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00:00We just heard from the Deputy Prime Minister of Malaysia how Malaysia is navigating both the U.S. and China.
00:06I'm just wondering, when you take a look at the trade deals that have been, you know, been negotiated in this part of the world,
00:13can you see who are the potential winners and losers so far?
00:18Well, so far, I think the U.S. has been the winner to a great extent,
00:23because if you notice the meeting that Xi had with Trump, Trump came out ahead in the sense he walked away with what he wanted.
00:32That was soybean exports to China.
00:35You know, the American farmers are very important to elections.
00:39So that was one thing.
00:40And, of course, the rare earth release by China.
00:44That's another thing.
00:45So a number of things happened between Xi and Trump, which put the U.S. in a much better position.
00:51And, of course, as you know, Trump's visit to Southeast Asia was also very, very, very good.
00:58And then, most important of all, his trip to Japan put China in, I would say, a pretty bad position.
01:07So a lot of things are happening.
01:10I think the most important thing is the changes within the CCP.
01:16The Communist Party of China now is making a big shift, I believe.
01:21It's going to be a much friendlier orientation, an orientation which is going to be much more open,
01:28which makes me more bullish on the Chinese market.
01:31So on balance, the U.S. probably has come into a better position,
01:37but that doesn't mean the Chinese are going to be weak in terms of trade and that sort of thing.
01:42So China's become more attractive.
01:46How would you be playing this market now?
01:48It does seem like, you know, there's greater appetite for Chinese assets at this point in time.
01:53What's attractive, Mark?
01:55Well, the technology is very, very important in China, and it's getting better and better.
02:01As you know, China has embarked on a program to be self-sufficient in chips and many other areas of technology.
02:10And that is going to be very critical for investors like ourselves.
02:15So we're going to be looking at companies that have a leg up on the U.S. and Europe in technology.
02:22And as you know, if you look at the EV market in China, it's been incredible.
02:26I mean, you drive in a Chinese vehicle and it's better than a Rolls Royce.
02:32I had the experience recently of driving in a Rolls Royce,
02:36and then I got into a BYD and the BYD was better.
02:40So you're in a situation now in China where the technology is getting better and better,
02:45and they're moving up the technology stairs.
02:47Is there a convincing reversal in sentiment when it comes to investor sentiment in China?
02:56You know, it wasn't that long ago when China was actually uninvestable, Mark.
03:00I mean, is this the catalyst?
03:03Yes, I think it is a catalyst.
03:05It's not going to happen overnight.
03:06But you can see that the Chinese market overall has been outperforming.
03:11Outperforming, surprisingly, India.
03:13As you know, I've been a big supporter of Indian growth, and now China is outperforming India.
03:22And, in fact, if you look at the recent numbers, the Chinese market overall is outperforming the U.S. market.
03:27So there's no question that we're now in a different era.
03:32It's going to take time for people to adjust, for investors to adjust.
03:37Because a lot of people are still down on China.
03:40But I think that's going to change going forward.
03:42If the current trends continue.
03:45So we can expect a longer term re-rating of China.
03:49Is that right?
03:50I mean, if that is the case, what time period are you looking at?
03:55Looking at this year and next year, you're going to see a re-rating of China.
04:00I mean, this is all based on the assumption that the current trends,
04:05the political trends within China continue, where the hardline wolf warrior kind of approach in China goes away.
04:15And the Communist Party now is saying, look, we've got to make it much easier to deal with the U.S.
04:21We've got to be more friendly with the U.S.
04:24And that's going to change many, many things.
04:28Right.
04:28What's the biggest risk for China, Mark?
04:30I mean, you know, investor sentiment changes with the headlines.
04:34That's how quickly they change.
04:36Yeah, that's right.
04:36The big risk, of course, is if the wolf warrior stance that she has been promoting from the beginning of his term comes back.
04:47If that happens, then it's another game.
04:50But I don't think so.
04:52I think the Communist Party in the latest plenum realized that they've got to be friendly to the U.S.
04:59They've got to mend the relationship.
05:04And it's really interesting that in the meetings with Xi and Trump, Taiwan was not mentioned once, which is quite critical.
05:12That says a lot about relationships between the two countries.
05:16I want to pull back and go back to what you were talking about, the U.S., that U.S. is the winner.
05:23Yet, when you take a look at the market reaction right now, we've seen that sell-off.
05:27How are you making sense of that sell-off?
05:29Is it just a matter of removing some of the froth, especially in the AI space?
05:36Of course, if you look at the AI space, it's a lot of froth.
05:43And we expect there to be a big correction in these companies that are emphasizing AI and spending trillions of dollars in AI improvements and infrastructure.
05:56There's got to be a correction because some of the numbers are just out of sight.
06:01So that is going to happen going forward.
06:04But that doesn't mean that AI is going to disappear.
06:07AI is still critical.
06:09But I think some of the infrastructure spending and other spending on AI is probably excessive.
06:16And that will be a pullback on that.
06:21What's a big pullback?
06:23What's a big correction?
06:24Some on Wall Street say, you know, more than 10 percent.
06:27But what is 10 percent when you've risen more than 80?
06:31No, I mean, when I look at a correction, I look at 30 percent down, 30, 40 percent.
06:40That will happen.
06:42But it will be short-lived.
06:43I mean, that's the wonderful thing about these bear markets.
06:46The bear markets are much shorter in duration than the bull markets.
06:51And that's the reason why long-term investors, if they hang in there, tend to do fine.
06:57But I think we've got to be ready for a big pullback.
06:59When it's going to happen, nobody knows.
07:02Currently, everybody's euphoric.
07:04Everybody's happy.
07:05There are a few naysayers.
07:07But generally speaking, we've got to be prepared for a pullback.
07:12And you buy the debt, Mark, if you believe that the long-term trend is still higher.
07:17Oh, definitely.
07:18I mean, I'd love to see a pullback of 30, 40 percent.
07:21Then we'll be in there with both arms and legs.
07:25We'll be buying a lot.
07:26You know, when you see this pullback in AI stocks, what is the value case for EMs?
07:34How do they play against each other, Mark?
07:38Well, the good news with EM is because of the trade policies by the U.S., many of these
07:45countries are going to be producing and exporting the things that China has been producing and
07:51exporting.
07:52So if you look at Southeast Asia, for example, I think Malaysia is going to benefit from that.
07:58Thailand will benefit.
08:00Other countries, Taiwan will continue to do very well.
08:02Korea will do well.
08:03So this is a very, very critical development.
08:08And of course, India is developing an entire hardware industry for computers and all kinds
08:16of electronics.
08:17So I believe that this change is going to have a beneficial effect.
08:23Now, that doesn't mean that China loses out.
08:25China is moving up the scale.
08:27They're getting rid of the low technology kinds of industries and moving up the technology
08:34scale.
08:35And they will, of course, be benefiting from that as well.
08:39You know, we've been talking about how we will see a rotation back to EM, but we've not
08:44seen a real rotation back.
08:47You know, what catalyst, what's really needed for us to see that?
08:50Well, if you look at the EM index, you'll see that it's done very, very well, outperforming
08:56the U.S. market, at least in the short term.
08:58And the reason for that is China.
09:00China represents such a big part of the index.
09:03But I believe India will come back.
09:04And of course, these two powerhouses will really make emerging markets look very good.
09:11And of course, that will swash over into other emerging markets.
09:15If you look at the rest of Asia, there are many markets that are doing quite well.
09:21Malaysia looks good.
09:22You can notice that the Malaysian ringgit is getting stronger against the U.S. dollar.
09:28The Thai bot looks pretty good.
09:31Of course, the other currencies are weakening against the U.S. dollar, but not by very much.
09:38The trend so far, though, is dollar resilience, right?
09:43I mean, the Fed is not cutting as much as people thought it would.
09:48How might that impact on EMs?
09:52Well, a stronger U.S. dollar is great for EM because they can then export and earn more dollars.
10:02So I would say that's a very positive development for EM.
10:05But you must remember, if you look at the U.S. dollar index, it's now, after having come down substantially, it's now just beginning to churn.
10:14You begin to see the index moving up.
10:17And it's got a long way to go.
10:19It's going to be getting stronger and stronger.
10:22You see the Trump policy of strengthening the balance of payments of the U.S.
10:29And, of course, all of these tariff income, tariff income by the U.S., the U.S. is earning now, is going to have a big impact on the confidence of the U.S. dollar and the U.S. economy in general.
10:42So this trend has just begun.
10:45And hopefully, you know, during Trump's administration, it will continue going forward.
10:51There's also diverging rate cycles, right?
10:55We talk about how the Fed is quite resistant.
10:57But when it comes to Asian central banks, they've been more than willing to cut rates.
11:02That would work in EM's favors, no?
11:05Of course, yeah.
11:06I mean, they take the lead from the Fed, of course.
11:10And all these countries, as the Fed comes down with interest rates, they'll be lowering their own rates.
11:15And that will be very good for the economies.
11:17So we're in a very nice period.
11:20But when you look at the height of the U.S. market, you get a little nosebleed because we've moved up an awful lot.
11:30But I think emerging markets will follow.
11:33You talked earlier about India, how India will be, you know, an emerging market driver.
11:40How do you make sense of, you know, the attractiveness of the market, the resilience of the economy, GDP in excess of six and a half percent, yet it has a currency that is amongst the weakest in the Asia-Pac region?
11:54What is that reflecting, Mark?
11:56I mean, is it actually reflecting fundamentals or not?
12:00I think the problem with India is that despite the fact that it's got this enormous domestic market, the fact that they're moving very fast up the technology ladder, the problem is the bureaucracy.
12:13Putting money into India is a terrible, terrible process.
12:18It takes months and months for us to get money into India.
12:25We've been, for one of our funds, we've been working for nine months to get approvals.
12:30So this is a big, big problem for India.
12:32The Indian bureaucracy is really killing the Indian market's ability to absorb more and more foreign investment.
12:40Many foreign investors want to get in to India, but they've been prevented by this incredible bureaucracy.
12:46So the degree to which they're able to correct that will really be very meaningful in terms of what happens to India.
12:56And of course, we're not only talking about dollars going in, we're talking about investments going in, we're talking about technology going in, et cetera, et cetera.
13:05So this is a big, big challenge that India now has.
13:09So for India to be supported, for the Indian market to be supported longer term, you have to address the issue of bureaucracy.
13:17But shorter term, would earnings be the driver?
13:20Would earnings be, you know, holding up Indian stocks, you think?
13:25Well, it has.
13:26I mean, the Indian market companies have done very well, but they reached a peak where further growth was not possible.
13:35And that's the reason why the market corrected.
13:38And what is needed, as I mentioned, is more and more money coming in to the market, which I'm not only talking about the equity market, I'm talking about direct investment generally, companies coming in and investing.
13:52And by the way, part of this is China.
13:56India has to invite and welcome Chinese investment.
14:00Now, that may seem strange because of their fraught political relationship over a number of years.
14:07But generally speaking, China can contribute the kind of technology and manufacturing expertise that India can use to export all over the world.
14:17So this is and of course, China likes to do that because if they can't export to the U.S., they'd love to be able to establish a factory in India and then export to the U.S.
14:27So I think we're in a situation now where they have to do that.
14:33How do you play the Indian market?
14:35We often talk about how it is a consumption play, right?
14:38This is a billion people.
14:40But there are opinions out there saying that, you know, the Indians will probably get old before they get rich because, you know, they're struggling with job creation and so on and so forth.
14:50How do you play best the Indian market?
14:53I would say the way to play it is looking at the hardware technology.
15:00In other words, as you know, India has been an incredible producer of software.
15:05They've been exporting software all over the world.
15:08You have companies like Tata, Infosys are doing an incredible job globally exporting.
15:14Now they have to get into exporting of hardware, computer hardware.
15:19And that's the reason why this business of allowing foreign investment to come in and making it easier, foreign investment to come in, is very critical.
15:31You know, before, software is no problem because you don't need an export permit to export software.
15:38But for hardware, it's a different story.
15:40Mark, I just want to pivot somewhat to another emerging market, Korea.
15:46There was a lot of euphoria, right?
15:49I mean, a lot of money was being pumped into the Korean market, but it's also among the biggest losers with the sell-off.
15:56How attractive is Korea to you?
16:00Korea is one of the most interesting of the markets right now for us.
16:04Next to Taiwan, I think Korea ranks pretty high.
16:07Yeah, of course.
16:37A-high for a market like Korea.
16:41Everybody will be hit with that.
16:42There's no question about that.
16:43But it doesn't mean AI is going away.
16:46They will still be developing AI and they'll still be using AI.
16:51What's interesting currently is how retail investors are driving the markets.
16:57We're not seeing that just in Korea, but in India and even in the U.S. for that matter.
17:02Do you think this is a healthy trend going forward?
17:07Because should there be a sell-off, that correction of 30 percent, for instance, like what you anticipate later on, that could be damaging for these investors?
17:17Well, of course, you've got to look at the U.S. market because U.S. represents, what, about 70 percent of total equity investing around the world.
17:27And one of the developments that we've noticed is that U.S. does not reflect necessarily the U.S. economy, but the global economy.
17:37Because more and more of these companies, you look at Apple, you look at Amazon, you look at any of these companies, they're global companies, they're in emerging markets.
17:47And a lot of their growth in terms of sales and in terms of supply chain have been emerging markets, supply chain and sales growth.
17:57So this is, you've got to watch the U.S. market because U.S. market goes down and everybody will get hit.
18:04So this is, you've got to watch the U.S. market.
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