Hong Kong is pushing for this full reopening, whether or not that last. Let's discuss all that with Sam Lacorner, co founder and CEO of Stonehornet Global Partners with us in our Hong Kong studio. So Sam, a lot to discuss on the global front, but let's start with Hong Kong. Because the dismantling of hotel quarantine business is now pushing for a full reopening. How much does this thing? How much does this change things for Hong Kong? Yeah, good morning.
It's one of those things where it's definitely a step in the right direction. Um. I still think that there is the communication and what's required for a full unconditional reopening. Just having discussions over the weekend and people come in to Hong Kong in the near future. Um, there's still things that were required to be done. So I think that COVID is essentially obviously coming down here in Hong Kong. You can see that with the statistics. But the economy
has been hurt, has been hurt in China as well. UM, and a whole reopening, I think we'll remove some of the anxiety that's caused with the lockdowns that have been in place when it comes to mainland China stock investors very much looking to capitalize on any potential policy shifts at the Communist Party Congress next month. Do you think it is likely we will see a pivot away from dynamic zero and of course how much that changes the
outlook for China's economy. Yeah. The twentie Party Congress is the most important media in China for the last decade. It is so fundamentally important for the politic borrow to get the right people in. And there's an arm wrestle within the Communist Party at the moment in terms of opening up and those who are sort of leaning towards
the historical sort of ideologies as well. So something like COVID has been devastating to the to the underlying macro economy and lifting it is something which they need to prioritize, and in fact, economic policy needs to be prioritized over sort of political sort of internal issues that they're facing at the moment. So this, this this meeting cannot come too soon. It's such a fundamentally important one. And then they really have to get on with it because the
economy is faltering. It's not just the COVID policy. It's a proper to crisis as well. Where do you look for, I guess, kind of exposure to stocks that might either benefit from the reopening or some support for the policy of the property sector. It's a really good question. The property sector is something which has been induced. So they have the three Red Lines policy trying to get property developers to de leverage starting from about three years ago.
So you'd expect them to have a firm grip on this, but I think they've underestimated the issue. And the issue, I say is consumer confidence. The policies that China is putting in place a really supply side there. There's plenty of abundant liquidity. They're lowing the various loan prim rates and mini term lending facilities, so adding the liquidity and cutting cutting interest rates, but people still aren't going out and spending, and they're certainly not purchasing property at this point.
And that's a really issue because the oversupply is something like about two million to two million rather units of of unfinished inventory, and unless that clears, you're not going to have people come out because they're worried that the property price is going to continue to decline. So it's a really tricky one at the moment for China. And do we continue to see weakness in say the MSCR China Index, which is down about quarter versus a loss
of less than five percent for global stocks. Yeah, it's fundamental valuations are the most important thing. And you know with the Hangsing Index at a round about eight een thousand, and it's it's just one of those things where you're at sort of two thousand and eleven lows and you can pick up these tech names and Chinese sort of internet names at record low valuations. So that's the most important thing is to try to put everything into the perspective.
Obviously there's a lot of negative sentiment, there's a lot of issues in regards to consumer confidence. But we're seeing that these valuations are almost at record lows, and that's what we're focusing our attention on. A lot of the fair hikes. Momentum is really boosting dollar as we know. Is there a concern that we could see a reprise of financial crisis level stress for Asian currencies? Yeah, it's
a great question. Um, we've been looking through that and Asia in itself, there are the vast majority of m c I Asia extrapan in current account surpluses, so it's not essentially the same as it was at seven. And also if you look at the excess foreign debts, so
US denominated debt as much lower as well. But whenever you have a situation like this, where there's a bit of a crisis and confidence, you will see a rush to quality, and that's the US dollar, you know, the international trade exchange rates, so there are pockets of concern.
The rupee in India has depreciated to all timeloads. You've got some other markets which are more commodity based, like in Indonesia, but they are running a slight current account surplus, and other countries which are benefiting from the manufacturing sectors, such as the Vietnamese Dong, is holding up relatively well. So across Asia, you'd expect emerging markets to have a big sell off in currencies. We're seeing that, but not to the extent that you'd expect. You say, global tightening
is tough, but it is necessary. Do you agree with what Raphael Bostick told CBS that the US economy still is strong because of that strong labor market. And I guess to that point, how much of a downturn could we see. I think it's a little bit more than that. I think the the US market is strong because there's confidence, and that confidence comes because people are happy to have their capital there. Um, that's where China is really failing.
If anything. I think the US has underestimated China for for a period of time, and now China's underestimated the US. And what you have is a real disruption in that confidence. So the US market will continue to be strong. They're
bringing jobs home. Obviously the inflation effect is an impact, but long term, I think you'll see more people happy to do business in the US, and the US I think are winning over these sort of supplied chain constraints and disruptions that are occurring through tariff and protectionism, et cetera. These policies are essentially working and their weakening China. So we're we wait and look to see what concessions China will make and what the new era of China will
look like. So perhaps a bigger global headwind then is the energy crisis, and of course what we've been seeing in the UK as well. How much of a of a reaction could we see from from what we saw in the pound and these tax cuts the implications more globally there. Yeah, so I think the supply issues are going to continue. Um, you know, we still need a
lot more money spent renewable energy. China's got their own policies essentially they look to do like the new goals and new measures and the national determined contributions and and favoring solar is their big area. Um. But I just feel that right now that the China has the economy has so many other issues that if they're not prioritizing these things, um, and over time, you know, um, we'll
see what happens. The the issue with the fossil fuels, so you look at oil, gas, coal win particular, which is used in I p p s have all gone up significantly, but now are starting to drop off a little bit. So we'll see where they settle. And obviously what's happening in the Europe is a big issue on these underlying commodities. So are you of the class that is granting more momentum that the school of thought? I should say that we should be looking now at cuts
to three growth forecast for China as well. I mean, forget two which we know is not going to meet anywhere near their growth target three also look very shaky. It depends what they do after the Congress meeting. So it really depends on what policies they have, on what their priority is as well. So they need to focus on economic policy right now. China is at a massive crossroads and they have the control to make the right decisions.
Um And they need to obviously see and and work out where do they sit in this new world aura order that they were the export nation of the world. Are they entered the w t O in two thousand and one, but now they're moving up the supply chain and putting out sophisticated capital goods. What did look like in the future and what policies will help them in an export nation? Um So it really depends, like I've never seen it, this, this sort of like a two
way Yeah, alright, Sam, always a pleasure. Thank you. Sam Lacanu is co founder and ce I O of Stonehorn Global Partners with us in our Hong Kong studio here on Bloomberg Daybreak Asia