How were you yesterday in particular? Well, yesterday we witness the history
again. The worst single day loss since 2008 for
each and an. Not to mention the NASDAQ go down
dragging index fell 14 percent. Investors are really frustrated and
angry and they're trying to figure out what to do next.
So I think currently no news is bad news.
Basically, if we don't see some strong positive catalyst coming out of China,
the risk of trade might just continue. And that catalyst is.
Does it have to? Is it hope of zero?
That's the big one still. I think so.
Yeah, because of looking ahead. You know what can happen in the
near-term, right. External environment to the geopolitical
tensions. They're not getting back to early
October. We've seen us escalating the tech war by
sanctioning China's access to the most advanced ships and supercomputers and
markets, expecting more to come on quantum computing.
On a I know add along investment. So what can be positive?
Only I have to come from China domestically and reopen.
You will probably be the most important policy.
Okay. So how do you treat it?
I mean, do you go by the traditional metrics or do you have to do something
completely different? So, yes, the number one request we got
from investor was about to the foreign ownership data.
So basically, investors are thinking that whatever stocks that are more well
owned, especially by following those, could be more vulnerable to the
following sell down. Right.
From that perspective, you know, we will say, relatively speaking, to a market
that will probably do relatively better than offshore market.
Right. The value sobs could probably continue
to continue to outperform the grocer's stock because without reopening the oh,
look, the clarity on economic growth on corporate earnings will remain to be
low. So you don't know what is the growth.
They will focus on value. That's the strategy for the short term.
But if we can see pivoting to what are we opening, that might be helpful in
terms of start to change investor sentiment.
Positioning is one of the components of your wax and wane index, which on
aggregate is saying buy, for example. So what is positioning telling you right
now about short term direction of this market?
For the China issue, market positioning is neutral ish.
Right. So it's lower than, for example.
It's relatively low compared to past 18 months, but compared to the historical
low level is not that low. Right.
Similarly for China. Asia valuation, it's cheap compared to
the past five years, but compared to like in 2011, 2012, valuations is not
extremely low. And I think what's happening in the
market is there's a lot of non-technical factors.
Right. Whatever wax and big indicator, our
global fallback indicator. These are trading based on the technical
factors. But currently there are a lot of things
on people's mind about geopolitical tensions.
You know, politics that's not being able to track by what these quantitative
factors, the technicals don't matter. I guess valuations don't really matter
either at this point. Do we need to subscribe a new playbook
for China now and now that we've seen basically a clean sweep when it comes to
the political order? And is it to something that's new to
look at things like dual circulation, common prosperity?
Are those themes you have to kind of wrap an investment strategy around ISE
for now? Mark is trying to figure out what is the
right framework. And for a prop, probably for the next
few months, it will take time to repair a lot of the confidence, right.
Whether it is follow him up, the fundamental confidence of the consumers
of the business enterprise nerves to capital market investors confidence.
So I think, you know, the basics are still there, right.
We invest the full growth. We invest in companies that can deliver
continued good earnings growth. But for now, the gross visibility is
low. So we need to wait for the clarity of
that. And that clarity comes from policy
clarity. Right.
You know, now that the big political event is behind us, I say focus back on
policies rather than politics policy to the White House as well in the hopes
that we can knock down the chip ban that is going to have repercussions right
through not just Chinese markets where the economy itself and it is real
fundamental is, you know, enough. Yeah.
So, you know, the currently us is saying the aim is not for a tech company.
Right. The aim is to protect us going about it
the right way. All right.
So really, if we're talking about scenario of tech, decoupling would be
huge for the inflationary for the whole world.
Right. And it doesn't help with us recession.
It doesn't have with us monetary policy. And for China, we seen retaliation.
It's not necessarily the best option for the short term.
So, you know, I guess on that front, in the short term for China, hopefully
there will be management to de-escalate some of the tension.
There is no expectation currently on the G 20 or the potential meeting.
Between Chairman C and President Biden, there's no expectation, but that might
be a room for upside surprise if the dialogue can start with the escalate.
But also, I guess for China, the strategy will be further enhance its
role in global supply chain to make the decoupling more difficult vote for the
US. But long term perspective, China does
need to emphasize its technological self-reliance and its self relies on
many critical technology, its component materials.
Is there a difference between when you speak to foreign investor clients and
domestic investor financial institutions in terms of sentiment?
Because we know foreigners are largely bearish?
Well, we don't know so much about what domestic investors are thinking.
Roughly speaking, given what's happening, I think there are shared
frustration. Right.
You know, the weakness on the economy, the lack of visibility on the.
Oh, look, I think these are concerns shared across the board.
But, you know, among global investors and similarly domestic investors, we see
different sentiment among short term versus longer term investors.
Right. Short term, short term investor money.
We don't have to be in China. The money who don't have a benchmark
will say we'll try to reopen. If they don't, we don't we don't even
bother to invest in China. But longer term investor, they would say
that China will have to be open sometime, maybe not next one to two
months, but take us six to twelve months.
There will be a cyclical rebound, at least.
But the real concern is more on the long term.
The geopolitical tensions will happen. So time that in terms of sustainable
growth, if China can no longer play such an important role in the global supply
chain and don't have access to the western technologies I'm looking at
China even onshore is punching 730. You know, somewhere some traders are
saying this is some sort of mini devaluation of some sort.
How does that impact stocks in any way? Yeah.
Historically, MSA China does have a correlation with the currency, right?
Typically they both reflect the fundamental economy and also confidence
for the medium to long term. But also we also noticed that stock
market tend to Baltimore before the currency.
So soft market tend to be more forward looking, whereas currency is more, you
know, reflect the state of the fact. Yeah.