WEBVTT - Wei Yao on the Markets (Radio)

0:00:00.080 --> 0:00:01.760
<v Speaker 1>Let's get to our guess now where yeah's head of

0:00:01.800 --> 0:00:05.120
<v Speaker 1>research and chief Apack economist at Society General joining us

0:00:05.240 --> 0:00:07.720
<v Speaker 1>from Hong Kong. So I should talk about including all

0:00:07.720 --> 0:00:10.080
<v Speaker 1>these downgrades to China growth, but just want to start

0:00:10.080 --> 0:00:12.760
<v Speaker 1>with the broader picture and certainly what we've seen from

0:00:12.840 --> 0:00:15.800
<v Speaker 1>the FED at Jackson Hole. Do you think that we

0:00:15.840 --> 0:00:19.279
<v Speaker 1>are going to see inflation get back down to two

0:00:19.280 --> 0:00:24.079
<v Speaker 1>percent without causing some kind of global recession. Well, it's

0:00:24.320 --> 0:00:28.840
<v Speaker 1>obviously very very challenging. Um, the it's very clear that

0:00:28.960 --> 0:00:33.720
<v Speaker 1>inflation is driven boast by supply and demand. So the

0:00:34.200 --> 0:00:38.000
<v Speaker 1>FED has said itself that demand has to be destroyed

0:00:38.080 --> 0:00:42.760
<v Speaker 1>to some extent to achieve their goal. So inclicitly that means, uh,

0:00:43.400 --> 0:00:46.479
<v Speaker 1>it's going to be very challenging to to avoid economic pains.

0:00:47.320 --> 0:00:49.199
<v Speaker 1>All right, let's get to the China picture, because we're

0:00:49.240 --> 0:00:52.360
<v Speaker 1>continuing to see these downgrades coming through from the Economy

0:00:52.360 --> 0:00:55.320
<v Speaker 1>of Bloomberg survey now projecting China growth just three and

0:00:55.360 --> 0:00:57.400
<v Speaker 1>a half percent this year. I mean, that's well down

0:00:57.480 --> 0:01:00.240
<v Speaker 1>from other projections of three point nine. But even the

0:01:00.320 --> 0:01:03.160
<v Speaker 1>five and a half percent growth target the authorities had said,

0:01:03.840 --> 0:01:06.640
<v Speaker 1>what kind of challenges are we still saying in terms

0:01:06.680 --> 0:01:08.560
<v Speaker 1>of your view of how we even get to three

0:01:08.560 --> 0:01:12.840
<v Speaker 1>and a half percent growth. Okay, so there are two

0:01:12.880 --> 0:01:17.120
<v Speaker 1>things here. One zero COVID policy, this is becoming a

0:01:17.160 --> 0:01:20.800
<v Speaker 1>persistent drag on the economic activity and more importantly the

0:01:20.840 --> 0:01:23.959
<v Speaker 1>confidence of households, and then the and the corporate and

0:01:24.040 --> 0:01:28.640
<v Speaker 1>the second problem equally equally challenging is the housing situation.

0:01:29.280 --> 0:01:32.280
<v Speaker 1>The housing was already in a very bad shape before

0:01:32.600 --> 0:01:36.480
<v Speaker 1>the Sean high lockdown, but it has gotten worse um

0:01:36.520 --> 0:01:40.480
<v Speaker 1>because of the developers cash flow problem and the project

0:01:40.560 --> 0:01:45.040
<v Speaker 1>delays and all that. So the was these two big issues.

0:01:45.520 --> 0:01:50.640
<v Speaker 1>The Chinese goverman, however, has not done much um. This

0:01:50.720 --> 0:01:53.720
<v Speaker 1>is really the surprising part. And if they continue to

0:01:53.840 --> 0:01:58.240
<v Speaker 1>be slow to respond, the three point five percent would

0:01:58.280 --> 0:02:01.080
<v Speaker 1>be difficult to achieve. What more can be done in

0:02:01.440 --> 0:02:03.440
<v Speaker 1>your view then, because I mean you do have some

0:02:03.520 --> 0:02:05.360
<v Speaker 1>kind of policy action in terms of the cut to

0:02:05.400 --> 0:02:08.880
<v Speaker 1>the MLF recently and that one forty six billion dollars

0:02:08.919 --> 0:02:11.520
<v Speaker 1>of stimulus pledge. But but what is needed? Is it

0:02:11.560 --> 0:02:15.519
<v Speaker 1>more targeted towards the property sector in your view? Yeah,

0:02:15.560 --> 0:02:18.880
<v Speaker 1>certainly that that should be one very important past to

0:02:18.960 --> 0:02:22.320
<v Speaker 1>take um. Because the key here right now is to

0:02:22.600 --> 0:02:25.960
<v Speaker 1>restore the households confidence in the housing and this is

0:02:26.000 --> 0:02:32.120
<v Speaker 1>about finishing these stored projects and deliver the presol departments

0:02:32.160 --> 0:02:36.800
<v Speaker 1>to the households. Without that, nothing else can happen. So

0:02:36.800 --> 0:02:39.840
<v Speaker 1>so the government. It's very clear the developers have no

0:02:40.080 --> 0:02:43.320
<v Speaker 1>cash flow to do that, and not even the local governments.

0:02:43.360 --> 0:02:45.560
<v Speaker 1>So here we actually really need the central government to

0:02:45.600 --> 0:02:48.480
<v Speaker 1>step in. And here we got some news but no confirmation,

0:02:48.600 --> 0:02:52.919
<v Speaker 1>so that the lingering uncertainty is not not good. Let's

0:02:52.919 --> 0:02:55.560
<v Speaker 1>look at the currency moves as well. I mean, the

0:02:55.680 --> 0:02:58.880
<v Speaker 1>fourth day yesterday of a stronger than expected fix gives

0:02:58.880 --> 0:03:01.440
<v Speaker 1>you some kind of indication and authorities are not that

0:03:01.480 --> 0:03:03.880
<v Speaker 1>happy with a near two year low with the one

0:03:03.880 --> 0:03:05.680
<v Speaker 1>against the dollar, and you saw the on and off

0:03:05.680 --> 0:03:09.119
<v Speaker 1>shore pushed past six point nine. How much further weakness

0:03:09.360 --> 0:03:12.320
<v Speaker 1>for the one? You've got Goldman saying now seven? And uh,

0:03:12.400 --> 0:03:14.720
<v Speaker 1>and I guess what kind of further implications are you

0:03:14.800 --> 0:03:18.959
<v Speaker 1>expecting the weak currency to have on this economy. Yeah,

0:03:19.040 --> 0:03:21.720
<v Speaker 1>we also think seven is quite possible in the new turn.

0:03:22.680 --> 0:03:26.320
<v Speaker 1>The trouble here is indeed the hawkish FED we talked

0:03:26.320 --> 0:03:30.000
<v Speaker 1>about and p BOC is in the pressure to to

0:03:30.200 --> 0:03:34.040
<v Speaker 1>ease to support the economy, and of course the p

0:03:34.080 --> 0:03:36.680
<v Speaker 1>BOC once in a while would come. You want to

0:03:36.720 --> 0:03:39.560
<v Speaker 1>slow down the pace of the depreciation, but according to

0:03:39.600 --> 0:03:42.520
<v Speaker 1>the past experience, they can only slow, but then they

0:03:42.520 --> 0:03:46.000
<v Speaker 1>can never stop. So we think there's a more depreciationing

0:03:46.040 --> 0:03:50.080
<v Speaker 1>in your turn. Okay, so more appreciation to that point

0:03:50.120 --> 0:03:52.400
<v Speaker 1>of around seven. And just a quick word as well

0:03:52.440 --> 0:03:55.360
<v Speaker 1>about the business survey that we've seen with American firms

0:03:55.360 --> 0:03:58.200
<v Speaker 1>optimism about China fall into a record low. I mean,

0:03:58.240 --> 0:04:00.600
<v Speaker 1>if you have expats leaving, this is going to cause

0:04:00.680 --> 0:04:05.760
<v Speaker 1>even further I guess weakness to the economy. Yeah, so certainly,

0:04:05.800 --> 0:04:08.680
<v Speaker 1>I think this is a reflection of what we just

0:04:08.720 --> 0:04:13.160
<v Speaker 1>discussed about the confidence confidence shock from the zero COVID policy.

0:04:13.560 --> 0:04:16.600
<v Speaker 1>Of course, there are also other factors making people more

0:04:16.600 --> 0:04:19.640
<v Speaker 1>borrows to these days, but this is really the biggest issue.

0:04:19.880 --> 0:04:25.400
<v Speaker 1>If you can't have the certainty of business continuity, operation continuity, understandably,

0:04:25.480 --> 0:04:27.760
<v Speaker 1>you know, companies were not want to invest. Let's talk

0:04:27.760 --> 0:04:30.760
<v Speaker 1>about the situation in Korea. We had our Kathleen Hayes

0:04:30.760 --> 0:04:33.280
<v Speaker 1>speaking to the bank of a career governor re at

0:04:33.360 --> 0:04:37.039
<v Speaker 1>Jackson Hole and the city saying that his comments could

0:04:37.080 --> 0:04:40.120
<v Speaker 1>raise some hawkish risks in the central banks monetary policy

0:04:40.200 --> 0:04:43.120
<v Speaker 1>re basically saying that the Bank of Korea won't stop

0:04:43.160 --> 0:04:46.200
<v Speaker 1>tightening before the FED. What's your kind of outlook here

0:04:46.279 --> 0:04:48.880
<v Speaker 1>on the Korean one economy? Excuse me, I should say,

0:04:48.920 --> 0:04:51.320
<v Speaker 1>and also the complications of this one at a thirteen

0:04:51.360 --> 0:04:57.240
<v Speaker 1>year low. Yeah, sure, So the current economy obviously is

0:04:57.600 --> 0:05:01.920
<v Speaker 1>going to slow because of the the the external demand

0:05:02.040 --> 0:05:05.480
<v Speaker 1>is on the path of deceleration. It's actually already started.

0:05:05.839 --> 0:05:08.320
<v Speaker 1>And given how important it is for the current economy,

0:05:08.440 --> 0:05:10.960
<v Speaker 1>it's hard to see how how can how Korean girls

0:05:11.000 --> 0:05:14.920
<v Speaker 1>can can remain resilient in this environment. But meanwhile they

0:05:14.960 --> 0:05:17.920
<v Speaker 1>also have an inflation problem. The headline has peaked, it's

0:05:17.960 --> 0:05:21.800
<v Speaker 1>likely to decline here. But Korea has a little bit

0:05:21.839 --> 0:05:24.559
<v Speaker 1>of the same dynamics as in the in the West,

0:05:24.640 --> 0:05:27.760
<v Speaker 1>which is, you know, the labor market is tightening, so

0:05:27.839 --> 0:05:30.880
<v Speaker 1>there is demand pool inflation. So that really means yes,

0:05:30.960 --> 0:05:34.240
<v Speaker 1>the bok has to continue to to hiking trust rates

0:05:34.240 --> 0:05:37.080
<v Speaker 1>as well. You talk there about inflation. I think the

0:05:37.080 --> 0:05:40.200
<v Speaker 1>governor said himself that he expects inflation too slow below

0:05:40.320 --> 0:05:42.960
<v Speaker 1>three by the end of next year. Are you're saying

0:05:42.960 --> 0:05:48.279
<v Speaker 1>more broadly inflation picking across Asia? Well, it is coming.

0:05:48.440 --> 0:05:53.159
<v Speaker 1>Right in some countries, it's already here. Um. The for example,

0:05:53.240 --> 0:05:55.440
<v Speaker 1>in in As we can see you know, the there

0:05:55.480 --> 0:06:02.599
<v Speaker 1>are both demand pool and supply inflation. In countries like Sinkle, Singapore, Korea, Australia,

0:06:02.800 --> 0:06:05.520
<v Speaker 1>they have a titan labor market as well. So in

0:06:05.560 --> 0:06:09.240
<v Speaker 1>these places inflation is definitely broading beyond the food and

0:06:09.400 --> 0:06:13.000
<v Speaker 1>energy it would be harder to contain. Well, speaking of

0:06:13.160 --> 0:06:16.120
<v Speaker 1>beyond food and energy, we've got a Bloomberg intelligence pace

0:06:16.200 --> 0:06:20.200
<v Speaker 1>saying that the surging Singapore rents us something that's going

0:06:20.240 --> 0:06:23.600
<v Speaker 1>to keep inflationary pressures high too. Does that kind of

0:06:23.640 --> 0:06:27.720
<v Speaker 1>I guess, spur more investment demand for residential properties and

0:06:27.720 --> 0:06:30.200
<v Speaker 1>and I guess the housing market in Singapore or does

0:06:30.240 --> 0:06:35.720
<v Speaker 1>it call that demand? Uh? That will come um for sure,

0:06:36.200 --> 0:06:39.120
<v Speaker 1>but in the short term it's probably is still going

0:06:39.160 --> 0:06:43.400
<v Speaker 1>to take the policy titaning to cool some of the demand, um,

0:06:44.120 --> 0:06:48.480
<v Speaker 1>usually the housing projects. That's gonna take time. Um. And

0:06:48.600 --> 0:06:50.800
<v Speaker 1>in this case, you know we're talking about you know,

0:06:50.839 --> 0:06:54.120
<v Speaker 1>the idea that inflation in Asia is actually also a

0:06:54.120 --> 0:06:56.600
<v Speaker 1>problem for a lot of the central banks if they

0:06:56.640 --> 0:06:58.760
<v Speaker 1>have to hike not because of fair is hiking, but

0:06:58.839 --> 0:07:02.240
<v Speaker 1>because they also have to come in their own inflation. Well, yeah,

0:07:02.279 --> 0:07:04.400
<v Speaker 1>let's talk about where you are in Hong Kong, because

0:07:04.440 --> 0:07:06.640
<v Speaker 1>that has its own challenges to as it follows the

0:07:06.720 --> 0:07:11.600
<v Speaker 1>dynamic COVID policy. And we've talked here about businesses in China,

0:07:11.960 --> 0:07:14.840
<v Speaker 1>you know, not being very optimistic and and of course

0:07:14.880 --> 0:07:17.760
<v Speaker 1>the exodus too of the brain drain in Hong Kong.

0:07:18.200 --> 0:07:20.960
<v Speaker 1>What's your what's your outlook for Hong Kong? Does does

0:07:20.960 --> 0:07:22.800
<v Speaker 1>the city sort of come back when we get these

0:07:22.840 --> 0:07:29.160
<v Speaker 1>tough restrictions eased or as Hong Kong change forever? Well, um,

0:07:29.240 --> 0:07:33.440
<v Speaker 1>it's hard to say at this stage, but apparently it's

0:07:33.440 --> 0:07:37.240
<v Speaker 1>going to have a couple of difficult years ahead. One

0:07:37.360 --> 0:07:40.040
<v Speaker 1>is because Hong Kong still have a pretty a restrictive

0:07:40.360 --> 0:07:43.600
<v Speaker 1>entry policy well compared to the rest of the world,

0:07:43.960 --> 0:07:47.160
<v Speaker 1>so that's not going to help. And once people are leaving,

0:07:47.200 --> 0:07:49.080
<v Speaker 1>it's going to take time for time to come back.

0:07:49.440 --> 0:07:51.680
<v Speaker 1>And the other thing is Hong Kong economy is very

0:07:51.760 --> 0:07:57.280
<v Speaker 1>much connected to related integrating into into China Milan, and

0:07:57.920 --> 0:07:59.760
<v Speaker 1>China is not going to do well in the coming

0:07:59.800 --> 0:08:03.240
<v Speaker 1>few years probably in terms of growth. It's there is

0:08:03.320 --> 0:08:06.480
<v Speaker 1>a recovered there is also a structural their problem. They

0:08:06.480 --> 0:08:09.480
<v Speaker 1>need to resolve that's got to take time, all right.

0:08:09.640 --> 0:08:11.680
<v Speaker 1>Thank you for your insights. Where y'ao is Head of

0:08:11.720 --> 0:08:14.840
<v Speaker 1>Research in chief apack economist at Society General, joining us

0:08:14.840 --> 0:08:15.600
<v Speaker 1>from Hong Kong,