00:00What's the next step? The China report, the next step for China's bull markets. Where do I look for the next step?
00:05Yeah, I think, you know, for next year, we still remain bullish.
00:11To me, I think the big change is really the global monetary order reconstruction.
00:18From a, you know, strong dollar to a weak dollar.
00:22And then from China, U.S. constantly in the trade negotiations to a G2 framework.
00:28And then probably more importantly is the deep-seek moment, not just in AI, but many other industries, whether it's manufacturing, or it's cultural, or it's biopharmaceuticals.
00:42Almost every industry have received their own deep-seek moment.
00:47That, I think, together is the fundamental for a bull market, slow, but a bull market.
00:54Maybe for the first time in a long time, we'll finally have a slow-moving bull market.
00:59Dave mentioned, right, the secret sauce has been liquidity that's been driving a lot of this rally.
01:04Yes.
01:04Do you see anything on the horizon that could disturb or disrupt this sort of liquidity?
01:07Well, you know, in general, if we talk about liquidity, it's a central bank, believed to be, you know, the control of the liquidity.
01:17I think, you know, probably from the U.S. perspective, you know, the Fed is probably the mid-pods, but still in general is going to be eased further.
01:25And then China, of course, I think the central bank monetary policy will remain supportive.
01:32That, we talk about, you know, dynamic shift of, you know, central banking policy.
01:37In addition to that, I think it's probably more importantly, for a given liquidity, where is the money shifting around within the system?
01:45Right.
01:46For that, I think, you know, clearly to me, money is going to shift more towards Asia, towards Hong Kong, towards China.
01:53So, I'll give you a number, you know, of global actively managed money, 56 percent, that's from the EPFR, 56 percent is in U.S. asset.
02:05Three percent is in German asset.
02:08Only 1.8 percent in Chinese asset.
02:10So, that shows too much concentration in dollar asset.
02:15To me, that, you know, from what, that's what I meant by global monetary order reconstruction.
02:19We need more diversification from U.S. asset towards other asset, towards other currency, and Hong Kong and China are going to benefit from that.
02:27Let's talk about the specific opportunities that active manager subset can look at in the market.
02:34So, I think this year we've seen almost cycles and rotations between winners.
02:38Yeah.
02:38We've seen tech and AI.
02:39Yes.
02:40That's gone into financials and dividend plays.
02:42It's gone back out into tech.
02:43We've had a material consumption, new consumptions like Laupu Gold, Pop Mart.
02:48Yes.
02:48And then it's gone back into materials and rare earths, and now tech is back.
02:52Yeah.
02:52So, do we continue this sort of pattern of big winners, big losers within the market and the opportunities there?
02:58And where do you see the next one?
02:59I think, you know, we do see, you know, the shifting pattern, you know, some sectors rise, and then other sectors, you know, if they haven't risen enough, they're going to rise again.
03:12Yeah.
03:12So, but, you know, to me, I think, you know, this is maybe, you know, if you have a sustainable, slow-moving bull market, that means probably you will see those who haven't risen enough, they are going to catch up.
03:27They are going to catch up in this year.
03:29So, there are a few sectors I still, you know, remain very positive, even in terms of AI.
03:34I think, you know, China and the U.S. both doubling down on this AI race.
03:39So, I see a very positive on that.
03:41And then that may be more on the offensive side.
03:44On the defensive side, I think, you know, they have dividend space and the traditional manufacturing space, you know, the anti-evolution campaign is taking effect.
03:54That's also going to boost earnings, boost, you know, price.
03:58That's also going to have corporate bottom line.
04:01So, I think, you know, probably 2026, the market is going to be more balanced.
04:08You mentioned in your report about scarce assets.
04:12Can you kind of define what that is?
04:14And how do you determine what's scarce, depending on where we are in the credit cycle and where are we right now?
04:19Oh, scarce asset.
04:22You know, this thing can shift very quickly.
04:27It also depends on, you know, international sentiment.
04:30You know, this is a, for example, if something happens, say, in NVIDIA, you know, in the AI space, and then this is the China and U.S. market move, you know, to get very in lockstep with each other.
04:42Yeah.
04:42But I think, you know, the scarce, you have to be careful, you know, it's scarce in a point of time.
04:50It doesn't mean it's really, you know, if you really believe in the AI story, AI narrative, it may look, you know, it may look abundant at a point of time, but in the longer run, it still looks scarce.
05:02It's still, you know, very much in the making, you know, if you believe in the long run story or the narrative.
05:08Right.
05:09Yeah.
05:09The common pushback we get when we talk a lot to international investors, you know, that active cohort that still is over with the U.S., they point to still the lack of momentum and the recovery of the economy and the lack of inflation.
05:22Yes.
05:23What are your comments on that?
05:24And what's the pushback against that?
05:27What's the case for the market to broaden out, the rally to broaden out is my question amidst that reality?
05:32Good question.
05:33Yeah, I think, well, we are not out of the woods yet.
05:38Inflation this year is around zero CPI inflation.
05:42TPI is negative around 2%.
05:44But I do believe the biggest negative shock is behind us.
05:51So probably for next year, we are looking at a CPI slightly above zero, like around 0.5%.
05:58And the PPI also improving a little bit.
06:02Why I'm saying that, I think it's both supply and demand.
06:07On demand, the drag, the negative drag from real estate cycle is getting smaller and smaller.
06:16And then I also expect central government to do more fiscal stimulus.
06:22And then on supply side, we mentioned the anti-involution campaign.
06:28I think that, you know, that's very important.
06:31But probably more importantly, for the broader economic recovery or the strength of the broader economy,
06:41really we need to do more structural reforms.
06:43Because, you know, we talk about consumption.
06:46Consumption is a function of jobs, is a function of income, income expectations.
06:50And income is a function of jobs.
06:51And not only that, I think it's also about social safety net.
06:54So in those areas, I do believe China still have a lot of low-hanging fruit.
06:59For example, our social safety net for people retiring in the rural area is only 220 renminbi per month, the basic pension.
07:08So that has huge room to improve.
07:11So these areas with low-hanging fruit, I think, you know, it's going to be, you know, a strong foundation for a sustained recovery and a sustainable market in China.
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