More Fixed Income Value Outside of US, JPMorgan Asset Management's Sheng Says

Bloomberg

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00:00How are you looking at U.S. Treasuries? Is there a specific range that you're looking at?

00:03And is it looking more attractive compared to the rest of the world still?

00:06So looking at U.S. Treasuries, the 10-year, we think probably trading somewhere around 375 to 450.

00:12So we are closer to the upper end of the range.

00:14So we still see value in U.S. Treasuries, but maybe towards the short end of the curve, so three to five years.

00:21But looking globally, we do think there's more value outside of the U.S.,

00:25especially looking at Europe, Italian bonds, BTPs, we think still pretty good carry play here.

00:30I was going to ask you about U.K. Guilts, which is one of your preferences and what's going on there

00:34and the theatrics that are going on in the U.K. right now.

00:38What should I be doing with U.K. Guilts?

00:41So it was one of our preferred markets, but we think that's more driven by the fact

00:45we do think there are more rate cuts to come from the BOE compared to what the market is pricing.

00:50Clearly, what happened yesterday is a bit more of a risk.

00:54But we do see kind of the kind of Keir Stelmer walking back of some of the comments

01:02during the prime minister question time.

01:04So hopefully that's more of a short-term volatility.

01:07Yeah, well, let me ask you a follow-up on that.

01:10If Rachel Reeves loses her job, do you think you'll keep this call?

01:13Or is it, in other words, does the Bank of England part of the conversation

01:17outweigh anything on the political side?

01:19I do think there's definitely going to be more focus on fiscal sustainability in the U.K.

01:25if we do have the unfortunate event if Rachel Reeves doesn't stay in the cabinet.

01:31So I think that is definitely something we need to monitor.

01:34Yeah.

01:34If you take a look, we were just talking about what did well in the first half.

01:37It was equities, it was alternatives, and it was gold for the most part.

01:43We kind of captured a little bit more of the equity side of things.

01:45But what about, you know, when it comes to private credit or private markets,

01:49when it comes to alternatives and gold?

01:50What should I do with those in the second half now?

01:52So I think it's more of a longer-term play when you think about what we have in store.

01:57It's really about more active fiscal policy really everywhere,

02:01not just in the U.S., also in Europe as well.

02:04We're seeing that in China, and we do think eventually that's going to be more inflationary

02:08compared to what we saw after the GFC.

02:11So some of the assets you mentioned, alternatives, especially real assets and gold,

02:15they all tend to perform better in a higher inflationary environment.

02:19You mentioned regional equities.

02:22Can you be more specific?

02:23What apart from U.S. equities do you prefer?

02:26So we like Hong Kong equities.

02:28So we think it still has a bit of valuation support, and the momentum now is building.

02:34We think more broadly, we think that could definitely persist.

02:37And currently, we don't think there's much policy expectations built into the market.

02:42So we think that that potentially could be an upside risk when we look at Hong Kong.

02:45Japan is still one of our favorite markets.

02:48Compared to other DM markets, it is cheaper.

02:51And we think there's more structural momentum with that corporate reforms going on.

02:56And just on one less on the dollar, I guess.

02:58Is the assumption the dollar weakness continues?

03:01Yeah, we do think that in the second half of this year, we're going to see more dollar weakness.

03:05And it's also one of our calls in our long-term capital market assumptions

03:09that we think dollar is structurally more expensive, but there is more room for it to weaken.

03:14Thank you very much.

03:20Thank you very much.

03:21That's right.

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