Is a strong dollar story fair to say that any pullback will be shallow.
Given how hawkish the Fed is. Thanks for having me.
Yeah I mean at this point. Right.
I mean growth is strong. Kathleen mentioned.
And inflation is just not abating at this point.
And it's really not about inflation coming down.
It's really about inflation going back to its 2 percent which will help Fed
gain confidence that they can bring it back.
But the moment they don't have that confidence.
So dollars unfortunately probably still it's not just about the strong dollar is
also about the weakness in the yen that is impacting Asian currencies.
In particular we've seen how the falling peso is at a record low.
The weakness in the yen will impact also the likes of the Korean one and the Thai
baht. Yes.
So the weakness in the end the weakness in the yuan as well all combined.
You know this region is very highly correlated to CNY and it'll certainly be
weaker as well. Central banks will try to defend but
ultimately at this point you know for us relative value trades you know sort of
looking at the fundamentals the domestic fundamentals stories are probably the
best way to go. So you look at the relative performances
of these currencies do they match up with the fundamentals of these guys.
Mean for instance Thai baht had a torrid time of it in the last five days but
it's been a pretty good month to the. But overall given what's been happening
before fundamentals strong given the second half is going to see a surge in
tourism numbers. Then on top of that we've got Indonesia
and the rupiah. Give us a sense of how you view that.
So for both I'm actually positive both the IDR and the Thai baht as well.
So Thai baht to your point I am expecting tourism to recover.
Yeah people are still not convinced that the story is there but if you looked at
last month's number we're already at 1 million tourists for July.
You only meet one point one million tourists for the rest of the year to get
to that 10 million tourist mark. And that actually closes the current
account back from a deficit into a surplus.
And then you've got lower or slightly lower oil prices and also lower shipping
costs that will help that kind of balance as well.
On the Indonesia side the bank Indonesia has finally hiked policy rates.
I think everyone's waiting for that. So IDR was weak before that.
But I expect the fact that they've got likely fuel price hike coming they are
going to continue hiking gradually and measured.
Nothing to panicky. So a gradual 25 basis point that every
meeting and that should allow the IDR to find some support.
Think you're not a fan of the ring it or the yuan.
I mean the ones with all the obvious reasons would give us a you through your
your reasoning behind this. So I'm glad I'm not a fan of the yuan
given obvious reasons. And plus it's the perfect hedge really
given the center of calamity at the moment is China.
With regards to my not so big preference to the ringgit and also to the
Philippines peso the ringgit for example you know we're approaching election soon
and we've also got palm oil prices which has fallen quite substantially.
So the current account surplus is weakening.
I'm not expecting a deficit or anything there but it is relatively weakening
from where it was before. And the Philippines peso is certainly
impacted by the infrastructure investment build in Philippines which
will attract more capital imports and certainly weaken the current account.
They're not quite liking the yuan below see 6.
The currency the higher and for I think eight years running eight days running.
Now I'm just wanting with PBS can continue to defend the currency.
Also can the yuan I guess refrain from getting to 7 before that meeting in
October. I think they will try to keep it below 7
before but I don't think PBS is necessarily defending the level they
will keep trying to defend the currency especially high volatility within it.
There are plenty of policy tools we can use affects triple our rate actual spot
intervention. So on that front I do think they will
try. But I think you know there are too many
things going on at the moment. You've got a property sector that is
just not recovering. Consumption for obvious reasons is also
not recovering. So they've only got one driver of growth
at the moment which is infrastructure investments.
And that just raises risk of policy missteps and risk downside risk to
growth. The risk of capital flight.
So far we have banks aggressively cutting the projection for GDP for China
for the year. What are you anticipating.
I mean as low as 2 percent with the current cohort it down possible.
I don't have it as low as that yet. I still have a three to three point five
percent growth target for this but the recent lockdowns are certainly putting a
dent to that forecast. But for us more importantly it's the
next year forecast that is starting to look very worrying.
I don't expect them to open up straight away and it will be very gradual at some
point. But when you put that together you're
looking at a sub 5 percent growth number again for 2023.