Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner. As we get set to wrap up the trading week in the Apac Region, it's a good time to take a look at some of the driving forces. We are joined now by Taosha Wang, portfolio manager at Fidelity International. Taosha joins us from our studios in Hong Kong. Thanks for being with us. Can we begin by getting your take on the reaction that you're hearing from a lot of the people in the Apac Region clients that you're interacting with on the outcome of the US election. What has it been like.

Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner. As we get set to wrap up the trading week in the Apac Region, it's a good time to take a look at some of the driving forces. We are joined now by Taosha Wang, portfolio manager at Fidelity International. Taosha joins us from our studios in Hong Kong. Thanks for being with us. Can we begin by getting your take on the reaction that you're hearing from a lot of the people in the Apac Region clients that you're interacting with on the outcome of the US election. What has it been like.

I mean, the red sweet outcome wasn't exactly the expected base case. So people are sort of, you know, gathering, coming to their conclusion as to what this means from the market. And this is happening in the context that US exceptionalism is already quite strong, both from a top down data perspective as well as from a bottom up earning perspective. But I think that you know, with the strong mandate for the coming government, the there's greater potential for structural reform, which adds to the further upside skill to you know, how the US growth story is going to pan out. We typically talk about structural reform in the emergent market sense. You know, China does structural reform, India structural reform. Indonesia do structural reform. But sometimes people forget that developed market, a big developed market like the US can have structural reform as well. And if you mathematically think about you know, government efficiency, which you know is being talked about a lot these days, you think about, you know, the enumerator is the expenditure, and denominator is GDP, and the structural reform should probably worth work on both numbers. So it should you know, boost GDP by you know, reducing the regulatory red taps, boosting animal spirit, so in enlarge the GDP pie, whereas on the enumerator possibly you know, reducing some costs here and there, an alating in a more sensible way, so I think, and it's hard to necessarily gauge the magnitude of that. So that's why we say, you know, US exceptionalism continues, but you know, the structural reform is most likely upside surprise.

I mean, the red sweet outcome wasn't exactly the expected base case. So people are sort of, you know, gathering, coming to their conclusion as to what this means from the market. And this is happening in the context that US exceptionalism is already quite strong, both from a top down data perspective as well as from a bottom up earning perspective. But I think that you know, with the strong mandate for the coming government, the there's greater potential for structural reform, which adds to the further upside skill to you know, how the US growth story is going to pan out. We typically talk about structural reform in the emergent market sense. You know, China does structural reform, India structural reform. Indonesia do structural reform. But sometimes people forget that developed market, a big developed market like the US can have structural reform as well. And if you mathematically think about you know, government efficiency, which you know is being talked about a lot these days, you think about, you know, the enumerator is the expenditure, and denominator is GDP, and the structural reform should probably worth work on both numbers. So it should you know, boost GDP by you know, reducing the regulatory red taps, boosting animal spirit, so in enlarge the GDP pie, whereas on the enumerator possibly you know, reducing some costs here and there, an alating in a more sensible way, so I think, and it's hard to necessarily gauge the magnitude of that. So that's why we say, you know, US exceptionalism continues, but you know, the structural reform is most likely upside surprise.

That's a big part of the story, clearly, But the other seems to be the risk that we will have persistently high inflation in the US as a result of this. I mean that seems to be one of the concerns that the bond market has been grappling with right now, and the Fed seems to be communicating a slight adjustment. Maybe there'll be less aggressive in ease and going forward. Do you think that in any way complicates the story?

That's a big part of the story, clearly, But the other seems to be the risk that we will have persistently high inflation in the US as a result of this. I mean that seems to be one of the concerns that the bond market has been grappling with right now, and the Fed seems to be communicating a slight adjustment. Maybe there'll be less aggressive in ease and going forward. Do you think that in any way complicates the story?

Well, certainly. I think inflation has been a very important part of you know, the market rhetorics for quite a few years. Right now, I think we've decidedly left the period in Taiwan inflation was out of control. I mean, there's a clear trajectory of inflation coming down to a more normalized level, not to two percent, but a non normalized level. Looking forward, I think there is a risk that you know, stays slightly elevated, but I would say the chance of it becomes disorderly is not significant over the near term. But yes, I mean, lack of fiscal discipline can be a problem.

Well, certainly. I think inflation has been a very important part of you know, the market rhetorics for quite a few years. Right now, I think we've decidedly left the period in Taiwan inflation was out of control. I mean, there's a clear trajectory of inflation coming down to a more normalized level, not to two percent, but a non normalized level. Looking forward, I think there is a risk that you know, stays slightly elevated, but I would say the chance of it becomes disorderly is not significant over the near term. But yes, I mean, lack of fiscal discipline can be a problem.

A centerpiece of the Trump economic policy is the teriff issue that obviously has inflationary implications. But from your point of view in Hong Kong, trying to look at opportunities in the Asia Pacific against the backdrop of the potential for much higher tariffs, how does it shape or reshape your thinking?

A centerpiece of the Trump economic policy is the teriff issue that obviously has inflationary implications. But from your point of view in Hong Kong, trying to look at opportunities in the Asia Pacific against the backdrop of the potential for much higher tariffs, how does it shape or reshape your thinking?

I think that is certainly a tail risk to bear in mind. I mean, we don't have a crystal ball on exactly the shape and form of how the tariff, you know, how and when will that tariff take place. One of the ways is to actually gain exposure in countries that are a little bit more inward focused in terms of its capital market.

I think that is certainly a tail risk to bear in mind. I mean, we don't have a crystal ball on exactly the shape and form of how the tariff, you know, how and when will that tariff take place. One of the ways is to actually gain exposure in countries that are a little bit more inward focused in terms of its capital market.

Give me a couple of point. I was going to ask for an.

Give me a couple of point. I was going to ask for an.

Example, Indonesia in the big domestic market, young population, high natural growth rate, and relatively insulated from you know this terrriorf impact thats potentially coming out of the US. So those are the ways for us to sort of think holistically of the you know, the emerging markets in this region.

Example, Indonesia in the big domestic market, young population, high natural growth rate, and relatively insulated from you know this terrriorf impact thats potentially coming out of the US. So those are the ways for us to sort of think holistically of the you know, the emerging markets in this region.

You were talking about US exceptionalism. Can we talk about a strong dollar? We kind of indicated that the bond market's been struggling with what has the potential to be maybe stubborn inflation, if we can describe it that way. Higher yields have certainly been allowing the dollar to remain firm at the expensive currencies in the APEC region. I'm curious about your thinking on on the currency component in all of this.

You were talking about US exceptionalism. Can we talk about a strong dollar? We kind of indicated that the bond market's been struggling with what has the potential to be maybe stubborn inflation, if we can describe it that way. Higher yields have certainly been allowing the dollar to remain firm at the expensive currencies in the APEC region. I'm curious about your thinking on on the currency component in all of this.

I think it's that higher dollars a direct byproduct or direct product of US. It grows exceptionalism because this is the reserve currency still of the world. Now. Normally in a non reserve currency environment, and you have a country where inflation is running truly quite high, that's usually actually negative for the for the currency, but US is different. How sustainable is this? I mean, the effects tend to the effects. Trends tend to hold for take a long time to correct. So even if you say, Okay, the dollar is too expensive, inflation is very high, and you add that dollar strengths on top of it, everything in the US is getting really expensive compared to the rest of the world. It doesn't necessarily correct itself over a short term horizon. So this trend can you continue for quite some time?

I think it's that higher dollars a direct byproduct or direct product of US. It grows exceptionalism because this is the reserve currency still of the world. Now. Normally in a non reserve currency environment, and you have a country where inflation is running truly quite high, that's usually actually negative for the for the currency, but US is different. How sustainable is this? I mean, the effects tend to the effects. Trends tend to hold for take a long time to correct. So even if you say, Okay, the dollar is too expensive, inflation is very high, and you add that dollar strengths on top of it, everything in the US is getting really expensive compared to the rest of the world. It doesn't necessarily correct itself over a short term horizon. So this trend can you continue for quite some time?

Can we talk a little bit about what you perceive to be the changes in China and whether or not they're going to be effective in regenerating or rejuvenating economic growth. I mean, they've been coming out in these kind of small incremental stages. We've been getting a lot more in a way of clarity. The market seems to be accepting this. Maybe there's been a little bit of impacie that there hasn't been more more or greater communication. How do you understand what's been rolled out by Beijing and the likely impact that it's going to have in the economy.

Can we talk a little bit about what you perceive to be the changes in China and whether or not they're going to be effective in regenerating or rejuvenating economic growth. I mean, they've been coming out in these kind of small incremental stages. We've been getting a lot more in a way of clarity. The market seems to be accepting this. Maybe there's been a little bit of impacie that there hasn't been more more or greater communication. How do you understand what's been rolled out by Beijing and the likely impact that it's going to have in the economy.

I think the good news is that we're seeing flows of you know, positive policy initiatives. That is so incredibly important. I think the economy still needs a lot of support, but the repairment is not going to happen overnight. It's not like a new policy comes and ban tomorrow. You know, earnings goes up. If a business sentiment goes up, everything bounces back. It takes time to repair that, to to improve that, to regain the strengths in the economy and confidence in the business community. And now that we have seen a series of positive policy initiatives, we're more watchful than ever on. You know, how business community respond to that and how does that actually translate into earnings earning guidance.

I think the good news is that we're seeing flows of you know, positive policy initiatives. That is so incredibly important. I think the economy still needs a lot of support, but the repairment is not going to happen overnight. It's not like a new policy comes and ban tomorrow. You know, earnings goes up. If a business sentiment goes up, everything bounces back. It takes time to repair that, to to improve that, to regain the strengths in the economy and confidence in the business community. And now that we have seen a series of positive policy initiatives, we're more watchful than ever on. You know, how business community respond to that and how does that actually translate into earnings earning guidance.

Give me the way in which you understand that to translate into an investment strategy. What areas of the the Chinese market, Let's say, would you be interested in building positions in.

Give me the way in which you understand that to translate into an investment strategy. What areas of the the Chinese market, Let's say, would you be interested in building positions in.

Well, I think there are a lot of that the idios in credit. We're focused on the idiosyncratic opportunities there, you know, the areas that has For example, you know, we've talked about AI as a global trend. I mean, China is certainly forced to come up with you know, its own solutions at this at this very big trend. So there's you know, a large cohorta technology companies working on this as well. I mean, the export oriented companies are looking for looking to diversify their destination, you know, where the product can be and you know, anecdotally AI is helping that because previously they're much more focused on the English speaking export destinations. But right now you can simultaneously, you know, enter a whole lot of different markets in the world with the help of you know, language based AI. So really, I think we're looking more idiosyncratically, more bottom up at you know, companies with good potential.

Well, I think there are a lot of that the idios in credit. We're focused on the idiosyncratic opportunities there, you know, the areas that has For example, you know, we've talked about AI as a global trend. I mean, China is certainly forced to come up with you know, its own solutions at this at this very big trend. So there's you know, a large cohorta technology companies working on this as well. I mean, the export oriented companies are looking for looking to diversify their destination, you know, where the product can be and you know, anecdotally AI is helping that because previously they're much more focused on the English speaking export destinations. But right now you can simultaneously, you know, enter a whole lot of different markets in the world with the help of you know, language based AI. So really, I think we're looking more idiosyncratically, more bottom up at you know, companies with good potential.

Does that extend into kind of the realm of semiconductors? Is that what we're talking about? Are you focused more on the software side companies that have been putting together these artificial intelligence models, which is it is the hardware the software side, or maybe it's a combination of both.

Does that extend into kind of the realm of semiconductors? Is that what we're talking about? Are you focused more on the software side companies that have been putting together these artificial intelligence models, which is it is the hardware the software side, or maybe it's a combination of both.

I think it will always have to be a combination of both. One of the globally, one of the questions about you know, investing area is that you know, there's been a lot of investment at the hardware, at the semiconductor level, at the data center level, but we're still eager to see more applications, you know, new applications and solve problems in direct verticals. You know of specific application scenarios, some of them very professional, in very professional specific settings. So the application really needs to kick in and start generating positive free cash flow to enable a sustained sort of investment cycle, because if you make mon money, then you'll invest more. If you don't make money from application, the whole value chain does not sort of does not fund itself, then you have a problem of you know, investment potentially you know, starting to to to to come down a little bit. I think similar. I mean, every every country or every business community trying to solve this problem, they have to tackle it from the hardware side of things as well as the software side of things, So meaning both the investment side of things as well as the application side of things.

I think it will always have to be a combination of both. One of the globally, one of the questions about you know, investing area is that you know, there's been a lot of investment at the hardware, at the semiconductor level, at the data center level, but we're still eager to see more applications, you know, new applications and solve problems in direct verticals. You know of specific application scenarios, some of them very professional, in very professional specific settings. So the application really needs to kick in and start generating positive free cash flow to enable a sustained sort of investment cycle, because if you make mon money, then you'll invest more. If you don't make money from application, the whole value chain does not sort of does not fund itself, then you have a problem of you know, investment potentially you know, starting to to to to come down a little bit. I think similar. I mean, every every country or every business community trying to solve this problem, they have to tackle it from the hardware side of things as well as the software side of things, So meaning both the investment side of things as well as the application side of things.

When you look at the consumer in China right now. Are you seeing a resilient consumer maybe that that would be leaning into trying to maybe to increase a little bit more spending, or are things still too conservative, that sentiment is still so weak that maybe that aspect of the domestic economy is going to take a while to recover, even though parts of the export economy continue to seem to be robust.

When you look at the consumer in China right now. Are you seeing a resilient consumer maybe that that would be leaning into trying to maybe to increase a little bit more spending, or are things still too conservative, that sentiment is still so weak that maybe that aspect of the domestic economy is going to take a while to recover, even though parts of the export economy continue to seem to be robust.

I think, I think we need to consider the households willingness spent, a willingness to spend from a you know, a few perspectives. There's the job market side of things. There's also the Wells effect. For example, where housing price is going and where the stock market is going, and you know, they're moving differ different directions. I mean a lot of us might not have might have noticed that. You know, there has been a recent and sudden boom in the Chinese stock market responding to some of the policy initiatives. Right, So that adds to the Weals effect, and the housing market needs to be stabilized for people to feel a little bit more comfortable because that is a big, big part of the overall household balance sheet. Interest rate payment, uh, that is also a big part of the housing household expenses and also the domestic prices, you know, the general living expense. So I think a lot of moving parts are at play. I don't think there's a sharp it's a net net. I don't think there's a sharp rebound in the consumer spending in China per se, but that is, you know, taking time to play out.

I think, I think we need to consider the households willingness spent, a willingness to spend from a you know, a few perspectives. There's the job market side of things. There's also the Wells effect. For example, where housing price is going and where the stock market is going, and you know, they're moving differ different directions. I mean a lot of us might not have might have noticed that. You know, there has been a recent and sudden boom in the Chinese stock market responding to some of the policy initiatives. Right, So that adds to the Weals effect, and the housing market needs to be stabilized for people to feel a little bit more comfortable because that is a big, big part of the overall household balance sheet. Interest rate payment, uh, that is also a big part of the housing household expenses and also the domestic prices, you know, the general living expense. So I think a lot of moving parts are at play. I don't think there's a sharp it's a net net. I don't think there's a sharp rebound in the consumer spending in China per se, but that is, you know, taking time to play out.

Thank you so much for making time to chat with us. I really enjoyed the conversation with Taosha Wang, portfolio manager at Fidelity International, joining us up from Hong Kong here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast. I'm Doug Prisner. We're tracking market action today on this the final day of the trading week in the APEC region. And joining me now from our studios in Singapore is Mary Nicola, Bloomberg m Live Strategist. You and I were talking a moment ago about the dollar strength and a lot of the end weakness that's been created as a consequence of that. Earlier in the week, didn't we break to the week side of one fifty six against the greenback, Yeah.

Thank you so much for making time to chat with us. I really enjoyed the conversation with Taosha Wang, portfolio manager at Fidelity International, joining us up from Hong Kong here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast. I'm Doug Prisner. We're tracking market action today on this the final day of the trading week in the APEC region. And joining me now from our studios in Singapore is Mary Nicola, Bloomberg m Live Strategist. You and I were talking a moment ago about the dollar strength and a lot of the end weakness that's been created as a consequence of that. Earlier in the week, didn't we break to the week side of one fifty six against the greenback, Yeah.

We did, and then we saw a bit of a retlacement because the Central Bank governor came out and said from the BOJ, he said that it's hard to predict the outcome for the December meeting, so I always put December back on the table, which something wasn't even on anyone's radar screen at this point. So it looks like it's more of a live meeting now and now everyone's just looking for ques as to anything from the on the wires. Is he going to say something to signal December? But the yen is really struggling. The yen is struggling to break higher. It's really held back, especially because it's been a very strong dollar environment. So you need a clearer signal from the BOJ to say, Okay, we're actually going to continue normalizing rates.

We did, and then we saw a bit of a retlacement because the Central Bank governor came out and said from the BOJ, he said that it's hard to predict the outcome for the December meeting, so I always put December back on the table, which something wasn't even on anyone's radar screen at this point. So it looks like it's more of a live meeting now and now everyone's just looking for ques as to anything from the on the wires. Is he going to say something to signal December? But the yen is really struggling. The yen is struggling to break higher. It's really held back, especially because it's been a very strong dollar environment. So you need a clearer signal from the BOJ to say, Okay, we're actually going to continue normalizing rates.

So I saw earlier today that we had some inflation data for Japan core consumer prices in October up at an annual rate of two point three percent, a bit above what the market was looking for. But that's not going to move the needle, will it? When it comes to the BOJ.

So I saw earlier today that we had some inflation data for Japan core consumer prices in October up at an annual rate of two point three percent, a bit above what the market was looking for. But that's not going to move the needle, will it? When it comes to the BOJ.

I mean, they keep talking about we're going to change policy if our outlook is realized. Your every data point brings you closer to that outlook being realized. But in many ways they continue to drag their feet, and so the market is just getting a little bit impatient. So you're seeing that rate differentials, for example, on some of the crosses moving in the end's favor, but the yen isn't going along with it, and that's because traders aren't really fully buying it and they're not fully convinced. Because every single time the BOJ comes up with a different excuse, Oh, the outlook in the US, Oh, the domestic politics, Oh it's now US politics. So there always seems to be a reason for it.

I mean, they keep talking about we're going to change policy if our outlook is realized. Your every data point brings you closer to that outlook being realized. But in many ways they continue to drag their feet, and so the market is just getting a little bit impatient. So you're seeing that rate differentials, for example, on some of the crosses moving in the end's favor, but the yen isn't going along with it, and that's because traders aren't really fully buying it and they're not fully convinced. Because every single time the BOJ comes up with a different excuse, Oh, the outlook in the US, Oh, the domestic politics, Oh it's now US politics. So there always seems to be a reason for it.

So we can assume then, based on what I'm hearing, is that December is not going to be the meeting where they hike interest rates? Could January be that meeting?

So we can assume then, based on what I'm hearing, is that December is not going to be the meeting where they hike interest rates? Could January be that meeting?

January seems to be a little bit more likely. But I think a lot of what's happening in the US on the political side really muddies the waters for a lot of central banks, especially in this region. Not only do you have dollar strength, but also the fear of more protectionist policies are really coming through. So there's a lot of fear on that sense. So for example, Bank of Korea next week, they're likely to remain cautious even though the expectation was that they would continue cutting, and you're going to see a lot of that momentum shifting. But if the yen really needs to get a clear break and actually break higher, it still needs the BOJ to push hard.

January seems to be a little bit more likely. But I think a lot of what's happening in the US on the political side really muddies the waters for a lot of central banks, especially in this region. Not only do you have dollar strength, but also the fear of more protectionist policies are really coming through. So there's a lot of fear on that sense. So for example, Bank of Korea next week, they're likely to remain cautious even though the expectation was that they would continue cutting, and you're going to see a lot of that momentum shifting. But if the yen really needs to get a clear break and actually break higher, it still needs the BOJ to push hard.

So what does that mean in terms of the equity market in Tokyo.

So what does that mean in terms of the equity market in Tokyo.

Yeah, I mean there has been this Obviously, this relationship between a weaker yen drives the equity markets higher, especially because a lot of the major companies, so let's say the top ten by market cap, really do depend on the en weakness and they do better, profits do better as a result. But also there is a clear sticking point for the markets, and that's also because of their reliance on the US. So again, these protectionist policies will come into play if they actually do come to fruition. So you could get a number of headwinds accumulating for Japanese equities. Whether it's these protectionist policies or the stronger end that will all weigh on the equity markets, especially if domestic consumption isn't doing its job.

Yeah, I mean there has been this Obviously, this relationship between a weaker yen drives the equity markets higher, especially because a lot of the major companies, so let's say the top ten by market cap, really do depend on the en weakness and they do better, profits do better as a result. But also there is a clear sticking point for the markets, and that's also because of their reliance on the US. So again, these protectionist policies will come into play if they actually do come to fruition. So you could get a number of headwinds accumulating for Japanese equities. Whether it's these protectionist policies or the stronger end that will all weigh on the equity markets, especially if domestic consumption isn't doing its job.

I'm going to mix it up a little bit. Can we talk about crypto, because today during the New York session, we had bitcoin break in above ninety nine thousand for the first time. Some of this may have been linked to the fact that Gary Gensler, the head of the SEC essentially indicated that he is going to be leaving on January the twentieth. We know he's talked tough when it comes to regulating crypto, and if you can accept the fact that with the incoming administration, maybe we get an office at the White House that oversees crypto, maybe we get a Securities and Exchange Commission chair that is a lot more crypto friendly. Is anyone in your neck of the woods buying into this rally? Do they believe in it?

I'm going to mix it up a little bit. Can we talk about crypto, because today during the New York session, we had bitcoin break in above ninety nine thousand for the first time. Some of this may have been linked to the fact that Gary Gensler, the head of the SEC essentially indicated that he is going to be leaving on January the twentieth. We know he's talked tough when it comes to regulating crypto, and if you can accept the fact that with the incoming administration, maybe we get an office at the White House that oversees crypto, maybe we get a Securities and Exchange Commission chair that is a lot more crypto friendly. Is anyone in your neck of the woods buying into this rally? Do they believe in it?

I mean, the market is very clear that they buy into this rally. I think that's probably the clearest Trump trade that we've seen in terms of the expectation of deregulation is likely to come through. So, you know, people are now talking about one hundred thousand, right, and it seemed long ago it seems unattainable, But now it seems more than attainable within the very near future. So I think there's a lot of support, especially on the hopes that deregulation is going to come that there's going to be support from this new administration for cryptocurrencies, so it's hard to see the end of the rally coming through.

I mean, the market is very clear that they buy into this rally. I think that's probably the clearest Trump trade that we've seen in terms of the expectation of deregulation is likely to come through. So, you know, people are now talking about one hundred thousand, right, and it seemed long ago it seems unattainable, But now it seems more than attainable within the very near future. So I think there's a lot of support, especially on the hopes that deregulation is going to come that there's going to be support from this new administration for cryptocurrencies, so it's hard to see the end of the rally coming through.

Before I let you go, I want to ask about the view from overseas on the FED. It seems increasingly as though the market is backing away from the idea that the FED is going to be aggressive, and now even a conversation around the fact that maybe the FED will be on hold at the December meeting. To the point that we were making earlier about dollar strength, this is only going to underpin that right.

Before I let you go, I want to ask about the view from overseas on the FED. It seems increasingly as though the market is backing away from the idea that the FED is going to be aggressive, and now even a conversation around the fact that maybe the FED will be on hold at the December meeting. To the point that we were making earlier about dollar strength, this is only going to underpin that right.

Yeah, absolutely, and I think that's what makes it a little bit more are difficult for central banks in this region. We've already seen it from Bank Indonesia. They've taken on a little bit more cautious approach, especially because we've seen that their currency has weakened. Bank of Korea next week we'll probably toe the same line. So it's about the fact that if they take on a cautious approach, everyone in this region is going to do the same because they're frankly just worried about more currency weakness.

Yeah, absolutely, and I think that's what makes it a little bit more are difficult for central banks in this region. We've already seen it from Bank Indonesia. They've taken on a little bit more cautious approach, especially because we've seen that their currency has weakened. Bank of Korea next week we'll probably toe the same line. So it's about the fact that if they take on a cautious approach, everyone in this region is going to do the same because they're frankly just worried about more currency weakness.

We'll leave it there, Mary, thank you so much for making time. Thank you to chat with us. Mary Nicola Bloomberg m Live strategist joining us here on the Daybreak Asia podcast from our studios in Singapore. Welcome back to the Bloomberg Daybreak Asia Podcast. I'm Doug Prisner. Joining us for a look at market action is Chris Zacarelli. He is the chief investment officer at north Light Asset Management, joining us today from Charlotte, North Carolina. Chris, thanks for joining us. One of the things that struck me today when you look at market action, the rally that we had in small caps, the so called Trump trade seem to have resurfaced in a big way. We're talking a lot here about pro growth policies. Are you a buyer?

We'll leave it there, Mary, thank you so much for making time. Thank you to chat with us. Mary Nicola Bloomberg m Live strategist joining us here on the Daybreak Asia podcast from our studios in Singapore. Welcome back to the Bloomberg Daybreak Asia Podcast. I'm Doug Prisner. Joining us for a look at market action is Chris Zacarelli. He is the chief investment officer at north Light Asset Management, joining us today from Charlotte, North Carolina. Chris, thanks for joining us. One of the things that struck me today when you look at market action, the rally that we had in small caps, the so called Trump trade seem to have resurfaced in a big way. We're talking a lot here about pro growth policies. Are you a buyer?

Yeah, We've been interested in small caps for quite some time, and we think there's it is a game changer in terms of the red sweep in terms of potentially lower less or more regulation, lower taxes, and so we think that will benefit a lot of the smaller companies which are more levered to the tax code.

Yeah, We've been interested in small caps for quite some time, and we think there's it is a game changer in terms of the red sweep in terms of potentially lower less or more regulation, lower taxes, and so we think that will benefit a lot of the smaller companies which are more levered to the tax code.

But also as the country looks to be a.

But also as the country looks to be a.

Little bit more domestically focused and potentially see some headwinds internationally, we think small caps will also benefit because predominantly they have a lot less sales that are overseas in the small cap space versus large caps, is.

Little bit more domestically focused and potentially see some headwinds internationally, we think small caps will also benefit because predominantly they have a lot less sales that are overseas in the small cap space versus large caps, is.

There a risk that a number of these companies may be struggling to pay their debt and they may see a little bit of subdued earnings growth. Could that potentially spoil this trade a little bit?

There a risk that a number of these companies may be struggling to pay their debt and they may see a little bit of subdued earnings growth. Could that potentially spoil this trade a little bit?

Yeah, I mean, I think when you look at the trade, you know, obviously, if you're looking at small caps across the board, if you look at let's say, the Rustle two thousand, you know at least a third of those are not profitable. And so you know, for those companies which are struggling from a cashlow point of view, absolutely, if they have high debt loads and interest rates as saying higher for longer, that could be a challenge.

Yeah, I mean, I think when you look at the trade, you know, obviously, if you're looking at small caps across the board, if you look at let's say, the Rustle two thousand, you know at least a third of those are not profitable. And so you know, for those companies which are struggling from a cashlow point of view, absolutely, if they have high debt loads and interest rates as saying higher for longer, that could be a challenge.

We definitely think, you know, you have to pick your spots.

We definitely think, you know, you have to pick your spots.

You'll have to look for companies with more manageable debt loads or ones that have pushed out their maturity dates, as well as companies that are already casual positive, not necessarily cash flow positive in the future. So that is a possibility for the sector as a whole.

You'll have to look for companies with more manageable debt loads or ones that have pushed out their maturity dates, as well as companies that are already casual positive, not necessarily cash flow positive in the future. So that is a possibility for the sector as a whole.

Absolutely.

Absolutely.

The other thing, obviously that the market's been struggling to deal with is what appears to be an adjustment from the FED moderating the pace of rate cuts. Maybe we're dealing with a situation where higher for longer is going to be kind of the mantra, Is that fair?

The other thing, obviously that the market's been struggling to deal with is what appears to be an adjustment from the FED moderating the pace of rate cuts. Maybe we're dealing with a situation where higher for longer is going to be kind of the mantra, Is that fair?

I think that's definitely the change that we've seen, you know, since the election, the idea that potentially we'll see more inflation. Whether that's because pro growth policies will lead to a little bit of a hotter economy, or whether tourists get introduced next year and that leads to a inflation, there's a lot more. I think there's a wider range of outcomes at this point in terms of higher and lower. And I think, you know, if you're looking at a situation where the FED was looking to cut rates pretty aggressively last year, and I think if you look even at the end of October, maybe there was five or six rate cuts priced in. And now when I look at my Bloomberg terminal before this interview, you know, using the WIIRP function, it's less than three. So I think the market's already taken out some of the potential FED rate cuts. Obviously that really depends on policy, depends on the path of the economy, but for now, I think, you know, one big change you can say, at least in the last couple of weeks post election, is that most people are expecting fewer rate cuts versus even just a few weeks.

I think that's definitely the change that we've seen, you know, since the election, the idea that potentially we'll see more inflation. Whether that's because pro growth policies will lead to a little bit of a hotter economy, or whether tourists get introduced next year and that leads to a inflation, there's a lot more. I think there's a wider range of outcomes at this point in terms of higher and lower. And I think, you know, if you're looking at a situation where the FED was looking to cut rates pretty aggressively last year, and I think if you look even at the end of October, maybe there was five or six rate cuts priced in. And now when I look at my Bloomberg terminal before this interview, you know, using the WIIRP function, it's less than three. So I think the market's already taken out some of the potential FED rate cuts. Obviously that really depends on policy, depends on the path of the economy, but for now, I think, you know, one big change you can say, at least in the last couple of weeks post election, is that most people are expecting fewer rate cuts versus even just a few weeks.

Ago, higher for longer rates. Was a big question mark over the commercial real estate market, and I was struck today by a piece that we had on the Bloomberg Terminal. Carson Block was saying that apartment complexes are expected to be the next major source of problems in the commercial real estate market, particularly in the Sun Belt. Does he have a point there?

Ago, higher for longer rates. Was a big question mark over the commercial real estate market, and I was struck today by a piece that we had on the Bloomberg Terminal. Carson Block was saying that apartment complexes are expected to be the next major source of problems in the commercial real estate market, particularly in the Sun Belt. Does he have a point there?

I think he does.

I think he does.

And again, you know, when you're looking at real estate in general, and even commercial real estate, you know clearly it's a it's a very very broad sector, not just geographically, but also the quality of the of the you know, of the buildings.

And again, you know, when you're looking at real estate in general, and even commercial real estate, you know clearly it's a it's a very very broad sector, not just geographically, but also the quality of the of the you know, of the buildings.

And so I think just like you're going to see.

And so I think just like you're going to see.

Within within office, I think you'll say the same thing within residential. You know, those those buildings that are in great locations, potentially Class A and are really going to be a place where people want to come back to. I think you'll see the same thing on on the residential side for those for those places where you're you've got a lot of demand and and and the equality is high, I imagine you won't have much trouble. But for those properties that are below below A or or that are basically you know, in some of those less desirable geographies, you could see some issues. So I think, I think he's got a point. But again I wouldn't I wouldn't paint with a broad brush. I would I would look a little bit more specifically within within various geographies and various qualities even with in those geographies.

Within within office, I think you'll say the same thing within residential. You know, those those buildings that are in great locations, potentially Class A and are really going to be a place where people want to come back to. I think you'll see the same thing on on the residential side for those for those places where you're you've got a lot of demand and and and the equality is high, I imagine you won't have much trouble. But for those properties that are below below A or or that are basically you know, in some of those less desirable geographies, you could see some issues. So I think, I think he's got a point. But again I wouldn't I wouldn't paint with a broad brush. I would I would look a little bit more specifically within within various geographies and various qualities even with in those geographies.

So we talked about the Trump trade a moment ago. In some of those pro growth policies, tariffs obviously are the big centerpiece here of the Trump economic plan. How has that changed your thinking on putting money to work in public markets these days? Whether you're talking about US companies that are exposed to international trade flow, the multinationals, or let's say markets offshore like in Asia, Hong Kong for example, or even China.

So we talked about the Trump trade a moment ago. In some of those pro growth policies, tariffs obviously are the big centerpiece here of the Trump economic plan. How has that changed your thinking on putting money to work in public markets these days? Whether you're talking about US companies that are exposed to international trade flow, the multinationals, or let's say markets offshore like in Asia, Hong Kong for example, or even China.

It's definitely made us marginally less likely to go international, whether that's looking at actual ordinaries or ADRs, so you know, looking at international companies. But we've also moved down the cap structure as well, or moved down the capitalization structure, moving more from large caps relatively speaking to mid caps and small caps specifically, because we wanted to have a little bit less international exposure even within our revenues, and so that's that's been a change that we've made at the margins, I would say, like everything else, it remains to be seen what will happen over the next year or two, and we don't know to what degree we'll see tariffs, whether the tariffs will be a little bit more surgical in nature, whether they'll be across the board, or whether the tariff rates will be much higher than expected.

It's definitely made us marginally less likely to go international, whether that's looking at actual ordinaries or ADRs, so you know, looking at international companies. But we've also moved down the cap structure as well, or moved down the capitalization structure, moving more from large caps relatively speaking to mid caps and small caps specifically, because we wanted to have a little bit less international exposure even within our revenues, and so that's that's been a change that we've made at the margins, I would say, like everything else, it remains to be seen what will happen over the next year or two, and we don't know to what degree we'll see tariffs, whether the tariffs will be a little bit more surgical in nature, whether they'll be across the board, or whether the tariff rates will be much higher than expected.

I think it's a big unknown, and so there is some uncertainty. But at the.

I think it's a big unknown, and so there is some uncertainty. But at the.

Margins, we've definitely been a little bit more domestic focus, and we've moved down a little bit in terms of market capitalization versus where we were about a month ago.

Margins, we've definitely been a little bit more domestic focus, and we've moved down a little bit in terms of market capitalization versus where we were about a month ago.

The President elect has also put a lot of focus on expanding production of domestic crude oil. How are you feeling generally about the energy complex?

The President elect has also put a lot of focus on expanding production of domestic crude oil. How are you feeling generally about the energy complex?

And they're just pretty complicated.

And they're just pretty complicated.

And the reason I say that is, you know, all things being equal, you would expect a lot more supply to potentially drive down the price of oil, and that could make things a little bit more challenging for energy companies.

And the reason I say that is, you know, all things being equal, you would expect a lot more supply to potentially drive down the price of oil, and that could make things a little bit more challenging for energy companies.

However, we also think if you look at the stocks within.

However, we also think if you look at the stocks within.

The energy sector, it's been one of the more challenged sectors, definitely in the bottom quartile in terms of SOTCK returns at least prior to the election.

The energy sector, it's been one of the more challenged sectors, definitely in the bottom quartile in terms of SOTCK returns at least prior to the election.

So we think it's a more complicated picture.

So we think it's a more complicated picture.

We think deregulation and we think the ability to make higher revenues is definitely a factor.

We think deregulation and we think the ability to make higher revenues is definitely a factor.

And one that we think is a positive for the sector. On the other hand, we think if there's.

And one that we think is a positive for the sector. On the other hand, we think if there's.

Too much supply, that can drive down the price of oil and potentially reduce some of the profitability. So at the margin, we're really looking at it being a net positive for companies in general. And then because the stock valuations had been a lot lower and pretty depressed heading into the election, we think the energy sector is a good place to look for opportunities more because of valuation, not necessarily because we think expanding production dramatically is going to be good for profitability, because we think that'll be more ahead when the people are expecting.

Too much supply, that can drive down the price of oil and potentially reduce some of the profitability. So at the margin, we're really looking at it being a net positive for companies in general. And then because the stock valuations had been a lot lower and pretty depressed heading into the election, we think the energy sector is a good place to look for opportunities more because of valuation, not necessarily because we think expanding production dramatically is going to be good for profitability, because we think that'll be more ahead when the people are expecting.

Well, I'm glad you mentioned the issue of deregulation. Today we learned that the chair of the SEC, Gary Gensler, is planning to step down as of January twentieth, and there are a lot of folks saying that his departure will likely lead to an unwinding of regulation and maybe a little bit more friendly approach when it comes and maybe a little friendlier approach when it comes to cryptocurrencies. Earlier today, bitcoin broke above ninety nine nine thousand for the first time. How do you feel about cryptocurrencies?

Well, I'm glad you mentioned the issue of deregulation. Today we learned that the chair of the SEC, Gary Gensler, is planning to step down as of January twentieth, and there are a lot of folks saying that his departure will likely lead to an unwinding of regulation and maybe a little bit more friendly approach when it comes and maybe a little friendlier approach when it comes to cryptocurrencies. Earlier today, bitcoin broke above ninety nine nine thousand for the first time. How do you feel about cryptocurrencies?

I mean, in general, our stance has always been cryptocurrencies are pretty speculative in nature. We treat them as commodities in the sense of it's really hard to get a fundamental value.

I mean, in general, our stance has always been cryptocurrencies are pretty speculative in nature. We treat them as commodities in the sense of it's really hard to get a fundamental value.

So for the most part, we've we've.

So for the most part, we've we've.

Really stayed away from cryptocurrencies as far as something that we would invest in and put part of our client's portfolios, as far as.

Really stayed away from cryptocurrencies as far as something that we would invest in and put part of our client's portfolios, as far as.

From more retirement point of view.

From more retirement point of view.

But we have a lot of questions about it, clearly with a lot of price movement, and to your point, you know, you've seen the price of bitcoin really explode. Not only does it look like Trump Trump was likely to win the election, but post election as well. So we've had a lot of questions about it, and again we really put it into that speculative bucket, not something that we have within our within our general portfolios, but something that we get a lot of questions about, and we really think about.

But we have a lot of questions about it, clearly with a lot of price movement, and to your point, you know, you've seen the price of bitcoin really explode. Not only does it look like Trump Trump was likely to win the election, but post election as well. So we've had a lot of questions about it, and again we really put it into that speculative bucket, not something that we have within our within our general portfolios, but something that we get a lot of questions about, and we really think about.

It as something that has, you know, supply and.

It as something that has, you know, supply and.

Demand characteristics similar to what you'd see with gold or precious metals. So for now, we're not using it within our portfolios, but we are getting a lot of questions about it, and I'm sure when and if we cross that one hundred thousand dollars mark, the questions will only increase.

Demand characteristics similar to what you'd see with gold or precious metals. So for now, we're not using it within our portfolios, but we are getting a lot of questions about it, and I'm sure when and if we cross that one hundred thousand dollars mark, the questions will only increase.

Yeah, and I'm wondering whether the strategy is not to be long bitcoin per se, but maybe to invest directly in an ETF. Does that make sense?

Yeah, and I'm wondering whether the strategy is not to be long bitcoin per se, but maybe to invest directly in an ETF. Does that make sense?

Yeah, I mean we know as financial advisors it would be pretty difficult for us to help people invest in bitcoin directly. We're definitely set up if we were to have exposure bitcoin to use it through et apps for etns or other financial instruments, So that's really how we would access it. But I'm sure there's plenty of our clients who are accessing it directly.

Yeah, I mean we know as financial advisors it would be pretty difficult for us to help people invest in bitcoin directly. We're definitely set up if we were to have exposure bitcoin to use it through et apps for etns or other financial instruments, So that's really how we would access it. But I'm sure there's plenty of our clients who are accessing it directly.

It's just not something that we would be helping them with.

It's just not something that we would be helping them with.

Chris, thanks so much for joining us. Chris Zaccarelli there. He is the chief investment officer at north Light Asset Management, joining from Charlotte, North Carolina here on the Daybreak Asia Podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Prisoner and this is Bloomberg

Chris, thanks so much for joining us. Chris Zaccarelli there. He is the chief investment officer at north Light Asset Management, joining from Charlotte, North Carolina here on the Daybreak Asia Podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Prisoner and this is Bloomberg