1 00:00:00,080 --> 00:00:02,600 Speaker 1: Let's get to Rainer. Michael Price, our guest for the 2 00:00:02,640 --> 00:00:06,400 Speaker 1: half hour. Mike is a partner also portfolio strategist at 3 00:00:06,480 --> 00:00:09,880 Speaker 1: Das Family Office. He joins from Singapore. Mike, it's always 4 00:00:09,880 --> 00:00:12,600 Speaker 1: a pleasure. It's a critical week for inflation. I think 5 00:00:12,680 --> 00:00:15,440 Speaker 1: we can agree on that. We've got numbers here in 6 00:00:15,480 --> 00:00:18,560 Speaker 1: the US, the CPI data on Wednesday, Thursday it's pp 7 00:00:18,720 --> 00:00:22,759 Speaker 1: I and midweek of course, the inflation data UH in China. 8 00:00:23,280 --> 00:00:25,759 Speaker 1: To what extent do you have a sense that we're 9 00:00:25,880 --> 00:00:28,639 Speaker 1: very near peak inflation, particularly when you look at the 10 00:00:28,640 --> 00:00:32,680 Speaker 1: pullback that we have seen in the energy markets. I 11 00:00:32,720 --> 00:00:35,440 Speaker 1: think it's a very high probability that we're potentially close 12 00:00:35,479 --> 00:00:37,839 Speaker 1: to what the media might call peak inflation. Also, I 13 00:00:37,840 --> 00:00:41,199 Speaker 1: think the key point for investors and the audience, for 14 00:00:41,240 --> 00:00:43,080 Speaker 1: everybody to remember is that I think in the world 15 00:00:43,080 --> 00:00:47,320 Speaker 1: where the seven hundred billion spending packages called Inflation Reduction 16 00:00:47,360 --> 00:00:50,200 Speaker 1: Act one cannot be too bearish on the equity market 17 00:00:50,280 --> 00:00:54,440 Speaker 1: in my view, so inflation, most transitrial along, it's peaked. 18 00:00:55,840 --> 00:00:58,280 Speaker 1: We're too next for the For the FED, though, what's 19 00:00:58,320 --> 00:01:02,040 Speaker 1: the path they hit for rate increases? I think, look, 20 00:01:02,040 --> 00:01:03,480 Speaker 1: I mean, I mean, this is again the key point 21 00:01:03,480 --> 00:01:06,400 Speaker 1: of the narrative as ever, as many people might recall, 22 00:01:06,560 --> 00:01:09,880 Speaker 1: was it was temporary. Now I think the the acceptance 23 00:01:09,920 --> 00:01:12,880 Speaker 1: has been that it's higher for longer. But then again, 24 00:01:12,920 --> 00:01:16,440 Speaker 1: don't forget the Russian Central Bank raised interest rates and 25 00:01:16,480 --> 00:01:18,600 Speaker 1: according to Bloomberg data of the Russian ruble is the 26 00:01:18,640 --> 00:01:21,160 Speaker 1: best performing currency in the world. But I think more portly, 27 00:01:21,240 --> 00:01:24,080 Speaker 1: I think in the US scenario, as the US is 28 00:01:24,080 --> 00:01:26,880 Speaker 1: the world reserve currency, I think the FED most probably 29 00:01:26,920 --> 00:01:30,480 Speaker 1: will manage to engineer soft lending in the sense that 30 00:01:31,080 --> 00:01:34,000 Speaker 1: higher interest rates don't necessarily lead to earnings recession, and 31 00:01:34,000 --> 00:01:35,920 Speaker 1: that has been the concern in the market. People who 32 00:01:35,920 --> 00:01:38,960 Speaker 1: are who are bearish equities increasingly felt that we could 33 00:01:38,959 --> 00:01:41,759 Speaker 1: see an earnings recession that partentually I think is off 34 00:01:41,760 --> 00:01:43,840 Speaker 1: the table, especially if we have the so called inflation 35 00:01:43,880 --> 00:01:46,840 Speaker 1: Reduction Act. So you believe that the bond market has 36 00:01:46,880 --> 00:01:48,800 Speaker 1: it wrong, and I'm looking at the inversion in that 37 00:01:48,920 --> 00:01:51,360 Speaker 1: to the ten years segment. I mean, what it seems 38 00:01:51,360 --> 00:01:53,440 Speaker 1: to be suggesting is that the FED is going to 39 00:01:53,640 --> 00:01:56,880 Speaker 1: make a mistake and that inflation or rather recession will ensue. 40 00:01:56,920 --> 00:02:00,640 Speaker 1: You don't buy that, no, I think it be dangerous 41 00:02:00,680 --> 00:02:03,640 Speaker 1: to be in that camp of thinking is I think 42 00:02:03,640 --> 00:02:06,640 Speaker 1: what we might actually see going forward is that we 43 00:02:06,680 --> 00:02:09,720 Speaker 1: could see a sentiment shift again from no reset, no 44 00:02:09,800 --> 00:02:12,959 Speaker 1: earning supercession, but two stocks as an inflation hedge. I 45 00:02:13,000 --> 00:02:16,120 Speaker 1: think that's potentially could become the new narrative. And this, 46 00:02:16,520 --> 00:02:19,800 Speaker 1: if you think about it, equities have historically have been 47 00:02:19,800 --> 00:02:23,040 Speaker 1: in a hedge against inflation. So just because the Fed 48 00:02:23,160 --> 00:02:24,960 Speaker 1: is raising rates doesn't mean that you have to become 49 00:02:25,160 --> 00:02:28,359 Speaker 1: ultra barish on the equity market. That verrative, I think 50 00:02:28,440 --> 00:02:30,800 Speaker 1: is about to shift in the second half. The equity 51 00:02:30,840 --> 00:02:33,480 Speaker 1: markets really do seem to be struggling for conviction and 52 00:02:33,520 --> 00:02:36,680 Speaker 1: direction right now. When do you see a breakout happening 53 00:02:36,680 --> 00:02:41,000 Speaker 1: in in either direction? I think technically it's important that 54 00:02:41,040 --> 00:02:43,480 Speaker 1: we reclaimed the four thousand handle on the SMP, and 55 00:02:43,480 --> 00:02:46,480 Speaker 1: I think four thousand, three hundred to four thousand, six 56 00:02:46,520 --> 00:02:48,720 Speaker 1: hundred on the SMP potentially is a is a higher 57 00:02:48,800 --> 00:02:52,880 Speaker 1: higher probability outcome by by the second half, So I 58 00:02:52,919 --> 00:02:55,520 Speaker 1: think it drop below three thousand, eight hundred is increasingly 59 00:02:55,639 --> 00:02:58,400 Speaker 1: less likely, especially now since we have the Inflation Reduction 60 00:02:58,440 --> 00:03:03,279 Speaker 1: Act and were talking before the break about the possibility 61 00:03:03,360 --> 00:03:05,639 Speaker 1: of a soft landing in the United States. Becoming a 62 00:03:05,680 --> 00:03:08,720 Speaker 1: little more real. But how likely is that in some 63 00:03:08,919 --> 00:03:11,440 Speaker 1: of the other world's major economies. And I want to 64 00:03:11,480 --> 00:03:16,960 Speaker 1: start with the Eurozone, where things look somewhat more bleak. Yeah, look, 65 00:03:16,960 --> 00:03:19,800 Speaker 1: at my opinion, the Eurozone or eual European equities are 66 00:03:19,800 --> 00:03:22,280 Speaker 1: actually the biggest loser out of the unfortunate war in 67 00:03:22,280 --> 00:03:28,040 Speaker 1: the Ukraine. Okay, that seems clear. I mean, do you 68 00:03:28,080 --> 00:03:31,560 Speaker 1: maybe take the contrarian view and say that things are 69 00:03:31,639 --> 00:03:34,200 Speaker 1: cheap for a reason, and maybe I want to add 70 00:03:34,240 --> 00:03:37,440 Speaker 1: to some supply right now on the hope that things 71 00:03:37,760 --> 00:03:40,960 Speaker 1: take a turn. Now. I think they are cheap, potentially 72 00:03:41,000 --> 00:03:42,960 Speaker 1: estimentional for a reason. But I think the real problem 73 00:03:43,000 --> 00:03:46,839 Speaker 1: is that it's very difficult to quantify the risk. Where 74 00:03:46,840 --> 00:03:48,800 Speaker 1: do you put money for work? Though? In Europe? Because 75 00:03:48,800 --> 00:03:52,480 Speaker 1: I know there are a few pockets of appeal for you, 76 00:03:52,520 --> 00:03:54,840 Speaker 1: and I know you like European telecom stocks, why are 77 00:03:54,840 --> 00:03:59,120 Speaker 1: they somehow immune to what's going on? I think telecom stocks, 78 00:03:59,120 --> 00:04:00,960 Speaker 1: I mean, in the reason bound that we have seen 79 00:04:01,000 --> 00:04:03,240 Speaker 1: in Europe, as in the US equity market, in Europe, 80 00:04:03,480 --> 00:04:06,400 Speaker 1: telecom stocks have actually like the rebound in the indsease, 81 00:04:06,440 --> 00:04:08,920 Speaker 1: and in my opinion, they offer good valuation and attractive 82 00:04:08,960 --> 00:04:12,320 Speaker 1: dividend yield, And I think it's the yield story that 83 00:04:12,360 --> 00:04:15,320 Speaker 1: increasingly becomes important, especially in the world where inflation is 84 00:04:15,320 --> 00:04:18,560 Speaker 1: potentially here to stay for longer, higher, for longer, for higher, 85 00:04:18,640 --> 00:04:21,279 Speaker 1: higher for longer. Rather Okay, so you can make this 86 00:04:21,400 --> 00:04:24,560 Speaker 1: statement maybe where as it relates to the United States 87 00:04:24,560 --> 00:04:27,839 Speaker 1: that we're expecting inflation data midweek. For China, obviously, what 88 00:04:27,960 --> 00:04:30,640 Speaker 1: the mainland economy is dealing with right now is vastly 89 00:04:30,680 --> 00:04:33,120 Speaker 1: different than what we're dealing with here in the States. 90 00:04:33,160 --> 00:04:36,799 Speaker 1: We have the problems that still remain as a result 91 00:04:36,880 --> 00:04:40,200 Speaker 1: of the difficulty with the property market, and there's the 92 00:04:40,200 --> 00:04:43,960 Speaker 1: COVID zero policy and what that has done to basically 93 00:04:44,000 --> 00:04:48,480 Speaker 1: erode domestic consumption. Where are you with with mainland Chinese 94 00:04:48,480 --> 00:04:53,600 Speaker 1: equities right now? Uh, we are currently on neutral because 95 00:04:53,640 --> 00:04:57,679 Speaker 1: I think, I mean, the unfortunate COVID situation started in China, 96 00:04:57,760 --> 00:04:59,839 Speaker 1: and I think the zero COVID policy has some of 97 00:04:59,839 --> 00:05:03,920 Speaker 1: our further complicated the situation. But after this is hopefully over, 98 00:05:03,960 --> 00:05:06,719 Speaker 1: I think we can see potentially China focusing more on 99 00:05:06,760 --> 00:05:10,239 Speaker 1: demand goes and as a command economy with a single 100 00:05:10,279 --> 00:05:13,320 Speaker 1: party leadership, I think they could they can potentially pull 101 00:05:13,400 --> 00:05:15,400 Speaker 1: this off in the sense that they potentially could even 102 00:05:15,800 --> 00:05:19,280 Speaker 1: successfully implement for a government focus on more demand goes 103 00:05:19,320 --> 00:05:23,000 Speaker 1: and that in theory should be positive for domestic equities. Yeah. 104 00:05:23,040 --> 00:05:25,880 Speaker 1: It's a rather open ending question, though, isn't it. After 105 00:05:25,920 --> 00:05:27,600 Speaker 1: all of this is over, when when do you see 106 00:05:27,600 --> 00:05:33,720 Speaker 1: that COVID zero policy being no longer useful? Well, it's 107 00:05:33,720 --> 00:05:36,200 Speaker 1: always difficult to give an exact time, but I would 108 00:05:36,200 --> 00:05:38,400 Speaker 1: say I would think in the next three to six months. 109 00:05:39,320 --> 00:05:43,720 Speaker 1: So you're talking about the environment of rising inflation actually 110 00:05:43,760 --> 00:05:47,440 Speaker 1: being favorable for certain types of equities. Are there themes 111 00:05:47,480 --> 00:05:49,840 Speaker 1: here right now that you, like, Mike, are you going 112 00:05:49,880 --> 00:05:53,000 Speaker 1: along segments, let's say, of the US market, that that 113 00:05:53,160 --> 00:05:56,039 Speaker 1: you believe are good bets over the let's say, the 114 00:05:56,080 --> 00:06:00,279 Speaker 1: next six to twelve months. I think in the terms 115 00:06:00,279 --> 00:06:02,760 Speaker 1: of developed markets and in the US equity market, I 116 00:06:02,800 --> 00:06:06,360 Speaker 1: think the focus of the shift from from growth to 117 00:06:07,000 --> 00:06:10,520 Speaker 1: value stocks most probably can continue, in my view, especially 118 00:06:10,600 --> 00:06:13,840 Speaker 1: if the overall overall focuses it stocks as an inflation 119 00:06:13,880 --> 00:06:16,800 Speaker 1: hedge that you need to be in productive assets and 120 00:06:16,800 --> 00:06:20,440 Speaker 1: the companies that ultimately hedge against inflation. I think the 121 00:06:21,279 --> 00:06:23,040 Speaker 1: key fee of the market was that the fact that 122 00:06:23,120 --> 00:06:26,080 Speaker 1: might that the federal reserve might overhike and hence create 123 00:06:26,120 --> 00:06:28,760 Speaker 1: an earnings recession. I think that is two bearish of you. 124 00:06:30,120 --> 00:06:32,320 Speaker 1: I know you take an optimistic view of a couple 125 00:06:32,360 --> 00:06:34,960 Speaker 1: of other major economies in the Asia Pacific, India and 126 00:06:35,120 --> 00:06:37,680 Speaker 1: Indonesia as well. Can you walk us through your logic there? 127 00:06:37,720 --> 00:06:41,840 Speaker 1: What's the appeal? Yeah? And I mean in Asia or 128 00:06:42,400 --> 00:06:46,760 Speaker 1: in particular large economies there are somehow potentially benefiting from 129 00:06:46,760 --> 00:06:51,280 Speaker 1: still strong domestic consumption growth and also who are sheltered 130 00:06:51,320 --> 00:06:54,479 Speaker 1: from geopolitical tensions. I would consider those economies to be 131 00:06:54,560 --> 00:06:58,760 Speaker 1: both India and Indonesia. I think those most lovely markets 132 00:06:58,760 --> 00:07:01,600 Speaker 1: were here today they have actually outperformed, and I think 133 00:07:01,640 --> 00:07:04,240 Speaker 1: from an investing point of view here the trend is 134 00:07:04,240 --> 00:07:07,719 Speaker 1: still your friend. Just quickly, I know you've got some 135 00:07:07,760 --> 00:07:10,360 Speaker 1: thoughts on gold. Easy at the moment, but as inflation 136 00:07:10,400 --> 00:07:16,480 Speaker 1: pulls back, you still bullish on gold. Why is that? Well, 137 00:07:16,520 --> 00:07:18,120 Speaker 1: because in the world we have where we have too 138 00:07:18,240 --> 00:07:20,520 Speaker 1: much that gold is still one of the few assets 139 00:07:20,520 --> 00:07:24,240 Speaker 1: that has no counterparty risk alright, and there is that 140 00:07:24,240 --> 00:07:26,960 Speaker 1: that goal to some extent should have been much higher 141 00:07:26,960 --> 00:07:31,280 Speaker 1: given the current macroeconomic challenges. But again, the key fear 142 00:07:31,360 --> 00:07:33,760 Speaker 1: that the fat might overhike has actually led to a 143 00:07:33,800 --> 00:07:36,800 Speaker 1: reduction in the price of gold. Alright, Raindom, Michael Price, 144 00:07:36,840 --> 00:07:39,920 Speaker 1: partner and pull folio stranger just Adak Family Office. Thanks 145 00:07:39,920 --> 00:07:42,000 Speaker 1: so much for joining us on Daybreak Asia.