What are you making of all this. I mean it's a lot to be grappling with. You know somebody is investing money. It must be
a real conundrum. Yeah. Is a very very difficult time obviously for markets. In the last couple of weeks we've had some very bad
inflation data. Firstly the wage growth is coming down but it's not coming down
as quickly. The labor market I mean it's come down from 600000 to 400000. It needs to be roughly around 100000.
And also the wage growth is at 5.5 percent which is inconsistent with 2 percent inflation. Add on that the CPI data from the
weekend and the Fed has to act quickly. We're still expecting 50 this time 50 next month. And then let's see what happens in
September. I think the main difference in the markets and why we've got
risk off the markets now not believing the story that inflation is temporary and. Yeah and that is that that is the real risk
off. We've been warning the bonds are dangerous for a while but you have to have more alternatives. You have to have more
infrastructure. But we still like equities in the medium term. But in the short term everything's going to come under pressure.
That sort of seems like the moment you you've got to ask the governor just saying that you can't be complacent as things
change. Well obviously that's fundamentally the point here. So how does it impact ASEAN let's say emerging markets in this part
of the world. Because they in some sense is in depending on the jurisdiction have to play catch up or try to emulate others even
though they may not be quite as effective. Well I think the good the two positive things about this region is that you've got
Japan and China going the other way almost. Are they going to have to stimulate more to get things going. Now that's going to
put pressure on the currency in the shorter term. And the second good point is you know inflation's not as high in this region
even in Thailand even in Korea than it is in the rest of the world. You know you're talking 2 percent inflation rather than 8
percent inflation. And the third thing is the ASEAN region the Asian region hasn't been had as much stimulus as the rest of the
world in terms of the consumer. So this is the problem. You've got to going to have a growth problem in Europe as well not just
an inflation problem because all the you know furloughing all the extra help isn't going to be there. So the consumer's going
to be weaker and that's going to be affecting and bank lending as well. We're in the region. It's the opposite. The region
wasn't helped out. It's slowly coming out of Covid. Things are getting slightly better. It has inflation. It's a little bit
behind the curve. But the growth profile in the second half of the year is going to be better than the last two halves. Shona.
Asian dollar credit. Looking better than US peers given that the Fed is likely to tighten even more now.
Well I think it'll be selective in Asian credit. But I think Asian credit sold off a lot more than than was expected
due to the Chinese high yield issues. The property issues and is looking cheap. The duration is shorter. And at the moment we
want to be underweight duration. And we are seeing some good inflation hedges in Asian credit in India in renewables and
commodities in Australia. Some good opportunities in Japan as well outside of sovereign. So yeah we actually think on a
relative play Asian credit is holding up better. And as we always say it has this local bit. It's not subject to huge
amounts of money coming out now. Some other emerging market countries we wouldn't be as positive on outside of Asia as
countries like Turkey will suddenly suffer higher oil price higher inflation higher rates etc.. So one has to be selective.
But within emerging markets Asian credit is is a ray of light. But in terms of the equity markets you talked about still liking
equities. Are you liking Chinese equities. Have they bottomed. When do you start buying into Chinese equities.
Well we've been negative for a while on Chinese activities and we neutralize that a couple of months ago. We now think that
Chinese equities will well in the second half outperform but it's going to be slow.
We do think that the bottom has been reached and Chinese equities particularly in the international commerce stocks
partly because the Chinese government have changed their policy on regulation and there's better cost control. But we're going
to be in and out of lock down. And I'll view it's not going to be simple. There's gonna be two steps forward in China one step
back better growth in the second half of the year but not a V shaped recovery. So you have to be patient. But on a relative
basis they're quite cheap. Now if you get through one one more quarter of earnings we think they'll start to outperform and the
end of the year very quickly. Japan export is make hay with the end where it is.
Are you confident in their ability to continue to do so and would you be invested in them. Yeah we're still overweight
exporters in Japan where we're underweight the domestic side of the story. We're not going to switch that yet. I would even
actually think of switching exporters into China at some stage because I think everyone's very underweight China. So in the
next few months I think you'll be seeing people taking money out of Japan and also India which is looking a bit expensive and
putting it into China.