You want to be in emerging markets, strategist says

the FED is going into restrictive territory they're trying to slow the economy down and bring inflation lower you know I'm a multi-asset investor I think about Emerging Markets I think about China I think this is in many ways the most difficult moment for emerging markets because you've had the FED tightening but the U.S economy is still strong you've had china easing but the Chinese economy is still weak and so I think as those trends go through you actually want to be in assets like Emerging Markets which are beneficiary of these Futures future Trends so you you would say right now that's how you position you look more to what should be the higher growth in in EMS hopefully at this point which is a little bit more risky yeah so we have taken risk lower in our Equity portfolio but to the extent that we have exposure inequities we have allocated it towards Asia China there isn't there you don't know what they're going to do we keep debating day in day out whether there's no more stimulus coming because there are various cracks still emerging in the economy but then we're concerned that if they go down the old pathway of just throwing money across the economy it could exacerbate some of the structural issues that China has but those are taking money off the table say look Chinese hasn't performed you know let's just cut that exposure others are saying well look China could come up with something and nobody wants to be caught out or caught short if China does come up with a further package so how do you trade around the two different possibilities for China yeah I I think the mood is terrible in China I think you know the way I think of this is China is driven by credit cycles and Regulatory Cycles the credit cycle bottom in 2021 the regulatory cycle bottom in 2022 you're in the early stages of cyclical recovery investors always make the mistake of foregrounding these structural concerns at the early stage of cyclical recovery in a Deca you know we've got demographics and all this I saw the debt trap yesterday but actually they are going to stimulate they are highly incentivized to stimulate and we're seeing that come through in some numbers like domestic travel they clearly have to do more we expect some more in July at the polar Bureau meeting latest by December but I think uh I think that's the way we see China playing up does any of this filter its way through to the European market whether it's in the resources sector listed on the ftse whether it's a luxury stocks listed in on the French Market some Industrials in Germany do we see any any impact did definitely you will but the equity risk premium is about eight percent in China at the moment it's very high and you would see the impact of that in China and in Asian markets first with you perhaps looking at uh particularly some sort of less risk but still in that Emerging Market space would you would you would you worry at the thought of a of a possible recession I I know that the central Bankers themselves have kind of put it as almost a lost case Resort here do you factor that in at all does that worry at this point that there isn't any recessionary risk sort of piled in yeah we've all been worried about a recession arguably too much over the last 12 months when actually you've had this this bullwhip effect from the post-covert period uh really really driving markets I think what I would say is EMS are not where the boom happened in the last decade the boom was in tech the boom was in VC the boom was in PE so the bust is not likely in my view to be in emerging markets in the way that it might have been in previous Cycles I would also say that Emerging Markets understand inflation better than develop Market Central Bankers as we've learned over the last few years where Emerging Market Central Bankers took inflation more seriously in 2021 and 2022 so look for the asset class to behave slightly differently I mean last year EMS were less volatile than DM equities which I think is very interesting for NASA class it's supposed to be riskier so I think that's where we are

Channel: CNBC International TV

Views: 2,092

Keywords: Squawk Box

Id: KeKlM22fzx8

Length: 3min 46sec (226 seconds)

Published: Thu Jun 29 2023