00:00Today is one of those days that we can reflect a bit. I mean, we're hitting the pause button
00:03on this whole, you know, Asia rally that we've seen. Global stocks, though, we, up until now,
00:08have really tried to have, really shrugged off a lot of the geopolitical headlines when it comes
00:12to Iran. The AI story certainly has been that buffer and, you know, AI over, you know, what
00:19we've been seeing across energy markets, energy shocks. But how long do you think this can continue?
00:24I think as long as the fundamentals of all the companies remain very strong.
00:28And I think you're definitely right that tech or AI driven kind of earnings and corporate
00:34fundamentals improvement continue to be the biggest support, I think, for a lot of global
00:39companies and especially the tech supply chain companies in Taiwan and Korea. So if you believe
00:46that the fundamentals remain supportive, I think the market will look through those near term
00:52uncertainty and the noises related to the war. I would say the initial shock from the war
00:57probably already is over. So now we're entering this kind of back and forth uncertainty period
01:04between ceasefire or, you know, open fire again. But I feel market start to get a little bit better
01:12feel about this, given the strong fundamentals remains. And as we're heading into the first
01:16quarter earnings season, and I think that will remain the focus of the global market as a whole.
01:25I mean, I'm going to bring back what we heard from Goldman Sachs, the CEO, David Solomon, too, about just
01:31it seems like we're just one tweet away sometimes from the president and really sparking some sort of
01:38downturn economically. How do you subscribe to that sort of view? I mean, it seems like I know you're saying
01:44the fundamentals are still pretty solid among some of these companies, but it seems like it all it takes is
01:50maybe one post to really change sentiment.
01:54Yeah, sentiment definitely will be influenced more frequently, I would say, by some of the narratives or the headlines.
02:01However, if you look at the final impact on the economy, I think that's more important.
02:08So I wouldn't want to dismiss the idea that if the war dragged on longer, I do think the global
02:15growth,
02:15inflation, the interest rate cycle would be at risk. And those, I would say, more macro risks would
02:23probably have a bigger impact on the economy and also the global equity markets as a whole over the
02:31medium term. So I do think we need to watch the duration of this holding pattern period of the war,
02:38given that, as I mentioned, that energy price continues to rise. It will lead to a higher inflation
02:44and asymmetrically even impact some of the emerging markets even more adversely. So I do think there
02:51will be an impact. However, from the bottom up, corporate fundamentals perspective, a lot of those tech
02:58driven companies, they're agnostic to this kind of development to some extent, right? Even though I think
03:05inflation eventually will impact the interest rate environment, which will hurt more the tech and growth
03:10stocks more. However, given the demand of the tech remains so strong, undersupply is persisting. And that will
03:18continue to support the pricing dynamic of those companies. So even though, let's say, inflation will be two, three
03:24percent, even higher. But those companies ASP were talking about double digits. Even if you have double
03:29digit ASP, you still don't get enough supply. So that's why what I meant about the corporate fundamentals
03:36from the tech perspective actually probably matter more in the next couple of quarters.
03:42So from the tech perspective, it's also about this rotation that we've been seeing in Asia. I mean,
03:48except for today, perhaps on to AI trades, we've been seeing Korea, Taiwan doing well. But I wonder,
03:55do you have a preference for one market over the other because of what's been highlighted about the
04:00exposure in Taiwan to a broader swathe of the AI stack? I would say if you look at the key
04:09drivers,
04:10both Korea and Taiwan, both economy and equity markets are primarily driven by AI tech.
04:17But I do think Korea has a little bit broader drivers outside of the tech. For example,
04:25a few cyclically recovered industries, such as power equipment, shipbuilding, and also defense,
04:31actually are also very important for Korean markets. So those, to some extent, also probably
04:38are interesting credit kind of developments, given that those are industry cycle stories. And on top of
04:44that, I think Korea also have this value up initiatives. I think that will further help
04:50the corporate fundamentals improvement and return profile improvement. So I think both markets
04:57have a pretty favorable backdrop, maybe for different reasons. And you know, I think the common factors are
05:02tech. And I do think Taiwan has, there'll be more tech, 95% tech. Korea, I think,
05:09more other industries, in addition to memory, but also have some other corporate fundamentals
05:15initiatives, like value up and those kind of developments.
05:19How should I look at memory in Korea now, Vivian? They've rallied a lot, massively. Valuations are
05:24still pretty cheap in a fraction of what you see across some of the U.S. big tech names.
05:28Yeah. But maybe they're low valuations for a reason, right? Because the cyclicality
05:34in the nature of this sector, right? That, you know, some people say you can only see valuations
05:40catch up unless you see some sort of structural story that's emerging with the AI supply chain.
05:45Do you see that sort of structural change happening, or is this more just a cyclical sort of play?
05:50Yeah. I mean, there has been a debate out there whether or not memory is more structural story
05:55versus a cyclical story. I do think even it's a cyclical story. I think this phase of the upcycle
06:02is longer and stronger than before, given that HBM is really in a big shortage globally. And I believe
06:11that the consensus expectation is this shortage will last until at least the end of 2027.
06:17So even further into 2028. So because of this backdrop, I think memory actually remains pretty
06:27favorable from the industry backdrop perspective. And on top of that, I think the two players in
06:33Korea, they are very dominant players in the space. So that's why I feel nowadays emerging countries
06:40become a bigger, play a bigger role in the global tech supply chain, because we call the global champions
06:46of those mission critical supply chain are all in emerging countries. Having said that,
06:51I do think memory tend to be more cyclical than not, especially DRAM and NAND. And those are not
06:58HBM or high bandwidth memory. So those tend to be more cyclical. And therefore, there's a reason maybe
07:04those stocks are traded at a slightly lower multiples, and then some of the leading talent tech companies.
07:12Vivian, what's your take on China now? It seems like, you know, we still see flows going to the
07:17currency. It remains strong against most Asia FX. I take a look at, you know, the flows into the bond
07:22market, equity markets still remain quite resilient. Does China stand out to you in the face of all this
07:27volatility? How to position?
07:30Yeah, I think China is kind of it's on its own, if you will. First of all, they have a
07:36very difficult
07:37to speed economy and pattern for a long time, meaning that domestic consumption, domestic kind of
07:43manufacturing or fixed asset investment product market remain pretty weak. And so we're on this
07:48deflation, a deflationary path for a long period of time. But on the brighter side, you see the exports
07:54continue to do very well, especially the innovation led kind of exports, whether it's tech or advanced
08:00manufacturing or EV or ESS, all those. So I think because of this divergence from the underlying
08:09economy perspective, I think in China, you're probably going to see more selective companies doing
08:15better. And then you rely on those selective industries and companies to drive the overall equity
08:21markets. Therefore, the rally may not be that strong, or they will take a breather and come
08:28again. But net net, we still feel constructive about China from the bottom up perspective, because
08:34we see the broadening of those tech innovation driven industries, including even biotech and healthcare.
08:42So definitely compared to last year or a couple of years ago, I think China definitely have more
08:46interesting investment ideas out there. And I think they are also getting stronger and
08:51better as their positioning on the global level continue to improve. So that's how we think
08:57about China. But on an aggregate basis, I think the China Asia market and Asia or Hong Kong markets
09:04also have a little bit different dynamics. I think that's primarily driven by liquidity and flow.
09:09China Asia market is more kind of determined by the local investors, and they tend to
09:15like those maybe ideas a little bit more. But the global investors tend to look at Hong Kong market
09:22on the global context. So that's why. Yeah.
09:27Wanted to ask as well, a bit more quickly, if you can, your view on India, I mean, we've been
09:33talking
09:34about the reassessment in the past couple of months, and then that's kind of been exacerbated by the war in
09:40Iran because of India's exposure to energy or the vulnerabilities there. Do you see there as having
09:46been enough of a de-rating for that market to look attractive in some form?
09:55On a historical basis, yeah, India and multiple have come down quite materially. However,
10:01the earnings also decelerated quite tremendously. So this year, I think India's total earnings growth
10:08is about 8 to 10 percent. Yet, I think the market overall still traded more than
10:1440, 25 times PE, and some companies still 30, 40 times. So from the relative perspective versus the
10:21other emerging markets, I do think India look less attractive adjusted by the earnings growth.
10:27Even though over its own history, it has gotten cheaper, but for a reason. India is also the
10:33anti-AI trade to a large extent. And domestic economy also kind of in this normalized, weak period
10:42across consumption, financial services, and some local production and manufacturing front.
10:48And therefore, India, I think in the near term, could be a little bit difficult to attract more
10:53global investors' interest. And on top of that, Iran war will have more impact on India,
10:59given that India is a net oil importer. And 90 percent of the state of Formos kind of oil goes
11:06to Asia,
11:07and India is a big part of that. And therefore, you see Indian rupee really depreciate a lot in recent
11:13times. So combining all those factors, I do think near term, India could remain a little bit difficult
11:19until we see the earnings start to pick up again.
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