Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Welcome to the Daybreak Asia Podcast. I'm Charlie Tella. Doug
Speaker 2: Prisoner's got the week off. Asian equities are rallying today
Speaker 2: after President Trump signaled a delay and planned strikes on
Speaker 2: Iranian energy infrastructure, citing talks with Tehran and boosting hopes
Speaker 2: for a de escalation in the Middle East. And that's
Speaker 2: where we begin the conversation with surash Duantia. They had
Speaker 2: CIO for Asia Equity Strategy at UBS Global Wealth Management,
Speaker 2: and he spoke to Bloomberg's Heidi Stroud, Watts and Sherry on.
Speaker 1: How do you take the latest signals coming from President
Speaker 1: Trump and Iran and is this positive sentiment that we're
Speaker 1: seeing in the markets justified at this point.
Speaker 3: I think it's quite likely that this week we see
Speaker 3: a refriend given the markets were oversold, but this might
Speaker 3: not be the final solution. The situation is still very fluid.
Speaker 3: It's quite possible that a week later we get an
Speaker 3: a further escalation because they are asked from both side
Speaker 3: and it might be very difficult to reach to a
Speaker 3: final conclusion within a very short period of time. So
Speaker 3: I think markets could still remain very volatile in the
Speaker 3: short term. Our base case is that four to six
Speaker 3: weeks down the line we should see a resolution of
Speaker 3: the conflict because it's not in favor of both. But
Speaker 3: having said that, path to that resolution could be very messy.
Speaker 1: In the meantime, of course, we have seen the volatility
Speaker 1: and gold prices as people are trying to hedge right now.
Speaker 1: We saw that sort of breakdown when it comes to
Speaker 1: the safe haven correlation with the US dollar. What do
Speaker 1: you make of some of these assets and how they're
Speaker 1: training as safe havens and where would you go to hedge.
Speaker 3: It's very common to see this kind of pressure on
Speaker 3: gold during a liquidation crisis because investors were raising cash
Speaker 3: in this crisis, and that's why they were selling any
Speaker 3: asset which had made profit this year. So we saw
Speaker 3: profit booking in gold, in core, in equities, in Japanese equities.
Speaker 3: In the short term, we do think gold is still
Speaker 3: a very good hatch, especially after the ten percent pullback
Speaker 3: in the last few weeks. At this kind of level,
Speaker 3: it makes sense to buy gold because eventually we do
Speaker 3: think FED will deliver on rate cuts, dollar will be weaker,
Speaker 3: so gold will bounce back. The other areas investors can
Speaker 3: look at is a short dated investment grade bonds. Although
Speaker 3: there's a bit of uncertainty on how the FED is
Speaker 3: going to proceed on the rate cuts, but at least
Speaker 3: short dated bonds are not going to be effected and
Speaker 3: the eils are pretty juicy at current levels.
Speaker 4: Would you still recommend keeping some powder dry? When it
Speaker 4: comes to keeping cash.
Speaker 3: It might not be a bad idea to see keep
Speaker 3: some cash on a sideline. At least investors should hedge
Speaker 3: a little bit of risk in the equity side, reduce
Speaker 3: cyclical exposure. That's what we are doing in our client
Speaker 3: portfolios because you can never be sure and the tail
Speaker 3: risk is very high. Once this thing gets resolution, then
Speaker 3: I think we should say a very strong bounce back
Speaker 3: in the equity market, but meanwhile reduce cyclical exposure, diversify
Speaker 3: and keep some cash on the sideline.
Speaker 4: It's interesting, Sarsh, I see Germany, India, Eurozone facing the
Speaker 4: highest short term risks. If you take a step out,
Speaker 4: where do you see, I guess less risk or less
Speaker 4: or more opportunity with China be one of the markets
Speaker 4: that you could consider.
Speaker 3: You're absolutely right, and this morning actually we downdraad US
Speaker 3: on equities and Indian equities from attractive to neutral. They
Speaker 3: are more cyclical and going to be more affected by
Speaker 3: the high oil prices. Within Asia. I think China secuorities
Speaker 3: are going to be more resilient because China will keep
Speaker 3: getting the oil through the state of homus. Inflation is
Speaker 3: slow and the market has massively underperformed Asian markets over
Speaker 3: the last six months. So we don't see further downside
Speaker 3: in China quity market from current levels unless detailed Lisksnario
Speaker 3: place out. The other areas to look at in Asia
Speaker 3: would be investment grade bonds and definitely goldsted a very
Speaker 3: good hedch at current levels.
Speaker 1: When it comes to broader risk sentiment, how much does
Speaker 1: it help on the margins news that we have European
Speaker 1: Union Australia trade deal. I know that we're very much
Speaker 1: distracted with the ongoing Iran war. But if we see
Speaker 1: a more positive sentiment by allies, by other countries and
Speaker 1: not revolving everything around the US, could we see some
Speaker 1: help for markets.
Speaker 3: It's quite possible that we do see a bit of
Speaker 3: really fairly that markets market attention shift from the Iran
Speaker 3: crisis to the free trade deal, which indicate towards continuation
Speaker 3: of the global economic growth. But at the front and center,
Speaker 3: we are still going to be focused more on the
Speaker 3: Iran crisis because the tail risk is very high. If
Speaker 3: you don't see a resolution, it's quite likely that we
Speaker 3: see substantial pullback in the markets. So at the market
Speaker 3: it does help, but I think we do need to
Speaker 3: see a resolution of the crisis in the next four
Speaker 3: to six weeks.
Speaker 1: In the meantime, central banks around the world just struggling
Speaker 1: to understand what the implications of surgeon oil will be.
Speaker 1: Here in Japan, we got inflamation numbers that decelerated, but
Speaker 1: it seems that when it comes to JGB yields, for example,
Speaker 1: they continue to rise to multi decade highs and the
Speaker 1: yen continues to weaken. What are the implications for investors
Speaker 1: when they look at this market and we have already
Speaker 1: seen an incredible round in the last few years.
Speaker 3: Yeah, I think it's quite possible that the GGB yield
Speaker 3: continue to go higher, especially as the US skills have
Speaker 3: been going higher in the short term. But on the
Speaker 3: equity side, we do think that this pullback in the
Speaker 3: Champanese equity market has been oversold and this is actually
Speaker 3: a buying opportunity. In the short term, yes, market could
Speaker 3: remain volatile, but if you look at the medium term
Speaker 3: outlook for Japanese equity market, the earnings this year should
Speaker 3: be up close to high single digit and they are
Speaker 3: reforms coming from the government on the macro front with
Speaker 3: fiscal spending and more corporate governance reforms, and that should
Speaker 3: support higher equity prices. Short so short term more volatile,
Speaker 3: but eventually I think we should see a recovery in
Speaker 3: the Champuese equity market.
Speaker 2: So rash Tantia, the head CIO for Asia Equity Strategy
Speaker 2: at UBS Global Wealth Management, speaking to Bloomberg's highly Scround
Speaker 2: What and Sherry on Welcome back to the Daybreak Asia podcast.
Speaker 2: I'm Charlie Pellett, Doug Chrisner's got the week off And
Speaker 2: as we mentioned earlier, President Trump says the US will
Speaker 2: postpone strikes against Iran's energy infrastructure after productive conversations with
Speaker 2: the country. And for more analysis, we heard from rhanda
Speaker 2: Slim Middle East program lead at the Stimpson Center, and
Speaker 2: she spoke to Bloomberg's Heidi Stroud, Watts and Sherry.
Speaker 4: On President Trump clearly looking for an off ramp who
Speaker 4: has extended this deadline for negotiations to five days.
Speaker 1: The Iranians say, no.
Speaker 4: Such negotiations are taking place, and in fact, you know
Speaker 4: that the tone and the aggression is pretty intense coming
Speaker 4: from that side. Is this an asymmetric desire to find
Speaker 4: an end to the war at this point, No.
Speaker 5: I think we have entered the bizarre phase of this war,
Speaker 5: and each side is going to try to get as
Speaker 5: much as possible ahead of the actual negotiation and trying
Speaker 5: to improve their position. And that's what the Iranians are doing.
Speaker 5: If we look at the contacts that have been established,
Speaker 5: for example, between the Iranian officials and Pakistani officials or
Speaker 5: a rumored to be one of the three of countries
Speaker 5: that are helping with the mediation right now between the
Speaker 5: two countries, it proves that the Iranians are speaking with
Speaker 5: a potential mediator now, whether they have agreed on the
Speaker 5: terms of a meeting. I think mister Trump maybe has
Speaker 5: gone overboard, partly to help shape the market ahead of
Speaker 5: this morning opening, but definitely the two sides are interested
Speaker 5: and each one is going, especially the Iranian is going
Speaker 5: to try to improve the pre negotiation conditions. Let's put
Speaker 5: it this way in their favor.
Speaker 4: I think it's easier to see a scenario where the
Speaker 4: US and Iran can come to the table for some
Speaker 4: sort of ceisfile compromise. What about Israel, though, because I
Speaker 4: have a fairly different set of ambitions in this conflict.
Speaker 5: I totally agree with you. I mean, Israel remains interested
Speaker 5: in achieving its objective, which is Iranian regime collapse. The
Speaker 5: Americans are not interested in this objective. They want somebody
Speaker 5: who can they can deal with, you know, as mister
Speaker 5: Trump put it, another Ayatula or another insider from the
Speaker 5: regime that they can deal with, similar to the Venezuelan model.
Speaker 5: But at the same time, Israel cannot wage this war
Speaker 5: the way it is being waged without the American approval
Speaker 5: and the American assistance, and especially without mister trump approval,
Speaker 5: and so I think they are going to be in
Speaker 5: a bind. At some point they have to accede to
Speaker 5: mister Trump's demands if he gets to the point where
Speaker 5: he wants a ceasfire.
Speaker 1: Randa, where is the Iranian uprising? The popular uprising that
Speaker 1: we keep hearing might come, especially at a time when
Speaker 1: the Iranian security forces have been battered by these us
Speaker 1: is really strike.
Speaker 5: But yes, but when bombs are falling, you know from
Speaker 5: the skies on your towns, on your cities, it's very
Speaker 5: hard to go into the streets and and do enterprising.
Speaker 5: I mean, I lived through a civil war in Lebanon,
Speaker 5: and I know what people feel when you are in
Speaker 5: a state of war, and it's going to be very
Speaker 5: hard later. Now, if the regime survives, it's going to survive. Weakened,
Speaker 5: it's going to be to survive. Followed out, then you
Speaker 5: have conditions, political conditions on the ground that could lead
Speaker 5: to the regime collapse and change. But under in a
Speaker 5: war scenario, it's very hard to have a citizen uprising.
Speaker 1: How strong is the Ranian regime right now? And I'm
Speaker 1: not just talking within the country, but also when it
Speaker 1: comes to its proxy ecosystem.
Speaker 5: The proxy has been weakened. But at the same time,
Speaker 5: we thought that Hasbalala has been weakened a lot. Now
Speaker 5: we knew that it was. It was weakened, but not out,
Speaker 5: not defeated. But we did not think, at least I
Speaker 5: did not think, having studied has Bollah for a long time,
Speaker 5: that they will be as able as they have shown
Speaker 5: until now. To be able to mount and attack in
Speaker 5: response to the Israeli attacks on Lebanon, the hashed in Iraq.
Speaker 5: The pm F seems, you know, they are strong, but
Speaker 5: not too I mean, not as as strong as has
Speaker 5: Bola and the Hooties have not yet joined the fight.
Speaker 5: They are being held in reserve in my opinion by
Speaker 5: the Iranians.
Speaker 1: And how are you factoring in you and semestic politics
Speaker 1: in how this conflict also really evolves from this point
Speaker 1: because we have seen, as Haidi mentioned, President Trump really
Speaker 1: wanting an off ramp from here. But where do we
Speaker 1: go with Washington politics really combining with what these railings
Speaker 1: want and how this conflict might evolve.
Speaker 5: Look, there are two factors that are going to push
Speaker 5: you know, the administration to seek a ceasfire. One is munitions.
Speaker 5: They are running law on munitions and their ally is
Speaker 5: running law on munition. We know that the countries in
Speaker 5: the Gulf are running law on interceptors. And then the
Speaker 5: second is basically money. Is the stock market and the
Speaker 5: impact of not only the stop market but the oil
Speaker 5: fuel And now we are starting to hear from American
Speaker 5: farmers who are you know, are paying too much, too
Speaker 5: high a price for diesel. They are running short on fertilizers,
Speaker 5: so you are going to start seeing now the impact
Speaker 5: of this war manifesting itself domestically in different segments of
Speaker 5: the American society.
Speaker 2: Run the Slim Middle East programmed leader The Stimson Setter
Speaker 2: speaking to Bloomberg's High These Ground, Watts and shay On,
Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak
Speaker 2: Asia Edition podcast. Each weekday we look at the story
Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You
Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,
Speaker 2: or anywhere else you listen. Join us again tomorrow for
Speaker 2: insight on the market moves from Hong Kong to Singapore
Speaker 2: and Australia. I'm Doug Prisoner and this is Bloomberg