1
00:00:00,200 --> 00:00:03,040
Speaker 1: Let's get to our guests for this half hour. Olivia

2
00:00:03,279 --> 00:00:07,240
Speaker 1: d Sta is head of applied research at apex at

3
00:00:07,360 --> 00:00:10,520
Speaker 1: Contiguo and Olivia, I want to just start with the

4
00:00:10,560 --> 00:00:14,080
Speaker 1: remarks that we've heard today from the fits, Jim Ballads

5
00:00:14,320 --> 00:00:18,479
Speaker 1: and also Neil cash Carry signaling more hikes ahead. This

6
00:00:18,720 --> 00:00:21,599
Speaker 1: really shouldn't come as a surprise, should it. Have markets

7
00:00:21,640 --> 00:00:24,080
Speaker 1: been getting a little bit too far out in front

8
00:00:24,079 --> 00:00:27,880
Speaker 1: of this eventual FED pivot. I think they're right, yes,

9
00:00:27,920 --> 00:00:30,080
Speaker 1: the it shouldn't be a surprise. They've been saying the

10
00:00:30,120 --> 00:00:32,280
Speaker 1: same thing for a long time now, and selation is

11
00:00:32,320 --> 00:00:35,880
Speaker 1: still much higher than target, and therefore you can expect

12
00:00:35,920 --> 00:00:38,160
Speaker 1: the set to keep raising weights. Whether it's seventy five

13
00:00:38,200 --> 00:00:40,760
Speaker 1: business point for three or fifty business point for four

14
00:00:40,840 --> 00:00:44,400
Speaker 1: or five times, it's the same outcome, right, Um, The

15
00:00:44,479 --> 00:00:49,159
Speaker 1: market has been listening and believing that because volumes, average

16
00:00:49,200 --> 00:00:52,440
Speaker 1: trading volumes and in constituents of every benchmark is way

17
00:00:52,440 --> 00:00:54,680
Speaker 1: below what it was in the first half. So most

18
00:00:54,680 --> 00:00:57,360
Speaker 1: people have listened and are staying on the sideline and

19
00:00:57,400 --> 00:01:01,440
Speaker 1: are waiting. There are a few contrarian players that are

20
00:01:01,480 --> 00:01:03,840
Speaker 1: trying to play the pivot story, but they they're not

21
00:01:03,880 --> 00:01:06,880
Speaker 1: getting very far with it right? Yes, So now we're

22
00:01:07,040 --> 00:01:09,760
Speaker 1: seeing the FED suggesting that we're going to see rights

23
00:01:09,760 --> 00:01:13,160
Speaker 1: eventually settling with a five handle. What's your own projection

24
00:01:13,200 --> 00:01:16,200
Speaker 1: of where we're going to end up? And when? I

25
00:01:16,240 --> 00:01:18,840
Speaker 1: think that's about right? And and you know, going forward,

26
00:01:18,880 --> 00:01:20,840
Speaker 1: you're going to see higher rates than you have in

27
00:01:20,880 --> 00:01:24,320
Speaker 1: the last ten and fifteen years for sure. Uh, you know,

28
00:01:24,640 --> 00:01:27,720
Speaker 1: stimulative might become three percent instead of a zero that

29
00:01:27,800 --> 00:01:30,720
Speaker 1: we're used to, and people have to make adjustments to

30
00:01:30,760 --> 00:01:34,280
Speaker 1: their to their investment process for that. Ye. Do we

31
00:01:34,319 --> 00:01:36,360
Speaker 1: need to have a little bit of perspective here on rights?

32
00:01:36,400 --> 00:01:40,480
Speaker 1: I mean, historically speaking, five percent really isn't all that high.

33
00:01:40,520 --> 00:01:42,640
Speaker 1: We're nowhere close to what we saw, you know in

34
00:01:42,680 --> 00:01:45,480
Speaker 1: the eighties and early nineties. Do we just need to

35
00:01:46,000 --> 00:01:49,840
Speaker 1: recalibrate perhaps to what a new normal looks like. I

36
00:01:49,880 --> 00:01:52,040
Speaker 1: think that's what we're going to have to do. Yes, definitely,

37
00:01:52,120 --> 00:01:55,680
Speaker 1: the old zero is going out, the window, inflation is

38
00:01:55,800 --> 00:01:59,480
Speaker 1: is here. Pressures on supply chain, global supply chains from

39
00:02:00,040 --> 00:02:04,360
Speaker 1: both extreme weather events and geopolitical events will continue, which

40
00:02:04,400 --> 00:02:05,960
Speaker 1: means that you know, we're going to see this big

41
00:02:05,960 --> 00:02:10,080
Speaker 1: globalization effect go on, and people are gonna look for

42
00:02:10,200 --> 00:02:13,480
Speaker 1: near shoring or French shoring instead of the offshoring we

43
00:02:13,480 --> 00:02:16,080
Speaker 1: saw in the last twenty years. And that's going to

44
00:02:16,120 --> 00:02:19,080
Speaker 1: put quite a lot of pressure on supply chains for

45
00:02:19,080 --> 00:02:21,400
Speaker 1: for the foreseeable future, which will show up as as

46
00:02:21,560 --> 00:02:25,440
Speaker 1: inflationary pressure on prices. So you mentioned a number of

47
00:02:25,480 --> 00:02:28,120
Speaker 1: investors seem to be sitting on the sidelines at the moment.

48
00:02:28,480 --> 00:02:31,119
Speaker 1: We had heard rumors in the past few months that

49
00:02:31,120 --> 00:02:33,560
Speaker 1: that's the end of the sixty forty portfolio. But was

50
00:02:33,639 --> 00:02:36,600
Speaker 1: the death of that portfolio perhaps exaggerated? I mean JP

51
00:02:36,760 --> 00:02:41,160
Speaker 1: Morgan for one now season making a comeback. I think

52
00:02:41,240 --> 00:02:43,639
Speaker 1: you know it's still not the best way to play

53
00:02:43,680 --> 00:02:46,240
Speaker 1: that because sixty forty you're still betting on beta, and

54
00:02:46,320 --> 00:02:50,400
Speaker 1: beta is going to be under pressure for uh foreseeable future.

55
00:02:50,480 --> 00:02:53,440
Speaker 1: You you need to look for uncorrelated sources of return

56
00:02:53,560 --> 00:02:56,160
Speaker 1: and and sixty forty is still very highly correlated, so

57
00:02:56,200 --> 00:02:57,840
Speaker 1: that that's not really where you're going to get the

58
00:02:57,840 --> 00:03:01,079
Speaker 1: best bank for the book. Okay, I just want to

59
00:03:01,120 --> 00:03:02,760
Speaker 1: get your thoughts on where the U S dollars hitting

60
00:03:02,800 --> 00:03:04,840
Speaker 1: from here as well as there a period of volatility

61
00:03:04,840 --> 00:03:08,760
Speaker 1: are here now? Uh, you know, we're seeing a little

62
00:03:08,800 --> 00:03:10,760
Speaker 1: a little bit of softening now, but it's still the

63
00:03:10,800 --> 00:03:14,239
Speaker 1: safe haveing currency. People are still overweight the US market

64
00:03:14,280 --> 00:03:16,880
Speaker 1: over with US dollars, so I think every time there

65
00:03:16,960 --> 00:03:19,200
Speaker 1: is a little bit of uncertainty around, it'll go back

66
00:03:19,240 --> 00:03:21,799
Speaker 1: up Olivia. I want to now shift focused to the

67
00:03:21,840 --> 00:03:26,639
Speaker 1: Asia Pacific region and particularly opportunities in China. We've seen

68
00:03:26,680 --> 00:03:29,280
Speaker 1: the Hang Sing index not have a great day yesterday,

69
00:03:29,280 --> 00:03:31,679
Speaker 1: but over the course of this week better by four percents,

70
00:03:31,680 --> 00:03:35,320
Speaker 1: some modest gains for the Shanghai composite as well. Do

71
00:03:35,360 --> 00:03:37,200
Speaker 1: you get a stand that there's sort of an air

72
00:03:37,280 --> 00:03:41,920
Speaker 1: of inevitability around the reopening narrative in China now? I

73
00:03:41,960 --> 00:03:46,040
Speaker 1: think it's difficult to say, because obviously the communication around

74
00:03:46,040 --> 00:03:48,520
Speaker 1: it is a bit conflicting. Right. Some people say they're

75
00:03:48,560 --> 00:03:50,360
Speaker 1: going to relax with people, and then the officials come

76
00:03:50,360 --> 00:03:52,520
Speaker 1: out and say no. I think you know, we're heading

77
00:03:52,600 --> 00:03:57,400
Speaker 1: towards the winter month. Cases are bound to rise, uh

78
00:03:57,560 --> 00:04:01,440
Speaker 1: and this will continue, right, But I don't think investors

79
00:04:01,440 --> 00:04:05,080
Speaker 1: are really really focused on that in terms of all

80
00:04:05,160 --> 00:04:07,760
Speaker 1: I want to play the reopening or not reopening. They're

81
00:04:07,800 --> 00:04:11,120
Speaker 1: playing a longer term game, and what they like to

82
00:04:11,160 --> 00:04:13,080
Speaker 1: see right now is that the government is coming to

83
00:04:13,160 --> 00:04:15,600
Speaker 1: the to the help of the real estate sector. They're

84
00:04:15,600 --> 00:04:18,000
Speaker 1: coming to the help of the economy with liquidities and

85
00:04:18,000 --> 00:04:20,720
Speaker 1: stuff like that. So I think that's that's the bigger

86
00:04:20,760 --> 00:04:24,240
Speaker 1: story for them for investors right now. Yet was seeing

87
00:04:24,320 --> 00:04:27,599
Speaker 1: some more evidence of assistance coming coming down the line

88
00:04:27,640 --> 00:04:31,279
Speaker 1: for property developers in China just today. But as China

89
00:04:31,880 --> 00:04:35,480
Speaker 1: does move ahead with the reopening eventually, I'm just wondering

90
00:04:35,480 --> 00:04:38,280
Speaker 1: if you have a sense of what the risk around

91
00:04:38,320 --> 00:04:42,279
Speaker 1: inflation might be, because elsewhere around the world that's been

92
00:04:42,320 --> 00:04:45,200
Speaker 1: a very strong narrative as countries come out of COVID,

93
00:04:45,640 --> 00:04:50,040
Speaker 1: we've seen inflation get away. Yeah, I mean, let's happened everywhere,

94
00:04:50,120 --> 00:04:53,760
Speaker 1: and China has a lot of liquidity in the system

95
00:04:53,880 --> 00:04:58,560
Speaker 1: for so for sure it was a purely uh, you know,

96
00:04:59,240 --> 00:05:01,400
Speaker 1: free economy, it would but there are a lot of

97
00:05:01,400 --> 00:05:03,799
Speaker 1: controls in place in China and the government can always

98
00:05:04,240 --> 00:05:07,920
Speaker 1: enact more controls on prices if need be, So I

99
00:05:07,920 --> 00:05:10,320
Speaker 1: think that's that's less of a worry there than than

100
00:05:10,480 --> 00:05:12,960
Speaker 1: it would be elsewhere. So do you look at China

101
00:05:13,040 --> 00:05:15,640
Speaker 1: at the moment, valuations are very appealing, But as you say,

102
00:05:15,720 --> 00:05:18,440
Speaker 1: the the story around what's going on in terms of

103
00:05:18,480 --> 00:05:23,279
Speaker 1: property and COVID reopening is still somewhat mixed. That's right. Yeah,

104
00:05:23,360 --> 00:05:25,919
Speaker 1: the evaluations are very attractive. They've been on the performing

105
00:05:25,960 --> 00:05:29,320
Speaker 1: for two plus years now. But I think volumes show

106
00:05:29,400 --> 00:05:32,200
Speaker 1: that there's very little of the serious or long term

107
00:05:32,240 --> 00:05:34,040
Speaker 1: investors in the market right now. So you're gonna get

108
00:05:34,080 --> 00:05:36,680
Speaker 1: over reactions up and down, and it's it's not really

109
00:05:36,760 --> 00:05:39,720
Speaker 1: a great environment for for institutional investors to be and

110
00:05:39,880 --> 00:05:44,719
Speaker 1: they're gonna wait for more proof of an economic soft

111
00:05:44,800 --> 00:05:47,720
Speaker 1: lending of some kind or at least to be sure

112
00:05:47,760 --> 00:05:51,960
Speaker 1: that the economy is back on a growth pass, sustainable

113
00:05:52,000 --> 00:05:54,640
Speaker 1: growth pass before they jump back in. What do you

114
00:05:54,680 --> 00:05:56,400
Speaker 1: make of the inflation read that we just had out

115
00:05:56,400 --> 00:05:59,440
Speaker 1: of Japan earlier today October CPI coming in a little

116
00:05:59,480 --> 00:06:01,960
Speaker 1: bit harder than expected three point seven percent, But these

117
00:06:02,000 --> 00:06:04,440
Speaker 1: are numbers that we are not accustomed to seeing out

118
00:06:04,440 --> 00:06:07,440
Speaker 1: of Japan for many, many years. What do you see

119
00:06:07,440 --> 00:06:10,799
Speaker 1: the directory here? Yeah, this is this is a good

120
00:06:11,400 --> 00:06:14,400
Speaker 1: case study here because obviously two percent was the target.

121
00:06:14,400 --> 00:06:16,800
Speaker 1: We're way about that now, and still we still have

122
00:06:16,920 --> 00:06:19,120
Speaker 1: quantitative easy, we still have low interest rate, and we

123
00:06:19,160 --> 00:06:22,760
Speaker 1: still have asset purchasing programs. This is the only major

124
00:06:22,800 --> 00:06:26,960
Speaker 1: central bank that hasn't yet turned hawk ish, and it's

125
00:06:27,000 --> 00:06:30,120
Speaker 1: really hard to see how far this could go to

126
00:06:30,120 --> 00:06:31,800
Speaker 1: the end. It's already at one forty. It went up

127
00:06:31,839 --> 00:06:33,719
Speaker 1: to one fifty at the peak, so it can go

128
00:06:33,760 --> 00:06:36,839
Speaker 1: there again. And that's got to be damaging long term

129
00:06:36,880 --> 00:06:38,520
Speaker 1: for the economy, and it's got to be damaging for

130
00:06:38,640 --> 00:06:42,080
Speaker 1: consumers who are sixty plus percent of the GDP and

131
00:06:42,120 --> 00:06:45,479
Speaker 1: in that country. So sooner or later, someone something's got

132
00:06:45,480 --> 00:06:49,000
Speaker 1: to give there. Yeah, the thing that gives is that

133
00:06:49,080 --> 00:06:52,440
Speaker 1: Corona's term ending in April is that the inflection point

134
00:06:53,640 --> 00:06:55,479
Speaker 1: that could be. That could very well be if he's

135
00:06:55,520 --> 00:06:58,440
Speaker 1: not getting another term and someone else comes in and

136
00:06:58,440 --> 00:07:00,880
Speaker 1: can blame him for what of the damage is done

137
00:07:00,960 --> 00:07:04,240
Speaker 1: and and reversity monetary policy, that could be it. So

138
00:07:04,279 --> 00:07:06,440
Speaker 1: I think investors are going to really want to wait

139
00:07:06,520 --> 00:07:09,880
Speaker 1: until they find out what's next. In terms of mixed

140
00:07:09,880 --> 00:07:12,040
Speaker 1: signals as well, I just want to get your views

141
00:07:12,320 --> 00:07:14,280
Speaker 1: on where we might be hitting with crude oil. We're

142
00:07:14,280 --> 00:07:16,120
Speaker 1: seeing a little bit of weakness today, and that's the

143
00:07:16,120 --> 00:07:18,600
Speaker 1: bloomberg question of the day. Do you see crude hitting

144
00:07:18,640 --> 00:07:23,400
Speaker 1: sixty ft or fist? I think you know that's that's

145
00:07:23,440 --> 00:07:26,160
Speaker 1: the very big problem for for things like crude oil,

146
00:07:26,200 --> 00:07:29,280
Speaker 1: which is very economically sensitive. The data that comes out,

147
00:07:29,320 --> 00:07:32,240
Speaker 1: the macro data that's coming out everywhere. It's not bad

148
00:07:32,320 --> 00:07:34,520
Speaker 1: enough to be good and not good enough to be bad,

149
00:07:34,640 --> 00:07:37,920
Speaker 1: so investors are kind of left in the middle, not

150
00:07:38,000 --> 00:07:41,960
Speaker 1: really knowing which way it's come to go next. All right,

151
00:07:42,240 --> 00:07:43,800
Speaker 1: we'll have to leave it there, but thanks so much

152
00:07:43,840 --> 00:07:47,640
Speaker 1: for joining US. Olivia is hit all applied research for

153
00:07:47,800 --> 00:07:49,320
Speaker 1: APEX at Contigua