1 00:00:00,080 --> 00:00:02,440 Speaker 1: Let's get to our guests now to Ha Choo is 2 00:00:02,520 --> 00:00:06,240 Speaker 1: head of Fixed Income Asia, joining us from Rebecca here 3 00:00:06,240 --> 00:00:08,960 Speaker 1: in Singapore to talk all things China and specifically the 4 00:00:09,000 --> 00:00:12,000 Speaker 1: bond market. Wanted to get your broader thoughts though on 5 00:00:12,080 --> 00:00:14,560 Speaker 1: the overall economy as we're continuing to face so many 6 00:00:14,600 --> 00:00:17,439 Speaker 1: headwinds and now we're seeing the Chinese province of situation 7 00:00:17,520 --> 00:00:20,720 Speaker 1: extending these industrial power cuts to some users. This really 8 00:00:20,760 --> 00:00:23,320 Speaker 1: lies into the effect of what more stimulus we can 9 00:00:23,360 --> 00:00:26,799 Speaker 1: expect to see from authorities today it's the LPR. But 10 00:00:26,840 --> 00:00:29,280 Speaker 1: what's your view in terms of further stimulus we can 11 00:00:29,320 --> 00:00:33,240 Speaker 1: see here? Yes, I think we we think that is 12 00:00:33,240 --> 00:00:35,960 Speaker 1: going to have to look beyond monetary policies and in 13 00:00:36,200 --> 00:00:39,040 Speaker 1: ten vis this point, I don't think is going to 14 00:00:39,080 --> 00:00:41,840 Speaker 1: be significant given that we've seen most of the data. 15 00:00:41,880 --> 00:00:45,559 Speaker 1: Is thing. Actually, demand for credit isn't the problem. Uh, 16 00:00:45,720 --> 00:00:48,239 Speaker 1: you know, there isn't any command that much credit. What 17 00:00:48,360 --> 00:00:50,720 Speaker 1: you're saying, the cost of credit in the problem. So 18 00:00:50,800 --> 00:00:53,479 Speaker 1: what we're looking for is for them to go beyond 19 00:00:53,479 --> 00:00:57,000 Speaker 1: this and actually start look giving us some more fiscal stimulus, 20 00:00:57,040 --> 00:01:00,280 Speaker 1: preferably from the central government. And what would that look like? 21 00:01:00,320 --> 00:01:03,920 Speaker 1: What would you expect there. I think we'd like obviously 22 00:01:03,960 --> 00:01:09,640 Speaker 1: more infrastructive men. We'd like much more concerted, coordinated effort 23 00:01:09,680 --> 00:01:13,160 Speaker 1: to help them, you know, property sector. I know that 24 00:01:13,200 --> 00:01:16,840 Speaker 1: there's lots that have been announced, but I think we 25 00:01:16,880 --> 00:01:19,080 Speaker 1: can definitely see that with from the data ware thing 26 00:01:19,480 --> 00:01:21,920 Speaker 1: is that that that's not really feeling through, and you know, 27 00:01:22,080 --> 00:01:25,640 Speaker 1: on the physical market has to turn around before you 28 00:01:25,640 --> 00:01:28,440 Speaker 1: can get much more confidence that the economy and is 29 00:01:28,440 --> 00:01:31,560 Speaker 1: on a more steady foot Ed was talking there in 30 00:01:31,600 --> 00:01:34,960 Speaker 1: the news about Singapore relaxing some of the COVID restrictions, 31 00:01:34,959 --> 00:01:37,840 Speaker 1: which will pretty much bring Singapore back to pre pandemic 32 00:01:38,240 --> 00:01:41,320 Speaker 1: levels then, and that has been a very vast turnaround 33 00:01:41,440 --> 00:01:43,680 Speaker 1: in the last year when we still had borders shop 34 00:01:43,800 --> 00:01:46,520 Speaker 1: this time last year. When do you see China making 35 00:01:46,600 --> 00:01:48,920 Speaker 1: such an incredible pivot And how is that going to 36 00:01:49,240 --> 00:01:51,520 Speaker 1: change the dial here in terms of opening up the 37 00:01:51,520 --> 00:01:55,400 Speaker 1: economy and creating broader economic growth when we're so far 38 00:01:55,480 --> 00:01:58,360 Speaker 1: from that five and a half percent target. Yes, I 39 00:01:58,400 --> 00:02:01,320 Speaker 1: think it's going to have to depend a lot on 40 00:02:01,440 --> 00:02:03,800 Speaker 1: if they can get a vaccination a bit better, and 41 00:02:03,840 --> 00:02:07,440 Speaker 1: of course maybe potentially some some drugs that would be helped, 42 00:02:07,480 --> 00:02:10,960 Speaker 1: you know, helpful for for the COVID situation for those 43 00:02:11,000 --> 00:02:13,600 Speaker 1: who have not been vaccinated. So I think, I mean, 44 00:02:13,639 --> 00:02:16,040 Speaker 1: what I'm hearing is that that that could be on 45 00:02:16,120 --> 00:02:19,560 Speaker 1: the cars for early part of next year, obviously after 46 00:02:20,080 --> 00:02:22,000 Speaker 1: the national part of progress as well. So I think 47 00:02:22,040 --> 00:02:24,680 Speaker 1: that could be what we're looking at to see where 48 00:02:24,800 --> 00:02:28,560 Speaker 1: things could really turn around for COVID policy. UM And 49 00:02:28,600 --> 00:02:31,480 Speaker 1: I think sometimes when we're feeling very low about China, 50 00:02:31,600 --> 00:02:34,120 Speaker 1: remind myself that only Chinuary this year, I was feeling 51 00:02:34,200 --> 00:02:37,400 Speaker 1: very depressed about Singapore and thinking, are we're ab going 52 00:02:37,440 --> 00:02:40,400 Speaker 1: to to resume normality? And what we do see is 53 00:02:40,400 --> 00:02:43,440 Speaker 1: that when we do resume normality, it happens very quick 54 00:02:43,600 --> 00:02:45,480 Speaker 1: and very fast. And I think that's that's what we 55 00:02:45,520 --> 00:02:48,519 Speaker 1: have to kind of hold onto the back, that once 56 00:02:48,600 --> 00:02:51,120 Speaker 1: things are very place, we can cut around very quickly, 57 00:02:51,880 --> 00:02:54,079 Speaker 1: very fast turn around here in in Singapore. But when 58 00:02:54,120 --> 00:02:56,720 Speaker 1: it comes to the overall Chinese economic outlook, what what 59 00:02:56,880 --> 00:02:59,040 Speaker 1: is your forecast there in terms of growth? I mean 60 00:02:59,520 --> 00:03:01,680 Speaker 1: the five and the cent target has certainly been ditched, 61 00:03:01,720 --> 00:03:03,800 Speaker 1: but you more in that band of say three point 62 00:03:03,880 --> 00:03:07,480 Speaker 1: nine four point five percent? What's your outlook for China 63 00:03:07,720 --> 00:03:10,919 Speaker 1: much closer to the three uh handle than than a 64 00:03:10,960 --> 00:03:13,440 Speaker 1: four handle, given you know, everything we've seen, and given 65 00:03:13,480 --> 00:03:15,760 Speaker 1: the fact that the some of these things that beyond 66 00:03:15,800 --> 00:03:18,800 Speaker 1: their control as well, particularly you mentioned, should try on 67 00:03:18,840 --> 00:03:21,960 Speaker 1: the climate issue. I think we're beginning, I mean to 68 00:03:22,040 --> 00:03:25,680 Speaker 1: look at climate um not only UM here in China, 69 00:03:25,720 --> 00:03:27,560 Speaker 1: but even you know, when we look across your you know, 70 00:03:27,600 --> 00:03:30,360 Speaker 1: it is a big factor, one that I think could 71 00:03:30,360 --> 00:03:34,320 Speaker 1: actually be much have a much more longer impact on inflation. 72 00:03:34,800 --> 00:03:38,040 Speaker 1: When we think about particular region, put inflations will be 73 00:03:38,120 --> 00:03:41,360 Speaker 1: very very key, and some of these climates that we're seeing, 74 00:03:41,400 --> 00:03:44,920 Speaker 1: you know, could have quite a major impact in that 75 00:03:45,160 --> 00:03:47,800 Speaker 1: particularly you know, as to say, the harvest season now, 76 00:03:47,840 --> 00:03:50,760 Speaker 1: but this feeds into next year and the post the 77 00:03:50,760 --> 00:03:55,200 Speaker 1: gas prices and fertilizers. So again, climate inflation still very 78 00:03:55,280 --> 00:03:57,640 Speaker 1: much on the radar for this region. All right, Let's 79 00:03:57,680 --> 00:03:59,800 Speaker 1: talk about the China bond market. When you look at 80 00:04:00,240 --> 00:04:03,360 Speaker 1: shares in China, they're down about six percent over the 81 00:04:03,360 --> 00:04:06,440 Speaker 1: past month, whereas an MSCI gauge tracking the rest of 82 00:04:06,480 --> 00:04:08,840 Speaker 1: developing markets is up about seven percent. And it's similar 83 00:04:08,840 --> 00:04:11,440 Speaker 1: in the bond market, with Chinese debt up just about 84 00:04:11,800 --> 00:04:15,160 Speaker 1: one percent compared with a four percent return for emerging markets. 85 00:04:15,200 --> 00:04:19,200 Speaker 1: When does that I guess divergence change. Um. I think 86 00:04:19,240 --> 00:04:22,560 Speaker 1: we need to see the physical market a particular property 87 00:04:22,640 --> 00:04:25,520 Speaker 1: in China to turn around, and that's going to be 88 00:04:25,600 --> 00:04:27,720 Speaker 1: very difficult. As we mentioned talked a little bit earlier 89 00:04:27,720 --> 00:04:30,720 Speaker 1: bout COVID policy. Right, so you can put similars and 90 00:04:30,760 --> 00:04:34,000 Speaker 1: stuff in place, but you know, until people have confidence 91 00:04:34,120 --> 00:04:37,279 Speaker 1: in uh that in the economy and the physical market 92 00:04:37,360 --> 00:04:39,520 Speaker 1: is better, I think that's hard. That's the first step 93 00:04:39,560 --> 00:04:41,760 Speaker 1: that that needs to get taken. And then obviously a 94 00:04:43,040 --> 00:04:45,400 Speaker 1: number of steps that can be done in policy. Again, 95 00:04:46,160 --> 00:04:48,520 Speaker 1: some fiscal stimulus I mentioned, as well as much more 96 00:04:48,560 --> 00:04:53,000 Speaker 1: coordinated policy around funding. These all those things that would 97 00:04:53,000 --> 00:04:56,840 Speaker 1: need to help, you know, give that sector a much 98 00:04:57,040 --> 00:05:00,280 Speaker 1: firm of footing, and then of course hopefully few through 99 00:05:00,320 --> 00:05:04,000 Speaker 1: to the rest of the economy, but none are quite there. Yeah, 100 00:05:04,000 --> 00:05:05,640 Speaker 1: A lot of it is about the property sector. As 101 00:05:05,640 --> 00:05:08,480 Speaker 1: you say, when do you see a potential peak in defaults? 102 00:05:08,520 --> 00:05:12,000 Speaker 1: And I guess the worst behind us in the property sector, um, 103 00:05:12,040 --> 00:05:15,679 Speaker 1: I mean the faults are pretty you know, they're high already. 104 00:05:16,320 --> 00:05:18,960 Speaker 1: Hopefully we are definitely at the bottom, if you know, 105 00:05:19,040 --> 00:05:22,320 Speaker 1: if not, and certainly for the policy makers that that 106 00:05:22,480 --> 00:05:25,359 Speaker 1: is their direction is definitely to make sure that you know, 107 00:05:25,360 --> 00:05:29,600 Speaker 1: we don't decelerate anymore and hopefully turn around. But I said, 108 00:05:29,839 --> 00:05:32,360 Speaker 1: what can determine that is going to be the physical market, 109 00:05:32,520 --> 00:05:36,000 Speaker 1: and that is still very cloudy at this moment um, 110 00:05:36,360 --> 00:05:41,000 Speaker 1: not very clear. We're looking to how we're looking ahead 111 00:05:41,000 --> 00:05:43,000 Speaker 1: to Jackson Hole two and what we're going to hear 112 00:05:43,000 --> 00:05:45,159 Speaker 1: from the fair and how that plays into the rest 113 00:05:45,279 --> 00:05:49,159 Speaker 1: of the globe. I guess you're talking about looking for 114 00:05:49,200 --> 00:05:51,800 Speaker 1: some opportunity in in some other e M s, but 115 00:05:51,920 --> 00:05:55,760 Speaker 1: also in Indian high yield. Tell us what you like there, Yeah, 116 00:05:55,800 --> 00:05:58,440 Speaker 1: but I mean I think we I mean, then homes 117 00:05:58,560 --> 00:06:01,919 Speaker 1: is holding up quite well. Uh, Commodity, I mean, certainly 118 00:06:01,960 --> 00:06:04,680 Speaker 1: with oil a bit lower, that's that's helpful for that. 119 00:06:05,080 --> 00:06:09,000 Speaker 1: But I think just structurally some of the companies there 120 00:06:09,000 --> 00:06:12,159 Speaker 1: are just kind of quite well positioned. There's particularly that market, 121 00:06:12,560 --> 00:06:15,159 Speaker 1: some of the still companies that were looking at there, 122 00:06:15,160 --> 00:06:18,640 Speaker 1: and and a lot of the renewables you know, again 123 00:06:18,839 --> 00:06:22,320 Speaker 1: very structurally a good strong demand and they're feeding into 124 00:06:22,360 --> 00:06:26,440 Speaker 1: the whole idea that climate mitigation. Climate risk is going 125 00:06:26,440 --> 00:06:30,039 Speaker 1: to be something that you know, it's big on investor's mind. 126 00:06:31,040 --> 00:06:33,400 Speaker 1: If we do see the FAIR succeed in clamping down 127 00:06:33,400 --> 00:06:37,600 Speaker 1: on inflation without causing a recession. What kind of areas 128 00:06:37,600 --> 00:06:40,600 Speaker 1: of Asian credit do you see is benefiting here? So 129 00:06:40,640 --> 00:06:43,680 Speaker 1: I'd say most of the most of Asia credit would 130 00:06:43,680 --> 00:06:45,720 Speaker 1: be actually a big met The i G obviously UM 131 00:06:46,200 --> 00:06:49,080 Speaker 1: segment doing very well. Most of the companies they're including 132 00:06:49,160 --> 00:06:53,640 Speaker 1: Chinese company actually even benefit from that because UM you're 133 00:06:53,680 --> 00:06:56,560 Speaker 1: dislike the slowing of the economy, and in terms of 134 00:06:56,560 --> 00:07:00,359 Speaker 1: the most investment grade the fundamentals are so the the 135 00:07:00,400 --> 00:07:03,280 Speaker 1: companies themselves are actually quite quite strong, So that could 136 00:07:03,320 --> 00:07:06,560 Speaker 1: that would also benefit, and say within high use segments 137 00:07:06,600 --> 00:07:10,440 Speaker 1: of it away from you know, commodity names in Indonesia 138 00:07:10,600 --> 00:07:14,560 Speaker 1: and India all benefiting. The only area that's a very 139 00:07:14,840 --> 00:07:17,880 Speaker 1: destocratic would be Chinese property and that's going to need um, 140 00:07:17,920 --> 00:07:21,600 Speaker 1: you know, very much more Chinese policy makers to work 141 00:07:21,600 --> 00:07:24,240 Speaker 1: on that side. And are you confident that the FAIR 142 00:07:24,360 --> 00:07:26,400 Speaker 1: is going to achieve its target or are we facing 143 00:07:26,400 --> 00:07:31,320 Speaker 1: potentially a big deep procession. I actually I think that 144 00:07:31,360 --> 00:07:34,080 Speaker 1: they are doing the right things. Certainly, they're giving the 145 00:07:34,120 --> 00:07:38,000 Speaker 1: market the very strong signal that they do not want 146 00:07:38,120 --> 00:07:43,080 Speaker 1: inflation UM expectations to be embedded. And if that caused 147 00:07:43,080 --> 00:07:45,240 Speaker 1: the market to bobble. It's probably going to be better 148 00:07:45,280 --> 00:07:47,520 Speaker 1: than it would be if they let the inflation out 149 00:07:47,520 --> 00:07:49,320 Speaker 1: of control. So I think of the two evils, I 150 00:07:49,360 --> 00:07:52,000 Speaker 1: think the tackling inflation is probably going to be much 151 00:07:52,040 --> 00:07:54,440 Speaker 1: more better for the market in the long run, and 152 00:07:54,520 --> 00:07:57,440 Speaker 1: certainly need to make sure that we don't get embedded two. 153 00:07:57,520 --> 00:07:58,760 Speaker 1: Has been great to have you on. Thank you so 154 00:07:58,840 --> 00:08:00,640 Speaker 1: much for your insights. Too hard Out is head of 155 00:08:00,640 --> 00:08:04,000 Speaker 1: Fixed Income Asia, Rebecca joining us from Singapore here on 156 00:08:04,040 --> 00:08:05,320 Speaker 1: Bloomberg Daybreak Asia