September 17, 2025 • 19 mins
US equity-index futures gained, suggesting investors are regaining confidence after the Federal Reserve's decision to lower borrowing costs, even as questions linger over the path of future policy moves. Contracts for the S&P 500 and the Nasdaq 100 advanced around 0.4% in early trading Thursday, after the underlying benchmarks posted minor declines following the central bank's announcement. Stocks climbed to record highs this week as investors priced in a 25-basis-point cut ahead of Wednesday's meeting. While the Fed followed through, officials stressed policy will be decided "meeting by meeting" and warned "there's no risk-free path" ahead. Even so, policymakers now see two additional quarter-point cuts this year, which is one more than what was projected in June. We get reaction from George Schultze, Founder and CEO at Schultze Asset Management.
Meanwhile, Chinese focused ETFs rose overnight to provide a modest tailwind for Asian peers, despite US stocks and bonds slipping after the FOMC decision. For more on what's driving markets in the Asia-Pacific, we get the views of Stephanie Leung, Chief Investment Officer at StashAway.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.
The Fed cut its benchmark interest rate today by a
quarter point and policymakers in aggregate also penciled in two
more quarter point cuts this year.
Speaker 3 (00:23):
Now.
Speaker 2 (00:23):
The Fed statement points to growing signs of weakness in
the labor market as a justification. Here is Fedshair J. Powell.
Speaker 4 (00:30):
You can think of this in a way as a
risk management cut because if you look at the SEP,
actually the projections for growth this year and next actually
ticked up just a little bit, and inflation and unemployment
didn't really move once. So what's different now. What's different
now is that you see a very different picture of
the risks to the labor market.
Speaker 2 (00:48):
And at the same time, Powell reiterated the danger of
tariff hikes in creating a persistent uplift in inflationary pressure.
By the way, this vote was eleven to one, with
newly installed Fed Governor Steave Myron pushing for a larger
half point reduction. In a moment or two, we'll get
the market views of Stephanie Leung. She is the Chief
Investment Officer at Stashoway in Hong Kong, but we begin
(01:11):
here in the States. Joining me now is George Schultze.
He has founder CEO at Chultze Asset Management. Thanks for
making time to chat with me about this, George. A
lot going on in markets. Let's begin with the FED.
Not really a big surprise, right.
Speaker 1 (01:25):
No, not a big surprise, although some people were perhaps
a little too optimistic and expecting a fifty basis point cut.
But you know, the market is certainly expected action today
and it got pretty much what the expectation was at
twenty five basis points.
Speaker 2 (01:39):
So I was struck by the fact that here is
Powell kind of reinforcing the idea that merit maybe tariffs
begin to filter in to persistent inflation. Is that a
worry that you share?
Speaker 1 (01:49):
So not really, I'm a little bit more of the
camp that the tariffs are helping our economy and you know,
hopefully bringing some capital back from overseas. But clearly there
was a lot of concern that taris would would cause
more inflation. And you know, it's really not you know,
as much of a problem here as as labor market
(02:10):
seems to be at this point. So you know, it's
a tough time for the FED. But but I think
they made the right decision here.
Speaker 2 (02:17):
So help me understand then from your point of view,
while we saw a bit of a backup and yields
right across the curve, I think in the case of
both the two and the ten up a little bit
more than five basis points in each case.
Speaker 1 (02:29):
Right right, Yeah, And if you looked at it yesterday anyway,
that you know, the yield curve continues to be a
little inverted. So it's a good thing that they lowered
this short term interest rate a little bit more. I
think that really helps banks, and I think it helps
the overall picture. You know, it takes away some of
the risk in the uh, you know, in the early
part of the curve, in terms of expecting you know,
(02:51):
potential future recession or stagflation. So this move I think
is preemptive and it helps address that risk and really
helps I think banks that that make money on the
spread going forward.
Speaker 2 (03:03):
So Stephen Myron dissented in today's vote. He was pushing
for a half point great cut. One of the things
that Myron has done and being installed recently as a
FED governor, has created a lot of conversation around the
idea of FED independence. Is that something that you're concerned about.
Does the FED need to do more to demonstrate that
(03:24):
it is independent from the executive branch?
Speaker 1 (03:27):
I don't think so. I think the FED has really
walked that uh you know that line well, and you know,
all the controversy with Cook and you know, attempts to
change things along the way, you know, and the reaction
of the FED has really shown as independence and shown
how it how it navigates the you know, choppy water
(03:48):
is when when times changed like they have recently. I
think going forward, the big change that we should all expect,
of course, is that Powell next year, his term will
be up, and at that point it appears more likely
that the next uh, the next leader will be you know,
more on the lower rates camp. But clearly there's been
a lot of a lot of pressure between the Trump
(04:10):
administration and the FED and independence. But I think this
this meeting specifically proves, you know, its independence. And despite
the fact that it's uh, you know, it's building project
was audited and reviewed and there's a lot of press
and focus on and then the whole thing with with
FED Governor Cook, you know, made a lot of headlines,
but still the FED acted very independently, I think.
Speaker 2 (04:31):
Here so the Fed's decision and the Powell press conference
kind of failed to rattle the equity market beyond maybe
a minor blip. There was a little bit of volatility,
but the range of trading today was I would say,
fairly narrow. Are you constructive on the equity market going forward?
Speaker 1 (04:48):
We are here at Shultzi Asset Management, but really, you know,
the key is here Doug finding companies that are cheap
in not just throwing money at the at the big
names or the Max seven for instance. You know, so
working strug if there are some companies that are particularly inexpensive,
and some of them have really interesting events that are
likely to drive them higher. One of them is a
(05:09):
regional bank, Flagstar, which should benefit from these lower rates.
Here it's spread business of generating net interest income will
clearly increase now with short term rates haven't dropped a
little bit. But yeah, we're generally constructive on the equity markets,
and I think that this was the right move that
(05:30):
the FED made.
Speaker 2 (05:31):
Saw the Rustle two thousand getting a bit of a
lift today. Would you tend to say that the current
environment right now with declining yields lower rates that that
tends to favor some of the small cap MITCAB space.
Speaker 1 (05:44):
I do think that's right, But you still have a
couple other risks in the market. You have higher inflation
that's been sticking around. Interest rates even though they've dropped
a little bit today and are likely to drop two
more times at least this year. It looks like based
on market experts right now, either way, there's still much
higher than they were just a couple of years ago
(06:05):
where we had zero interest rate policy. So that's a
big change for companies that are overlevered. And you also
have secular change and that includes you know, technology technological
change such as AI and so those big overhang risks.
Can you really impact companies that are overlevered, But for
smaller companies, sure, you know, lower interest rates should help
(06:27):
them and uh, you know, I think possibly ignite some
animal spirits in their stocks.
Speaker 2 (06:32):
How do you assess the risk of stagflation right now?
Speaker 1 (06:36):
Well, I think that's you know, one of the things
that the FED was concerned about, you know, having a
softening labor market along with inflationary pressures continuing to come through,
And that's exactly what you've been seeing. So that's the UH.
I think that's one of the main reasons they lowered
the rate today. And you've seen that because you know,
(06:58):
some companies are forcing higher costs through from tarifs to
their customers. You're seeing that with food appliance as automobiles,
and even the Bank of International Settlements recently suggested that,
you know, some of this UH, you know, might be
complicating the fed's dual mandate and and creating that kind
of that kind of risk.
Speaker 2 (07:17):
Right now, President Trump is in the UK. We heard
from him earlier touting some of the high tech deals
that we're going to be or will be announced tomorrow,
with names like Microsoft and open Ai being involved. When
you look at the big tech story right now globally,
whether we're talking about South Korea, whether we're talking about
Hong Kong and by extension, China, whether we're talking about
(07:39):
the UK even and obviously here in the States, how
are you feeling about big tech in the current environment.
Speaker 1 (07:46):
I think he's big tech companies their position pretty well
and have they certainly have Trump's ear He's getting deals
you know, to the table for him or for them,
you know, the TikTok announced from yesterday. It was big news,
and you know, there's some big US investors that look
like they'll benefit from that. But clearly part of negotiating
(08:09):
tariff deals includes helping some of the largest companies in
the US. I think some of these big companies will
really benefit from that as you keep seeing tariff deals
get made going forward. Having said all that, you know,
some of them have really appreciated to you know, unbelievable levels,
and you know, it really makes me wonder whether there's
still a lot more upside in their valuations. So we're
(08:30):
trying to pick our winners and you know, future gainers
in different places for now.
Speaker 2 (08:36):
So you're rotating a little bit, I mean, taking money
off the table in certain names and redeploying that cash
in other areas of the equity market. Is that what
I hear you.
Speaker 1 (08:44):
Saying a little bit?
Speaker 5 (08:46):
Yeah.
Speaker 1 (08:46):
I mean, we didn't have big exposure to the Max
seven for instance, to begin with, but we certainly think
there are some great opportunities with event driven stocks, companies
that are fundamentally cheap on a valuation basis, and specifically
these that happen to have an overhang of distress that
you know that has put a cloud over them from
(09:07):
you know, from distress or situations that they were enveloped
with in the past.
Speaker 2 (09:12):
George will leave it there. Thank you so much. George Schultze.
He is founder and CEO of Schultze Asset Management. Joining
us here on the Daybreak Asia podcast. Welcome back to
the Daybreak Asia Podcast. I'm Doug Chrisner. Chinese focused ETFs
(09:33):
rose in the Wednesday session and provided a modest tailwind
for Asian peers. Let's take a look at markets across
the Asia Pacific more broadly. Now. Joining me is Stephanie
Liungshi is the chief investment officer at Stashaway. Stephanie joins
us from our studios in Hong Kong. Thank you so
much for making time to chat with me. If you
don't mind, I'd like to begin the conversation around this
(09:54):
rally that we have seen a powerful one at that
Ian markets like Hong Kong and South career. What do
you think is driving this?
Speaker 5 (10:02):
Yeah, I think if you look at kind of emerging
markets as a whole, it's been actually rallying quite a
bit in recent months. So the restart of a interest
rate cycle cut cycle is actually typically quite good for
emerging markets, particularly given that US dollar now is actually
quite recently priced compared to let's say a year ago.
(10:26):
So a kind of weaker US dollar environment coupled with
interest rate further interest rate cuts from the Fed typically
creates a fairly good environment for emerging markets. Now if
we look at kind of the fundamental data, it's I mean,
of course, like China is still kind of the elephant
in the room. But even China it seems to be
(10:48):
slowly turning around a corner. Recent data suggests that the
Chinese economy is sort of stabilizing.
Speaker 3 (10:56):
There are some pockets which are.
Speaker 5 (10:57):
Picking up, but of course it's a it's a big economy,
so it'll take some time to turn around.
Speaker 3 (11:03):
Uh.
Speaker 5 (11:03):
If you look at some of the other Asian markets,
I mean, Japan market has been kind of boosted by
a return to inflation to inflation.
Speaker 1 (11:13):
Uh.
Speaker 3 (11:13):
And of course if you look at kind of the more.
Speaker 5 (11:15):
Tech heavy markets like Korea and Taiwan, I mean, those
have been boosted by the investments in ai So I
think there are various stories going around in emerging markets. Uh,
it which supports kind of investor coming back to to
to re look at what are the opportunities there.
Speaker 2 (11:32):
Do you have a sense of the balance between institutional
participation right now and what may be happening from the
retail crowd. How is this balance do you think?
Speaker 1 (11:42):
So?
Speaker 5 (11:43):
I think it depends on the market obviously, I think
from it and also from kind of what investor base. Right,
we talk about international investor base or domestic. So I
think from an international kind of investor based perspective, most
of the flow is still kind of institutional. I think
it's a lot of that is sort of rebalancing out
(12:04):
of the US, uh, partly triggered by the the sort
of the trade tariff scares in the beginning of the year, right,
and also a kind of a relook at the overweight
in the US. So I think that's sort of that's
sort of the flow that we've been mostly seeing from
an international investor base. From the domestic side, I think
(12:26):
there are some signs that, uh, the the animal spirits
are returning a bit to the to the market. So
to take for example, UH in the hawkoal market, which
is kind of closest to our heart, UH, the IPO
market has.
Speaker 3 (12:38):
Been actually quite hot.
Speaker 5 (12:40):
Uh. And typically when you see kind of hot ipo
markets that's the sign that retail is coming back.
Speaker 1 (12:46):
Uh.
Speaker 5 (12:46):
Even if you look at China on shore, right Asia
market is typically not a I guess not an internationally
driven market. I mean that has been on a tear
and a lot significant part of that is because of
the excitement around kind of technology, around kind of some
of the themes that China is pushing through. So again,
I think there are from a domestic perspective, there is
(13:09):
increasing kind of retail participation, but I think from an
international kind of esset allocation point of view, most of
it is still institutional. Even within our platform at Stashway,
we don't see most of our investors are actually kind
of retail investors. Of course that includes a lot of
the kind of more premium retail investors, but still what
(13:30):
we're seeing is still not a not a lot of
kind of euphoria or a lot of emerging markets yet.
Speaker 2 (13:36):
So you mentioned technology. Now we know since the deep
Seek moment that has certainly been a big driver for
equity markets in the APEC region. But I'm wondering about
betting on the strength of the consumer right now across
the Asia Pacific. Is that becoming a trend that you
think is durable, whether you're looking at e commerce names
like an Ali Baba or a by Doer or even
(13:58):
a young China whether people are betting on a return
of consumer strength.
Speaker 5 (14:03):
I think it's it's actually been quite selective, I would say,
because if you look at China, for example, the I mean,
the economy is still stabilizing, but it's it's it's not
coming back in the visions right, it's not very very
strong recovery. So I think if you look at kind
(14:23):
of pockets of consumer names, I mean there are names
like Potmart or some of these Chinese IP names that
have been on a tear, and I mean that shows
strength in terms of I think not just kind of
the strength of the Chinese consumer, but more of the
strength of some of these newer Chinese brands which are
(14:45):
actually going international. So I mean PopMart is of course
the make of La Boobu, which has been kind of
a phenomenon in the last kind of twelve to eighteen months.
And apart from that, I think if you look at
some of these Chinese e commerce names, they are much
more affected by what's happening domestically, right and on shore.
(15:07):
Domestically they are in fact, I mean fighting a price war, right,
the likes of Maitwan, like JD even Ali Baba are
involved in heavily subsidizing the consumer in order to grab
market share. And that's where I guess the companies are
still in a heavy investment phase. And I mean those
areas are of course are not so great for equity investors.
(15:30):
So I think it really depends on what segments and
what kind of sub themes we're looking at. Instead of
like a broad stroke saying, oh, these companies are all
going to benefit from the Chinese consumption story.
Speaker 2 (15:44):
I'm wondering about, for as much experience as you have
in markets, whether you've seen in the past big moves
like this that have happened over a short period of time,
and whether that has created in your mind a great
deal of concern and as a result, you may be
beginning to put in some hedging strategies in place.
Speaker 3 (16:02):
I think if you look at.
Speaker 5 (16:05):
The US market, for example, it is of course like
pretty expensive on a valuation basis, but I think that's
sort of also quite heavily skew towards the big caps,
and just I mean perhaps the tech sector. If you
look at kind of outside of the tech sector, for example,
(16:25):
in the most cyclical parts of the of the market,
and also into like even make caps of smaller caps,
those are relatively actually quite cheap still, so I think
it's I wouldn't say it's sort of like a bubble
right now in the sense that, oh, the risk of
a kind of thirty percent plus straw down is significant
(16:50):
because of two things. Number one, as I mentioned, I mean,
evaluation kind of premium is much more focused on this
in the big caps. And secondly, I think if you
look at the fundamentals of the US economy, yes, there
has been some slow down in labor market, but I
think if you look at things like liquidity, look at
(17:11):
things like credit spreads, or even if you look at
some real time kind of consumer data, those are still
going very very strong. So I think in the next
kind of sex to twelve months, so risk of a
recession is pretty low. So I think that from that angle,
I don't see a significant risk of a big drawdown.
So I think, I guess I mean, could we see
(17:32):
like a five cent percent correction, yeah, absolutely, I mean
that these are things that happen like every few months,
but anything much more sinister than that, I think that
that's fairly unlikely for now.
Speaker 2 (17:43):
I'm wondering about whether you feel that way about equity
markets in the Asia Pacific, where we could see a
bit of an interruption, maybe in a move lower.
Speaker 5 (17:51):
I mean, of course, like Asia Pacific markets like sort
of tends to be more volatile than the US market.
So from a beta just that perspective, yes, I mean
there could be kind of if the US corrects ten percent,
I mean Asia Pacientic markets could correct kind of ten
to fifteen percent, right, But I also think that there's
a cushion in terms of valuation and also a cushion
(18:14):
in terms of investor possessioning. So I mentioned that there
has been a kind of a rotation trade out of
the US into Asia Pacific or emerging markets from an
insitutional level, I.
Speaker 3 (18:26):
Don't think that's happening on resale level yet.
Speaker 5 (18:28):
So from a kind of possisioning perspective, I think there's
still room for investors, particularly international investors, that add to
emerging markets, and I think that's starting to happen, particularly
with the easier kind of liquidity environment. So I think
(18:48):
the risk of that correction is I guess it is
not that high.
Speaker 3 (18:53):
In my view.
Speaker 2 (18:55):
Okay, we'll leave it there, Stephanie, It's always a pleasure.
Thank you so very much. Stephanie Leung, their chief and
Vestment officer at Stashuay, joining from Hong Kong 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, and geopolitics in
(19:17):
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 and Australia. I'm Doug Chrisner,
and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.
The Fed cut its benchmark interest rate today by a
quarter point and policymakers in aggregate also penciled in two
more quarter point cuts this year.
Speaker 3 (00:23):
Now.
Speaker 2 (00:23):
The Fed statement points to growing signs of weakness in
the labor market as a justification. Here is Fedshair J. Powell.
Speaker 4 (00:30):
You can think of this in a way as a
risk management cut because if you look at the SEP,
actually the projections for growth this year and next actually
ticked up just a little bit, and inflation and unemployment
didn't really move once. So what's different now. What's different
now is that you see a very different picture of
the risks to the labor market.
Speaker 2 (00:48):
And at the same time, Powell reiterated the danger of
tariff hikes in creating a persistent uplift in inflationary pressure.
By the way, this vote was eleven to one, with
newly installed Fed Governor Steave Myron pushing for a larger
half point reduction. In a moment or two, we'll get
the market views of Stephanie Leung. She is the Chief
Investment Officer at Stashoway in Hong Kong, but we begin
(01:11):
here in the States. Joining me now is George Schultze.
He has founder CEO at Chultze Asset Management. Thanks for
making time to chat with me about this, George. A
lot going on in markets. Let's begin with the FED.
Not really a big surprise, right.
Speaker 1 (01:25):
No, not a big surprise, although some people were perhaps
a little too optimistic and expecting a fifty basis point cut.
But you know, the market is certainly expected action today
and it got pretty much what the expectation was at
twenty five basis points.
Speaker 2 (01:39):
So I was struck by the fact that here is
Powell kind of reinforcing the idea that merit maybe tariffs
begin to filter in to persistent inflation. Is that a
worry that you share?
Speaker 1 (01:49):
So not really, I'm a little bit more of the
camp that the tariffs are helping our economy and you know,
hopefully bringing some capital back from overseas. But clearly there
was a lot of concern that taris would would cause
more inflation. And you know, it's really not you know,
as much of a problem here as as labor market
(02:10):
seems to be at this point. So you know, it's
a tough time for the FED. But but I think
they made the right decision here.
Speaker 2 (02:17):
So help me understand then from your point of view,
while we saw a bit of a backup and yields
right across the curve, I think in the case of
both the two and the ten up a little bit
more than five basis points in each case.
Speaker 1 (02:29):
Right right, Yeah, And if you looked at it yesterday anyway,
that you know, the yield curve continues to be a
little inverted. So it's a good thing that they lowered
this short term interest rate a little bit more. I
think that really helps banks, and I think it helps
the overall picture. You know, it takes away some of
the risk in the uh, you know, in the early
part of the curve, in terms of expecting you know,
(02:51):
potential future recession or stagflation. So this move I think
is preemptive and it helps address that risk and really
helps I think banks that that make money on the
spread going forward.
Speaker 2 (03:03):
So Stephen Myron dissented in today's vote. He was pushing
for a half point great cut. One of the things
that Myron has done and being installed recently as a
FED governor, has created a lot of conversation around the
idea of FED independence. Is that something that you're concerned about.
Does the FED need to do more to demonstrate that
(03:24):
it is independent from the executive branch?
Speaker 1 (03:27):
I don't think so. I think the FED has really
walked that uh you know that line well, and you know,
all the controversy with Cook and you know, attempts to
change things along the way, you know, and the reaction
of the FED has really shown as independence and shown
how it how it navigates the you know, choppy water
(03:48):
is when when times changed like they have recently. I
think going forward, the big change that we should all expect,
of course, is that Powell next year, his term will
be up, and at that point it appears more likely
that the next uh, the next leader will be you know,
more on the lower rates camp. But clearly there's been
a lot of a lot of pressure between the Trump
(04:10):
administration and the FED and independence. But I think this
this meeting specifically proves, you know, its independence. And despite
the fact that it's uh, you know, it's building project
was audited and reviewed and there's a lot of press
and focus on and then the whole thing with with
FED Governor Cook, you know, made a lot of headlines,
but still the FED acted very independently, I think.
Speaker 2 (04:31):
Here so the Fed's decision and the Powell press conference
kind of failed to rattle the equity market beyond maybe
a minor blip. There was a little bit of volatility,
but the range of trading today was I would say,
fairly narrow. Are you constructive on the equity market going forward?
Speaker 1 (04:48):
We are here at Shultzi Asset Management, but really, you know,
the key is here Doug finding companies that are cheap
in not just throwing money at the at the big
names or the Max seven for instance. You know, so
working strug if there are some companies that are particularly inexpensive,
and some of them have really interesting events that are
likely to drive them higher. One of them is a
(05:09):
regional bank, Flagstar, which should benefit from these lower rates.
Here it's spread business of generating net interest income will
clearly increase now with short term rates haven't dropped a
little bit. But yeah, we're generally constructive on the equity markets,
and I think that this was the right move that
(05:30):
the FED made.
Speaker 2 (05:31):
Saw the Rustle two thousand getting a bit of a
lift today. Would you tend to say that the current
environment right now with declining yields lower rates that that
tends to favor some of the small cap MITCAB space.
Speaker 1 (05:44):
I do think that's right, But you still have a
couple other risks in the market. You have higher inflation
that's been sticking around. Interest rates even though they've dropped
a little bit today and are likely to drop two
more times at least this year. It looks like based
on market experts right now, either way, there's still much
higher than they were just a couple of years ago
(06:05):
where we had zero interest rate policy. So that's a
big change for companies that are overlevered. And you also
have secular change and that includes you know, technology technological
change such as AI and so those big overhang risks.
Can you really impact companies that are overlevered, But for
smaller companies, sure, you know, lower interest rates should help
(06:27):
them and uh, you know, I think possibly ignite some
animal spirits in their stocks.
Speaker 2 (06:32):
How do you assess the risk of stagflation right now?
Speaker 1 (06:36):
Well, I think that's you know, one of the things
that the FED was concerned about, you know, having a
softening labor market along with inflationary pressures continuing to come through,
And that's exactly what you've been seeing. So that's the UH.
I think that's one of the main reasons they lowered
the rate today. And you've seen that because you know,
(06:58):
some companies are forcing higher costs through from tarifs to
their customers. You're seeing that with food appliance as automobiles,
and even the Bank of International Settlements recently suggested that,
you know, some of this UH, you know, might be
complicating the fed's dual mandate and and creating that kind
of that kind of risk.
Speaker 2 (07:17):
Right now, President Trump is in the UK. We heard
from him earlier touting some of the high tech deals
that we're going to be or will be announced tomorrow,
with names like Microsoft and open Ai being involved. When
you look at the big tech story right now globally,
whether we're talking about South Korea, whether we're talking about
Hong Kong and by extension, China, whether we're talking about
(07:39):
the UK even and obviously here in the States, how
are you feeling about big tech in the current environment.
Speaker 1 (07:46):
I think he's big tech companies their position pretty well
and have they certainly have Trump's ear He's getting deals
you know, to the table for him or for them,
you know, the TikTok announced from yesterday. It was big news,
and you know, there's some big US investors that look
like they'll benefit from that. But clearly part of negotiating
(08:09):
tariff deals includes helping some of the largest companies in
the US. I think some of these big companies will
really benefit from that as you keep seeing tariff deals
get made going forward. Having said all that, you know,
some of them have really appreciated to you know, unbelievable levels,
and you know, it really makes me wonder whether there's
still a lot more upside in their valuations. So we're
(08:30):
trying to pick our winners and you know, future gainers
in different places for now.
Speaker 2 (08:36):
So you're rotating a little bit, I mean, taking money
off the table in certain names and redeploying that cash
in other areas of the equity market. Is that what
I hear you.
Speaker 1 (08:44):
Saying a little bit?
Speaker 5 (08:46):
Yeah.
Speaker 1 (08:46):
I mean, we didn't have big exposure to the Max
seven for instance, to begin with, but we certainly think
there are some great opportunities with event driven stocks, companies
that are fundamentally cheap on a valuation basis, and specifically
these that happen to have an overhang of distress that
you know that has put a cloud over them from
(09:07):
you know, from distress or situations that they were enveloped
with in the past.
Speaker 2 (09:12):
George will leave it there. Thank you so much. George Schultze.
He is founder and CEO of Schultze Asset Management. Joining
us here on the Daybreak Asia podcast. Welcome back to
the Daybreak Asia Podcast. I'm Doug Chrisner. Chinese focused ETFs
(09:33):
rose in the Wednesday session and provided a modest tailwind
for Asian peers. Let's take a look at markets across
the Asia Pacific more broadly. Now. Joining me is Stephanie
Liungshi is the chief investment officer at Stashaway. Stephanie joins
us from our studios in Hong Kong. Thank you so
much for making time to chat with me. If you
don't mind, I'd like to begin the conversation around this
(09:54):
rally that we have seen a powerful one at that
Ian markets like Hong Kong and South career. What do
you think is driving this?
Speaker 5 (10:02):
Yeah, I think if you look at kind of emerging
markets as a whole, it's been actually rallying quite a
bit in recent months. So the restart of a interest
rate cycle cut cycle is actually typically quite good for
emerging markets, particularly given that US dollar now is actually
quite recently priced compared to let's say a year ago.
(10:26):
So a kind of weaker US dollar environment coupled with
interest rate further interest rate cuts from the Fed typically
creates a fairly good environment for emerging markets. Now if
we look at kind of the fundamental data, it's I mean,
of course, like China is still kind of the elephant
in the room. But even China it seems to be
(10:48):
slowly turning around a corner. Recent data suggests that the
Chinese economy is sort of stabilizing.
Speaker 3 (10:56):
There are some pockets which are.
Speaker 5 (10:57):
Picking up, but of course it's a it's a big economy,
so it'll take some time to turn around.
Speaker 3 (11:03):
Uh.
Speaker 5 (11:03):
If you look at some of the other Asian markets,
I mean, Japan market has been kind of boosted by
a return to inflation to inflation.
Speaker 1 (11:13):
Uh.
Speaker 3 (11:13):
And of course if you look at kind of the more.
Speaker 5 (11:15):
Tech heavy markets like Korea and Taiwan, I mean, those
have been boosted by the investments in ai So I
think there are various stories going around in emerging markets. Uh,
it which supports kind of investor coming back to to
to re look at what are the opportunities there.
Speaker 2 (11:32):
Do you have a sense of the balance between institutional
participation right now and what may be happening from the
retail crowd. How is this balance do you think?
Speaker 1 (11:42):
So?
Speaker 5 (11:43):
I think it depends on the market obviously, I think
from it and also from kind of what investor base. Right,
we talk about international investor base or domestic. So I
think from an international kind of investor based perspective, most
of the flow is still kind of institutional. I think
it's a lot of that is sort of rebalancing out
(12:04):
of the US, uh, partly triggered by the the sort
of the trade tariff scares in the beginning of the year, right,
and also a kind of a relook at the overweight
in the US. So I think that's sort of that's
sort of the flow that we've been mostly seeing from
an international investor base. From the domestic side, I think
(12:26):
there are some signs that, uh, the the animal spirits
are returning a bit to the to the market. So
to take for example, UH in the hawkoal market, which
is kind of closest to our heart, UH, the IPO
market has.
Speaker 3 (12:38):
Been actually quite hot.
Speaker 5 (12:40):
Uh. And typically when you see kind of hot ipo
markets that's the sign that retail is coming back.
Speaker 1 (12:46):
Uh.
Speaker 5 (12:46):
Even if you look at China on shore, right Asia
market is typically not a I guess not an internationally
driven market. I mean that has been on a tear
and a lot significant part of that is because of
the excitement around kind of technology, around kind of some
of the themes that China is pushing through. So again,
I think there are from a domestic perspective, there is
(13:09):
increasing kind of retail participation, but I think from an
international kind of esset allocation point of view, most of
it is still institutional. Even within our platform at Stashway,
we don't see most of our investors are actually kind
of retail investors. Of course that includes a lot of
the kind of more premium retail investors, but still what
(13:30):
we're seeing is still not a not a lot of
kind of euphoria or a lot of emerging markets yet.
Speaker 2 (13:36):
So you mentioned technology. Now we know since the deep
Seek moment that has certainly been a big driver for
equity markets in the APEC region. But I'm wondering about
betting on the strength of the consumer right now across
the Asia Pacific. Is that becoming a trend that you
think is durable, whether you're looking at e commerce names
like an Ali Baba or a by Doer or even
(13:58):
a young China whether people are betting on a return
of consumer strength.
Speaker 5 (14:03):
I think it's it's actually been quite selective, I would say,
because if you look at China, for example, the I mean,
the economy is still stabilizing, but it's it's it's not
coming back in the visions right, it's not very very
strong recovery. So I think if you look at kind
(14:23):
of pockets of consumer names, I mean there are names
like Potmart or some of these Chinese IP names that
have been on a tear, and I mean that shows
strength in terms of I think not just kind of
the strength of the Chinese consumer, but more of the
strength of some of these newer Chinese brands which are
(14:45):
actually going international. So I mean PopMart is of course
the make of La Boobu, which has been kind of
a phenomenon in the last kind of twelve to eighteen months.
And apart from that, I think if you look at
some of these Chinese e commerce names, they are much
more affected by what's happening domestically, right and on shore.
(15:07):
Domestically they are in fact, I mean fighting a price war, right,
the likes of Maitwan, like JD even Ali Baba are
involved in heavily subsidizing the consumer in order to grab
market share. And that's where I guess the companies are
still in a heavy investment phase. And I mean those
areas are of course are not so great for equity investors.
(15:30):
So I think it really depends on what segments and
what kind of sub themes we're looking at. Instead of
like a broad stroke saying, oh, these companies are all
going to benefit from the Chinese consumption story.
Speaker 2 (15:44):
I'm wondering about, for as much experience as you have
in markets, whether you've seen in the past big moves
like this that have happened over a short period of time,
and whether that has created in your mind a great
deal of concern and as a result, you may be
beginning to put in some hedging strategies in place.
Speaker 3 (16:02):
I think if you look at.
Speaker 5 (16:05):
The US market, for example, it is of course like
pretty expensive on a valuation basis, but I think that's
sort of also quite heavily skew towards the big caps,
and just I mean perhaps the tech sector. If you
look at kind of outside of the tech sector, for example,
(16:25):
in the most cyclical parts of the of the market,
and also into like even make caps of smaller caps,
those are relatively actually quite cheap still, so I think
it's I wouldn't say it's sort of like a bubble
right now in the sense that, oh, the risk of
a kind of thirty percent plus straw down is significant
(16:50):
because of two things. Number one, as I mentioned, I mean,
evaluation kind of premium is much more focused on this
in the big caps. And secondly, I think if you
look at the fundamentals of the US economy, yes, there
has been some slow down in labor market, but I
think if you look at things like liquidity, look at
(17:11):
things like credit spreads, or even if you look at
some real time kind of consumer data, those are still
going very very strong. So I think in the next
kind of sex to twelve months, so risk of a
recession is pretty low. So I think that from that angle,
I don't see a significant risk of a big drawdown.
So I think, I guess I mean, could we see
(17:32):
like a five cent percent correction, yeah, absolutely, I mean
that these are things that happen like every few months,
but anything much more sinister than that, I think that
that's fairly unlikely for now.
Speaker 2 (17:43):
I'm wondering about whether you feel that way about equity
markets in the Asia Pacific, where we could see a
bit of an interruption, maybe in a move lower.
Speaker 5 (17:51):
I mean, of course, like Asia Pacific markets like sort
of tends to be more volatile than the US market.
So from a beta just that perspective, yes, I mean
there could be kind of if the US corrects ten percent,
I mean Asia Pacientic markets could correct kind of ten
to fifteen percent, right, But I also think that there's
a cushion in terms of valuation and also a cushion
(18:14):
in terms of investor possessioning. So I mentioned that there
has been a kind of a rotation trade out of
the US into Asia Pacific or emerging markets from an
insitutional level, I.
Speaker 3 (18:26):
Don't think that's happening on resale level yet.
Speaker 5 (18:28):
So from a kind of possisioning perspective, I think there's
still room for investors, particularly international investors, that add to
emerging markets, and I think that's starting to happen, particularly
with the easier kind of liquidity environment. So I think
(18:48):
the risk of that correction is I guess it is
not that high.
Speaker 3 (18:53):
In my view.
Speaker 2 (18:55):
Okay, we'll leave it there, Stephanie, It's always a pleasure.
Thank you so very much. Stephanie Leung, their chief and
Vestment officer at Stashuay, joining from Hong Kong 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, and geopolitics in
(19:17):
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 and Australia. I'm Doug Chrisner,
and this is Bloomberg
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