To Max Mondori joins us. Max is the CEO of s GMC Capital. He joins from Singapore. It's always a pleasure Max. So much of this price action seems to be driven by this idea that the Fed is getting very close to some kind of an adjustment in it's thinking when it comes to rate hikes. Maybe as soon as December we become or we're faced with a less hawk is fed. Do you think that's a possibility. Well, definitely in terms of future rate hikes, we're going to
see a slowdown. They're probably gonna do a zero seventy five now and then they're gonna slow down the pace of hiking. But I was also normal they couldn't keep going at seventy five apiece every time. The real question here is in terms of messaging and in terms of
how long interest rates remain at elevated levels. Just keep in mind, if we do get to that four and a half five percent kind of band, that is quite restrictive as a policy, and the market now is probably a little bit over optimistic and expecting the Fed to start cutting rates already as early as July August of next year, when we think actually rates could remain higher for longer in order for inflation to really come down and put a humper own growth before Yes, future hikes
will be lower, but from here to a dabbish FED, I think there's still a lot of time for us. Do you sense that we are getting towards the end of the inflation fight or perhaps just the end of the beginning. Well, we've seen the peak, and I think that's more or less given. I mean, of course, unless something big geopolitically happens, but how quickly that will come down,
it's still a question mark. And the real issue here is that for inflation to really decline meaningfully closer to the FEDS target, unemployment in the US has to come up, because that is the only way that you really are going to be humpering growth and you're going to have less demand in the system. And then, of course, if that happens, that's bad news for living standards in general
and for US and valuations. Therefore, Uh, we're definitely in a better position than we were a few months, right, But there's still a lot of work to be done. So you just mentioned geopolitical risk, and I'm wondering whether the market is maybe a little too complacent, whether it's what's going on in Ukraine, the notion of a dirty bomb of some sort, or China and incursion on Taiwan. I mean, do you think the market is too complacent in measuring geopolitical risk right now? We believe the market
is too complacent. The issue with these risks is that they're extremely binary. So um, if something should break out into any of the risk that you have mentioned, whether it's the Taiwan, whether it's a dirty bomb, clearly you're going to have a massive repercaution. Negative reprocution on marketing is going to happen extremely quickly. But if that does not happen, then you've probably already seeing quite a few of the economic risks, not all of them, but a
few of them already been discounted before. It's all a question of the likelihood that investors put in the materialization of such risks, and of course will depend in terms of the narrative going forward. A rise and unemployment would be one of the key things that causes the fit to make a devilish pivot should that happen, though other
risks come into focus as well. What do you consider to be the risk of a recession in the US, and more broadly, well, we believe the US will enter a recession and the unemployment rising is really the only way for inflation to count down because you need to get a demand down and need to get growth down, and that's the only way that inflation is gonna come down from the current levels to roughly in line toward
the fat things um with respect to economic risk. Of course, that means that there's going to be less growth and there's going to be less demand, But that's what you need in order to get inflation down. You need to call down the economy. You need to pull push on the brakes, um and the fourth That's what we think and that's actually going to be that news also for leading standards overall, because we find employment increases that's never good news. But again we believe that this period of
faith will need to materialize in order for fatther Reaches objectives. Max, I'd like to get your view on China now that we have the Party Congress in the rear view mirror, and we know now that Washington is using kind of bands on US chips and chip expertise as a way of exporting that technology to China. Which has the potential to really stifle a lot of development of advanced Chinese technology. Give me your your sense of how significant this is
and what the repercussions could be. Well, it is definitely very significant, first of all, in terms of relationships between the U ask China. Clearly here we are escalating on the negative side, and in terms of actual process of growth for the industry within China, that's also negative news, especially given that one of the plans and the objectives of China is to improve their technological If you want advance, obviously, if you don't have the correct access to semi conductors
and microchips, that becomes extremely hard developing domestic alternative. We all know it's not that easy, uh, And therefore, in this fast space environment, even losing out a few months of normal growth and development probably needs light years in other industries before we think it will have an impact. It will have an effect. The question is China will definitely try and see some domestic alternatives, but it's not
so easy. So the question is really how much of help and support they're going to try and give to this industry in order to figure out some local alternatives. How do you view the investing environment in China at the moment. You know, a number of stocks and other assets are very very cheap, but there are a number of risks as well. Are you looking at the space. We're definitely looking at the space. So it is true that from an absolute and relative point of view, valuations
are cheap. But it's also true, especially after the recent cong risks, Uncertainty is very high, visibility is extremely low, geopolitical risks are very high. Headlines rings remain high. We have seen that it's unlikely that they're gonna turn particularly market friendly anytime soon before. Not having a Chinese exposure is is we believe not correct. But also we have been trimming down of our exposure given the recent news.
And keep in mind that, yes, evaluations in China are cheap, but after the reason fall we've seen in other markets where you definitely have more visibility, you're also getting some cheaper evaluations elsewhere. Uh. Therefore, we do keep looking at it. We are in the market, but we have been scaling down also because now a number of alternatives have started
to appear. So Max, when you have the morning meeting later today at s GMC Capital and you talk about the strategy between now, let's say in the end of the year, give me thirty seconds on what that looks like. Short term, you could see further bounce, but we think that the market is likely to go to contest June lows. Again. There will come a time of buying and there's going to be great buying opportunities, but it's not now yet. We need to be a little bit more patient. More
play needs to happen within the US economy. So we're probably looking at you want you to over next year and really start deploying the remainder quarter is probably still the time to be cautious. Alright, Max Bondor We'll leave it there. Thanks so much for joining us on Bloomberg Daybreak Asia. Max Bondori is CEO of s GMC Capital