messy reopening. We are

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Speaker 1: just getting the daily COVID case numbers as well, seven

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Speaker 1: fifty four, which is the most during the pandemic, So

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Speaker 1: a record there. I mean that just comes back to

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Speaker 1: the complicated picture of how all this works. And I

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Speaker 1: guess how protracted a reopening would be, what would it

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Speaker 1: look like? It will be a long process, juliet um

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Speaker 1: I and I think obviously it's subject to a lot

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Speaker 1: of uncertainty and different variables, how the virus will played

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Speaker 1: oft from here in terms of mutation, and how quickly

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Speaker 1: can China ramp up uh the necessary infrastructure in terms

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Speaker 1: of medical support to contain the COVID situation. But I

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Speaker 1: guess when it comes to the equity market, one thing

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Speaker 1: that we are pretty uh, I would say a pretty

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Speaker 1: sure about is market is always forward looking, and as

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Speaker 1: long as we are getting more policy signal or signpost

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Speaker 1: that China is moving away from kind of serial COVID regime,

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Speaker 1: then I think the market will start to to do

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Speaker 1: better going into two three and one. Thing that just

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Speaker 1: some point the highlight here. As you mentioned, we are

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Speaker 1: now heat seeing record high COVID cases. We put it

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Speaker 1: by the authorities UM. And if you look at the

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Speaker 1: CDs that are designated as medium to high risks area UH,

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Speaker 1: they represent more than fifty of the economy in terms

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Speaker 1: of GDP, but the actual disruption to the economy is

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Speaker 1: actually lower than where we were about a few six

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Speaker 1: moms ago when Shanha was in broad lockdown. So let's

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Speaker 1: talk about some of your picks. I noticed one of

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Speaker 1: your colleagues is upgraded Country Garden to neutral. But at

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Speaker 1: the same time, your chief economists told us yesterday that

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Speaker 1: the zero tolerance approach to combating infections is actually going

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Speaker 1: to curb the benefits that were expecting from that sixteen

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Speaker 1: point property plan to support the sector. How do you

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Speaker 1: view the property players going into now UM fund fund

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Speaker 1: fundamental UM perspective, We re mean relatively cautious on the

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Speaker 1: actual housing market activity going into next year. So our

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Speaker 1: current forecast continued to suggest that nationwide property sales will

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Speaker 1: be down ten percent in two twenty three after kind

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Speaker 1: of correcting like fort so far in this year. Now

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Speaker 1: the tempersent drop will likely be driven many by UM

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Speaker 1: volume declined, but prices essentially staying flat on our forecast.

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Speaker 1: So the big picture here is that we're not expecting

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Speaker 1: any sort of near term recovery in housing activity um

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Speaker 1: at US going into next year. But the reason why

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Speaker 1: we are turning a little bit more positive on the

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Speaker 1: asset market side of things is because, as you mentioned,

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Speaker 1: the sixteen policy measures just came out just a week ago.

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Speaker 1: Essentially we think that these measures will help reduce the

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Speaker 1: left held risks that are embedded in asset markets, whether

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Speaker 1: it is equities or fixed incomes or credits, so essentially

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Speaker 1: help these securities to re rate to a more reasonable

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Speaker 1: level from a longer term fundamental outlook standpoint. So a

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Speaker 1: sixteen percent forecast return for MCI China Index and the

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Speaker 1: cs I three hundred next year, you know you could

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Speaker 1: are you coming off potentially some low bases there? What

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Speaker 1: what sectors are going to outperform here? I think on

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Speaker 1: a more tactical or sychnical basis, we like UM did

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Speaker 1: we opening beneficiaries story? Um? So we have and we

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Speaker 1: have actually upgraded a number of consumer related sectors to

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Speaker 1: overweight for marketware including consumer services, medical services, and at

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Speaker 1: the same time retaining our overweight stands on online retailing

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Speaker 1: and consumer staples. So and the grand schmeal of thing

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Speaker 1: is it's more like a very heavy tiot to the

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Speaker 1: consumer sectors to really start to us in twenty three

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Speaker 1: in anticipation of the reopening UM expectation that we just

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Speaker 1: talked about UM. But on a long term basis, we

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Speaker 1: think that you have to align your portfolio worth policy

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Speaker 1: directions in China to make some money in the equity market.

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Speaker 1: So in that sense, we're we have been highlighting a

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Speaker 1: thing what we call as Chinese little giants, basically our

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Speaker 1: small metcaps emerging companies resigning in strategically important sectors for

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Speaker 1: China long term growth such as cap goods, new materials,

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Speaker 1: semiconductor and hardware technology hardware. What about where we see

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Speaker 1: the movement of the one and how that kind of

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Speaker 1: is it gets a risk for Chinese exports in the

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Speaker 1: long run. Well, UM, I think the I would say

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Speaker 1: on looking at just the R and B versus the data,

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Speaker 1: which is obviously the key cross that many infanstors look at,

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Speaker 1: we expect a little further downside from here or depreciation

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Speaker 1: pressures for the R and B in the next three months.

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Speaker 1: As we expect the fact will not finish the hiking

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Speaker 1: cycle until May next year, but after that we think

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Speaker 1: there could be some moderate appreciation potential for the R

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Speaker 1: and B, particularly given the reopening impulse that we are

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Speaker 1: forecasting to take place in second of the next year.

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Speaker 1: Um So, I think that continues to put UM the

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Speaker 1: R and B at a relatively comparative level in the meantime,

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Speaker 1: um So, uh the in depresation or one depresiation and appreciation,

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Speaker 1: I don't think that's too much of a concern to

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Speaker 1: how we think about the export compeativeness for China. And

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Speaker 1: just very quickly China signaling this lie clear triple our

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Speaker 1: cut to aid the growth. When could we see that? Well,

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Speaker 1: if you look at the past few UM episodes, usually

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Speaker 1: after the policymakers hindered about potential triple cuts or interest

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Speaker 1: rate cuts, that cut will would normally come two or

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Speaker 1: three days after after that policy signal. So we expect

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Speaker 1: something to be announced probably today or over the weekend. Keiner,

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Speaker 1: always a pleasure, Thank you. Kinjilau is Chief China Equity

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Speaker 1: strategist at Goldman Sex with us in our Hong Kong

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Speaker 1: studio