June 25, 2025 • 26 mins
Stock markets have been surprisingly resilient this year. Despite global trade chaos, war in the Middle East, Russia's extended invasion of Ukraine and domestic political strife, major equity markets around the world have rallied near record levels.
Investors are finding a lot to like from India to South Korea, where domestic growth stories, technology and AI investment, and diversified supply chains leave plenty of room for growth, says Jessica Tea, JPMorgan emerging markets and APAC equities investment specialist. She joins John Lee and Katia Dmitrieva from Singapore to discuss consumption strength across Asia — highlighted by the popularity of Labubu dolls — investing in the backend of EVs and finding returns amid uncertainty.
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Episode Transcript
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Speaker 1 (00:00):
Asian equities are on a tear, from South Korea's cosp
index to Hong Kong's Hang saying the region stocks are rallying.
That's just by domestic and global political risks. Part of
this trade lays in the cell us trade that's gripped
global markets, but there are also factors driving funds to
the region, including China's increased focus on technology.
Speaker 2 (00:26):
You're listening to Asia Centric from Bloomberg Intelligence. I'm John
Lee in Hong Kong.
Speaker 1 (00:30):
And I'm Katidmitrieva, also in Hong Kong.
Speaker 2 (00:33):
Today we're offering a catch up on big themes for
equities this year and what lays ahead for twenty twenty five.
Why are stocks rising despite growing risks, Where can investors
still find value and what are the biggest opportunities.
Speaker 1 (00:48):
So we're joined today by Jessica t She's Emerging market
and APAC equity investment specialist at JP Morgan Asset Management.
Thank you so much for joining us today.
Speaker 3 (00:58):
Thank you very much for having me.
Speaker 1 (01:00):
I wanted to start kind of broadly because we're challenge
just before the show about the resilience of the equity
market even in the US where you had, you know,
a bit of a hiccup earlier this year, the stocks
came back, even in countries where there might be political
issues or exposure to the trade war. Are you surprised
by that? Are you surprised by how strong equity markets
(01:22):
have performed?
Speaker 3 (01:23):
So I think it's definitely good news with especially the
US exceptionalism narrative, no fading away, no imminent, no global recession.
The Dotter actually may continue to weaken further, and so
so far this has acted as a telling for Asian
and energy markets. So we have seen actually a lot
of interest moving from the US to elsewhere. People are
(01:46):
looking for more diversification. And obviously, I mean Asia may
face some varying degrees of no tariff risk impact, but
at the moment the situation has de escalated. We are
seeing more improvement on many fronts, and so as evidence
of that, the Asian equity markets have done very well,
not just in China, but also like in the Asian
(02:10):
region in North Asia, like Taiwan, markets have done very well.
So yeah, now we are seeing investors increasingly looking beyond
the US and looking to regions such as Asia, countries
like Japan and Chinese. So back in the discussion.
Speaker 2 (02:26):
And Jessica, there's been a lot of talk about this
Cell America trade, and you've alluded to the fact that
a lot of funds are flowing outside of the US
into places like Asia. Do you think this trend will
continue going forward?
Speaker 3 (02:40):
Well, as long as there's a lot of entertainties in
the US, I mean, this trend may continue. But obviously
the susue is very fluid. It depends also on you know,
whether like the usler will rebound, whether the US economic
growth will do better. So there are a couple of
variables to take into account, but so far, what we're
seeing is that investors believe that diversification is crucial in
(03:04):
their allocations, and especially in times like this, it's very
important to basically not put all the eggs in the
same baskets. And so this is where we think that
emerging market, especially the Asian region, should benefit from it.
Speaker 1 (03:17):
Do you think that's what investors are thinking about, you know, diversification, Like,
why else would equity markets rally so much when there's
you know, in times of uncertainty, you think of more
safety assets as outperforming, but we've seen this incredible strength
and equities.
Speaker 3 (03:34):
That's a very good question I think we are also
in a different times compared to the previous trade war.
Like back in twenty seventeen eighteen, I think this took
a lot of investors' best surprise, but this time, I mean,
we are familiar with this narrative obviously, like the magnitude
of it is a bit different. But since that painful period,
(03:55):
a number of markets have or worked on, you know,
divers paying more that trade partners. In the case of China,
the strategy of the government was to insulate more economy
but continue to diversify their supply chains to mitigate the
trade risk. We're also seeing a number of domestic stories,
especially in the Asian region. There's plenty of domestically led
(04:17):
growth stories, for example in the Philippines, which has benefited
from the more favorable global interest rates but also more
favorable community prices. We think that this offers a lot
of opportunities for example for the Philippines banks, for the
indonsial banks as well after the revaluation. So there are
opportunities to be found outside of the US, especially in
(04:40):
the Asian region, and that potentially could explain why I mean,
we have seen such strong like rady in the past
few months. The other point I want to mention so
is on the government side, the policy side, we have
seen much stronger credibility, like for central banks in terms
of not managing their monetary and fiscal policies. China has
(05:01):
become even more pro growth, pro business, So all of
those elements helped contribute to I would say, a more
constructive view on the Asian markets.
Speaker 2 (05:12):
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(05:35):
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And Shair Jessica, how has the tariff and the trade
war impacted the investment decisions of your firm?
Speaker 3 (05:46):
Yeah, indeed, something that we have been looking at very closely, because,
as you can imagine, with Asia being an export oriented region,
the the region has been significantly impacted by the US
tarif on exports. Obviously, now thoughts. Plus the daughter has weakened,
so that has acted as a telling for the region.
But still it's important to monitor this situation very closely.
(06:08):
So what we have noticed is that not all countries
should be considered. I mean the same way. Eljia has
faced varying degrees of tariff impact, so Taiwan Korea, which
are more export sensative, have felt more impact. But on
the other hand, China, Indonesia, the Philippines are probably expected
to be more resilient because of this focus on domestic growth.
(06:32):
And as a matter of fact, if you look at,
for example, those messi in disease, you will see that
the majority of the revenues in Asia are mostly domestically driven.
That is especially the case for the Philippines for China,
and on top of that, many countries have already started
to reduce reliance on the US exports. China is definitely
the best example, and so that domestic focus should prove
(06:53):
defensive for those markets.
Speaker 1 (06:56):
Seems like you might have a more constructive view of Asia.
Then meets the eye if you read you know, headlines,
because you think about a South Korea, for example, which
you just mentioned, heavily exposed to trade and the trade war.
Potentially we'll see once there's an agreement in place. But
the costp has soared how much did you say that?
Speaker 2 (07:17):
It's almost I think it's the best performing market year
to date in local currency terms, it's up almost twenty
one percent. Also, the Hank saying is on fire, that's
Hong Kong is up almost twenty percent as well.
Speaker 1 (07:28):
So it's sort of like, if you're an investor, thinking
that the trade war is going to hit these economy
is really hard, you probably wouldn't be investing so much
in the equity market, So, you know, is the idea
that perhaps the trade war won't hit these economies as
hard as people think.
Speaker 3 (07:46):
So I think there are here very like domestic stories
that explained why we have seence such rally in the
case of Korea, and this is probably something that has
been undermined. The improvements are in copper. Government story is real,
probably not as advanced as what we're seeing in Japan.
I think a lot of people are quite aware of
this improvement on that side, but in Korea we're still
(08:09):
at the in fancy stage, but things are progressing really
quite substantially. So we talk about this value up program
where it's not just pacting a few sectors, but we
start to see like a change of mindset. Obviously, it
will take some time, and in the case of Japan
it took a decade, so I think for Korea was
still at the beginning. But at least this should help
(08:30):
broaden you know, this corporate government changed mindset and help
ultimately like lead to better shop price going forward. The
other also good news is probably the political entertainties. You
probably have heard about this political turmoil over the past
few months and now with the election outcomes, this has
also brought more clarity. So all those elements helped contribute
(08:53):
to a more positive outcome for Korea. And in this
type of market this is well. We think that there
are plenty we have stock opportunities to be found. But
once again it's important to be selective because not all
names will be impacted the same way. We are vigilant
and those could be suffering from tariff frictions or edgertanties.
But on the other hand, we try to look at
(09:15):
the name that are attractive and presenting long term growth stories.
Speaker 2 (09:19):
Jessica, you alluded to domestic oriented companies and economies. Is
that what JP Morgan is investing in i e. Companies
that benefit from a domestic consumption lead story as opposed
to export oriented companies.
Speaker 3 (09:37):
So I think it depends on the different strategies that
we're looking at. But overall, our PROFULO managers have found
a lot of built up stock opportunities in a number
of domestic oriented stories. That doesn't mean that there are
no interesting exporters. I think if they look at the exporters,
they try to look at the one that will be
(09:59):
facing less trade war risks. So for example, those that
have really like new diversified their supply chains, not just
with the US, but you know, within the Asian region
or with the little least, or basically globally. There are
also other like interesting exporters who may be focusing mostly
India and not just know like the US. So we
(10:20):
are trying to look at, you know, those that probably
will suffer less from those trade risk But on the
other hand, it's quite obvious that there are plenty of
domestic stories to be found. For example, when we look
at the Chinese tech story, we see a lot of
industry up grades, important constitution story. The focus on sex
(10:40):
efficiency is becoming very, very obvious. So that means that
we can find a lot of tech opportunities, especially some
AI you know proxies, but not just in the hard tech.
In the software space, there are also plenty of opportunities
to be found, especially post and deepsick impact. We think
that there are plenty of good place in this place.
(11:02):
So we're trying to say that'd be also quite diversified
in our approach, making sure to pick the best conviction ideas.
But yeah, that miss states. I think investment managers to
like be very you know, focused on different diverse areas
and not just purely like a few buggets. So to
(11:22):
answer your question, there are plenty of domestic currented stories,
but I won't say that we're purely invested in this
area and ignoring the exporters. We're really also trying to
look at the other global opportunities where the names could
be less impacted by do straight frictions.
Speaker 1 (11:38):
Yeah, you mentioned Chrya Tech just now. Is there still
room to find value after deep Sea? It seems like
there is a big kind of rally that month or
that week, But where do you see the most value
in China tech right now?
Speaker 3 (11:54):
That's interesting because deepsea has collision the world that China
is able to innovate and cheaper price. So when you
have a very like high performing and you know, at
a cheaper cost LM model, I mean, this is clearly
a game changer for a number of sectors. So we
have spotted a number of opportunities indeed in China in
this space. First is the AI infrastructure, like all the
(12:17):
AI servers you know, are becoming a necessity for the market.
I mean not just for China, but actually globally. This
is something that the common trend that we're seeing, so
the AI edge is key. Second, so the AI use
cases supposed dip sick, we think that the number of
companies would probably look for more monetization and cost opportimization.
(12:40):
So we think that there are plenty of opportunities to
be found in the AI use cases like area. And finally,
when it comes to automation, I think focusing on profitability
is key, especially in the aging demographics environment, so it's
important to look at all those game changing technologies. And
we think that like humanity, the bots could become the
(13:02):
next trend. So these are areas that we have been
exploding in our.
Speaker 2 (13:06):
Shutche Jessica You mentioned quite a few themes there, but
I wanted to talk about in particular AI and deep Seek.
And one of the frustrations with a lot of investors
is been the lack of monetization, especially with a lot
of technology coming from China. Now we know China's greater innovation.
You see what they're doing in electric vehicles, also with
(13:27):
AI LM models, but they're really behind in making money
out of these, like Deep Seek doesn't make that much
money compared to someone like open Ai. Is that a
risk that there's just so much competition in these sectors
that leads to price wars. Some services you don't even
have to pay for.
Speaker 3 (13:46):
We're SAI at the beginning, so you know, things can
evolve very fast, and especially in the case of China,
the market took claus surprise a lot of investors about
the digital story, and so I think it's probably too
early to have a definite entry on this. That said,
it's true that in China it is extremely competitive, and
what deepsy has brought is clearly like a big revival
(14:08):
of the animal spirit, and clearly the corporate sentiment has
been strongly boosted. So there are areas that we probably
do better compared to others, and this is where we
want to be extremely cautious and selective. So you mentioned
about ev I think that's definitely an interesting sector to
discuss because this is an area where we like to
spend time in China has been extremely advanced in this field,
(14:33):
and not just EVY but in the solar space. I mean,
the China has a very dominant position there. But we
won't jump into any type of ev OEMs for example.
Here we want to be selective because the competition is
extremely intensive and so when we think about the long
term trajectory of the ev supply chain, we think that
(14:54):
there's clearly a long way to go. But we want
to focus probably a bit more on the energy battery
or story because that would become very strong growth drivers,
especially for the supplection related businesses, rather than you know,
the ev o ems where it's extremely competitive. So in
other words, we are constructing our bets mostly on you know,
the suppliers with better or more favorable demand supply structure.
(15:18):
So for example, these IV batteries, the power semis are
very interesting and we also looked for the companies that
present very high barriers to entrigue whether it is in
terms of cost or capital investment or technology. I think
that the one you know, with a strong pressing power
will do better versus the others.
Speaker 1 (15:39):
Humanoid robots, how do you get exposure to humanoid robots?
Speaker 2 (15:42):
Many of them are not listed all the very small
these companies.
Speaker 3 (15:46):
So we're trying to look at more the names that
will contribute to those end products. So for example, in
the automation space, they're trying to look at, you know,
names that are basically providing like the other resources so
that they can achieve this end goal.
Speaker 1 (16:02):
So like the metal or the screws or the chips
maybe exactly.
Speaker 3 (16:07):
So this is the same by the way, for EV's
not just about know like the EV cars. As I said,
we are focusing on those TV suppliers, the EV batteries,
IV storage system, but also the power like semans that
will be fed into the end product.
Speaker 2 (16:23):
But do you see humanoid robotics or robot companies as
like is this going to be a multi theme?
Speaker 3 (16:31):
Well, same words at the very beginning, So anything is possible.
But according to our investment team, they do split a
lot of interesting elements into it, and we are starting
to see not just in China, but globally a lot
of entresation about many the robots. So yes, we think
this is going to be a long term trend. Let's
(16:52):
see how things will play out.
Speaker 1 (16:54):
One more question on humanoid robots. Maybe we should do
an entire episode at some very specific human oild robots.
But as someone who looks at these companies and sort
of use cases, I mean, what's your vision or how
how does the team see humanoid robots playing out? Is
it more on on sort of assembly lines, is it
military applications and sort of what's the what's the time horizon?
Speaker 3 (17:19):
Well, our team usually keep a very long term, you know,
investment horizon mindset, and they believe that nowadays in the
number of economies, we're seeing aging demographics and there's also
a very strong need to boost to profitability. Obviously, it
will be very difficult to replace some labor forces. In
the case of Japan, I think it's quite obvious. So
(17:42):
our research team believes that actually do human aid robots
could play a very important role in filling those gaps.
So it will not just help the current labor force,
but it will also help improve the productivity of people
so that I can spend more efficiently time on other tasks.
So it's not necessarily like I would say, at this
point in time, like military, like related. I mean to us,
(18:05):
this remains quite a sensitive area to invest, but we
think that it's more like on the productivity level, those
newer elements could bring a lot of positive change and
that's why they believe that this is definitely part of
the long term growth stories that we want to explain.
One on that front is still the very beginning, but
we think that this could bring definitely a good opportunities
(18:25):
in a living one.
Speaker 2 (18:26):
Jessica, I wanted to also talk about another big trend,
and that's the growing influence of females or the Shei
economy in China. And what I mean by she I
mean yeah, as I said, females not president, she women president.
But for the benefit of the listeners, some of these
stocks that are related to females driving consumption have really skyrocketed.
(18:49):
Now PopMart, it's listed in Hong Kong. They make the
famous Labu Boo dolls. That's up over two hundred percent.
Did you want to explain what Labuoboo dolls are.
Speaker 1 (19:00):
For our dear listeners who are not aware of the
popularity of blue Boo Boo dolls. There are these kind
of gremlin like little dolls that you put on your keychain.
They go on a keychain, you can put them on
bags and stuff, and I believe that they were popularized
by a lot of K pop celebrities. I think it
was Black Pink actually that yeah, yeah, who drove the
(19:21):
cruse And there was one that sold recently at auction
for about one hundred and fifty thousand US dollars, like
a bigger version of it.
Speaker 2 (19:27):
But that's stock now, it's it's multi billion dollar into
the market cap. It's up two hundred percent. There's another
cosmetics company it's up over one hundred percent. Is this
a big theme that you see unfolding and going forward?
Speaker 3 (19:39):
Jessica, Indeed, we have seen actually this thing becoming a
big trend. It was it took a lot of investors
by surprise because it almost came from nowhere, know, like,
it was very surprising. And I think that this is
also part probably of the change in nor mindset in
the market. I know, after tough period during COVID, you
(20:01):
all the challenges related to that, those regulation, the properly downturn.
People are maybe just want to enjoy like simple things,
and probably I mean this has contributed to the search
of such a consumption product. So yeah, we think it's
aligned with you know, the some nutrends the conception that
we're seeing in China. But one thing that to us
(20:23):
would be very key to follow is to see whether
this consumption recovery will take a stronger pace. For now,
it has been quite muted simply because, yeah, it takes
a lot of patients for people to see there are
no confidence recovering, especially when you know, the problem market
has been really tough and we have seen some negative
wealth effects. I mean, this is not easy. But the
(20:46):
positive aspect about China is that although like consumption, you know,
like a confidence is still low at the moment, there
are money in China. I mean, there's no lack of
money in China. Basically what is missing is the willingness
to spend this money because of those properly downturned, the
negative wealth effects and those sort of job prospects, especially
(21:09):
at least past few years. So if we see any
gain in confidence in China, that could be highly significant
and can help also like bring even more opportunities in
consumption space.
Speaker 1 (21:20):
And do you see consumption in China? Maybe we could
talk about the broader region here in Asia as well,
but do you see that consumption lasting through the end
of the year, at least for now, because that would
you know, it's a little booboo. It's cosmetics companies, it's
a range of service providers as well, like restaurant chains
for example. So do you kind of see that continuing
(21:43):
through your end?
Speaker 3 (21:44):
We think that would continue. But this is where we're
extremely selective. We think that the areas that would benefit
from those long term opportunities are the ones that probably
at the moment, would be benefiting the most from the
cella's similar expansion. So, for example, you know, all those
areas which are for now presenting attractive evaluation, even the
internet names in China that are more consumer facing, the
(22:07):
names that are benefiting from the fiscal stimulus measures, those
infrastructure no clapex beneficiaries, those areas should probably do better,
especially if they have strong pressing power. But we want
to be selective because not everyone in this game will win,
especially in a very competitive environment, So we want to
look at the names that not only present strong pressing power,
(22:29):
but also very strong competitive advantage. In the consumption space.
Speaker 1 (22:33):
Which sectors fall on both sides of that, which sectors
in China consumption space would be beneficiaries and which would
be a bit more at risk, like I had mentioned,
like restaurant chains for example, or maybe mall owners. Are
there certain specific kind of sectors that you like more
and those that are maybe not so great?
Speaker 3 (22:56):
Yeah, so I think that, for example, you mentioned rationians,
so we do like a couple of them. The Internet
names are so very interesting because not just the growth stories,
but also like the improving the copper government stories, the
share buybacks. We look at the Internet names that are
more consumer facing, and then I would say also all
(23:18):
those beneficiaries like greed or the one that benefit basically
from all those physical stimulus measures, we think these should
do quite well. So that's the type of areas that
we like. On the other hand, we're a bit more
cautious on all those consumer names which are very like
expot oriented for obvious reasons, because of those storyff you know,
(23:39):
friction and certainties. Even if now the stustion is getting better,
I mean, who knows what will happened in July once
you know the Natiday reprieve is behind us. So, yeah,
so we try to be extremely selective in this space.
Speaker 2 (23:51):
Just we've talked about a lot of different countries, sectors,
we talked about a lot of different themes or thematic
way of investing. How does JP Morgan, what's the investment process? Like,
how do you distill all these ideas into investing in stocks.
Speaker 3 (24:09):
So I think it's very important to have a very disciplined,
long established process that we are not refining over time.
But being consistent in our approach is extremely important, especially
during those certain times because it's obviously very easy to
follow the noises or to panic. But in this case,
we think when we have a very well established framework,
(24:31):
it's much easier than to build stronger conviction in our names,
even if there could be some shortened you know, times
of ncertainties. So that way, this has helped us really
like you know, stick to our highest conviction, like you know, holdings,
and we mentioned a lot about China opportunities, but this
(24:52):
is not the only area where we see opportunities. The
Asian region is also full of long term structural growth
opportunities the customer space because you know of the growing
in the class we STI also opportunities in financials and greeds,
whether it is in the Philippines and Singapore and Indonesia.
And one market that probably has been neglected for a
(25:13):
long long time because this market has been unloved and
their own for long time is Japan. Japan, because we
are seeing a big corporate governance revolution taking place even
more over the past two years. As I said earlier,
it took a decade for Japan to now see much
more you know, improvement, but clearly like the TSC reforms
(25:34):
has been a tremendous change, and now we're seeing more
attractive risk reward opportunities because of I mean thanks to
the copper governance reforms to return to inflation. So for example,
there are opportunities to be found in automation, gaming, IP, digitalization.
There's plenty of exciting stories to be found in Japan,
(25:55):
but it's very important to understand, you know, the macro
environment and also to differentiate I would say the Macrones
situation from the stock selections is that because you know,
the economy is growing like slow, that you cannot find
exciting earnings beneficiaries in Japan. So the same here we
are trying to be diversified inspective in the space.
Speaker 1 (26:17):
Well, thank you so much for joining us today.
Speaker 3 (26:19):
Thank you, Joan.
Speaker 1 (26:21):
You've been listening to Asia sandtrack from Blueberg Intelligence.
Speaker 2 (26:24):
I'm cartidmitary of on Hong Kong, and I'm John Lee,
also in Hong Kong. You can listen to all our
episodes on Apple Podcasts, Spotify or where you listen and
this episode was produced and edited by Clara Chen.
Speaker 1 (26:37):
Thanks for listening, See you next week.
Asian equities are on a tear, from South Korea's cosp
index to Hong Kong's Hang saying the region stocks are rallying.
That's just by domestic and global political risks. Part of
this trade lays in the cell us trade that's gripped
global markets, but there are also factors driving funds to
the region, including China's increased focus on technology.
Speaker 2 (00:26):
You're listening to Asia Centric from Bloomberg Intelligence. I'm John
Lee in Hong Kong.
Speaker 1 (00:30):
And I'm Katidmitrieva, also in Hong Kong.
Speaker 2 (00:33):
Today we're offering a catch up on big themes for
equities this year and what lays ahead for twenty twenty five.
Why are stocks rising despite growing risks, Where can investors
still find value and what are the biggest opportunities.
Speaker 1 (00:48):
So we're joined today by Jessica t She's Emerging market
and APAC equity investment specialist at JP Morgan Asset Management.
Thank you so much for joining us today.
Speaker 3 (00:58):
Thank you very much for having me.
Speaker 1 (01:00):
I wanted to start kind of broadly because we're challenge
just before the show about the resilience of the equity
market even in the US where you had, you know,
a bit of a hiccup earlier this year, the stocks
came back, even in countries where there might be political
issues or exposure to the trade war. Are you surprised
by that? Are you surprised by how strong equity markets
(01:22):
have performed?
Speaker 3 (01:23):
So I think it's definitely good news with especially the
US exceptionalism narrative, no fading away, no imminent, no global recession.
The Dotter actually may continue to weaken further, and so
so far this has acted as a telling for Asian
and energy markets. So we have seen actually a lot
of interest moving from the US to elsewhere. People are
(01:46):
looking for more diversification. And obviously, I mean Asia may
face some varying degrees of no tariff risk impact, but
at the moment the situation has de escalated. We are
seeing more improvement on many fronts, and so as evidence
of that, the Asian equity markets have done very well,
not just in China, but also like in the Asian
(02:10):
region in North Asia, like Taiwan, markets have done very well.
So yeah, now we are seeing investors increasingly looking beyond
the US and looking to regions such as Asia, countries
like Japan and Chinese. So back in the discussion.
Speaker 2 (02:26):
And Jessica, there's been a lot of talk about this
Cell America trade, and you've alluded to the fact that
a lot of funds are flowing outside of the US
into places like Asia. Do you think this trend will
continue going forward?
Speaker 3 (02:40):
Well, as long as there's a lot of entertainties in
the US, I mean, this trend may continue. But obviously
the susue is very fluid. It depends also on you know,
whether like the usler will rebound, whether the US economic
growth will do better. So there are a couple of
variables to take into account, but so far, what we're
seeing is that investors believe that diversification is crucial in
(03:04):
their allocations, and especially in times like this, it's very
important to basically not put all the eggs in the
same baskets. And so this is where we think that
emerging market, especially the Asian region, should benefit from it.
Speaker 1 (03:17):
Do you think that's what investors are thinking about, you know, diversification, Like,
why else would equity markets rally so much when there's
you know, in times of uncertainty, you think of more
safety assets as outperforming, but we've seen this incredible strength
and equities.
Speaker 3 (03:34):
That's a very good question I think we are also
in a different times compared to the previous trade war.
Like back in twenty seventeen eighteen, I think this took
a lot of investors' best surprise, but this time, I mean,
we are familiar with this narrative obviously, like the magnitude
of it is a bit different. But since that painful period,
(03:55):
a number of markets have or worked on, you know,
divers paying more that trade partners. In the case of China,
the strategy of the government was to insulate more economy
but continue to diversify their supply chains to mitigate the
trade risk. We're also seeing a number of domestic stories,
especially in the Asian region. There's plenty of domestically led
(04:17):
growth stories, for example in the Philippines, which has benefited
from the more favorable global interest rates but also more
favorable community prices. We think that this offers a lot
of opportunities for example for the Philippines banks, for the
indonsial banks as well after the revaluation. So there are
opportunities to be found outside of the US, especially in
(04:40):
the Asian region, and that potentially could explain why I mean,
we have seen such strong like rady in the past
few months. The other point I want to mention so
is on the government side, the policy side, we have
seen much stronger credibility, like for central banks in terms
of not managing their monetary and fiscal policies. China has
(05:01):
become even more pro growth, pro business, So all of
those elements helped contribute to I would say, a more
constructive view on the Asian markets.
Speaker 2 (05:12):
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(05:35):
If you like what you're hear, don't forget to subscribe
And Shair Jessica, how has the tariff and the trade
war impacted the investment decisions of your firm?
Speaker 3 (05:46):
Yeah, indeed, something that we have been looking at very closely, because,
as you can imagine, with Asia being an export oriented region,
the the region has been significantly impacted by the US
tarif on exports. Obviously, now thoughts. Plus the daughter has weakened,
so that has acted as a telling for the region.
But still it's important to monitor this situation very closely.
(06:08):
So what we have noticed is that not all countries
should be considered. I mean the same way. Eljia has
faced varying degrees of tariff impact, so Taiwan Korea, which
are more export sensative, have felt more impact. But on
the other hand, China, Indonesia, the Philippines are probably expected
to be more resilient because of this focus on domestic growth.
(06:32):
And as a matter of fact, if you look at,
for example, those messi in disease, you will see that
the majority of the revenues in Asia are mostly domestically driven.
That is especially the case for the Philippines for China,
and on top of that, many countries have already started
to reduce reliance on the US exports. China is definitely
the best example, and so that domestic focus should prove
(06:53):
defensive for those markets.
Speaker 1 (06:56):
Seems like you might have a more constructive view of Asia.
Then meets the eye if you read you know, headlines,
because you think about a South Korea, for example, which
you just mentioned, heavily exposed to trade and the trade war.
Potentially we'll see once there's an agreement in place. But
the costp has soared how much did you say that?
Speaker 2 (07:17):
It's almost I think it's the best performing market year
to date in local currency terms, it's up almost twenty
one percent. Also, the Hank saying is on fire, that's
Hong Kong is up almost twenty percent as well.
Speaker 1 (07:28):
So it's sort of like, if you're an investor, thinking
that the trade war is going to hit these economy
is really hard, you probably wouldn't be investing so much
in the equity market, So, you know, is the idea
that perhaps the trade war won't hit these economies as
hard as people think.
Speaker 3 (07:46):
So I think there are here very like domestic stories
that explained why we have seence such rally in the
case of Korea, and this is probably something that has
been undermined. The improvements are in copper. Government story is real,
probably not as advanced as what we're seeing in Japan.
I think a lot of people are quite aware of
this improvement on that side, but in Korea we're still
(08:09):
at the in fancy stage, but things are progressing really
quite substantially. So we talk about this value up program
where it's not just pacting a few sectors, but we
start to see like a change of mindset. Obviously, it
will take some time, and in the case of Japan
it took a decade, so I think for Korea was
still at the beginning. But at least this should help
(08:30):
broaden you know, this corporate government changed mindset and help
ultimately like lead to better shop price going forward. The
other also good news is probably the political entertainties. You
probably have heard about this political turmoil over the past
few months and now with the election outcomes, this has
also brought more clarity. So all those elements helped contribute
(08:53):
to a more positive outcome for Korea. And in this
type of market this is well. We think that there
are plenty we have stock opportunities to be found. But
once again it's important to be selective because not all
names will be impacted the same way. We are vigilant
and those could be suffering from tariff frictions or edgertanties.
But on the other hand, we try to look at
(09:15):
the name that are attractive and presenting long term growth stories.
Speaker 2 (09:19):
Jessica, you alluded to domestic oriented companies and economies. Is
that what JP Morgan is investing in i e. Companies
that benefit from a domestic consumption lead story as opposed
to export oriented companies.
Speaker 3 (09:37):
So I think it depends on the different strategies that
we're looking at. But overall, our PROFULO managers have found
a lot of built up stock opportunities in a number
of domestic oriented stories. That doesn't mean that there are
no interesting exporters. I think if they look at the exporters,
they try to look at the one that will be
(09:59):
facing less trade war risks. So for example, those that
have really like new diversified their supply chains, not just
with the US, but you know, within the Asian region
or with the little least, or basically globally. There are
also other like interesting exporters who may be focusing mostly
India and not just know like the US. So we
(10:20):
are trying to look at, you know, those that probably
will suffer less from those trade risk But on the
other hand, it's quite obvious that there are plenty of
domestic stories to be found. For example, when we look
at the Chinese tech story, we see a lot of
industry up grades, important constitution story. The focus on sex
(10:40):
efficiency is becoming very, very obvious. So that means that
we can find a lot of tech opportunities, especially some
AI you know proxies, but not just in the hard tech.
In the software space, there are also plenty of opportunities
to be found, especially post and deepsick impact. We think
that there are plenty of good place in this place.
(11:02):
So we're trying to say that'd be also quite diversified
in our approach, making sure to pick the best conviction ideas.
But yeah, that miss states. I think investment managers to
like be very you know, focused on different diverse areas
and not just purely like a few buggets. So to
(11:22):
answer your question, there are plenty of domestic currented stories,
but I won't say that we're purely invested in this
area and ignoring the exporters. We're really also trying to
look at the other global opportunities where the names could
be less impacted by do straight frictions.
Speaker 1 (11:38):
Yeah, you mentioned Chrya Tech just now. Is there still
room to find value after deep Sea? It seems like
there is a big kind of rally that month or
that week, But where do you see the most value
in China tech right now?
Speaker 3 (11:54):
That's interesting because deepsea has collision the world that China
is able to innovate and cheaper price. So when you
have a very like high performing and you know, at
a cheaper cost LM model, I mean, this is clearly
a game changer for a number of sectors. So we
have spotted a number of opportunities indeed in China in
this space. First is the AI infrastructure, like all the
(12:17):
AI servers you know, are becoming a necessity for the market.
I mean not just for China, but actually globally. This
is something that the common trend that we're seeing, so
the AI edge is key. Second, so the AI use
cases supposed dip sick, we think that the number of
companies would probably look for more monetization and cost opportimization.
(12:40):
So we think that there are plenty of opportunities to
be found in the AI use cases like area. And finally,
when it comes to automation, I think focusing on profitability
is key, especially in the aging demographics environment, so it's
important to look at all those game changing technologies. And
we think that like humanity, the bots could become the
(13:02):
next trend. So these are areas that we have been
exploding in our.
Speaker 2 (13:06):
Shutche Jessica You mentioned quite a few themes there, but
I wanted to talk about in particular AI and deep Seek.
And one of the frustrations with a lot of investors
is been the lack of monetization, especially with a lot
of technology coming from China. Now we know China's greater innovation.
You see what they're doing in electric vehicles, also with
(13:27):
AI LM models, but they're really behind in making money
out of these, like Deep Seek doesn't make that much
money compared to someone like open Ai. Is that a
risk that there's just so much competition in these sectors
that leads to price wars. Some services you don't even
have to pay for.
Speaker 3 (13:46):
We're SAI at the beginning, so you know, things can
evolve very fast, and especially in the case of China,
the market took claus surprise a lot of investors about
the digital story, and so I think it's probably too
early to have a definite entry on this. That said,
it's true that in China it is extremely competitive, and
what deepsy has brought is clearly like a big revival
(14:08):
of the animal spirit, and clearly the corporate sentiment has
been strongly boosted. So there are areas that we probably
do better compared to others, and this is where we
want to be extremely cautious and selective. So you mentioned
about ev I think that's definitely an interesting sector to
discuss because this is an area where we like to
spend time in China has been extremely advanced in this field,
(14:33):
and not just EVY but in the solar space. I mean,
the China has a very dominant position there. But we
won't jump into any type of ev OEMs for example.
Here we want to be selective because the competition is
extremely intensive and so when we think about the long
term trajectory of the ev supply chain, we think that
(14:54):
there's clearly a long way to go. But we want
to focus probably a bit more on the energy battery
or story because that would become very strong growth drivers,
especially for the supplection related businesses, rather than you know,
the ev o ems where it's extremely competitive. So in
other words, we are constructing our bets mostly on you know,
the suppliers with better or more favorable demand supply structure.
(15:18):
So for example, these IV batteries, the power semis are
very interesting and we also looked for the companies that
present very high barriers to entrigue whether it is in
terms of cost or capital investment or technology. I think
that the one you know, with a strong pressing power
will do better versus the others.
Speaker 1 (15:39):
Humanoid robots, how do you get exposure to humanoid robots?
Speaker 2 (15:42):
Many of them are not listed all the very small
these companies.
Speaker 3 (15:46):
So we're trying to look at more the names that
will contribute to those end products. So for example, in
the automation space, they're trying to look at, you know,
names that are basically providing like the other resources so
that they can achieve this end goal.
Speaker 1 (16:02):
So like the metal or the screws or the chips
maybe exactly.
Speaker 3 (16:07):
So this is the same by the way, for EV's
not just about know like the EV cars. As I said,
we are focusing on those TV suppliers, the EV batteries,
IV storage system, but also the power like semans that
will be fed into the end product.
Speaker 2 (16:23):
But do you see humanoid robotics or robot companies as
like is this going to be a multi theme?
Speaker 3 (16:31):
Well, same words at the very beginning, So anything is possible.
But according to our investment team, they do split a
lot of interesting elements into it, and we are starting
to see not just in China, but globally a lot
of entresation about many the robots. So yes, we think
this is going to be a long term trend. Let's
(16:52):
see how things will play out.
Speaker 1 (16:54):
One more question on humanoid robots. Maybe we should do
an entire episode at some very specific human oild robots.
But as someone who looks at these companies and sort
of use cases, I mean, what's your vision or how
how does the team see humanoid robots playing out? Is
it more on on sort of assembly lines, is it
military applications and sort of what's the what's the time horizon?
Speaker 3 (17:19):
Well, our team usually keep a very long term, you know,
investment horizon mindset, and they believe that nowadays in the
number of economies, we're seeing aging demographics and there's also
a very strong need to boost to profitability. Obviously, it
will be very difficult to replace some labor forces. In
the case of Japan, I think it's quite obvious. So
(17:42):
our research team believes that actually do human aid robots
could play a very important role in filling those gaps.
So it will not just help the current labor force,
but it will also help improve the productivity of people
so that I can spend more efficiently time on other tasks.
So it's not necessarily like I would say, at this
point in time, like military, like related. I mean to us,
(18:05):
this remains quite a sensitive area to invest, but we
think that it's more like on the productivity level, those
newer elements could bring a lot of positive change and
that's why they believe that this is definitely part of
the long term growth stories that we want to explain.
One on that front is still the very beginning, but
we think that this could bring definitely a good opportunities
(18:25):
in a living one.
Speaker 2 (18:26):
Jessica, I wanted to also talk about another big trend,
and that's the growing influence of females or the Shei
economy in China. And what I mean by she I
mean yeah, as I said, females not president, she women president.
But for the benefit of the listeners, some of these
stocks that are related to females driving consumption have really skyrocketed.
(18:49):
Now PopMart, it's listed in Hong Kong. They make the
famous Labu Boo dolls. That's up over two hundred percent.
Did you want to explain what Labuoboo dolls are.
Speaker 1 (19:00):
For our dear listeners who are not aware of the
popularity of blue Boo Boo dolls. There are these kind
of gremlin like little dolls that you put on your keychain.
They go on a keychain, you can put them on
bags and stuff, and I believe that they were popularized
by a lot of K pop celebrities. I think it
was Black Pink actually that yeah, yeah, who drove the
(19:21):
cruse And there was one that sold recently at auction
for about one hundred and fifty thousand US dollars, like
a bigger version of it.
Speaker 2 (19:27):
But that's stock now, it's it's multi billion dollar into
the market cap. It's up two hundred percent. There's another
cosmetics company it's up over one hundred percent. Is this
a big theme that you see unfolding and going forward?
Speaker 3 (19:39):
Jessica, Indeed, we have seen actually this thing becoming a
big trend. It was it took a lot of investors
by surprise because it almost came from nowhere, know, like,
it was very surprising. And I think that this is
also part probably of the change in nor mindset in
the market. I know, after tough period during COVID, you
(20:01):
all the challenges related to that, those regulation, the properly downturn.
People are maybe just want to enjoy like simple things,
and probably I mean this has contributed to the search
of such a consumption product. So yeah, we think it's
aligned with you know, the some nutrends the conception that
we're seeing in China. But one thing that to us
(20:23):
would be very key to follow is to see whether
this consumption recovery will take a stronger pace. For now,
it has been quite muted simply because, yeah, it takes
a lot of patients for people to see there are
no confidence recovering, especially when you know, the problem market
has been really tough and we have seen some negative
wealth effects. I mean, this is not easy. But the
(20:46):
positive aspect about China is that although like consumption, you know,
like a confidence is still low at the moment, there
are money in China. I mean, there's no lack of
money in China. Basically what is missing is the willingness
to spend this money because of those properly downturned, the
negative wealth effects and those sort of job prospects, especially
(21:09):
at least past few years. So if we see any
gain in confidence in China, that could be highly significant
and can help also like bring even more opportunities in
consumption space.
Speaker 1 (21:20):
And do you see consumption in China? Maybe we could
talk about the broader region here in Asia as well,
but do you see that consumption lasting through the end
of the year, at least for now, because that would
you know, it's a little booboo. It's cosmetics companies, it's
a range of service providers as well, like restaurant chains
for example. So do you kind of see that continuing
(21:43):
through your end?
Speaker 3 (21:44):
We think that would continue. But this is where we're
extremely selective. We think that the areas that would benefit
from those long term opportunities are the ones that probably
at the moment, would be benefiting the most from the
cella's similar expansion. So, for example, you know, all those
areas which are for now presenting attractive evaluation, even the
internet names in China that are more consumer facing, the
(22:07):
names that are benefiting from the fiscal stimulus measures, those
infrastructure no clapex beneficiaries, those areas should probably do better,
especially if they have strong pressing power. But we want
to be selective because not everyone in this game will win,
especially in a very competitive environment, So we want to
look at the names that not only present strong pressing power,
(22:29):
but also very strong competitive advantage. In the consumption space.
Speaker 1 (22:33):
Which sectors fall on both sides of that, which sectors
in China consumption space would be beneficiaries and which would
be a bit more at risk, like I had mentioned,
like restaurant chains for example, or maybe mall owners. Are
there certain specific kind of sectors that you like more
and those that are maybe not so great?
Speaker 3 (22:56):
Yeah, so I think that, for example, you mentioned rationians,
so we do like a couple of them. The Internet
names are so very interesting because not just the growth stories,
but also like the improving the copper government stories, the
share buybacks. We look at the Internet names that are
more consumer facing, and then I would say also all
(23:18):
those beneficiaries like greed or the one that benefit basically
from all those physical stimulus measures, we think these should
do quite well. So that's the type of areas that
we like. On the other hand, we're a bit more
cautious on all those consumer names which are very like
expot oriented for obvious reasons, because of those storyff you know,
(23:39):
friction and certainties. Even if now the stustion is getting better,
I mean, who knows what will happened in July once
you know the Natiday reprieve is behind us. So, yeah,
so we try to be extremely selective in this space.
Speaker 2 (23:51):
Just we've talked about a lot of different countries, sectors,
we talked about a lot of different themes or thematic
way of investing. How does JP Morgan, what's the investment process? Like,
how do you distill all these ideas into investing in stocks.
Speaker 3 (24:09):
So I think it's very important to have a very disciplined,
long established process that we are not refining over time.
But being consistent in our approach is extremely important, especially
during those certain times because it's obviously very easy to
follow the noises or to panic. But in this case,
we think when we have a very well established framework,
(24:31):
it's much easier than to build stronger conviction in our names,
even if there could be some shortened you know, times
of ncertainties. So that way, this has helped us really
like you know, stick to our highest conviction, like you know, holdings,
and we mentioned a lot about China opportunities, but this
(24:52):
is not the only area where we see opportunities. The
Asian region is also full of long term structural growth
opportunities the customer space because you know of the growing
in the class we STI also opportunities in financials and greeds,
whether it is in the Philippines and Singapore and Indonesia.
And one market that probably has been neglected for a
(25:13):
long long time because this market has been unloved and
their own for long time is Japan. Japan, because we
are seeing a big corporate governance revolution taking place even
more over the past two years. As I said earlier,
it took a decade for Japan to now see much
more you know, improvement, but clearly like the TSC reforms
(25:34):
has been a tremendous change, and now we're seeing more
attractive risk reward opportunities because of I mean thanks to
the copper governance reforms to return to inflation. So for example,
there are opportunities to be found in automation, gaming, IP, digitalization.
There's plenty of exciting stories to be found in Japan,
(25:55):
but it's very important to understand, you know, the macro
environment and also to differentiate I would say the Macrones
situation from the stock selections is that because you know,
the economy is growing like slow, that you cannot find
exciting earnings beneficiaries in Japan. So the same here we
are trying to be diversified inspective in the space.
Speaker 1 (26:17):
Well, thank you so much for joining us today.
Speaker 3 (26:19):
Thank you, Joan.
Speaker 1 (26:21):
You've been listening to Asia sandtrack from Blueberg Intelligence.
Speaker 2 (26:24):
I'm cartidmitary of on Hong Kong, and I'm John Lee,
also in Hong Kong. You can listen to all our
episodes on Apple Podcasts, Spotify or where you listen and
this episode was produced and edited by Clara Chen.
Speaker 1 (26:37):
Thanks for listening, See you next week.
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John Lee
Tom Corbett
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