Let's get to George bob Boras, executive director and head of Research at K two Asset Management in our Singapore studio. George, great to have you with us. Um. So we've been posing on the Market's live blog. You know if there are any alternatives to the dollar, well, this morning there appeared to be and it it brings us to the story of the advanced by the Ukraine military. You can't read too much into it, but my gosh, if this led to some sort of settlement talks between Russia and Ukraine,
that could bode well for the future. I'm getting excited at the thought your thoughts. Yes, Um, I'm looking at the same headlines as you, as you sort of highlighted, and that is a left field Jai political to win without a doubt, um, But but front and center the US dollar strength is I think even those paper that didn't believe it last year, I can say it notwithstanding what you've just said on the Jai political that it's got so much certainty and predictability related to other regents
the world right across the capital structure. When you're investing that while the strength won't continue at this rate, you'd suspect it to stay to these levels for a little bit longer. But notwithstanding again what you've just said that that would be very big positive ta win for Europe. That's in the world of pain so strong a dollar. What about in terms of what other kind of moves we're going to see in risk oursets this week as
we await the key inflation print. Yeah, so you know, like most people will put my head up, Juliete and say, it would be a reasonable statement to say that we are peak inflation in the US, and that's tug and cheek. Of course we are, but it's about the way the unit costs feed into the core inflation measures. Can't see it getting down to that two or three band anytime
soon unfortunately. Um, But it will be positive news. And the headline sentiment is waning, particularly on the retail investor side, sentiment on the institutional side, it's a bit more proactive. Um, But it would be a positive news event this week. Notwithstanding again, I'm using that word a lot. Seventy five basis point is a lot for this month, and those people that are trying to create a narrative that that's not going to happen, I don't think that's quite right.
They've got plenty of opportunity just to deliver the seventy five and do a fifty and then twenty five going to that order, and I think that that that's available and they should go down that pathway, and that gets you right up to four percent on the Fed funds rate.
And we don't have to see inflation at two to three percent from markets to to really stand up and pay attention, right, George, I mean, if you start to see inflation coming down and investors sense that, you know this, this will take some time, but it's happening at a time when the Fed is probably maxed out up around four percenters, so markets might rally spot on, and that's it rallying and restrictive, knowing that it's increasing at a
decreasing rate. Again back to basics. Next rate move, we're going to official type monetary restrictive levels, and then a couple more moved to get to that four four handle. And in that narrative that you said, you know, with minimal rate rises in twenty three, just holding that's a good rally. Multiples are reasonable, they're not cheap, they're not expensive, they're reasonable. High yield is in higher demand in the
short duration. But those two asset class are just naming two of many would would rarely quite strongly on that narrative. What's your outlook for Asia when we're starting to see the latter part of the year coming in. And of course that dollar strength also complicates things here too. Yeah, BlimE, it does complicate things, and it's complicated things again, we don't tend to use March twenty one has been so difficult because what's going on in China and it's just
continues to have more pain delivered to itself. And so therefore we just look at the other side of the Congress and we believe bitter clarity. For five years they've been much more coordinated, innovative fiscal stimulus that can actually work with the p BOC, but not good news coming out of their Hence, evaluations are very very cheap. Nevertheless, we still underweight that area where we traditionally would be overweight.
But you know, Alie Barb and JD are just too that we would have picked up in that late June quarter sell off. But a world of pain still to be delivered. Let's just get the other side of this party Congress and try and get some certainty and to see what they're what they're going to do for the years ahead to deal with this economic destruction of that that's been delivered through that economy. Let's pick up on what you were talking about with the China COVID zero
policy or dynamic zero. We're looking ahead at the Party Congress to see whether or not that is dropped or not. If it is, do things change materially from there? And I guess what our sets would you be looking in China that are potentially undervalued at the moment. Yeah, a million dollar question, Juliet, but quite clearly post the Congress, expectation for more certainty from a low base, that's pretty
reasonable statement. And then basically cross across the board and everything is discounted in China again because of Beijing's policy pivot in March twenty one. That's really confused the West in trying to acquire and buy future earnings. So there's so many, so many opportunities in mainland China, but obviously the domestic demand that they're more consumption expectation for the
decade ahead, there's just so much upside. But right across the board earlier there's just discounts for what's been going on and the disappointment. So obviously, you know the five and a half were never going to happen from a year ago, but obviously now we're getting that three and a half possibly a two handle. So they're really got to turn it around for this calendar year and get those upgrades for twenty three and then twenty four and beyond.
But again, the certainty from Party Congress creates opportunity. The more opportunity and certainty they can create for investors, they need capital, it is finite. Still, there's there's opportunities right across the bord to mainland China staying away from property still as they did as that destruction. It's working through the system to the p BOC come up with some top of broad based solution. But a bad bank perhaps can be part of that narrative. But but yeah, it's
discounted through out for many many reasons. You can you can flip a switch on on dynamic zero, but you can't flip a switch on the on the Chinese property crisis. Is that something that they are going to be suffering the consequences from that for years to come. Spot on and really looking for a new quote Mario drag Pboc Beijing narrative, like something big has to happen to solve
what is significant. This is the biggest property impairment the world's ever seen, and it has to be addressed some way. But having said all of that, the again, it's all about that certain team policy. They need to start from a low base and create that. And then with the opening up of mainland China, let's look at the template coming out of Japan. Much smaller, completely different economy for
obvious reasons. But the opening up of Japan is a is a smaller template of what will be happening in mainland China when they do decide to really open up sometime next year. How attractive is Japan. I've also got that incredibly weakend. Yeah, it's it's it's always attractive. It's just it's generally a safe haven to not go to underweight, Julian,
let it go to overweight. But nevertheless, Japan is attractive in the reopening narrative that particularly from October November this year, it is an attractive place to be and a lot of a lot of funds that have been investing in Asia I've been using more and more Japan and at the bottom end Australian New Zealand for the dividend to compensate for what's been going on in China and those
linked to China earnings. I take it you raised some cash over the past a couple of months looking for the right opportunity where where will you deploy them with the most feverish aggression. Yes, so the cash was quite high in this in the in the June quarter and about ten. It has been deployed in July and August and so far so far in September, but that's been
deployed coming out of that sell off into energy. So even at global portfolio, so woodside because of the Woodside global portfolio as few depresent l n G. So we're looking maintaining that overweight. Looking at global financial with US dollar base, so you get JP Morgan's in there. We put mcquarie Bank in that bucket for what it's worth because of the diversification of earnings were across their business units, and the and the compelling valuations across some of Corey
business units UH and then UM and anything. Looking for m and an opportunity with the big cash flow, so that that puts b hp rio into that into that basket an opportunity there. But but but basically that l m G play has been a bigger contributor at some diverse five financials U S dollar base. There's still like the U S dollar narrative and for the two cents
worth for those out there. We look at the SMP five hundred ranges for the year ahead as a forty four hundred thirty nine hundred, so we're towards that bottom end of that range. Again, there's some head winds there, but they're more predictability for those earnings in the year ahead, not despote some risks. We think it's on balanced, quite reasonable. George,
thank you and enjoy Singapore. George bboris executive director, head of Research a care to Asset Management with us in our Singapore studio