00:00New tariff threats, on top of, of course, what's happening between the U.S. and Canada, between U.S. and European countries.
00:06How consequential could the latest threats on South Korea be for broader risk of sentiment that could be more sustained in the days ahead?
00:16Well, good morning. I don't think this threat is going to have a big impact.
00:20We have learned from the past that, you know, Trump loves to threaten, but then it bakes down.
00:26I think this seems also to be a more technical in nature, talking about the legislative process is not really fundamental.
00:32So I think, yeah, of course, markets have been very strong recently.
00:35So some kind of a pause of profit taking is likely, but I don't think it will have long lasting impact on markets.
00:44At least when it comes to some of those sectors that are being targeted, autos, pharmaceuticals, for example,
00:50they've not just been targeted, but they've been just very vulnerable to these trade negotiations ongoing since last year.
00:57Should investors be a bit more careful approaching these sectors, not only in South Korea, but across Asia, here in Japan as well?
01:06Well, again, there is obviously a risk.
01:08And I think to me, though, the real kind of risk here is more like on the currencies,
01:14in the sense that I understand that Trump is starting to threaten obviously with tariffs,
01:19but I think the real kind of target from the President Trump is to have all the Asian currency to appreciate.
01:26I think this will have a more long lasting impact.
01:29I think it's more realistic to expect.
01:30And we see that also in Japan, the Japanese authority is playing the same game.
01:34So I do think that the impact is more on a currency level, while in terms of earnings,
01:39in terms of impact on the overall market, I think especially in the equity market should be very contained in almost every sector.
01:48If that's the case, how much further do you see the dollar falling?
01:53Well, we are very bearish on the dollar for a lot of fundamental reasons.
01:58The dollar is still expensive of almost any measure.
02:01The Fed is probably likely to cut rates.
02:05The U.S. economy is strong, but not as strong as it used to be.
02:08And we see this kind of de-dollarization trend that goes on.
02:11So there are, let's say, fundamental reasons, more long-term and short-term reasons,
02:15why we expect the dollar to continue to decline this year as well.
02:20As investors rethink U.S. assets, their attractiveness, what do you make of what we're seeing in stocks?
02:28I mean, this week we're watching out for earnings from the big tech names.
02:32We might see U.S. stocks versus, say, Japan or Europeans continue their underperformance.
02:40Is that also your read of the situation?
02:41Well, we do think that, you know, the earnings picture is very, very solid, not only in the U.S.
02:48We see inflation going down, interest rate going down.
02:51This is a very bullish backdrop for stocks.
02:54Having said that, we see more potential outside of the U.S.
02:56because this is where I think there are more upside risks, I do believe.
03:02And I do believe also that when we look at the tech sector, again, yes, the temptation is always to say, well, this is a bubble.
03:10But the reality is that all these companies are still making a lot of money.
03:15We are just at the beginning of a significant long-term upcycle.
03:19So I do believe that the risk here is to sell too early.
03:22And we do believe that fundamentals remain strong for the tech sectors, even if we prefer to be invested more in other sectors,
03:30because we do believe that the value sectors will continue to perform.
03:36Value sectors in which markets are we talking about?
03:40Because, of course, when we talk about tech, it's not only about U.S. tech that has seen that significant rise.
03:46We're also talking about Chinese tech, which has seen significant interest in recent months.
03:51Could we see some value sectors in that market, for example, when the broader economy still remains pretty lackluster?
04:00Absolutely. We don't think that the best way to play this tech or AI cycle is just investing U.S. tech stocks.
04:07I think we want to invest in Asia.
04:10Not only, there are even some potential interest names in Europe and Japan.
04:15So we want to broaden out the team.
04:17And I do believe, though, that the general trend is up.
04:20And there is no question that in some parts of the market, the Chinese players are incredibly strong, innovative,
04:26and also cheaper than their U.S. peers.
04:30Luca, are you seeing the events so far in January, whether it's Venezuela, Greenland, Iran to some extent,
04:37now these tariff threats?
04:38Is that also driving more towards Chinese assets?
04:45I think so.
04:46In a way, what we are experiencing here, well, we've seen this before in a way.
04:50The U.S. playing our ball here with tariff threats and all the other things.
04:54The reality is that China in this environment seems to be almost like a safe haven.
04:58And I think it's important to highlight that China seems to be an area of stability against, let's say, West,
05:07especially the U.S., where there are these constant threats and all these kind of things.
05:11So I do believe that there is some truth in the idea that the Chinese market,
05:15in this very volatile environment, politically volatile environment, geopolitical volatile environment,
05:20the Chinese stock market seems to be relatively a safer option than other markets.
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