Speaker 1: Let's get to our guest, Vasu Menon is whether it's
Speaker 1: executive director of Investment Strategy at OCBC Bank Wealth Management
Speaker 1: on the line from Singapore, vas who thank you for
Speaker 1: being with us. At the top of the hour, We're
Speaker 1: going to get these data points for the Chinese economy
Speaker 1: and our forecast indicates that they're likely to show modest
Speaker 1: improvement in the month of July. Is that a safe
Speaker 1: bet at this point? Uh? That good morning, and yes,
Speaker 1: I think it is a safe bet to show that,
Speaker 1: you know, China will show a slight improvement in July
Speaker 1: compared to June. I wouldn't be surprised if that happens.
Speaker 1: But the key word here is slight. You know, there
Speaker 1: are still several hit wins in China. Uh, they're still
Speaker 1: COVID lockdowns taking place, your COVID flay ups taking place
Speaker 1: in China. Uh. You've had stimulus, but no big bang
Speaker 1: in China. So you know, yes, the economy is slowly
Speaker 1: getting back on its feet, but it's a gradual recovery.
Speaker 1: But even with that gradual recovery, they're still hit wins
Speaker 1: hit in China, and so you know, China is not
Speaker 1: completely out of the woods. China not completely out of
Speaker 1: the woods. But what do you think in terms of
Speaker 1: that quarterly Monetary policy statement we had from the PBOC
Speaker 1: last week that kind of sounded a warning sign about
Speaker 1: what you've seen from the US and Europe in regards
Speaker 1: to stimulus and their efforts to kind of fight inflation too.
Speaker 1: Does that mean that we don't see as much stimulus
Speaker 1: coming through from the pipeline in China. Well, I wouldn't
Speaker 1: be surprised if that's the case. You know, I wouldn't
Speaker 1: be surprised if the Chinese authorities do not undertake the
Speaker 1: Big Bang approach. I think they clearly don't want to
Speaker 1: oversteal with the economy. They've done that before. They're seeing
Speaker 1: what happens. In fact, they're still paying the price written
Speaker 1: in to some extent because you know, we've got the
Speaker 1: property market bubble partly because of previous stimulus as well.
Speaker 1: And I think they'll be gradual in the way they
Speaker 1: manage this. You know, they've got they're fighting against several
Speaker 1: global head winds, uh, you know that are beyond their control,
Speaker 1: so they will manage this carefully. Uh. But nevertheless, you know,
Speaker 1: they've got the dripe out and they can uh, you know,
Speaker 1: invoked the dripe out they need to, but I think
Speaker 1: they will move gradually, not the big bang approach. Something
Speaker 1: else must be a foot. If you look at the
Speaker 1: credit data from last Friday, shockingly weak numbers aggregate fan
Speaker 1: financing nearly half of what economists we're expecting. What's going
Speaker 1: on here? Well, you know the reality is that you know,
Speaker 1: Main Street in China is still not doing as well,
Speaker 1: right because you know the economy is still slowly getting
Speaker 1: make on its feet. Yes, well, you know, the government
Speaker 1: can push for stimulus the previews, he can supposedly push
Speaker 1: for stimudus, get the banks to lend. The real demand
Speaker 1: out there is still fairly weak because of what's happening
Speaker 1: with the COVID situation, because of what's happening the property sector.
Speaker 1: That's a dragon the economy, you know. So I think
Speaker 1: it's a reflection of the fact that you know, real
Speaker 1: demand is relatively weak. You know, corporates are careful consumerus
Speaker 1: to some extent a careful as well, and you know
Speaker 1: that's partly coming through in the credit data you just mentioned.
Speaker 1: See when we look at the I guess kind of
Speaker 1: bear market rally that you're seeing in the SMP five.
Speaker 1: What kind of helps to propel that further? Is it
Speaker 1: a dubbish pivot by the FED or have we kind
Speaker 1: of seen a top in this rally? Well, you know, yeah,
Speaker 1: the market have u surprised everyone in the SMP founder
Speaker 1: is almost seventeen percent from the middle of June. I mean,
Speaker 1: that's quite a big move upwards, and a few things
Speaker 1: have propelled it. I think the earning season has propelled
Speaker 1: it partly. I mean, you've got better than expected earnings
Speaker 1: coming out of the US. But the question is is
Speaker 1: this sustainable in the coming quarters. You've not any major surprises.
Speaker 1: You know, more than seventy percent of companies have exceeded
Speaker 1: market expectations. I think the other fact that you just
Speaker 1: mentioned is a do wish pivot by the FAT. I
Speaker 1: think the better than expected CPN numbers, the declining pp
Speaker 1: A numbers so last week has resulted in you know,
Speaker 1: markets changing the expectation to a wish fat. But I
Speaker 1: think the FAT is not ready to turn davish. Uh.
Speaker 1: They might do that, you know, sometime later this year,
Speaker 1: early next year, but hey, they're not ready for it.
Speaker 1: So when we're looking at markets, Uh, we have seen
Speaker 1: some momentum coming through in the Asian stock benchmark, but
Speaker 1: the durability of the recovery already been questioned, and we've
Speaker 1: got analysts predicting the biggest profit drop for Asian equity
Speaker 1: since the pandemic started. So does that mean that we
Speaker 1: kind of an underperformance here from the ms c I
Speaker 1: Asia Pacific Index versus what we're saying in that rally
Speaker 1: we saw on the SMP five. Uh, definitely, I mean, Juliet,
Speaker 1: I mean you've already seen that underperformance take place. I mean,
Speaker 1: the US stock market is clearly taking the lead. UH
Speaker 1: is charging a hit. It also came down the most Uh,
Speaker 1: you know when you have saw the correction, and also
Speaker 1: therefore you're also seeing a nicely bound in the U
Speaker 1: stock markets. And Asia is legging. And I'm not surprised
Speaker 1: because you know, the US all is very strong. Asian
Speaker 1: currencies have been generally weak. Manatoring policy in Asia expected
Speaker 1: we you know, Titan support the currencies to some extent,
Speaker 1: and so they had wins in Asia two. I mean,
Speaker 1: of course, you know, we talked about China quite a bit, uh,
Speaker 1: and China remains an uncertainty for Asian economies. So there
Speaker 1: they are issues with Asia, you know, uncertainties with Asia,
Speaker 1: but that doesn't mean that you know, you're abandoned Asia altogether.
Speaker 1: I think, you know, medium term, Asia is still a
Speaker 1: good story. But you know, in the short term, at
Speaker 1: least UH, those hid means will play out. I promised
Speaker 1: to go somewhere other than China in the segment of
Speaker 1: the conversation, but I've got to talk to you about
Speaker 1: what the PBOC has just done. They have reduced the
Speaker 1: rate on the one year mL to UH to seventy
Speaker 1: five from two eighty five, so a cut of ten
Speaker 1: basis points. What does this tell you, Well, it tells
Speaker 1: you that you know, they're ready to provide some degree
Speaker 1: of support to the economy. They recognize the fact that
Speaker 1: the economy is UH languishing, but they're not prepared to
Speaker 1: do UH. As I said earlier, the big bang approach.
Speaker 1: I mean, China is moving away from that approach. It's
Speaker 1: a bit more selective, a bit more gradual. Uh. You know,
Speaker 1: you're fighting a lot of hit wins, global hit wins,
Speaker 1: especially the strong, the very aggresive federal reserves. So you know,
Speaker 1: I think the PBUC saving it's a bullets probably for
Speaker 1: later on another day. I mean, but nevertheless, you know,
Speaker 1: the signal you're sending to the market is that you
Speaker 1: know they're prepared to step into some extent and do
Speaker 1: what they can. How attractive is the Japan story for you?
Speaker 1: We've got the neck to to five on track to
Speaker 1: erase a year to day laws, and we're looking ahead
Speaker 1: for a rebound in the economy too with those second
Speaker 1: quarter GDP figures. Well, you know Japan, Yes, you're right,
Speaker 1: Japan is an interesting market. I mean, the yen's weekend
Speaker 1: now you're starting to strengthen once again. You know, inflation
Speaker 1: in Japan appears to be coming back. Um, we've got
Speaker 1: a neutral reading in Japan. We've got neutle reating on
Speaker 1: US Japan and age X Japan. So we don't see
Speaker 1: anything exceptional in JEPEND at this junction. But as you
Speaker 1: as you highlight that, I mean, the economy is rebounding
Speaker 1: quite nicely. Uh. And you know, the Japanese economy is
Speaker 1: not open yet. I mean many of the economies have
Speaker 1: opened up. Jepend is not opened up. And when they
Speaker 1: do open up, they'll get that, you know, the pent
Speaker 1: up demands stimulus for the economy. Uh. You see tories
Speaker 1: flows coming in greater travel within Japan, most spending taking place,
Speaker 1: and that could be good for the Japanese economy down
Speaker 1: the route. Yeah, and the guys on our m Live
Speaker 1: blog we're pointing out that as part of this second
Speaker 1: quarter GDP report, it is preliminary, we get that, but
Speaker 1: the deflator for household consumption excluding rent was up one
Speaker 1: point three Is it too soon to say maybe that
Speaker 1: in the consumer sector you're seeing evidence of inflation and
Speaker 1: maybe maybe we're close to some kind of inflection point
Speaker 1: where we're on the other side of deflationary pressures. Uh,
Speaker 1: possible that. I mean, you're not seeing any major inflation
Speaker 1: in Japan yet. I mean, inflation is picking up, as
Speaker 1: you said, consumer spending is picking up. Inflation is also
Speaker 1: picking up Japan. Is you know, not isolated case. But
Speaker 1: but you know, it hasn't gone up enough of the
Speaker 1: vield to say that, look we need to start tightening
Speaker 1: and uh. But but it's a good sign. I mean,
Speaker 1: it seems to be showing some turnaround the corner. And uh,
Speaker 1: I think that's one reason why investors and you know,
Speaker 1: markets have turned slightly more positive in Japanese economy as well,
Speaker 1: and the stock markets of course, just a very quick
Speaker 1: word VERTI on a Siena. I mean we're looking at
Speaker 1: recovery and Thailand really lifting the bars and getting back
Speaker 1: to those tourist levels too. Is that still on attractive play? Uh, well,
Speaker 1: you know, Thailand is not one of our topics. But nevertheless,
Speaker 1: you know again the Thaie economy is getting the stimulus
Speaker 1: from tourism. One of the biggest similars you get from
Speaker 1: you know, you get from COVID nineteen reopening is tourist
Speaker 1: flow spicking up. And Thailand is a major tourist attraction.
Speaker 1: So yes, you know, something to keep in mind. But China,
Speaker 1: Singapore and Hong Kong or topics for ye. All right, Fas,
Speaker 1: it always a pleasure, Thank you so much. Fasumnan executive
Speaker 1: director of Investment Strategy at O C b C Bank
Speaker 1: Wealth Management. Here in Singapore. This is Bloomberg