Let's get to our guest, Vasu Menon is whether it's executive director of Investment Strategy at OCBC Bank Wealth Management on the line from Singapore, vas who thank you for being with us. At the top of the hour, We're going to get these data points for the Chinese economy and our forecast indicates that they're likely to show modest improvement in the month of July. Is that a safe
bet at this point? Uh? That good morning, and yes, I think it is a safe bet to show that, you know, China will show a slight improvement in July compared to June. I wouldn't be surprised if that happens. But the key word here is slight. You know, there are still several hit wins in China. Uh, they're still COVID lockdowns taking place, your COVID flay ups taking place in China. Uh. You've had stimulus, but no big bang
in China. So you know, yes, the economy is slowly getting back on its feet, but it's a gradual recovery. But even with that gradual recovery, they're still hit wins hit in China, and so you know, China is not completely out of the woods. China not completely out of
the woods. But what do you think in terms of that quarterly Monetary policy statement we had from the PBOC last week that kind of sounded a warning sign about what you've seen from the US and Europe in regards to stimulus and their efforts to kind of fight inflation too. Does that mean that we don't see as much stimulus coming through from the pipeline in China. Well, I wouldn't be surprised if that's the case. You know, I wouldn't be surprised if the Chinese authorities do not undertake the
Big Bang approach. I think they clearly don't want to oversteal with the economy. They've done that before. They're seeing what happens. In fact, they're still paying the price written in to some extent because you know, we've got the property market bubble partly because of previous stimulus as well. And I think they'll be gradual in the way they manage this. You know, they've got they're fighting against several global head winds, uh, you know that are beyond their control,
so they will manage this carefully. Uh. But nevertheless, you know, they've got the dripe out and they can uh, you know, invoked the dripe out they need to, but I think they will move gradually, not the big bang approach. Something else must be a foot. If you look at the credit data from last Friday, shockingly weak numbers aggregate fan financing nearly half of what economists we're expecting. What's going
on here? Well, you know the reality is that you know, Main Street in China is still not doing as well, right because you know the economy is still slowly getting make on its feet. Yes, well, you know, the government can push for stimulus the previews, he can supposedly push for stimudus, get the banks to lend. The real demand out there is still fairly weak because of what's happening with the COVID situation, because of what's happening the property sector.
That's a dragon the economy, you know. So I think it's a reflection of the fact that you know, real demand is relatively weak. You know, corporates are careful consumerus to some extent a careful as well, and you know that's partly coming through in the credit data you just mentioned. See when we look at the I guess kind of bear market rally that you're seeing in the SMP five. What kind of helps to propel that further? Is it a dubbish pivot by the FED or have we kind
of seen a top in this rally? Well, you know, yeah, the market have u surprised everyone in the SMP founder is almost seventeen percent from the middle of June. I mean, that's quite a big move upwards, and a few things have propelled it. I think the earning season has propelled it partly. I mean, you've got better than expected earnings coming out of the US. But the question is is this sustainable in the coming quarters. You've not any major surprises.
You know, more than seventy percent of companies have exceeded market expectations. I think the other fact that you just mentioned is a do wish pivot by the FAT. I think the better than expected CPN numbers, the declining pp A numbers so last week has resulted in you know, markets changing the expectation to a wish fat. But I think the FAT is not ready to turn davish. Uh. They might do that, you know, sometime later this year, early next year, but hey, they're not ready for it.
So when we're looking at markets, Uh, we have seen some momentum coming through in the Asian stock benchmark, but the durability of the recovery already been questioned, and we've got analysts predicting the biggest profit drop for Asian equity since the pandemic started. So does that mean that we kind of an underperformance here from the ms c I Asia Pacific Index versus what we're saying in that rally we saw on the SMP five. Uh, definitely, I mean, Juliet,
I mean you've already seen that underperformance take place. I mean, the US stock market is clearly taking the lead. UH is charging a hit. It also came down the most Uh, you know when you have saw the correction, and also therefore you're also seeing a nicely bound in the U stock markets. And Asia is legging. And I'm not surprised because you know, the US all is very strong. Asian
currencies have been generally weak. Manatoring policy in Asia expected we you know, Titan support the currencies to some extent, and so they had wins in Asia two. I mean, of course, you know, we talked about China quite a bit, uh, and China remains an uncertainty for Asian economies. So there they are issues with Asia, you know, uncertainties with Asia, but that doesn't mean that you know, you're abandoned Asia altogether. I think, you know, medium term, Asia is still a
good story. But you know, in the short term, at least UH, those hid means will play out. I promised to go somewhere other than China in the segment of the conversation, but I've got to talk to you about what the PBOC has just done. They have reduced the rate on the one year mL to UH to seventy five from two eighty five, so a cut of ten basis points. What does this tell you, Well, it tells you that you know, they're ready to provide some degree
of support to the economy. They recognize the fact that the economy is UH languishing, but they're not prepared to do UH. As I said earlier, the big bang approach. I mean, China is moving away from that approach. It's a bit more selective, a bit more gradual. Uh. You know, you're fighting a lot of hit wins, global hit wins, especially the strong, the very aggresive federal reserves. So you know, I think the PBUC saving it's a bullets probably for
later on another day. I mean, but nevertheless, you know, the signal you're sending to the market is that you know they're prepared to step into some extent and do what they can. How attractive is the Japan story for you? We've got the neck to to five on track to erase a year to day laws, and we're looking ahead for a rebound in the economy too with those second quarter GDP figures. Well, you know Japan, Yes, you're right, Japan is an interesting market. I mean, the yen's weekend
now you're starting to strengthen once again. You know, inflation in Japan appears to be coming back. Um, we've got a neutral reading in Japan. We've got neutle reating on US Japan and age X Japan. So we don't see anything exceptional in JEPEND at this junction. But as you as you highlight that, I mean, the economy is rebounding quite nicely. Uh. And you know, the Japanese economy is not open yet. I mean many of the economies have
opened up. Jepend is not opened up. And when they do open up, they'll get that, you know, the pent up demands stimulus for the economy. Uh. You see tories flows coming in greater travel within Japan, most spending taking place, and that could be good for the Japanese economy down
the route. Yeah, and the guys on our m Live blog we're pointing out that as part of this second quarter GDP report, it is preliminary, we get that, but the deflator for household consumption excluding rent was up one point three Is it too soon to say maybe that in the consumer sector you're seeing evidence of inflation and maybe maybe we're close to some kind of inflection point where we're on the other side of deflationary pressures. Uh,
possible that. I mean, you're not seeing any major inflation in Japan yet. I mean, inflation is picking up, as you said, consumer spending is picking up. Inflation is also picking up Japan. Is you know, not isolated case. But but you know, it hasn't gone up enough of the vield to say that, look we need to start tightening and uh. But but it's a good sign. I mean,
it seems to be showing some turnaround the corner. And uh, I think that's one reason why investors and you know, markets have turned slightly more positive in Japanese economy as well, and the stock markets of course, just a very quick word VERTI on a Siena. I mean we're looking at recovery and Thailand really lifting the bars and getting back to those tourist levels too. Is that still on attractive play? Uh, well,
you know, Thailand is not one of our topics. But nevertheless, you know again the Thaie economy is getting the stimulus from tourism. One of the biggest similars you get from you know, you get from COVID nineteen reopening is tourist flow spicking up. And Thailand is a major tourist attraction. So yes, you know, something to keep in mind. But China, Singapore and Hong Kong or topics for ye. All right, Fas,
it always a pleasure, Thank you so much. Fasumnan executive director of Investment Strategy at O C b C Bank Wealth Management. Here in Singapore. This is Bloomberg