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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Welcome to the Daybreak Asia Podcast. I'm Charlie Tella. Doug

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Speaker 2: Prisoner's got the week off. Asian equities are rallying today

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Speaker 2: after President Trump signaled a delay and planned strikes on

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Speaker 2: Iranian energy infrastructure, citing talks with Tehran and boosting hopes

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Speaker 2: for a de escalation in the Middle East. And that's

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Speaker 2: where we begin the conversation with surash Duantia. They had

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Speaker 2: CIO for Asia Equity Strategy at UBS Global Wealth Management,

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Speaker 2: and he spoke to Bloomberg's Heidi Stroud, Watts and Sherry on.

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Speaker 1: How do you take the latest signals coming from President

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Speaker 1: Trump and Iran and is this positive sentiment that we're

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Speaker 1: seeing in the markets justified at this point.

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Speaker 3: I think it's quite likely that this week we see

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Speaker 3: a refriend given the markets were oversold, but this might

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Speaker 3: not be the final solution. The situation is still very fluid.

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Speaker 3: It's quite possible that a week later we get an

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Speaker 3: a further escalation because they are asked from both side

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Speaker 3: and it might be very difficult to reach to a

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Speaker 3: final conclusion within a very short period of time. So

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Speaker 3: I think markets could still remain very volatile in the

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Speaker 3: short term. Our base case is that four to six

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Speaker 3: weeks down the line we should see a resolution of

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Speaker 3: the conflict because it's not in favor of both. But

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Speaker 3: having said that, path to that resolution could be very messy.

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Speaker 1: In the meantime, of course, we have seen the volatility

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Speaker 1: and gold prices as people are trying to hedge right now.

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Speaker 1: We saw that sort of breakdown when it comes to

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Speaker 1: the safe haven correlation with the US dollar. What do

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Speaker 1: you make of some of these assets and how they're

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Speaker 1: training as safe havens and where would you go to hedge.

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Speaker 3: It's very common to see this kind of pressure on

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Speaker 3: gold during a liquidation crisis because investors were raising cash

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Speaker 3: in this crisis, and that's why they were selling any

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Speaker 3: asset which had made profit this year. So we saw

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Speaker 3: profit booking in gold, in core, in equities, in Japanese equities.

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Speaker 3: In the short term, we do think gold is still

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Speaker 3: a very good hatch, especially after the ten percent pullback

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Speaker 3: in the last few weeks. At this kind of level,

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Speaker 3: it makes sense to buy gold because eventually we do

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Speaker 3: think FED will deliver on rate cuts, dollar will be weaker,

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Speaker 3: so gold will bounce back. The other areas investors can

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Speaker 3: look at is a short dated investment grade bonds. Although

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Speaker 3: there's a bit of uncertainty on how the FED is

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Speaker 3: going to proceed on the rate cuts, but at least

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Speaker 3: short dated bonds are not going to be effected and

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Speaker 3: the eils are pretty juicy at current levels.

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Speaker 4: Would you still recommend keeping some powder dry? When it

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Speaker 4: comes to keeping cash.

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Speaker 3: It might not be a bad idea to see keep

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Speaker 3: some cash on a sideline. At least investors should hedge

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Speaker 3: a little bit of risk in the equity side, reduce

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Speaker 3: cyclical exposure. That's what we are doing in our client

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Speaker 3: portfolios because you can never be sure and the tail

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Speaker 3: risk is very high. Once this thing gets resolution, then

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Speaker 3: I think we should say a very strong bounce back

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Speaker 3: in the equity market, but meanwhile reduce cyclical exposure, diversify

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Speaker 3: and keep some cash on the sideline.

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Speaker 4: It's interesting, Sarsh, I see Germany, India, Eurozone facing the

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Speaker 4: highest short term risks. If you take a step out,

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Speaker 4: where do you see, I guess less risk or less

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Speaker 4: or more opportunity with China be one of the markets

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Speaker 4: that you could consider.

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Speaker 3: You're absolutely right, and this morning actually we downdraad US

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Speaker 3: on equities and Indian equities from attractive to neutral. They

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Speaker 3: are more cyclical and going to be more affected by

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Speaker 3: the high oil prices. Within Asia. I think China secuorities

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Speaker 3: are going to be more resilient because China will keep

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Speaker 3: getting the oil through the state of homus. Inflation is

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Speaker 3: slow and the market has massively underperformed Asian markets over

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Speaker 3: the last six months. So we don't see further downside

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Speaker 3: in China quity market from current levels unless detailed Lisksnario

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Speaker 3: place out. The other areas to look at in Asia

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Speaker 3: would be investment grade bonds and definitely goldsted a very

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Speaker 3: good hedch at current levels.

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Speaker 1: When it comes to broader risk sentiment, how much does

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Speaker 1: it help on the margins news that we have European

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Speaker 1: Union Australia trade deal. I know that we're very much

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Speaker 1: distracted with the ongoing Iran war. But if we see

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Speaker 1: a more positive sentiment by allies, by other countries and

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Speaker 1: not revolving everything around the US, could we see some

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Speaker 1: help for markets.

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Speaker 3: It's quite possible that we do see a bit of

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Speaker 3: really fairly that markets market attention shift from the Iran

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Speaker 3: crisis to the free trade deal, which indicate towards continuation

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Speaker 3: of the global economic growth. But at the front and center,

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Speaker 3: we are still going to be focused more on the

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Speaker 3: Iran crisis because the tail risk is very high. If

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Speaker 3: you don't see a resolution, it's quite likely that we

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Speaker 3: see substantial pullback in the markets. So at the market

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Speaker 3: it does help, but I think we do need to

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Speaker 3: see a resolution of the crisis in the next four

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Speaker 3: to six weeks.

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Speaker 1: In the meantime, central banks around the world just struggling

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Speaker 1: to understand what the implications of surgeon oil will be.

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Speaker 1: Here in Japan, we got inflamation numbers that decelerated, but

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Speaker 1: it seems that when it comes to JGB yields, for example,

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Speaker 1: they continue to rise to multi decade highs and the

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Speaker 1: yen continues to weaken. What are the implications for investors

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Speaker 1: when they look at this market and we have already

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Speaker 1: seen an incredible round in the last few years.

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Speaker 3: Yeah, I think it's quite possible that the GGB yield

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Speaker 3: continue to go higher, especially as the US skills have

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Speaker 3: been going higher in the short term. But on the

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Speaker 3: equity side, we do think that this pullback in the

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Speaker 3: Champanese equity market has been oversold and this is actually

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Speaker 3: a buying opportunity. In the short term, yes, market could

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Speaker 3: remain volatile, but if you look at the medium term

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Speaker 3: outlook for Japanese equity market, the earnings this year should

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Speaker 3: be up close to high single digit and they are

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Speaker 3: reforms coming from the government on the macro front with

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Speaker 3: fiscal spending and more corporate governance reforms, and that should

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Speaker 3: support higher equity prices. Short so short term more volatile,

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Speaker 3: but eventually I think we should see a recovery in

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Speaker 3: the Champuese equity market.

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Speaker 2: So rash Tantia, the head CIO for Asia Equity Strategy

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Speaker 2: at UBS Global Wealth Management, speaking to Bloomberg's highly Scround

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Speaker 2: What and Sherry on Welcome back to the Daybreak Asia podcast.

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Speaker 2: I'm Charlie Pellett, Doug Chrisner's got the week off And

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Speaker 2: as we mentioned earlier, President Trump says the US will

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Speaker 2: postpone strikes against Iran's energy infrastructure after productive conversations with

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Speaker 2: the country. And for more analysis, we heard from rhanda

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Speaker 2: Slim Middle East program lead at the Stimpson Center, and

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Speaker 2: she spoke to Bloomberg's Heidi Stroud, Watts and Sherry.

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Speaker 4: On President Trump clearly looking for an off ramp who

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Speaker 4: has extended this deadline for negotiations to five days.

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Speaker 1: The Iranians say, no.

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Speaker 4: Such negotiations are taking place, and in fact, you know

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Speaker 4: that the tone and the aggression is pretty intense coming

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Speaker 4: from that side. Is this an asymmetric desire to find

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Speaker 4: an end to the war at this point, No.

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Speaker 5: I think we have entered the bizarre phase of this war,

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Speaker 5: and each side is going to try to get as

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Speaker 5: much as possible ahead of the actual negotiation and trying

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Speaker 5: to improve their position. And that's what the Iranians are doing.

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Speaker 5: If we look at the contacts that have been established,

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Speaker 5: for example, between the Iranian officials and Pakistani officials or

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Speaker 5: a rumored to be one of the three of countries

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Speaker 5: that are helping with the mediation right now between the

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Speaker 5: two countries, it proves that the Iranians are speaking with

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Speaker 5: a potential mediator now, whether they have agreed on the

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Speaker 5: terms of a meeting. I think mister Trump maybe has

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Speaker 5: gone overboard, partly to help shape the market ahead of

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Speaker 5: this morning opening, but definitely the two sides are interested

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Speaker 5: and each one is going, especially the Iranian is going

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Speaker 5: to try to improve the pre negotiation conditions. Let's put

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Speaker 5: it this way in their favor.

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Speaker 4: I think it's easier to see a scenario where the

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Speaker 4: US and Iran can come to the table for some

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Speaker 4: sort of ceisfile compromise. What about Israel, though, because I

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Speaker 4: have a fairly different set of ambitions in this conflict.

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Speaker 5: I totally agree with you. I mean, Israel remains interested

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Speaker 5: in achieving its objective, which is Iranian regime collapse. The

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Speaker 5: Americans are not interested in this objective. They want somebody

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Speaker 5: who can they can deal with, you know, as mister

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Speaker 5: Trump put it, another Ayatula or another insider from the

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Speaker 5: regime that they can deal with, similar to the Venezuelan model.

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Speaker 5: But at the same time, Israel cannot wage this war

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Speaker 5: the way it is being waged without the American approval

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Speaker 5: and the American assistance, and especially without mister trump approval,

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Speaker 5: and so I think they are going to be in

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Speaker 5: a bind. At some point they have to accede to

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Speaker 5: mister Trump's demands if he gets to the point where

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Speaker 5: he wants a ceasfire.

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Speaker 1: Randa, where is the Iranian uprising? The popular uprising that

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Speaker 1: we keep hearing might come, especially at a time when

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Speaker 1: the Iranian security forces have been battered by these us

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Speaker 1: is really strike.

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Speaker 5: But yes, but when bombs are falling, you know from

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Speaker 5: the skies on your towns, on your cities, it's very

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Speaker 5: hard to go into the streets and and do enterprising.

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Speaker 5: I mean, I lived through a civil war in Lebanon,

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Speaker 5: and I know what people feel when you are in

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Speaker 5: a state of war, and it's going to be very

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Speaker 5: hard later. Now, if the regime survives, it's going to survive. Weakened,

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Speaker 5: it's going to be to survive. Followed out, then you

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Speaker 5: have conditions, political conditions on the ground that could lead

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Speaker 5: to the regime collapse and change. But under in a

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Speaker 5: war scenario, it's very hard to have a citizen uprising.

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Speaker 1: How strong is the Ranian regime right now? And I'm

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Speaker 1: not just talking within the country, but also when it

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Speaker 1: comes to its proxy ecosystem.

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Speaker 5: The proxy has been weakened. But at the same time,

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Speaker 5: we thought that Hasbalala has been weakened a lot. Now

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Speaker 5: we knew that it was. It was weakened, but not out,

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Speaker 5: not defeated. But we did not think, at least I

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Speaker 5: did not think, having studied has Bollah for a long time,

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Speaker 5: that they will be as able as they have shown

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Speaker 5: until now. To be able to mount and attack in

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Speaker 5: response to the Israeli attacks on Lebanon, the hashed in Iraq.

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Speaker 5: The pm F seems, you know, they are strong, but

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Speaker 5: not too I mean, not as as strong as has

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Speaker 5: Bola and the Hooties have not yet joined the fight.

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Speaker 5: They are being held in reserve in my opinion by

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Speaker 5: the Iranians.

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Speaker 1: And how are you factoring in you and semestic politics

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Speaker 1: in how this conflict also really evolves from this point

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Speaker 1: because we have seen, as Haidi mentioned, President Trump really

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Speaker 1: wanting an off ramp from here. But where do we

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Speaker 1: go with Washington politics really combining with what these railings

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Speaker 1: want and how this conflict might evolve.

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Speaker 5: Look, there are two factors that are going to push

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Speaker 5: you know, the administration to seek a ceasfire. One is munitions.

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Speaker 5: They are running law on munitions and their ally is

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Speaker 5: running law on munition. We know that the countries in

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Speaker 5: the Gulf are running law on interceptors. And then the

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Speaker 5: second is basically money. Is the stock market and the

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Speaker 5: impact of not only the stop market but the oil

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Speaker 5: fuel And now we are starting to hear from American

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Speaker 5: farmers who are you know, are paying too much, too

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Speaker 5: high a price for diesel. They are running short on fertilizers,

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Speaker 5: so you are going to start seeing now the impact

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Speaker 5: of this war manifesting itself domestically in different segments of

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Speaker 5: the American society.

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Speaker 2: Run the Slim Middle East programmed leader The Stimson Setter

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Speaker 2: speaking to Bloomberg's High These Ground, Watts and shay On,

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Prisoner and this is Bloomberg