00:00Just an update of the breaking news and hence why U.S. futures have changed their course.
00:04This journal headline that just crossed, we're just trying to figure out as well,
00:09market is trying to figure out globally whether or not this does present the most feasible
00:15off-ramp. With all that being said, it is somewhat of a confusing end to what's really
00:23been a manic month and it's really been a terrible month for risk assets. In fact,
00:27when you look at how we've done on global equities this month alone, it's the single
00:31biggest month in terms of value destruction on record. Close to $12 trillion in market cap has
00:37been wiped out across our benchmarks of market cap at Bloomberg globally and as you can see year to
00:43date, we've now erased if not more gains for most asset classes for the year and this has taken us
00:49back a few months in terms of price here. I mean the fact that this is even bigger than what
00:53we saw
00:53during the Russian invasion of Ukraine back in 2022, even bigger than what we saw in COVID of
00:592020, I mean that certainly does show really what we've seen is that, you know, are we still at this
01:05point, some people are still wondering, are we still underpricing the really the risks to not just
01:10supply but also potentially the demand destruction that could take away given the fact that even if
01:15we see President Trump saying, you know, I'm done even without the reopening of the Strait of Hormuz,
01:19you're still talking about energy infrastructure, oil infrastructure that has to be repaired that
01:24could take months, even years. So I think the longer term implications are certainly the one
01:29thing that we have to really deal with here and what does that mean for, you know, investors in
01:32portfolio construction? Yeah, in fact, let's get the thoughts right now of Dina Tang, she's with us
01:38right now, she's head of global index portfolio management at Franklin Templeton. Dina, good morning
01:44and a pleasure to have you join us right now. I'm not sure what kind of months you've had. It's
01:50really been manic across most of us for here, here in the Asia Pacific here looking at these markets,
01:56but to tell us the month that we've had in terms of market moves and value destruction,
02:02is there a dip you are willing to buy at this point? What would you buy? What would you stay
02:07away
02:08from? I think the way investors should look at it is looking at the long term, right? And also at
02:14the
02:14horizon. So you mentioned the month, but if you look at the year to date, there are some markets that
02:19are still posting positive number for the year to date number. So I think it's about where the war
02:26will potentially end and also how each of the different asset classes as well as specific country
02:34are positioning, because it's not impacting everyone the same way. And I think it shows that
02:41diversification really pays. On top of that, strategic planning for each of the country or who can
02:49best plan with the different contingency, you can see that in their differentiated performance.
02:56So which are those sort of, you know, markets and sectors that you look at, right? If it's not going
03:03to be,
03:03you know, single haven sort of hedging, what are sort of the beneficiaries of this then?
03:11Yeah, so I think the way to look at it is looking at the specific countries. So if you look
03:16at China,
03:17for example, they are less impacted in this. And part of that is because of their strategic
03:23diversification of their energy supplies, both into different locations, but also into renewable energy.
03:31They also have a huge stockpiles that have strategically been put together. And I think
03:37people realize now the dependence of oil may not be the best bet. And you've seen the data now that
03:43electrification could actually be cheaper. And China is one where you can potentially play
03:49in that sector, not only for their own country and their own economy, but also for the rest of the
03:56region, other outside of Asia, as well as in Africa.
04:01Okay. So, well, again, sorry to circle back to my initial question, what do I buy then?
04:07Yeah. So I think for investors to look at is trying to disaggregate the exposure globally,
04:17right? So if you look at specific, you can go with sectors, you can also go with single
04:23countries. So if you disaggregate international market and see how they play, you can look at
04:28markets such as China, you can look at Taiwan, you can also look at Brazil as a potential
04:34of the precification to your typical allocation. So on top of that, if you look even more at the top
04:43line, you can also look at the correlation across all the assets because in periods of volatility,
04:49not only you zero in on the specific asset that has lower volatility, but you also look for
04:59uncorrelated asset. And if you look across different markets on the equity, that level of correlation
05:07actually has decreased, which is the good news for investors to be able to get the pieces and
05:15create a portfolio that is diversified, but less correlated. And I think that's where ETF come into
05:22play, right? There's a lot of ETFs out there from single country ETF to income tilted ETF, but investors
05:30can see and be able to allocate very quickly to get the targeted exposure, but also using it as part
05:39of the
05:39the whole portfolio construction to balance correlation and liquidity as well as the overall risk and return
05:47from the overall portfolio.
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