00:00It's such an exciting investment story again. The exuberance around Japanese tech, Korean tech, Taiwanese tech. Is this the right
00:07place to be?
00:08I think so. I mean I just returned from South Korea and the investment story there is incredibly robust.
00:17I think you have to go back to Asia crisis period to see 200 percent year on year earnings growth
00:24for the next year with a one year P.E. at seven.
00:30It was just unheard of. Right. So it's a phenomenal opportunity to be investing in in Korean assets as well
00:37as the currency.
00:38So we think that you're going to see most Asian currencies especially in North Asia that are exposed to these
00:44fourth industrial revolution trends really power up this year.
00:49So we're not stretched at this point. Not at all. I mean if anything we're still stretched the other way.
00:55Right.
00:55Right. Evidence by the Bank of Japan intervening. And so no we think dollar Korea can come off in particular
01:01well below 1400 towards 1350.
01:06A different story for the Japanese yen. How sustainable are these bouts of strength that we're seeing?
01:11Well I think the market needs to get a little bit more confident with some of the macro particularly around
01:17reflation the outcome of Shunto and what the B.O.J.'s next moves are going to be.
01:22I think there were expectations that the normalization process probably would have proceeded a little bit faster once it gets
01:29traction the type of traction that we're seeing equity investors get excited about.
01:32We should see that flow through into currency strength as well. Does that translate to more resilience for the Japanese
01:40equity space as well?
01:42I think it has to. Right. You're spending only a couple of days here. It's uncanny how inexpensive it is.
01:49Right.
01:49This sort of cheapness one experiences walk around town is is unrivaled certainly a lot different than when I lived
01:58here decades ago when Dalian was down at 80.
02:00So I think that I was here when he was around 70. So I think you'll see some normalization there.
02:08Yeah. The 155 160 those levels seem very excessive to us. Yeah.
02:14Brian I always like your contrarian views bullish New Zealand. I mean who is bullish New Zealand these days. Tell
02:20me why.
02:22That suit out to me too. I was asking my producers around me. OK. OK. Full disclosure as a former
02:29Reserve Bank of New Zealand employee.
02:31I tend to be accused of being a cheerleader of the place from time to time. But really it's it's
02:35about terms of trade. Their terms of trade has been incredibly robust.
02:39It looks to me like interest rates are too low. We're starting to see the private sector credit demand pick
02:45up. New Zealand would benefit from a little bit
02:50more fiscal impulse. I think you're likely to get that after the election into the forecast horizon. So you know
02:59as the dollar falls across the board.
03:01I think that the New Zealand dollar has some catching up to do. Against that of course and against a
03:09lot of other markets in this region is the theme
03:12that you call American geopolitical disruption to global supply and value chains. Not quite as catchy as simply asking what
03:18does the president do next. Right.
03:20Is that the biggest risk you think. Are we not talking about tariffs and supply chains enough. Probably. I mean
03:29we tend to think about it in terms of headwinds and tailwinds
03:35and the tailwind to global growth particularly North Asian growth has been tied to this. As I mentioned a moment
03:44ago this fourth industrial revolution theme.
03:47Right. So all the technological advancements that we're seeing. Not the least of which is the AI theme.
03:54So as that powers on the headwind that seems to meet it are these geopolitical ructions. Many of which are
04:03coming from the U.S.
04:04So I think if we see some tamping down of that maybe in front of the midterm elections these trends
04:13can the trends that we've seen
04:16particularly since the Iran noise has settled down a little bit in the markets. Those trends can continue.
04:23Whether it's Iran war spiking oil prices or supply chain disruptions. All of this potentially means more inflationary pressures. Right.
04:31What that means is potentially more hawkish central banks around the world. Could that act as a counter here.
04:37I think some central banks have more to move than others. Right. So Korea in particular. Right.
04:43Where you're already seeing inflation take out where the cash rate is 2.6 or 2.5 and export growth
04:49there is incredibly strong. Right.
04:51You've got 50 percent year on year growth in exports. We should start to see the J curve come through.
04:56That to me suggests a BOK could be behind the curve. Conversely it looks to us like Australia has kind
05:03of done their dance already.
05:04So I don't think the RBA are necessarily going to have to move as much. It's now probably all about
05:11second round effects from inflation.
05:12And where they've been a little bit more aggressive in tightening policy or maybe the currency has appreciated more than
05:20they shouldn't have as many issues with second round effects.
05:25Yeah. I was going to say do you think you would go so far as to say that the RBA
05:29has perhaps made a bit of a policy misstep. Do you think the Aussie by extension is now overvalued.
05:33Right. I wouldn't I don't want to criticize them, but it's there's just such a yawning gap between what we've
05:43seen Michelle Bullock and her team do relative to peers.
05:47So one trade that does seem to make some sense would be owning fixed interest in Australia relative to some
05:55of the laggards, especially in North Asia.
05:58Like like I mentioned, Korea, because that J curve effect from exports to domestic demand should be really powerful.
06:06And we haven't seen any action from the central banks yet.
06:08Yeah.
06:09Mm hmm.
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