December 21, 2025 • 18 mins
Asian equities opened higher, tracking Friday's gains in US stocks that helped intensify bets for a strong finish to the year. Hopes for a year-end rally have grown as dip buyers late last week helped equities recover from a slide driven by doubts over AI exuberance and the scope for Federal Reserve easing. We heard from to Vasu Menon, Managing Director for Investment Strategy at OCBC. He spoke to Bloomberg's Annabelle Droulers.
Plus - Moore Threads Technology Co. introduced a new generation of chips aimed at reducing artificial-intelligence developers' dependence on Nvidia Corp.'s hardware, just weeks after pulling off one of the most successful Chinese IPOs in years. For a macro outlook on Chinese equities, we heard from Yan Wang, Macro Chief EM and China Strategist at Alpine. He spoke to Bloomberg's David Ingles.
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:11):
Welcome to the Daybreak Asia Podcast. I'm Dan Schwartzman. Doug
Chrisner has the day off. Asian equities opened higher tracking
Friday's games in US stocks. That helped intensify bets for
a strong finish to the year. Hopes for a year
and rally have grown as dip buyers late last week
helped equities recover from a slide driven by doubts over
AI exuberants and the scope for Federal reserve easing. From
(00:32):
more on the market action, we turned to Vasu Menen,
Managing director for Investment Strategy at OCBC.
Speaker 3 (00:37):
He spoke to Bloomberg Xenna Belt rulers.
Speaker 4 (00:39):
I think one of the key questions for investors' big
questions is always setting up with Santa Culs rally.
Speaker 5 (00:46):
Well, you know that's a hot one because we've had
a very strong rally already so far this year. Global
equities up something like nineteen percent if I'm not mistaken,
US equity sixteen percent, and if you look at Asia
in Europe and China for example, in US dollar terms,
they've gone up more than twenty five percent each. So
we've had very strong rally. I wouldn't be surprised if
(01:09):
we close the year on a slightly higher note. But
I think twenty twenty six is going to be a
challenging year, but we remain positive on the outlook for
twenty twenty six. We think that at the end of
twenty twenty six, markets will be higher than what they
eye the end of twenty twenty five. But the next
couple of weeks, as you said, the center class close.
Really that's a hard one to predict. But I wouldn't
(01:30):
be surprised with the market's at clear hand and the
year on a higher note, because you know, we've had
quite a number of tailwinds helping the markets to actually
scale new heights in recent days and weeks.
Speaker 4 (01:44):
Yeah, let's talk about the state of play this year,
because we've got a chart actually where we can see
just a share underperformance of US equities versus their global
peers in twenty twenty five. We don't see that too often,
I think really three times in the last decade or so.
Do you see also that being replicated next year, or
do you think that you can actually see US stocks
(02:04):
starting to outpace those from elsewhere?
Speaker 5 (02:08):
Well, I wantn't be surprised if US stocks continue to
underperform other regions. My own sense is that, you know,
fund managers, global fund managers appear to be more receptive
to opportunities in Asia ex Japan, in Japan, in Europe.
And I think that is also born out in the
valuation data, you know. And I was looking at the
evaluation data on Bloomberg terminals before I came for the show.
(02:30):
And if you look at the MSCI USA Index or
the S and P find Index, which measures the U
stock market in terms of forward P ratio, it's trading
close to two times standard deviation over a tenure history.
In comparison, if you look at Asia ex Japan, you
look at Europe for example, they're trading below one standard divation.
(02:50):
So in terms of evaluations, you know, you see better
value in other regions outside the US. So I wouldn't
be surprised if the US stock market continues to underperform
in twenty twenty six as money rotates out of the
US into other regions.
Speaker 4 (03:07):
Yeah, which you mentioned some of those challenges that stocks
might have next year, which are the big ones that
you're looking at?
Speaker 5 (03:13):
Do you think, well, you know, one of the key
challenges I think we'll be looking out for in twenty
twenty six would be how Trum deals with the Federal
Reserve and FAT independence. I think that's going to come
to the forefront as Jerome Powell steps down in May
and as Lisa Cooks you know, trial in Supreme Court.
(03:35):
You know, the outcome will actually also determine market perception
about fat independence. So FED independence is going to be
quite critical, we think in twenty twenty six, and how
Trum deals with it, I think will be quite important.
And of course the US midterm elections at the end
of next year. In the run up to it, you
could see jee political risks go up, a greater US
(03:56):
China tension. That could also, you know, figure on how
the markets performed. But overall, we think there are more
tail winds that than hit winds in twenty twenty six,
and the markets should still end the year on a
higher note despite volatility. As you saw in twenty twenty five,
twenty twenty five is a very volatile year, but still
the markets ended are going to end the year on
(04:17):
a pretty strong note. I think you're going to see
the same story player in twenty twenty six. There will
be challenges and hit winds, as I mentioned, but I
think the markets will be able to overcome them and
still close on a higher note at the end of
next year.
Speaker 4 (04:31):
Do you think markets are fully appreciated as well that
risk that we at least see maybe the end of
easing cycles even the start of tightening cycles once again.
I mean that's the fact that we've been talking about
maybe being a little bit underappreciated by investors right now.
Speaker 5 (04:48):
Well, I think yes, it is starting to come to
the forefront to some extent. The markets are starting to
worry about the bang of Canada, the RBA, you know,
the ECB even you know, possibly hiking rate. But I
think it's still a bit premature. It looks like, you know,
the FAT will probably continue to cut inter strates in
twenty twenty six at least one time. And I think
(05:09):
the FAT is a key part of the whole global equation,
and the FAT we think is going to continue easy.
I don't think the FAT is going to tighten anytime soon.
And other central banks, like the ECB for example, they
have signal, but I don't think they're ready to tighten
anytime yet. I think that could be a story that
could come into play in the second half of twenty
twenty six, but even then, I don't think there's a
(05:29):
lot of latitude for central banks to tighten in a
big way because there are global hit wins as far
as you know economic growth is concerned, So there could be,
you know, some signals from central banks, but whether they're
ready to move and derail the global economic recovery and
financial market recovery, I think I'm not sure if they
are ready to do that right now, But in any case,
I think it's more story for the latter half of
(05:51):
twenty twenty six.
Speaker 4 (05:53):
What's your expectation around China as well?
Speaker 3 (05:55):
For next year?
Speaker 4 (05:56):
We've seen again those issues or concerns around the economic
weakness coming to the forefront for equities once again. But
at the same time, obviously the dominant theme for this
year has been that tech and innovation led story, and
you see the cities side three hundred for instanceuff around
forty percent so far or on an analyzed basis. But still,
what's your expectation for where we go for next year?
Speaker 5 (06:20):
Well, we are positive in China. China is one of
our stronger conviction calls. We're positive on EGYX Japan and
within EASYX, China is one of our strong conviction calls.
And as you said, you know, I mean the Chinese
economy is not doing fantastically well in twenty twenty five,
that was a story as well. You know, the economy
fears a great deal of challenges. But look at the
stock market is done exceptionally well. THEMSCAI China Index is
(06:44):
up thirty percent a year to date. I mean, so
it's I'll perform the US and a big We almost
double the performance of the US stock market in terms
of thesca USA Index. So we think that you know,
China will contrough to perform in twenty twenty six.
Speaker 3 (06:58):
As well.
Speaker 5 (06:59):
The potential for fiscal stimulus, monetary stimulus evaluations that are expensive,
and Chinese households have a huge amount of savings, you know,
more than twenty trillion US dollars in savings. That's got
to find a home and that could and not just that,
I think global fund managers are also starting to put
the put more money into China. And so put all
(07:20):
that together, it means that you know, the Chinese stock
market has mobsite again. It will not be a straight
line climb. It'll be volatile, but you know, we think
that you know this mobsite.
Speaker 2 (07:28):
That was Vasumnen, Managing director for Investment Strategy at OCBC,
speaking to Bloomberg's Annabelt Rulers.
Speaker 3 (07:34):
Coming up on the Daybreak Gasia podcast, we.
Speaker 2 (07:36):
Get an outlook on Chinese equities well here from Yan Wang,
macro chief EM and China strategist at Alpine. Welcome back
to the Daybreak Asia podcast. I'm Dan Schwartzman. Doug Chrisner
has the day off. More threats technology introduced a new
generation of chips to reduce dependence on nvidious hardware comes
(08:00):
as Chinese ship makers are in the spotlight as authorities
push forward with efforts to develop a world class semiconductor sector.
And we get a macro outlook on the markets from
Yen Wang, macro chief EM and China strategist at Alpine.
Speaker 3 (08:12):
He spoke to Bloomberg's David and Glass.
Speaker 6 (08:14):
I know, and let me just make reference to your
note about six weeks ago, first or second week of
November where you did observe a course China is hot again.
You've been on this whirlwind global tour speaking to investors,
including I should mention of course here Hong Kong, China
and Singapore. What's your overall sense of what people are
(08:35):
looking for in the Chinese story going into next year.
Speaker 7 (08:41):
I think the biggest takeaway is that global investors are
becoming more interested in China again. In twenty three and
twenty twenty four, China was deemed as uninvestable. Back then,
the economy was bad, Jeo political solution was bad, the
market was not reperforming, so people were not really tested
in China at all. But in my recent trips, in
(09:04):
my meetings with clients with investors, I can get the
science that investors are becoming more interested on China. China
is back on the radar, and I think this is
a very important change because people are still very very
underwe China, and so if they are interested in China
racing reacing exposure from a very low starting point, I
(09:27):
think that that can drive a lot of captalin flow
into the Chinese aputy market. So I think the biggest
question mark, obviously is the market that's gone up a lot, right,
So actually the market bottomed February twenty twenty four, so
the market has been rising for over two years, almost
two years. So the question is whether investors should chase
(09:49):
the market because they didn't really have any exposure at all.
So now the market just keep rising. So I think
the biggest concern is why going into twenty two, twenty six,
whether the boot market can can continue.
Speaker 6 (10:05):
What in your sense, what do you suspect will be
the so so we know about the lack of inflation story,
we know about you know, liquidity, abundant liquidity that has
managed to offset most, if not all, of the former story.
And I'm curious to see, curious to hear what you
think in terms of the big question mark and what
(10:26):
resolves itself going into going into next year.
Speaker 7 (10:30):
Well, I think I think really the biggest change since
last year is probably, uh, you've just begun to realize
China is a you know, it's almost imperative to invest
in this kind of true world. Right, So for example,
you know, you mentioned the Chinese chip makers, So all
(10:51):
of a sudden, you see Chinese companies are making very
advanced chips.
Speaker 8 (10:57):
You know, a few years ago, that's unthinkable.
Speaker 7 (11:00):
So regardless of this, uh, this story, regardless of the
cyclic profile of the Chinese economy, now you do have
two systems a parallel to each other.
Speaker 8 (11:12):
One is the US system. The other is the Chinese system.
Speaker 7 (11:15):
So I think now people began to realize that every
investor has had so much exposure to the US market,
but has so little exposure to the Chinese market. So
I think this kind of you know, very lopsided allocation
is one of the most important incentives for investors to
look at China. You know, for example, at the beginning
(11:37):
of the year, we had deep sick moments. That's when
really began to draw a global investors' attention on China,
not just focusing on the weaker part of the economy,
not just the real estate market deflation, but also there
are a lot of growth sectors.
Speaker 8 (11:53):
So I think that's really.
Speaker 7 (11:55):
Driving a lot of attentions, also a lot of capital inflows.
Speaker 6 (12:00):
And it's that distinction visible between the groups of investors
that are more familiar with the Chinese market, let's call
it domestic players of course, the home bias. And how
does that story, how is the appreciation of that story,
how does it change as you look further away from China.
Speaker 7 (12:20):
Yeah, so I think the China uninvestable story was mainly
concentrated in the US among US investors and some European investors,
so because because you know, most of it was because
of geo political tensions, geopolitical environment, and for European investors
(12:42):
the China's role in the US Russia Russia Ukraine War,
China was deemed very unfriendly.
Speaker 8 (12:49):
I think that was the like I.
Speaker 7 (12:51):
Remember in those years when I was talking to the investors,
even though these investors they didn't share the gloomy views
on China, but they were concerned about so called reputational.
Speaker 8 (13:03):
Risk of investing in China.
Speaker 7 (13:04):
So I think now this this is gradually changing in
Asia in em vessages are vestage view on China have
always been more nuanced.
Speaker 6 (13:16):
Yeah, okay, so the the the common denominator going into
next year globally and you have an em mandate too,
is it does seem like the tailwinds from easy monetary
policy will will will somewhat not be as big a
part of the conversation next year as most central banks
either pause or have ended their their easing cycle. How
(13:37):
do we distill the tailwinds coming through out of loser
policy and what does that mean for you know, the
weaker dollar story which has helped and you know, the
appetite for EMS sets next year.
Speaker 8 (13:49):
Yeah, I think I think the dollar is a big story.
Speaker 7 (13:51):
I think if the dollar continues to weaken, then obviously
global investors interest down e ms as will will increase,
so I think that can still be a factor. On
the other hand, I think the fact will continuity to ease.
We believe the US inflation will continue to fall, so
that will allow the fact to ease. And then it's
(14:13):
still a lot of EM countries that are real interest
rates are still very very high, right so I don't
think the mindring easying tailwind will diminish much next year,
especially for a lot of high yielding EM countries, especially
like in Latin and South Africa in China.
Speaker 8 (14:31):
In China, the mind rue easing may.
Speaker 7 (14:33):
Not be a big story, but a lot of the
major headwinds that we have had this year will diminish,
right So, in housing has been in such a long
deep slump, consumer confidence has been so weak for so long,
uh and Chinese exports to the US this year contracted
a lot.
Speaker 8 (14:54):
So these are really the major headwinds for.
Speaker 7 (14:56):
The Chinese economy this year, but most likely going into
next year, all these three negative factors will either stabilize
or even improve.
Speaker 8 (15:07):
So I think on the China front, I.
Speaker 7 (15:10):
Don't really think mindory policy easing will play an important
role because you know, the problem now is demand for
loans is very weak. It's not the prime it's not
interest rate is not affordable. It's demand it's weak. But
if these three headwinds will gradually turn into some kind
(15:31):
of tail wind, then I think the Chinese economy will
perform a lot better.
Speaker 6 (15:36):
That's a big gift and I'm glad we end on that.
Can I just ask you a little bit more on
the housing market and consumer confidence. We know if that
goes away, it doesn't matter if the PBOC is tightening
interest rates. You know, the market will rally if those
two things recover. What gives you the confidence, apartment based
effects that the housing market and consumer confidence will be
a better story in twenty twenty six, right.
Speaker 7 (15:59):
I think the consumer story is probably easier to tell
because if we look at over the past two years,
there was this kind of uh self feeding vicious circle
between the corporate sector and the consumer sector. Uh the
corporate sector was not hiring, so consumer confidence was weak,
and then consumer confidence week demand was weak, then corporate
(16:21):
sector was not hiring. So now you have this kind
of you know, very vicious circle between these two self feeding.
But now we are beginning to see some evidence that
corporate sector hiens intention began to improve so across the board.
You know, even when I was in China talking to
some uh some to uh to the business community, my
(16:42):
senses confidence is slightly better than my previous trips. So
I think if that changes, I think I do think
there are high hodds of this being changed. Uh, then
the visious feedback between the corporate sector and consumer sector
will begin to uh to to to reverse. So I
think that's to me, I think that's a kind of
(17:04):
higher odds event. On the housing sector. The simple fact
is the housing sector KaiA has contracted for over four years.
Housing stars have contracted by over seventy eighty percent. So
nothing false forever, right, So I think that's why we
even we not consider this kind of you know, basic fact.
(17:24):
I suspect we are very close. We are a lot
closer to the bottom.
Speaker 2 (17:29):
That was Ian Wang MACROCHIVM and China strategist at Alpine
speaking to Bloomberg's David and Glass.
Speaker 9 (17:36):
Thanks for listening to today's episode of the Bloomberg Daybreak
Asia edition podcast. Each weekday, we look at the story
shaping markets, finance, and geopolitics in the Asia Pacific. You
can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,
or anywhere else you listen. Join us again tomorrow for
insight on the market moves from Hong Kong to Singapore
(17:59):
and Australia. I'm Doug Prisoner and this is Bloomberg
Speaker 7 (18:10):
M
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:11):
Welcome to the Daybreak Asia Podcast. I'm Dan Schwartzman. Doug
Chrisner has the day off. Asian equities opened higher tracking
Friday's games in US stocks. That helped intensify bets for
a strong finish to the year. Hopes for a year
and rally have grown as dip buyers late last week
helped equities recover from a slide driven by doubts over
AI exuberants and the scope for Federal reserve easing. From
(00:32):
more on the market action, we turned to Vasu Menen,
Managing director for Investment Strategy at OCBC.
Speaker 3 (00:37):
He spoke to Bloomberg Xenna Belt rulers.
Speaker 4 (00:39):
I think one of the key questions for investors' big
questions is always setting up with Santa Culs rally.
Speaker 5 (00:46):
Well, you know that's a hot one because we've had
a very strong rally already so far this year. Global
equities up something like nineteen percent if I'm not mistaken,
US equity sixteen percent, and if you look at Asia
in Europe and China for example, in US dollar terms,
they've gone up more than twenty five percent each. So
we've had very strong rally. I wouldn't be surprised if
(01:09):
we close the year on a slightly higher note. But
I think twenty twenty six is going to be a
challenging year, but we remain positive on the outlook for
twenty twenty six. We think that at the end of
twenty twenty six, markets will be higher than what they
eye the end of twenty twenty five. But the next
couple of weeks, as you said, the center class close.
Really that's a hard one to predict. But I wouldn't
(01:30):
be surprised with the market's at clear hand and the
year on a higher note, because you know, we've had
quite a number of tailwinds helping the markets to actually
scale new heights in recent days and weeks.
Speaker 4 (01:44):
Yeah, let's talk about the state of play this year,
because we've got a chart actually where we can see
just a share underperformance of US equities versus their global
peers in twenty twenty five. We don't see that too often,
I think really three times in the last decade or so.
Do you see also that being replicated next year, or
do you think that you can actually see US stocks
(02:04):
starting to outpace those from elsewhere?
Speaker 5 (02:08):
Well, I wantn't be surprised if US stocks continue to
underperform other regions. My own sense is that, you know,
fund managers, global fund managers appear to be more receptive
to opportunities in Asia ex Japan, in Japan, in Europe.
And I think that is also born out in the
valuation data, you know. And I was looking at the
evaluation data on Bloomberg terminals before I came for the show.
(02:30):
And if you look at the MSCI USA Index or
the S and P find Index, which measures the U
stock market in terms of forward P ratio, it's trading
close to two times standard deviation over a tenure history.
In comparison, if you look at Asia ex Japan, you
look at Europe for example, they're trading below one standard divation.
(02:50):
So in terms of evaluations, you know, you see better
value in other regions outside the US. So I wouldn't
be surprised if the US stock market continues to underperform
in twenty twenty six as money rotates out of the
US into other regions.
Speaker 4 (03:07):
Yeah, which you mentioned some of those challenges that stocks
might have next year, which are the big ones that
you're looking at?
Speaker 5 (03:13):
Do you think, well, you know, one of the key
challenges I think we'll be looking out for in twenty
twenty six would be how Trum deals with the Federal
Reserve and FAT independence. I think that's going to come
to the forefront as Jerome Powell steps down in May
and as Lisa Cooks you know, trial in Supreme Court.
(03:35):
You know, the outcome will actually also determine market perception
about fat independence. So FED independence is going to be
quite critical, we think in twenty twenty six, and how
Trum deals with it, I think will be quite important.
And of course the US midterm elections at the end
of next year. In the run up to it, you
could see jee political risks go up, a greater US
(03:56):
China tension. That could also, you know, figure on how
the markets performed. But overall, we think there are more
tail winds that than hit winds in twenty twenty six,
and the markets should still end the year on a
higher note despite volatility. As you saw in twenty twenty five,
twenty twenty five is a very volatile year, but still
the markets ended are going to end the year on
(04:17):
a pretty strong note. I think you're going to see
the same story player in twenty twenty six. There will
be challenges and hit winds, as I mentioned, but I
think the markets will be able to overcome them and
still close on a higher note at the end of
next year.
Speaker 4 (04:31):
Do you think markets are fully appreciated as well that
risk that we at least see maybe the end of
easing cycles even the start of tightening cycles once again.
I mean that's the fact that we've been talking about
maybe being a little bit underappreciated by investors right now.
Speaker 5 (04:48):
Well, I think yes, it is starting to come to
the forefront to some extent. The markets are starting to
worry about the bang of Canada, the RBA, you know,
the ECB even you know, possibly hiking rate. But I
think it's still a bit premature. It looks like, you know,
the FAT will probably continue to cut inter strates in
twenty twenty six at least one time. And I think
(05:09):
the FAT is a key part of the whole global equation,
and the FAT we think is going to continue easy.
I don't think the FAT is going to tighten anytime soon.
And other central banks, like the ECB for example, they
have signal, but I don't think they're ready to tighten
anytime yet. I think that could be a story that
could come into play in the second half of twenty
twenty six, but even then, I don't think there's a
(05:29):
lot of latitude for central banks to tighten in a
big way because there are global hit wins as far
as you know economic growth is concerned, So there could be,
you know, some signals from central banks, but whether they're
ready to move and derail the global economic recovery and
financial market recovery, I think I'm not sure if they
are ready to do that right now, But in any case,
I think it's more story for the latter half of
(05:51):
twenty twenty six.
Speaker 4 (05:53):
What's your expectation around China as well?
Speaker 3 (05:55):
For next year?
Speaker 4 (05:56):
We've seen again those issues or concerns around the economic
weakness coming to the forefront for equities once again. But
at the same time, obviously the dominant theme for this
year has been that tech and innovation led story, and
you see the cities side three hundred for instanceuff around
forty percent so far or on an analyzed basis. But still,
what's your expectation for where we go for next year?
Speaker 5 (06:20):
Well, we are positive in China. China is one of
our stronger conviction calls. We're positive on EGYX Japan and
within EASYX, China is one of our strong conviction calls.
And as you said, you know, I mean the Chinese
economy is not doing fantastically well in twenty twenty five,
that was a story as well. You know, the economy
fears a great deal of challenges. But look at the
stock market is done exceptionally well. THEMSCAI China Index is
(06:44):
up thirty percent a year to date. I mean, so
it's I'll perform the US and a big We almost
double the performance of the US stock market in terms
of thesca USA Index. So we think that you know,
China will contrough to perform in twenty twenty six.
Speaker 3 (06:58):
As well.
Speaker 5 (06:59):
The potential for fiscal stimulus, monetary stimulus evaluations that are expensive,
and Chinese households have a huge amount of savings, you know,
more than twenty trillion US dollars in savings. That's got
to find a home and that could and not just that,
I think global fund managers are also starting to put
the put more money into China. And so put all
(07:20):
that together, it means that you know, the Chinese stock
market has mobsite again. It will not be a straight
line climb. It'll be volatile, but you know, we think
that you know this mobsite.
Speaker 2 (07:28):
That was Vasumnen, Managing director for Investment Strategy at OCBC,
speaking to Bloomberg's Annabelt Rulers.
Speaker 3 (07:34):
Coming up on the Daybreak Gasia podcast, we.
Speaker 2 (07:36):
Get an outlook on Chinese equities well here from Yan Wang,
macro chief EM and China strategist at Alpine. Welcome back
to the Daybreak Asia podcast. I'm Dan Schwartzman. Doug Chrisner
has the day off. More threats technology introduced a new
generation of chips to reduce dependence on nvidious hardware comes
(08:00):
as Chinese ship makers are in the spotlight as authorities
push forward with efforts to develop a world class semiconductor sector.
And we get a macro outlook on the markets from
Yen Wang, macro chief EM and China strategist at Alpine.
Speaker 3 (08:12):
He spoke to Bloomberg's David and Glass.
Speaker 6 (08:14):
I know, and let me just make reference to your
note about six weeks ago, first or second week of
November where you did observe a course China is hot again.
You've been on this whirlwind global tour speaking to investors,
including I should mention of course here Hong Kong, China
and Singapore. What's your overall sense of what people are
(08:35):
looking for in the Chinese story going into next year.
Speaker 7 (08:41):
I think the biggest takeaway is that global investors are
becoming more interested in China again. In twenty three and
twenty twenty four, China was deemed as uninvestable. Back then,
the economy was bad, Jeo political solution was bad, the
market was not reperforming, so people were not really tested
in China at all. But in my recent trips, in
(09:04):
my meetings with clients with investors, I can get the
science that investors are becoming more interested on China. China
is back on the radar, and I think this is
a very important change because people are still very very
underwe China, and so if they are interested in China
racing reacing exposure from a very low starting point, I
(09:27):
think that that can drive a lot of captalin flow
into the Chinese aputy market. So I think the biggest
question mark, obviously is the market that's gone up a lot, right,
So actually the market bottomed February twenty twenty four, so
the market has been rising for over two years, almost
two years. So the question is whether investors should chase
(09:49):
the market because they didn't really have any exposure at all.
So now the market just keep rising. So I think
the biggest concern is why going into twenty two, twenty six,
whether the boot market can can continue.
Speaker 6 (10:05):
What in your sense, what do you suspect will be
the so so we know about the lack of inflation story,
we know about you know, liquidity, abundant liquidity that has
managed to offset most, if not all, of the former story.
And I'm curious to see, curious to hear what you
think in terms of the big question mark and what
(10:26):
resolves itself going into going into next year.
Speaker 7 (10:30):
Well, I think I think really the biggest change since
last year is probably, uh, you've just begun to realize
China is a you know, it's almost imperative to invest
in this kind of true world. Right, So for example,
you know, you mentioned the Chinese chip makers, So all
(10:51):
of a sudden, you see Chinese companies are making very
advanced chips.
Speaker 8 (10:57):
You know, a few years ago, that's unthinkable.
Speaker 7 (11:00):
So regardless of this, uh, this story, regardless of the
cyclic profile of the Chinese economy, now you do have
two systems a parallel to each other.
Speaker 8 (11:12):
One is the US system. The other is the Chinese system.
Speaker 7 (11:15):
So I think now people began to realize that every
investor has had so much exposure to the US market,
but has so little exposure to the Chinese market. So
I think this kind of you know, very lopsided allocation
is one of the most important incentives for investors to
look at China. You know, for example, at the beginning
(11:37):
of the year, we had deep sick moments. That's when
really began to draw a global investors' attention on China,
not just focusing on the weaker part of the economy,
not just the real estate market deflation, but also there
are a lot of growth sectors.
Speaker 8 (11:53):
So I think that's really.
Speaker 7 (11:55):
Driving a lot of attentions, also a lot of capital inflows.
Speaker 6 (12:00):
And it's that distinction visible between the groups of investors
that are more familiar with the Chinese market, let's call
it domestic players of course, the home bias. And how
does that story, how is the appreciation of that story,
how does it change as you look further away from China.
Speaker 7 (12:20):
Yeah, so I think the China uninvestable story was mainly
concentrated in the US among US investors and some European investors,
so because because you know, most of it was because
of geo political tensions, geopolitical environment, and for European investors
(12:42):
the China's role in the US Russia Russia Ukraine War,
China was deemed very unfriendly.
Speaker 8 (12:49):
I think that was the like I.
Speaker 7 (12:51):
Remember in those years when I was talking to the investors,
even though these investors they didn't share the gloomy views
on China, but they were concerned about so called reputational.
Speaker 8 (13:03):
Risk of investing in China.
Speaker 7 (13:04):
So I think now this this is gradually changing in
Asia in em vessages are vestage view on China have
always been more nuanced.
Speaker 6 (13:16):
Yeah, okay, so the the the common denominator going into
next year globally and you have an em mandate too,
is it does seem like the tailwinds from easy monetary
policy will will will somewhat not be as big a
part of the conversation next year as most central banks
either pause or have ended their their easing cycle. How
(13:37):
do we distill the tailwinds coming through out of loser
policy and what does that mean for you know, the
weaker dollar story which has helped and you know, the
appetite for EMS sets next year.
Speaker 8 (13:49):
Yeah, I think I think the dollar is a big story.
Speaker 7 (13:51):
I think if the dollar continues to weaken, then obviously
global investors interest down e ms as will will increase,
so I think that can still be a factor. On
the other hand, I think the fact will continuity to ease.
We believe the US inflation will continue to fall, so
that will allow the fact to ease. And then it's
(14:13):
still a lot of EM countries that are real interest
rates are still very very high, right so I don't
think the mindring easying tailwind will diminish much next year,
especially for a lot of high yielding EM countries, especially
like in Latin and South Africa in China.
Speaker 8 (14:31):
In China, the mind rue easing may.
Speaker 7 (14:33):
Not be a big story, but a lot of the
major headwinds that we have had this year will diminish,
right So, in housing has been in such a long
deep slump, consumer confidence has been so weak for so long,
uh and Chinese exports to the US this year contracted
a lot.
Speaker 8 (14:54):
So these are really the major headwinds for.
Speaker 7 (14:56):
The Chinese economy this year, but most likely going into
next year, all these three negative factors will either stabilize
or even improve.
Speaker 8 (15:07):
So I think on the China front, I.
Speaker 7 (15:10):
Don't really think mindory policy easing will play an important
role because you know, the problem now is demand for
loans is very weak. It's not the prime it's not
interest rate is not affordable. It's demand it's weak. But
if these three headwinds will gradually turn into some kind
(15:31):
of tail wind, then I think the Chinese economy will
perform a lot better.
Speaker 6 (15:36):
That's a big gift and I'm glad we end on that.
Can I just ask you a little bit more on
the housing market and consumer confidence. We know if that
goes away, it doesn't matter if the PBOC is tightening
interest rates. You know, the market will rally if those
two things recover. What gives you the confidence, apartment based
effects that the housing market and consumer confidence will be
a better story in twenty twenty six, right.
Speaker 7 (15:59):
I think the consumer story is probably easier to tell
because if we look at over the past two years,
there was this kind of uh self feeding vicious circle
between the corporate sector and the consumer sector. Uh the
corporate sector was not hiring, so consumer confidence was weak,
and then consumer confidence week demand was weak, then corporate
(16:21):
sector was not hiring. So now you have this kind
of you know, very vicious circle between these two self feeding.
But now we are beginning to see some evidence that
corporate sector hiens intention began to improve so across the board.
You know, even when I was in China talking to
some uh some to uh to the business community, my
(16:42):
senses confidence is slightly better than my previous trips. So
I think if that changes, I think I do think
there are high hodds of this being changed. Uh, then
the visious feedback between the corporate sector and consumer sector
will begin to uh to to to reverse. So I
think that's to me, I think that's a kind of
(17:04):
higher odds event. On the housing sector. The simple fact
is the housing sector KaiA has contracted for over four years.
Housing stars have contracted by over seventy eighty percent. So
nothing false forever, right, So I think that's why we
even we not consider this kind of you know, basic fact.
(17:24):
I suspect we are very close. We are a lot
closer to the bottom.
Speaker 2 (17:29):
That was Ian Wang MACROCHIVM and China strategist at Alpine
speaking to Bloomberg's David and Glass.
Speaker 9 (17:36):
Thanks for listening to today's episode of the Bloomberg Daybreak
Asia edition podcast. Each weekday, we look at the story
shaping markets, finance, and geopolitics in the Asia Pacific. You
can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,
or anywhere else you listen. Join us again tomorrow for
insight on the market moves from Hong Kong to Singapore
(17:59):
and Australia. I'm Doug Prisoner and this is Bloomberg
Speaker 7 (18:10):
M
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