Speaker 1: Let's get to our guests now to Ha Choo is
Speaker 1: head of Fixed Income Asia, joining us from Rebecca here
Speaker 1: in Singapore to talk all things China and specifically the
Speaker 1: bond market. Wanted to get your broader thoughts though on
Speaker 1: the overall economy as we're continuing to face so many
Speaker 1: headwinds and now we're seeing the Chinese province of situation
Speaker 1: extending these industrial power cuts to some users. This really
Speaker 1: lies into the effect of what more stimulus we can
Speaker 1: expect to see from authorities today it's the LPR. But
Speaker 1: what's your view in terms of further stimulus we can
Speaker 1: see here? Yes, I think we we think that is
Speaker 1: going to have to look beyond monetary policies and in
Speaker 1: ten vis this point, I don't think is going to
Speaker 1: be significant given that we've seen most of the data.
Speaker 1: Is thing. Actually, demand for credit isn't the problem. Uh,
Speaker 1: you know, there isn't any command that much credit. What
Speaker 1: you're saying, the cost of credit in the problem. So
Speaker 1: what we're looking for is for them to go beyond
Speaker 1: this and actually start look giving us some more fiscal stimulus,
Speaker 1: preferably from the central government. And what would that look like?
Speaker 1: What would you expect there. I think we'd like obviously
Speaker 1: more infrastructive men. We'd like much more concerted, coordinated effort
Speaker 1: to help them, you know, property sector. I know that
Speaker 1: there's lots that have been announced, but I think we
Speaker 1: can definitely see that with from the data ware thing
Speaker 1: is that that that's not really feeling through, and you know,
Speaker 1: on the physical market has to turn around before you
Speaker 1: can get much more confidence that the economy and is
Speaker 1: on a more steady foot Ed was talking there in
Speaker 1: the news about Singapore relaxing some of the COVID restrictions,
Speaker 1: which will pretty much bring Singapore back to pre pandemic
Speaker 1: levels then, and that has been a very vast turnaround
Speaker 1: in the last year when we still had borders shop
Speaker 1: this time last year. When do you see China making
Speaker 1: such an incredible pivot And how is that going to
Speaker 1: change the dial here in terms of opening up the
Speaker 1: economy and creating broader economic growth when we're so far
Speaker 1: from that five and a half percent target. Yes, I
Speaker 1: think it's going to have to depend a lot on
Speaker 1: if they can get a vaccination a bit better, and
Speaker 1: of course maybe potentially some some drugs that would be helped,
Speaker 1: you know, helpful for for the COVID situation for those
Speaker 1: who have not been vaccinated. So I think, I mean,
Speaker 1: what I'm hearing is that that that could be on
Speaker 1: the cars for early part of next year, obviously after
Speaker 1: the national part of progress as well. So I think
Speaker 1: that could be what we're looking at to see where
Speaker 1: things could really turn around for COVID policy. UM And
Speaker 1: I think sometimes when we're feeling very low about China,
Speaker 1: remind myself that only Chinuary this year, I was feeling
Speaker 1: very depressed about Singapore and thinking, are we're ab going
Speaker 1: to to resume normality? And what we do see is
Speaker 1: that when we do resume normality, it happens very quick
Speaker 1: and very fast. And I think that's that's what we
Speaker 1: have to kind of hold onto the back, that once
Speaker 1: things are very place, we can cut around very quickly,
Speaker 1: very fast turn around here in in Singapore. But when
Speaker 1: it comes to the overall Chinese economic outlook, what what
Speaker 1: is your forecast there in terms of growth? I mean
Speaker 1: the five and the cent target has certainly been ditched,
Speaker 1: but you more in that band of say three point
Speaker 1: nine four point five percent? What's your outlook for China
Speaker 1: much closer to the three uh handle than than a
Speaker 1: four handle, given you know, everything we've seen, and given
Speaker 1: the fact that the some of these things that beyond
Speaker 1: their control as well, particularly you mentioned, should try on
Speaker 1: the climate issue. I think we're beginning, I mean to
Speaker 1: look at climate um not only UM here in China,
Speaker 1: but even you know, when we look across your you know,
Speaker 1: it is a big factor, one that I think could
Speaker 1: actually be much have a much more longer impact on inflation.
Speaker 1: When we think about particular region, put inflations will be
Speaker 1: very very key, and some of these climates that we're seeing,
Speaker 1: you know, could have quite a major impact in that
Speaker 1: particularly you know, as to say, the harvest season now,
Speaker 1: but this feeds into next year and the post the
Speaker 1: gas prices and fertilizers. So again, climate inflation still very
Speaker 1: much on the radar for this region. All right, Let's
Speaker 1: talk about the China bond market. When you look at
Speaker 1: shares in China, they're down about six percent over the
Speaker 1: past month, whereas an MSCI gauge tracking the rest of
Speaker 1: developing markets is up about seven percent. And it's similar
Speaker 1: in the bond market, with Chinese debt up just about
Speaker 1: one percent compared with a four percent return for emerging markets.
Speaker 1: When does that I guess divergence change. Um. I think
Speaker 1: we need to see the physical market a particular property
Speaker 1: in China to turn around, and that's going to be
Speaker 1: very difficult. As we mentioned talked a little bit earlier
Speaker 1: bout COVID policy. Right, so you can put similars and
Speaker 1: stuff in place, but you know, until people have confidence
Speaker 1: in uh that in the economy and the physical market
Speaker 1: is better, I think that's hard. That's the first step
Speaker 1: that that needs to get taken. And then obviously a
Speaker 1: number of steps that can be done in policy. Again,
Speaker 1: some fiscal stimulus I mentioned, as well as much more
Speaker 1: coordinated policy around funding. These all those things that would
Speaker 1: need to help, you know, give that sector a much
Speaker 1: firm of footing, and then of course hopefully few through
Speaker 1: to the rest of the economy, but none are quite there. Yeah,
Speaker 1: A lot of it is about the property sector. As
Speaker 1: you say, when do you see a potential peak in defaults?
Speaker 1: And I guess the worst behind us in the property sector, um,
Speaker 1: I mean the faults are pretty you know, they're high already.
Speaker 1: Hopefully we are definitely at the bottom, if you know,
Speaker 1: if not, and certainly for the policy makers that that
Speaker 1: is their direction is definitely to make sure that you know,
Speaker 1: we don't decelerate anymore and hopefully turn around. But I said,
Speaker 1: what can determine that is going to be the physical market,
Speaker 1: and that is still very cloudy at this moment um,
Speaker 1: not very clear. We're looking to how we're looking ahead
Speaker 1: to Jackson Hole two and what we're going to hear
Speaker 1: from the fair and how that plays into the rest
Speaker 1: of the globe. I guess you're talking about looking for
Speaker 1: some opportunity in in some other e M s, but
Speaker 1: also in Indian high yield. Tell us what you like there, Yeah,
Speaker 1: but I mean I think we I mean, then homes
Speaker 1: is holding up quite well. Uh, Commodity, I mean, certainly
Speaker 1: with oil a bit lower, that's that's helpful for that.
Speaker 1: But I think just structurally some of the companies there
Speaker 1: are just kind of quite well positioned. There's particularly that market,
Speaker 1: some of the still companies that were looking at there,
Speaker 1: and and a lot of the renewables you know, again
Speaker 1: very structurally a good strong demand and they're feeding into
Speaker 1: the whole idea that climate mitigation. Climate risk is going
Speaker 1: to be something that you know, it's big on investor's mind.
Speaker 1: If we do see the FAIR succeed in clamping down
Speaker 1: on inflation without causing a recession. What kind of areas
Speaker 1: of Asian credit do you see is benefiting here? So
Speaker 1: I'd say most of the most of Asia credit would
Speaker 1: be actually a big met The i G obviously UM
Speaker 1: segment doing very well. Most of the companies they're including
Speaker 1: Chinese company actually even benefit from that because UM you're
Speaker 1: dislike the slowing of the economy, and in terms of
Speaker 1: the most investment grade the fundamentals are so the the
Speaker 1: companies themselves are actually quite quite strong, So that could
Speaker 1: that would also benefit, and say within high use segments
Speaker 1: of it away from you know, commodity names in Indonesia
Speaker 1: and India all benefiting. The only area that's a very
Speaker 1: destocratic would be Chinese property and that's going to need um,
Speaker 1: you know, very much more Chinese policy makers to work
Speaker 1: on that side. And are you confident that the FAIR
Speaker 1: is going to achieve its target or are we facing
Speaker 1: potentially a big deep procession. I actually I think that
Speaker 1: they are doing the right things. Certainly, they're giving the
Speaker 1: market the very strong signal that they do not want
Speaker 1: inflation UM expectations to be embedded. And if that caused
Speaker 1: the market to bobble. It's probably going to be better
Speaker 1: than it would be if they let the inflation out
Speaker 1: of control. So I think of the two evils, I
Speaker 1: think the tackling inflation is probably going to be much
Speaker 1: more better for the market in the long run, and
Speaker 1: certainly need to make sure that we don't get embedded two.
Speaker 1: Has been great to have you on. Thank you so
Speaker 1: much for your insights. Too hard Out is head of
Speaker 1: Fixed Income Asia, Rebecca joining us from Singapore here on
Speaker 1: Bloomberg Daybreak Asia