July 10, 2025 • 22 mins
The story of US tariffs has dominated much of the conversation for markets. Earlier today, stocks advanced Thursday in a sign investors are shifting their focus from concerns about lower growth and higher inflation from tariffs to instead prepare for corporate earnings season, which starts in a few days. We speak to Keith Buchanan, Senior Portfolio Manager at Globalt Investments.
Also - contracts for the S&P 500, which gained early in Asian trading, dipped 0.2% after Trump said he plans to impose ‘blanket’ tariffs of 15% or 20%. We get insight from Nadia Grant, Head of Global Equity at BNP Paribas Asset Management.
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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 Doug Chrisner. So
the story on US tariffs has, as we know, dominated
much of the conversation in markets. Statements from the Trump
administration recently have been at times contradictory, especially in the
run up to the new trade deal deadline of August. First,
in a moment, we'll go to Hong Kong and get
(00:31):
the perspective of Nadia Grant from BNP Pariba Asset Management.
On Thursday, we heard from Jamie Diamond, the CEO of
JP Morgan Chase. He was speaking in Dublin where he
warned of complacency on tariffs. He also said it's important
that an agreement is reached between the European Union and
the US for a closer look now at how tariffs
(00:53):
are impacting market psychology. I'm joined by Keith Buchanan. He
is senior portfolio manager at Global Investments. Keith joining today
from Chicago, Illinois. Keith, thank you so much for making
time to chat with me on this tariff story. What
is your sense of where we stand right now?
Speaker 3 (01:12):
Well, thanks Degan, it's a good thing to chat with you.
Speaker 4 (01:14):
Again, we've looked at the tariff story as having the
potential to inject new, almost reinvigorated inflation to the economy.
Now it depends on the whole picks of the toll.
Speaker 1 (01:28):
Is.
Speaker 3 (01:28):
We look at tariffs as like a.
Speaker 4 (01:30):
Traffic toll and someone has to pay it or pass along,
whether it's the importer, the US corporation, or the end consumer,
whether it's corporation or individual. So we've looked at this
as you know, still a developing story, not one that's
in the review myriad as corporations have as you mentioned
in the in the break before that, there have been
(01:52):
some corporations that made adjustments in order to make sure
that they didn't have a full implementation of tariffs. Had
to run through price increases that perhaps their consumers couldn't take,
so they built up inventories and there are things that
might affect the cash flow but didn't affect earnings so directly.
So we're investigating how that really plays out, and it's
(02:12):
really critical this earning season.
Speaker 2 (02:14):
I'm wondering how it's going to affect the Fed's thinking
as well. Right now, if you look at futures pricing,
the markets expecting two rate cuts before the end of
the year. Do you think that's maybe a little too optimistic,
But the.
Speaker 4 (02:28):
Minutes last week kind of painted a story of anticipation
that kind of aligns with what we're thinking internally with
the corporations really making sure that you know, the way
that the tariffs have been implemented won't really throw them
off from an annual earning.
Speaker 3 (02:48):
Standpoint, And I think that's what.
Speaker 4 (02:51):
Those of the Fed have also taken notice of, is
it will take some time to really see the real
effects that can either outweigh or justify temporary even call it,
if you will, transitory change. The corporations are made in
order to elude the most negative impacts of tariff.
Speaker 3 (03:09):
So I think there's a wait and.
Speaker 4 (03:11):
See approach that we are waiting for corporations to see
what they have done how that impacts earnings, but also
the Federal Reserve and those decision makers on monetary policy
are also waiting to see who has those effects that
we can't get around and when does that really hit
the road as far as the data perspective, And we
just haven't seen it just yet, but that doesn't mean
(03:32):
we won't see it over the next couple of months.
Speaker 2 (03:34):
How difficult is it to try to assess which companies
are best insulated from this tariff threat right now? Or
is that simply impossible because in some way all companies
are exposed.
Speaker 4 (03:46):
We feel like all companies are exposed to a degree,
and then that degree varies by the industry and by
the approach to the latest from the administration. It's definitely
too early to tell from an aggregate standpoint. We don't
feel like there's a determination to be made just yet,
and we'd like to wait and see them make sure
that we're not premature and making a call, whether it's
(04:09):
positible or negative on just what the lasting impact is
of the most recent trade policy changes.
Speaker 3 (04:17):
We just don't think we're there yet.
Speaker 4 (04:19):
And frankly, this earning season could be, you know, the
very first they have a full what corporations can really
speak freely about it, but still could possibly be you know,
several quarters a come before we really have a good
grasp of what the impact is from the trade policy changes.
Speaker 2 (04:35):
The unofficial start to the season begins next week. We'll
hear from the big banks today a pretty upbeat forecast
from Delta Airlines that stock popped about twelve percent so
if we can go back to kind of expectations for
not only earnings, but what we may hear in terms
of forecast from some of these companies, do you have
a sense of.
Speaker 4 (04:53):
That, And look, Delta Airlines is a microcosm of exactly
what we've been studying internally. Delta pulled their pull their
earnings guidance earlier in the year from an annual standpoint,
and they re implemented this quarter today when they had
better color around the puts and takes as to what
at this point, as much as they can graft the
(05:15):
impact could be. So they were much less certain a
quarter ago. Now they're more.
Speaker 3 (05:19):
Certain that we can have more clarity is what their earnings.
Speaker 4 (05:21):
And cash flow for cast could be, and we can,
and we as onlookers and investors can have more confidence
and some of the estimates that we've put.
Speaker 3 (05:30):
Around some corporations.
Speaker 4 (05:31):
So we feel like Delta really set the tone for
us to really have more confidence in this earning season
going in a way that it's not just a old
pulling guidance.
Speaker 3 (05:39):
We're not adjusting guidance. We don't know what the next.
Speaker 4 (05:41):
Step could be, and a little more clarity to help
us understand what this earnings growth this quarter could be,
and also we understand and appreciate just how impactful that
could be for evaluation of the SB five hundred going forward.
So we feel like that this quarter is very critical
in understanding the next steps market.
Speaker 2 (06:00):
As I'm speaking to you, I'm watching Bitcoin set a
record high. We're trading around one hundred and sixteen thousand
at the moment. Given everything that's going on in other
markets right now, do you have to have a little
exposure to the crypto space, and maybe it's through bitcoins.
Speaker 3 (06:20):
We don't.
Speaker 4 (06:20):
We don't have any in our in our in our
strategies right now. We don't necessarily look at it as
the ass as a as a real detractor. We feel
like it's definitely a beta plus type of measure. We'd
rather get that exposure through equities, frankly, and changing our
(06:42):
exposed equities and even gaining more leverage if possible. But
right now we just don't have that exposure. But we don't.
We don't feel like that. It's it's something that we is,
something that we actually discussed on a very active basis,
is not yet.
Speaker 2 (06:55):
You know, right after the election, a lot of the
conversation focused on merger and acquisition activity and deregulation. We
haven't seen much in the way of deal flow and
M and A activity. How are you feeling about that
possibility moving forward, perhaps after the tariff story fades into
the background.
Speaker 4 (07:13):
From a deregulatory standpoint, the initial thought was after deregulation
and some anti trust concerns were abated, then you'd see
this influx and flurry of eminet. We feel like the
main driver and the data supports this is more brilliant
economic exportations and we just haven't had that because the
(07:34):
traff conversation has been in a way so as that
starts to not necessarily that the terrorfs go away, but
is there more certainty and clarity around the direction and
the drivers of the psychology of our trade positive changes,
specifically when it comes to TERRAFK. We feel like some
of that imminate can unlocked because the anti trust levers
(07:58):
are have been loosen some and so we appreciate that
part of it, but we just still have to have
some economic clarity in order for those conversations to really
gain momentum and we get paying the pad on though,
so we feel like economic inspectation to wait more. Even
we're selling this environment than some of the anti trust
concerns being alleviated. You have to have optimism about economic
(08:23):
developments over the next five, ten, fifteen years, and that
picture's just been very, very unclear. And as that clarity
comes to the marketplace, we feel like em and they
could pick up in a substantial way.
Speaker 2 (08:33):
So away from the US keith, I'm wondering whether you're
forced to find opportunity offshore right now. Maybe it's in Europe.
How are you thinking about foreign markets?
Speaker 4 (08:45):
We've we've we've had a underway when it comes in
the national compared to domestic here for some time.
Speaker 3 (08:52):
Now.
Speaker 4 (08:53):
That's that's a that's a marketplace that we've paid more
attention to it. It's a little more exciting and more
you know, our ears are perking up a little more,
but not necessarily where we feel like we change that
position that we're in as far as going from underweight
to overweight, we feel like you have. Politically, there's still
a lot of concerns in the world. You know, we
(09:15):
can go down the list and it's you know, very
well known issues that kind of take some of the
headlines here in the past several months, we don't really
feel like that changes, and the prospects here in the
US we feel like, even with our monetary fiscal concerns,
still a little more exciting than what we see in nationally.
So we're comf fable in the position we've been in. And
(09:36):
that's that goes from Margie and the Bella markets as well.
Speaker 2 (09:38):
Keith will leave it there, Thank you so very much.
He is Keith Buchanan, Senior portfolio manager at Globalt Investments,
joining from Chicago here on the Daybreak Asia podcast. Welcome
back to the Daybreak Asia Podcast. I'm Doug Chrisner. I
(09:59):
think we can agree the major challenge for markets right
now is determining the effect of those US tariffs. For
a closer look now, I am joined by Nadia Grant.
She is head of Global Equity at Bnpperabat Asset Management,
and Nadia is joining from our studios in Hong Kong.
Thank you so much for making time to chat with me.
Speaker 3 (10:17):
I know the.
Speaker 2 (10:18):
Tariff story is a still evolving one right now, although
I think we may be able to say there are
several highly probable scenarios. Let me begin with the growth outlook.
How are you feeling about growth going forward.
Speaker 1 (10:31):
Yeah, it's a pleasure to be with you. The growth
outlook is definitely uncertain and most definitely as well, most
likely on a downward trajectory. And so when we think
about the tariff and how the market is looking at them,
it seems that the market is now completely pricing an
outcome whereby their view as a negotiating tool, and that
they will be evolving. And when we listen to what
(10:54):
has been said more recently by the administration, and I'm
thinking about a Treasury Secretary as cop essant when he
was actually talking about using tariff as a source of
revenues and to finance that the tax cuts and the
provisions from the big beautiful Bill. And so there may
be a bit of complacency in the part of the
market when it comes to tariff because of that ever
(11:16):
changing nature of it.
Speaker 2 (11:17):
When it comes to the impact of tariff's I'm curious
as to how you see the economic risk distributed across Asia.
So many of those countries we know are exporters, and
obviously they have exposure, but I'm wondering about jurisdictions that
may have a slight advantage.
Speaker 1 (11:34):
So I'm a Stockpiaker. So I look at companies and
sectors and so and obviously at countries as well, and
so I would say, you know that we initially when
we heard about the potential of tariff, those that had
big exposure to US exports were obviously the most at risk.
And so I'm thinking the like Vietnam, for example, But
(11:55):
Vietnam has been really quick to get to negotiate, and
actually what the end did up negotiating is a pretty
positive outcome versus what was feared. And so the knee
jerk reaction of the market was really to sell this
market first. And now we're seeing really that we've passed
that big overhang and you can start investing and looking
(12:16):
at companies again. So you have a big of a
big relief rally there, and then you have obviously others
where you still have a very uncertain outcome because we
just don't know where the tariff will land. Definitely, we
know that the auto sector has been very penalized for Japan,
it's been quite impactful. So although we like some of
(12:37):
our exposure in Japan, we prefer exposure in Japan to
the financials, to the banks that are exposed to more
of the CPI strands and the wage growth and the
fact that the rates are well underpend and so benefit
from that outlook as opposed to the exporters on the
auto side that are really feeling the blunt of the
pressure on the tariff.
Speaker 2 (12:58):
So you're normally based in London, I understand you or
in China recently, and I'm very curious about your observations
there and whether or not you're finding opportunity in China
right now.
Speaker 1 (13:09):
We are absolutely so. We were really excited by China
Tech after Deep Sick. We thought that there was a
big realization that actually really China was closing in on
the AI race and find opportunities there earlier on the year.
But we also really like the fact that on the
consumer side on there's not The service sector and particularly
(13:30):
the financial service sector has got so much greenfield that's
got so much room to grow, and so we have
exposure to a life insurance company there. And what has
really captured our attention this week in particular has been
the talks on supply side reform, the talks of anti involution,
(13:50):
because that's been one of the area where we were
did in terms of sectors where we've been sort of
more shy and haven't really wanted to get exposure. Have
been those where we've seen obviously oversupply, fierce competition, because
that is very negative for margins for returns, and so
if the government is really a key to tackle the
(14:11):
issue and to instill more supply discipline, we think that
would be a really strong catalyst for Chinese equity, in
particular in the sector of ev so on the auto surrey,
on the battery, on the solar side, where you've seen
that fierce competition.
Speaker 2 (14:28):
But you're not concerned about the overcapacity issue, or you're
not concerned at all when you look at the wholesale
level of deflation in China, these are not concerns that
you have.
Speaker 1 (14:39):
Oh absolutely. That's why at the moment we're on the sideline.
We want to see whether these measures will come to fruition.
But historically, when you've seen more supply discipline, when you've
seen closure of capacity that has been that's very market positive.
So we're really keen to see whether these measures are
going to come through, whether you will see supply side
reform to tackle these issues.
Speaker 2 (15:00):
Do you feel confident in Beijing's ability to strike some
sort of deal with Washington so that the pressure that
this trade war represents will be alleviated.
Speaker 1 (15:11):
I think we've already seen a big degree of de
escalation because if you recall earlier on a year we
had really outlandish tariff levels that were completely punitive and prohibitive.
We were in one hundred percent range if memory serves
me well, So you've already had a great degree of
de escalation. I think in the case of China, I
(15:35):
think that they can really tackle the tariff in many ways.
So there's the negotiation route, absolutely, but there's also been
a high degree of trying to offset some of the
impact of the tariff by stimulating the economy so to
really try to compensate. And then there's also the opportunity.
What we've observed the first time we had tariff back
in twenty eighteen is a degree as well of re
(15:58):
routing and recycling, and so really seeing some of the
exports that were meant for the US market perhaps being
rerouted such that it would not go directly to the
US but find its way there eventually, and recycling meaning
that some of the exports that were initially meant for
the US actually finding their way elsewhere, and I'm thinking
(16:19):
in Europe or elsewhere in the world, and so there's
many ways in which we've seen companies being agile and
adapting to the circumstances. But to go back to your
first question of growth, obviously this is a gross reduction.
This is a handicap that we're putting on global trade
and on global growth.
Speaker 2 (16:38):
So, Nadia, when you are on the mainland and you
were engaged in conversation around technology, particularly the focus on AI,
I'm curious as to whether or not people really feel
that the US has a potential, through these export controls
and the limits that have already been put into effect
when it comes to certain aspects of the technology, whether
(16:58):
that still has the ability to hold back further growth
in the tech sector in China, or is there a
growing sense of confidence that China, through its own means,
has the ability to kind of compensate and maybe work
this out on its own.
Speaker 3 (17:14):
Yeah.
Speaker 1 (17:14):
I think it's very interesting because I've been really amazed
by the agility really of China tech in terms of
that ability to adapt and find efficiencies in the face
of challenge, in the face of restriction. And so when
you listen to some of the big tech CEO in
the US, they would tell you that they actually think
(17:36):
that China is really catching up and he is really
able to manage with those constraints. So yeah, I would
think so. And in the case of on the US side,
I mean, you know, the CEO of the largest chip
company or the largest company has really been quite vocal
about the fact that it would be a lot more
productive to not have this restrictions because in the end
(18:02):
they don't achieve the objective that they set out to achieve.
Speaker 2 (18:06):
Give me your sense of the pharmaceutical industry. I know
that China and the US are somewhat entwined at that level.
Are you optimistic that we can avoid much more in
the way of tension on that front? And I'm curious
to get your take on the farmer business on the mainland.
Speaker 1 (18:21):
Oh, farmer business on the mainland. So we don't have
much exposure to the farmer business there. I must admit.
We have exposure to European pharmaceutical company, but the way
they are set up, so the one in particular, we
have exposure to one leader on oncology because we really
think that from a demographic standpoint, oncology is not only
(18:44):
the largest therapeutics, but it's the one that's growing the
most because of aging population. But that specific company has
having its manufacturing footprint, is answering US demand with the
US manufacturing and supply chain and so pretty much insulated
from from the impact on the tariff. It's so, it
seems so we really want to make sure that when
(19:06):
we think about tariff and specific companies that we understand
the makeup of their supply chain, of their manufacturing footprint,
because if the if the if a company in the
same sector would export its drugs to the US, then
obviously would feel the full blunt of the tariff. So
it's really important to understand case by case how the
(19:28):
companies are organized. And we've seen actually a florry of
announcement for on shoring of farmer companies from Europe in particular,
but not only back to the US, and the tariff
that have just been announced on the farmer sector by
the administration this week, they really allow for a year
(19:51):
or two before coming into effect, because they acknowledged that
if you want to bring bring manufacturing back to the
U S you really need to allow some time for
this to occur.
Speaker 2 (20:03):
So you mentioned European pharma how are you feeling about
European markets more broadly.
Speaker 1 (20:09):
Well, for the first time in a long time, I'm
actually pretty sanguine in that I really think we've had
we've had a wake up call in Europe that you've
had that bazooka in the German Infrastructure Plan. Germany was
the only country that had fiscal room to ease, and
(20:30):
it's doing so in a very material way. And so
we think that the plan that has been announced, I mean,
Germany is the largest European economy, he's going to add
point three two point six percent growth to European GDP,
which is very material when Europe was so desperately in
need of growth and so and so we really added
(20:50):
exposure to what we thought was some of the main
beneficiaries of that plan, so namely in the construction sector,
MidCap names that would set to benefit from a lot
of the stimulus happening there. And you know, monetary policy
is also loose in Europe, so we think the combination
(21:13):
of those two ise is quite supportive. Obviously, the European
market started the year really strongly, and then I sort
of gave some back because of the fear of tariff
and we'll have to We'll have to see what happens there.
But in so far as our exposure, we can really
sort of get exposure mainly through MidCap that are more
(21:34):
insulated and more focused on the German infrastructure plan.
Speaker 2 (21:37):
Nadia will leave it there. Thank you so very much
for making time to chat with me. She is Nadi
a Grant, Head of Global Equity at BNP. Payabout asset management.
Joining us here on the Daybreak Asia Podcast. Thanks for
listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Each weekday, we look at the story shaping markets, finance,
(21:58):
and geopolitics in the Asia.
Speaker 3 (21:59):
Pason it.
Speaker 2 (22:00):
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 and Australia. I'm Doug Chrisner, and this is
Bloomberg
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. So
the story on US tariffs has, as we know, dominated
much of the conversation in markets. Statements from the Trump
administration recently have been at times contradictory, especially in the
run up to the new trade deal deadline of August. First,
in a moment, we'll go to Hong Kong and get
(00:31):
the perspective of Nadia Grant from BNP Pariba Asset Management.
On Thursday, we heard from Jamie Diamond, the CEO of
JP Morgan Chase. He was speaking in Dublin where he
warned of complacency on tariffs. He also said it's important
that an agreement is reached between the European Union and
the US for a closer look now at how tariffs
(00:53):
are impacting market psychology. I'm joined by Keith Buchanan. He
is senior portfolio manager at Global Investments. Keith joining today
from Chicago, Illinois. Keith, thank you so much for making
time to chat with me on this tariff story. What
is your sense of where we stand right now?
Speaker 3 (01:12):
Well, thanks Degan, it's a good thing to chat with you.
Speaker 4 (01:14):
Again, we've looked at the tariff story as having the
potential to inject new, almost reinvigorated inflation to the economy.
Now it depends on the whole picks of the toll.
Speaker 1 (01:28):
Is.
Speaker 3 (01:28):
We look at tariffs as like a.
Speaker 4 (01:30):
Traffic toll and someone has to pay it or pass along,
whether it's the importer, the US corporation, or the end consumer,
whether it's corporation or individual. So we've looked at this
as you know, still a developing story, not one that's
in the review myriad as corporations have as you mentioned
in the in the break before that, there have been
(01:52):
some corporations that made adjustments in order to make sure
that they didn't have a full implementation of tariffs. Had
to run through price increases that perhaps their consumers couldn't take,
so they built up inventories and there are things that
might affect the cash flow but didn't affect earnings so directly.
So we're investigating how that really plays out, and it's
(02:12):
really critical this earning season.
Speaker 2 (02:14):
I'm wondering how it's going to affect the Fed's thinking
as well. Right now, if you look at futures pricing,
the markets expecting two rate cuts before the end of
the year. Do you think that's maybe a little too optimistic,
But the.
Speaker 4 (02:28):
Minutes last week kind of painted a story of anticipation
that kind of aligns with what we're thinking internally with
the corporations really making sure that you know, the way
that the tariffs have been implemented won't really throw them
off from an annual earning.
Speaker 3 (02:48):
Standpoint, And I think that's what.
Speaker 4 (02:51):
Those of the Fed have also taken notice of, is
it will take some time to really see the real
effects that can either outweigh or justify temporary even call it,
if you will, transitory change. The corporations are made in
order to elude the most negative impacts of tariff.
Speaker 3 (03:09):
So I think there's a wait and.
Speaker 4 (03:11):
See approach that we are waiting for corporations to see
what they have done how that impacts earnings, but also
the Federal Reserve and those decision makers on monetary policy
are also waiting to see who has those effects that
we can't get around and when does that really hit
the road as far as the data perspective, And we
just haven't seen it just yet, but that doesn't mean
(03:32):
we won't see it over the next couple of months.
Speaker 2 (03:34):
How difficult is it to try to assess which companies
are best insulated from this tariff threat right now? Or
is that simply impossible because in some way all companies
are exposed.
Speaker 4 (03:46):
We feel like all companies are exposed to a degree,
and then that degree varies by the industry and by
the approach to the latest from the administration. It's definitely
too early to tell from an aggregate standpoint. We don't
feel like there's a determination to be made just yet,
and we'd like to wait and see them make sure
that we're not premature and making a call, whether it's
(04:09):
positible or negative on just what the lasting impact is
of the most recent trade policy changes.
Speaker 3 (04:17):
We just don't think we're there yet.
Speaker 4 (04:19):
And frankly, this earning season could be, you know, the
very first they have a full what corporations can really
speak freely about it, but still could possibly be you know,
several quarters a come before we really have a good
grasp of what the impact is from the trade policy changes.
Speaker 2 (04:35):
The unofficial start to the season begins next week. We'll
hear from the big banks today a pretty upbeat forecast
from Delta Airlines that stock popped about twelve percent so
if we can go back to kind of expectations for
not only earnings, but what we may hear in terms
of forecast from some of these companies, do you have
a sense of.
Speaker 4 (04:53):
That, And look, Delta Airlines is a microcosm of exactly
what we've been studying internally. Delta pulled their pull their
earnings guidance earlier in the year from an annual standpoint,
and they re implemented this quarter today when they had
better color around the puts and takes as to what
at this point, as much as they can graft the
(05:15):
impact could be. So they were much less certain a
quarter ago. Now they're more.
Speaker 3 (05:19):
Certain that we can have more clarity is what their earnings.
Speaker 4 (05:21):
And cash flow for cast could be, and we can,
and we as onlookers and investors can have more confidence
and some of the estimates that we've put.
Speaker 3 (05:30):
Around some corporations.
Speaker 4 (05:31):
So we feel like Delta really set the tone for
us to really have more confidence in this earning season
going in a way that it's not just a old
pulling guidance.
Speaker 3 (05:39):
We're not adjusting guidance. We don't know what the next.
Speaker 4 (05:41):
Step could be, and a little more clarity to help
us understand what this earnings growth this quarter could be,
and also we understand and appreciate just how impactful that
could be for evaluation of the SB five hundred going forward.
So we feel like that this quarter is very critical
in understanding the next steps market.
Speaker 2 (06:00):
As I'm speaking to you, I'm watching Bitcoin set a
record high. We're trading around one hundred and sixteen thousand
at the moment. Given everything that's going on in other
markets right now, do you have to have a little
exposure to the crypto space, and maybe it's through bitcoins.
Speaker 3 (06:20):
We don't.
Speaker 4 (06:20):
We don't have any in our in our in our
strategies right now. We don't necessarily look at it as
the ass as a as a real detractor. We feel
like it's definitely a beta plus type of measure. We'd
rather get that exposure through equities, frankly, and changing our
(06:42):
exposed equities and even gaining more leverage if possible. But
right now we just don't have that exposure. But we don't.
We don't feel like that. It's it's something that we is,
something that we actually discussed on a very active basis,
is not yet.
Speaker 2 (06:55):
You know, right after the election, a lot of the
conversation focused on merger and acquisition activity and deregulation. We
haven't seen much in the way of deal flow and
M and A activity. How are you feeling about that
possibility moving forward, perhaps after the tariff story fades into
the background.
Speaker 4 (07:13):
From a deregulatory standpoint, the initial thought was after deregulation
and some anti trust concerns were abated, then you'd see
this influx and flurry of eminet. We feel like the
main driver and the data supports this is more brilliant
economic exportations and we just haven't had that because the
(07:34):
traff conversation has been in a way so as that
starts to not necessarily that the terrorfs go away, but
is there more certainty and clarity around the direction and
the drivers of the psychology of our trade positive changes,
specifically when it comes to TERRAFK. We feel like some
of that imminate can unlocked because the anti trust levers
(07:58):
are have been loosen some and so we appreciate that
part of it, but we just still have to have
some economic clarity in order for those conversations to really
gain momentum and we get paying the pad on though,
so we feel like economic inspectation to wait more. Even
we're selling this environment than some of the anti trust
concerns being alleviated. You have to have optimism about economic
(08:23):
developments over the next five, ten, fifteen years, and that
picture's just been very, very unclear. And as that clarity
comes to the marketplace, we feel like em and they
could pick up in a substantial way.
Speaker 2 (08:33):
So away from the US keith, I'm wondering whether you're
forced to find opportunity offshore right now. Maybe it's in Europe.
How are you thinking about foreign markets?
Speaker 4 (08:45):
We've we've we've had a underway when it comes in
the national compared to domestic here for some time.
Speaker 3 (08:52):
Now.
Speaker 4 (08:53):
That's that's a that's a marketplace that we've paid more
attention to it. It's a little more exciting and more
you know, our ears are perking up a little more,
but not necessarily where we feel like we change that
position that we're in as far as going from underweight
to overweight, we feel like you have. Politically, there's still
a lot of concerns in the world. You know, we
(09:15):
can go down the list and it's you know, very
well known issues that kind of take some of the
headlines here in the past several months, we don't really
feel like that changes, and the prospects here in the
US we feel like, even with our monetary fiscal concerns,
still a little more exciting than what we see in nationally.
So we're comf fable in the position we've been in. And
(09:36):
that's that goes from Margie and the Bella markets as well.
Speaker 2 (09:38):
Keith will leave it there, Thank you so very much.
He is Keith Buchanan, Senior portfolio manager at Globalt Investments,
joining from Chicago here on the Daybreak Asia podcast. Welcome
back to the Daybreak Asia Podcast. I'm Doug Chrisner. I
(09:59):
think we can agree the major challenge for markets right
now is determining the effect of those US tariffs. For
a closer look now, I am joined by Nadia Grant.
She is head of Global Equity at Bnpperabat Asset Management,
and Nadia is joining from our studios in Hong Kong.
Thank you so much for making time to chat with me.
Speaker 3 (10:17):
I know the.
Speaker 2 (10:18):
Tariff story is a still evolving one right now, although
I think we may be able to say there are
several highly probable scenarios. Let me begin with the growth outlook.
How are you feeling about growth going forward.
Speaker 1 (10:31):
Yeah, it's a pleasure to be with you. The growth
outlook is definitely uncertain and most definitely as well, most
likely on a downward trajectory. And so when we think
about the tariff and how the market is looking at them,
it seems that the market is now completely pricing an
outcome whereby their view as a negotiating tool, and that
they will be evolving. And when we listen to what
(10:54):
has been said more recently by the administration, and I'm
thinking about a Treasury Secretary as cop essant when he
was actually talking about using tariff as a source of
revenues and to finance that the tax cuts and the
provisions from the big beautiful Bill. And so there may
be a bit of complacency in the part of the
market when it comes to tariff because of that ever
(11:16):
changing nature of it.
Speaker 2 (11:17):
When it comes to the impact of tariff's I'm curious
as to how you see the economic risk distributed across Asia.
So many of those countries we know are exporters, and
obviously they have exposure, but I'm wondering about jurisdictions that
may have a slight advantage.
Speaker 1 (11:34):
So I'm a Stockpiaker. So I look at companies and
sectors and so and obviously at countries as well, and
so I would say, you know that we initially when
we heard about the potential of tariff, those that had
big exposure to US exports were obviously the most at risk.
And so I'm thinking the like Vietnam, for example, But
(11:55):
Vietnam has been really quick to get to negotiate, and
actually what the end did up negotiating is a pretty
positive outcome versus what was feared. And so the knee
jerk reaction of the market was really to sell this
market first. And now we're seeing really that we've passed
that big overhang and you can start investing and looking
(12:16):
at companies again. So you have a big of a
big relief rally there, and then you have obviously others
where you still have a very uncertain outcome because we
just don't know where the tariff will land. Definitely, we
know that the auto sector has been very penalized for Japan,
it's been quite impactful. So although we like some of
(12:37):
our exposure in Japan, we prefer exposure in Japan to
the financials, to the banks that are exposed to more
of the CPI strands and the wage growth and the
fact that the rates are well underpend and so benefit
from that outlook as opposed to the exporters on the
auto side that are really feeling the blunt of the
pressure on the tariff.
Speaker 2 (12:58):
So you're normally based in London, I understand you or
in China recently, and I'm very curious about your observations
there and whether or not you're finding opportunity in China
right now.
Speaker 1 (13:09):
We are absolutely so. We were really excited by China
Tech after Deep Sick. We thought that there was a
big realization that actually really China was closing in on
the AI race and find opportunities there earlier on the year.
But we also really like the fact that on the
consumer side on there's not The service sector and particularly
(13:30):
the financial service sector has got so much greenfield that's
got so much room to grow, and so we have
exposure to a life insurance company there. And what has
really captured our attention this week in particular has been
the talks on supply side reform, the talks of anti involution,
(13:50):
because that's been one of the area where we were
did in terms of sectors where we've been sort of
more shy and haven't really wanted to get exposure. Have
been those where we've seen obviously oversupply, fierce competition, because
that is very negative for margins for returns, and so
if the government is really a key to tackle the
(14:11):
issue and to instill more supply discipline, we think that
would be a really strong catalyst for Chinese equity, in
particular in the sector of ev so on the auto surrey,
on the battery, on the solar side, where you've seen
that fierce competition.
Speaker 2 (14:28):
But you're not concerned about the overcapacity issue, or you're
not concerned at all when you look at the wholesale
level of deflation in China, these are not concerns that
you have.
Speaker 1 (14:39):
Oh absolutely. That's why at the moment we're on the sideline.
We want to see whether these measures will come to fruition.
But historically, when you've seen more supply discipline, when you've
seen closure of capacity that has been that's very market positive.
So we're really keen to see whether these measures are
going to come through, whether you will see supply side
reform to tackle these issues.
Speaker 2 (15:00):
Do you feel confident in Beijing's ability to strike some
sort of deal with Washington so that the pressure that
this trade war represents will be alleviated.
Speaker 1 (15:11):
I think we've already seen a big degree of de
escalation because if you recall earlier on a year we
had really outlandish tariff levels that were completely punitive and prohibitive.
We were in one hundred percent range if memory serves
me well, So you've already had a great degree of
de escalation. I think in the case of China, I
(15:35):
think that they can really tackle the tariff in many ways.
So there's the negotiation route, absolutely, but there's also been
a high degree of trying to offset some of the
impact of the tariff by stimulating the economy so to
really try to compensate. And then there's also the opportunity.
What we've observed the first time we had tariff back
in twenty eighteen is a degree as well of re
(15:58):
routing and recycling, and so really seeing some of the
exports that were meant for the US market perhaps being
rerouted such that it would not go directly to the
US but find its way there eventually, and recycling meaning
that some of the exports that were initially meant for
the US actually finding their way elsewhere, and I'm thinking
(16:19):
in Europe or elsewhere in the world, and so there's
many ways in which we've seen companies being agile and
adapting to the circumstances. But to go back to your
first question of growth, obviously this is a gross reduction.
This is a handicap that we're putting on global trade
and on global growth.
Speaker 2 (16:38):
So, Nadia, when you are on the mainland and you
were engaged in conversation around technology, particularly the focus on AI,
I'm curious as to whether or not people really feel
that the US has a potential, through these export controls
and the limits that have already been put into effect
when it comes to certain aspects of the technology, whether
(16:58):
that still has the ability to hold back further growth
in the tech sector in China, or is there a
growing sense of confidence that China, through its own means,
has the ability to kind of compensate and maybe work
this out on its own.
Speaker 3 (17:14):
Yeah.
Speaker 1 (17:14):
I think it's very interesting because I've been really amazed
by the agility really of China tech in terms of
that ability to adapt and find efficiencies in the face
of challenge, in the face of restriction. And so when
you listen to some of the big tech CEO in
the US, they would tell you that they actually think
(17:36):
that China is really catching up and he is really
able to manage with those constraints. So yeah, I would
think so. And in the case of on the US side,
I mean, you know, the CEO of the largest chip
company or the largest company has really been quite vocal
about the fact that it would be a lot more
productive to not have this restrictions because in the end
(18:02):
they don't achieve the objective that they set out to achieve.
Speaker 2 (18:06):
Give me your sense of the pharmaceutical industry. I know
that China and the US are somewhat entwined at that level.
Are you optimistic that we can avoid much more in
the way of tension on that front? And I'm curious
to get your take on the farmer business on the mainland.
Speaker 1 (18:21):
Oh, farmer business on the mainland. So we don't have
much exposure to the farmer business there. I must admit.
We have exposure to European pharmaceutical company, but the way
they are set up, so the one in particular, we
have exposure to one leader on oncology because we really
think that from a demographic standpoint, oncology is not only
(18:44):
the largest therapeutics, but it's the one that's growing the
most because of aging population. But that specific company has
having its manufacturing footprint, is answering US demand with the
US manufacturing and supply chain and so pretty much insulated
from from the impact on the tariff. It's so, it
seems so we really want to make sure that when
(19:06):
we think about tariff and specific companies that we understand
the makeup of their supply chain, of their manufacturing footprint,
because if the if the if a company in the
same sector would export its drugs to the US, then
obviously would feel the full blunt of the tariff. So
it's really important to understand case by case how the
(19:28):
companies are organized. And we've seen actually a florry of
announcement for on shoring of farmer companies from Europe in particular,
but not only back to the US, and the tariff
that have just been announced on the farmer sector by
the administration this week, they really allow for a year
(19:51):
or two before coming into effect, because they acknowledged that
if you want to bring bring manufacturing back to the
U S you really need to allow some time for
this to occur.
Speaker 2 (20:03):
So you mentioned European pharma how are you feeling about
European markets more broadly.
Speaker 1 (20:09):
Well, for the first time in a long time, I'm
actually pretty sanguine in that I really think we've had
we've had a wake up call in Europe that you've
had that bazooka in the German Infrastructure Plan. Germany was
the only country that had fiscal room to ease, and
(20:30):
it's doing so in a very material way. And so
we think that the plan that has been announced, I mean,
Germany is the largest European economy, he's going to add
point three two point six percent growth to European GDP,
which is very material when Europe was so desperately in
need of growth and so and so we really added
(20:50):
exposure to what we thought was some of the main
beneficiaries of that plan, so namely in the construction sector,
MidCap names that would set to benefit from a lot
of the stimulus happening there. And you know, monetary policy
is also loose in Europe, so we think the combination
(21:13):
of those two ise is quite supportive. Obviously, the European
market started the year really strongly, and then I sort
of gave some back because of the fear of tariff
and we'll have to We'll have to see what happens there.
But in so far as our exposure, we can really
sort of get exposure mainly through MidCap that are more
(21:34):
insulated and more focused on the German infrastructure plan.
Speaker 2 (21:37):
Nadia will leave it there. Thank you so very much
for making time to chat with me. She is Nadi
a Grant, Head of Global Equity at BNP. Payabout asset management.
Joining us here on the Daybreak Asia Podcast. Thanks for
listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Each weekday, we look at the story shaping markets, finance,
(21:58):
and geopolitics in the Asia.
Speaker 3 (21:59):
Pason it.
Speaker 2 (22:00):
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 and Australia. I'm Doug Chrisner, and this is
Bloomberg
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