Speaker 1: Let's get to our guests. Olivia Dossier, head of applied
Speaker 1: research for a pack at Contigo. He's on the line
Speaker 1: from Singapore. Olivier, thanks for being with us. I'm wondering
Speaker 1: whether you're advising clients in the current environment. Hey, let's
Speaker 1: avoid China, put money to work in the US. Are
Speaker 1: you doing that? I think you know that the issues
Speaker 1: with investing in China is not uh, nothing to do
Speaker 1: with what's happened this week right there. The COVID policy
Speaker 1: is holding people back because obviously you can't forecast consumer
Speaker 1: demand when you can't forecast if they'll be able to
Speaker 1: go shop. So I think that's been holding investors back
Speaker 1: for from now. You had a couple of weeks of
Speaker 1: good markets in China when the regulators were being very
Speaker 1: you know, pro growth after the reopening of the previous lockdown.
Speaker 1: But that's not enough to carry people people back, especially
Speaker 1: when you know the U S or other markets are
Speaker 1: doing very well. Not enough to carry people back the
Speaker 1: hubs in July when we saw that huge underperform. But
Speaker 1: when we're looking ahead to you know, this very important
Speaker 1: Congress in China and expected more stimulus, particularly to try
Speaker 1: and support the property sector. Could you say we are
Speaker 1: going to see some more rallying coming through into the
Speaker 1: end of the year. It's possible because again, regulators can
Speaker 1: make a big difference in at least with local investors.
Speaker 1: There is still a very big question mark about the
Speaker 1: health of the real estate UH sector in China, and
Speaker 1: the debt burden and US interest races still going up
Speaker 1: to anything with US denominated debt is going to be
Speaker 1: something to avoid UH, regardless of what happens UH. So
Speaker 1: you know you're going to get the usual around October
Speaker 1: type of rally from from from local investors, but it's
Speaker 1: not going to be enough to woo foreign investors back
Speaker 1: in for especially when they're making such great games outside
Speaker 1: of China. Now, yeah, a tough call to I mean
Speaker 1: for markets in the region that are heavily dependent on
Speaker 1: a strong Chinese economy. I'm thinking of South Korea as
Speaker 1: one example. But I don't want to speak or what
Speaker 1: we're in your mouth. Are there opportunities in the Asia
Speaker 1: Pacific that you like right now outside of China. It's
Speaker 1: difficult because, as you say, China is a big piece
Speaker 1: of the puzzle for a lot of the countries around UH,
Speaker 1: around Asia Pacific, So obviously that's a that's an issue.
Speaker 1: The Japan UH market is also a little bit troubling
Speaker 1: because you know, the end is way too weak. The
Speaker 1: central bank there has not yet moved against inflation, and
Speaker 1: consumers are feeling the pain the longer at last. UH.
Speaker 1: You know that they power six the GDP in that country.
Speaker 1: So if you don't look after consumers interest, you're in
Speaker 1: trouble down the road. So I think there's question marks
Speaker 1: now about the economy in Japan as well, especially after
Speaker 1: the summer is over. We've been looking at the OPEC
Speaker 1: Plus meeting, which just had that modest increase in supply
Speaker 1: in oil. UH. What does that mean for crude oil
Speaker 1: prices in this cycle and other risk assets that we
Speaker 1: kind of reached peak oil. I think that's a good
Speaker 1: news obviously for for risk assets in general, because obviously
Speaker 1: how much people pay at the pump will eat into
Speaker 1: their consumption budgets and that eventually will feed to lower
Speaker 1: demand for other products. Right. So, so far the earning
Speaker 1: season has shown that companies have been able to pass
Speaker 1: on higher costs through higher prices and consumers have been
Speaker 1: willing to pay for But if if gas of the
Speaker 1: bump stays high for for a long period of time,
Speaker 1: they increasingly will not be able to pay or not
Speaker 1: be willing to pay higher prices for other goods. So, uh,
Speaker 1: lower gas prices is good news for the market for sure. Yeah,
Speaker 1: we had the news in the U S session that
Speaker 1: the American government reported an unexpected building inventories for both
Speaker 1: crude and gasoline. So maybe we're seeing a bit of
Speaker 1: demand destruction the consequence perhaps of FED tightening. Where are
Speaker 1: you with with the FEDS strategy right now? And do
Speaker 1: you expect hard landing? Do you are you forecasting recession?
Speaker 1: So what we see is that the consensus into one
Speaker 1: among investors with that inflation was winning, Inflation was beating
Speaker 1: central bank uh. So central banks got very aggressive in
Speaker 1: Q two, announced the very aggressive second half as well,
Speaker 1: and by the end of Q two by June. The
Speaker 1: end of June, investors felt that it could end in
Speaker 1: a draw. Right, So what they did was rebalance their
Speaker 1: portfolios because their portfolios had been position for a worst
Speaker 1: case scenario during Q one UH, and now we saw
Speaker 1: in July the switched to a base case scenario where
Speaker 1: inflation and the FED might end in a draw. The
Speaker 1: next question is what about the FED and the economy
Speaker 1: night So far, Uh, this is also looking like a draw.
Speaker 1: We're getting mixed messages on the macro front, but mostly
Speaker 1: positive ones. We're getting positive news on the earning front.
Speaker 1: So as long as unemployment, as long as you know,
Speaker 1: the economy remains a full employment, people will have money
Speaker 1: to pay for for for goods, even if the prices
Speaker 1: is a little higher. So I think that's going to
Speaker 1: be the switch that we're going to see from for
Speaker 1: investors in terms of focus. They're gonna look more at
Speaker 1: the employment numbers, the economic number, growth numbers, rather than
Speaker 1: inflation going forward. I think if that's going to take
Speaker 1: care of that, and they'll focus on whether or not
Speaker 1: people will have, you know, wages to pay for for
Speaker 1: increased prices. You point out that we're expecting tightening from
Speaker 1: central banks pretty much globally acceptable. We've touched on China
Speaker 1: and the b o J. You say it doesn't seem
Speaker 1: to have gotten the memo. When could we potentially see
Speaker 1: a change in strategy from the Bank of Japan. I think,
Speaker 1: you know, in Japan, it's going to be up to
Speaker 1: the consumers to send that message to to the b
Speaker 1: o J. Uh, obviously after the summer and the end
Speaker 1: of the tourist season the weekend. Uh, you know, Uh,
Speaker 1: it's not going to be a main factor, but consumers
Speaker 1: control and consumer spending a sixt GDP in Japan. If
Speaker 1: they don't, if they stop going to the stores, if
Speaker 1: they stop buying, the bog will get the message. Olivia,
Speaker 1: we had a historic visit this week from HOW Speaker
Speaker 1: Nancy Pelosi to Taiwan and subsequent response from China that
Speaker 1: was I think fair to say a little angry. Markets
Speaker 1: were on edge as a result of that. Do you
Speaker 1: think China will drive a wedge deeper into some of
Speaker 1: these important relationships, whether it's Taiwan in and of itself
Speaker 1: for the US, I think, you know, the U S
Speaker 1: China relationship is obviously a big h to your political
Speaker 1: impact for for investors, but it's background noise right now,
Speaker 1: still earning this front. Uh noise. So is the Fed.
Speaker 1: So is inflation. So I don't I don't perceive a
Speaker 1: lot of movement from that. It depends if the situation
Speaker 1: between the US and China gets worse. Right, it got
Speaker 1: really bad when when we had the trade war under
Speaker 1: Resident Trumps, we thought it might be better under a Biden.
Speaker 1: It hasn't. Will it get even worse? That is the
Speaker 1: big question. And so far it's all the response we're seeing.
Speaker 1: It's China Taiwan response. We're not really seeing a U. S.
Speaker 1: China response yet from them, so the market is going
Speaker 1: to ignore that. Alright. Oh, it's great to have your insights.
Speaker 1: Thank you so much. Olivia Dosia has head over applied
Speaker 1: research for APEC from Kintingo on the line for US
Speaker 1: from Singapore,