00:00If the U.S. is seen as a sort of safe haven, how much under pressure are you expecting on
00:06Asian assets?
00:09So a lot of it really comes down to the dependence on oil.
00:12If you look, for example, so the U.S. is a net oil exporter.
00:17China imports about 40 percent of its oil from the Middle East.
00:21Japan imports more than 90 percent from the Middle East.
00:25China is obviously a very manufacturing dependent economy.
00:28It's much more energy intensive than, for example, the U.S. is.
00:32And then you've got a market like Korea, which ran up dramatically in the first couple of months of this
00:37year.
00:37And not only is Korea very dependent on imported oil, but it's also quite expensive market relative to its history
00:45as well.
00:45So I think in this sort of world, at least for the next few weeks, the U.S. looks like
00:49a relative safe haven.
00:51And the Asian markets probably are much more at risk.
00:54So where would you look for hedges, if you like?
00:56Like you probably want to look for economies and markets that have quite a lot of energy companies in their
01:02indexes.
01:03So that would be Australia, for example, Canada amongst emerging markets, Brazil and Mexico.
01:08Those should end up relatively safe compared to countries that depend on oil imports.
01:13Do you buy into the thesis that China remains a good hedge in terms of decorrelation from global geopolitics, the
01:21fact that the economy is more advanced in electrification than others?
01:28So I was in Shanghai and Beijing the first three days of this week, and it's certainly true.
01:32Talking to Chinese investors, they are very sanguine about the risk.
01:36They say, oh, no, no, China is fine.
01:37So that worries me.
01:39And I think in the short term, therefore, China is actually probably more vulnerable than most people believe.
01:43The positive story, though, for China and at BCA, we're overweight on the Chinese offshore stocks,
01:48is that because the economy is already pretty weak, the property market is still in a terrible state.
01:54The MPC last week didn't really produce any new measures.
01:57I think by mid-year, the Chinese authorities will understand that they'll have to roll out more stimulus measures.
02:02So it might be like a mini 2008 when China did its usual playbook of infrastructure spending.
02:09Our expectation would be that perhaps by mid-this year, you're going to see that,
02:14which could mean actually that the Chinese markets do end up being a little safer than some other markets around
02:19the world.
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