We are seeing the policy that emerges between the Federal Reserve the BMJ the PBS see as well. What are you watching
closely to sort of a gauge where the potential opportunities could be.
Yes absolutely. I think the reason we like China the most is because it has just gone through a legitimate and pretty deep
recession that it's coming out of the process of exiting that recession. Recovery is going to be kind of bumpy because of
external concerns such as well you've been covering all morning and because of you know lingering Covid control policies risks
with that. So there's always going to be a bumpy road. But I think China has turned a corner. And I think that's the that's
that's the key a key opportunity for us in the in the second half we're likely to see a global volatility still elevated. Can
you also play the divergence between the Federal Reserve and the B J. We have seen a very weak yen but even weaker beneficiaries
haven't done that well. This is true. Right. I mean the Japanese equities that's
supposed to be the weekend beneficiary but snow at the moments. It's why I mean this has all been driven by movements in the US
yield and the BMJ has done all they can to keep keep the yield curve control policy in place. So I think the question really is
one will Kuroda be able to maintain his policy. And it sounds like he wants to. And to when will U.S. yields roll over and
begin to come down. And I think that's obviously a you know a function of inflation as well. So so there's a lot of moving
parts here. One of those moving parts is the recovery in China. You call it
meaningful. Does that mean we could continue to see on top of the policy divergence between the PRC and much of the rest of
the world that opportunities are emerging in China. Yes I think so because first of all
the good the Covid the Covid pandemic control policies is likely to become a little bit more measured and more selective. They
get smarter in implementing these partial lockdowns. So I think that you know the Shanghai style of lockdowns is going to become
less likely. But you know if we have another wave before the party Congress then then then we might see more partial
restrictions. And then after the party Congress I think the political imperative to lock down would well weaken. And the
policy is likely to have more flexibility. So that's that's under the deal the largest domestic risk to me.
And for that for the external risk I think you know it's more depends on whether the US goes into a recession. And I actually
think that even if it does it's not going to be a very deep one. And so in that
grants that general scheme I think that China Chinese equities can be more resilient and and continue to to to price in
recovery. At the moment the pent up demand is not fully released. You know we made some progress in terms of tech
regulation but that's not that the valuations there basically only recovered about tenth of what was lost. I think there's
quite a long long way to go in this recovery road. Yeah. Ken was there a lot of repricing across the board when it
comes to solve friends. We're just seeing now the Australian 10 year yield rising about 4 percent for the first time since 2014
with the Treasury's action overnight the biggest two days for treasuries since 1987. Is there a sense that you're getting a
lot of questions asked really across the curve in terms of where that neutral rate is going to end up and if we're going to have
to see it. Clearly restrictive tightening measures now from central banks not just get into neutral.
Yeah well actually I think I think a lot of a little bit by inflation first rate. I mean we did see that the goods inflation
continue to roll over. We peaked at some 10 percent. Our core of goods CPI in the US picked up twelve percent in February and now
we're about even a half. So that's happening to what's happening in services inflation the continuous climb you know surprising
markets. But I think it's the repeat of what what what goods inflation did about six months ago. Right. So so I think I think
the inflation cycle is moves in this fashion each time. And I think it's it's basically a matter of time before we see that
the downdraft from demand bring bring prices down. So as I think I think that's probably still going to happen towards later part
of this year. At the moment we're probably at peak fear peak hawkishness in terms of the Fed. But I think that this week
there's still going to go with 50 50 basis points but they're likely to maintain a fairly firm language while they do that. So
does it make sense then to have these recession hedges now being raised by traders I believe at the fastest pace since 2020.
We're talking about those defensive trades long dollar calls downsize soft protection. And given that of course is very
aggressive tightening could as you mentioned now lead to perhaps a slowdown later next year and perhaps even rate cuts in 2024.
Why. Actually I think Greek has become earlier possible here. By late you know by late at twenty three. We could be seeing that
being priced more aggressively into into markets. But you know at this moments I think we shouldn't we should be very careful
right. Because if you continue to pile on long dollar pile onto the you know the short equity trade you're you're prone to get
squeezed by all souls of investors will do that. Should should be very careful with with those kind of trades. But ultimately I
think this is still going to be a more positive market for bonds before it becomes one for equities. Right. Because the you know
all it takes for bonds two to four for risk free yields treasury yields to come back down I think is for inflation to roll over
and for inflation expectations to become more anchored. What it takes for equities to find a bottom I think we need to
see signs of a demand bottom which might come a bit later.