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00:00Seth Freeman, thanks so much for joining in, great to have you. Can you hear us?
00:04Yes, I can hear you. Sorry about the technical problems.
00:06No, no, completely fine, Seth. I mean, that happens to the best of us.
00:10But just trying to understand, Seth, there are two or three big stories here. Let's start off
00:14with Japan and, you know, the surprise election outcome. Some people call it a surprise.
00:20What's the impact, Seth, of the same on monetary policy in Japan, the yen,
00:26and thereby any impact of the yen carry trade on other EM stocks?
00:31Well, we've been seeing the decline of the carry trade opportunity over the last,
00:37I don't know, six weeks or so. So this sort of thing is very positive for emerging markets.
00:45You know, long term, to the extent people were borrowing in Japan and investing in India,
00:53I don't know if that's really a thing. I don't know what the numbers are behind that.
00:58But, you know, we're seeing a complete shift with what's happened from just,
01:05I was on with you like a week ago, 10 days ago, after the US rates went down.
01:12And some policy announcements like we saw in China, for example, really made the market there
01:21rock at 22%. So policy changes in Japan are likely to have a much larger reaction than we
01:30would anticipate. Just specifically, Seth, on what Mr. Ishiba is expected to do, and let me come to
01:40the Bank of Japan action. Last we heard, Bank of Japan increases rates, this yen carry trade
01:46tsunami hits world markets, and then Bank of Japan and the then government comes in and says,
01:51okay, okay, we're going to go slow. Is there a concern that with the new Prime Minister coming in,
01:56this stance gets reversed, and we could see aggressive rate hikes? What would be the impact
02:02thereof? Well, if there are aggressive rate hikes, that could be very disruptive to, you know,
02:09hedge funds who have very complex trades in place. But I would be really shocked.
02:18There are, you know, political and even cultural constraints on making major shifts within the
02:25Japanese market. So I would be pretty surprised if we're going to see major changes.
02:33Okay, let's talk a bit about China, Seth. And what are the concerns as far as Chinese economy
02:40goes? The PMI now, factory data has come in negative as was expected, but then a lot of
02:44moves being announced by China in quick succession. Is this giving some comfort?
02:51Well, look what happened to the market in just a few days in China. It pulled in a tremendous
02:59amount of money. And, you know, suddenly, investors, especially, you know, hedge funds
03:07and shorter term traders are very excited about the Chinese market. However, the market's one
03:15thing. The tight control by the Politburo, and the basic fundamental political
03:26shift risks, and especially the terrible real estate industry there, that doesn't go
03:34away overnight. So I think that this is really, we're seeing movements based on
03:40pure opportunism, not necessarily long term commitment.
03:45Okay. Just trying to understand, Seth, in slight more detail, one question,
03:50there's a big rally building up in metals, right? So my question to you is,
03:53can there be further upsides to base commodities and industrial commodities,
03:58because of what China has done? Or is the global growth overhang gonna hit those prices? Because
04:03crude is certainly not lifting off, even as base metals are. So what happens there?
04:09Well, you know, I think it really has to be more specific to which metals and the demand drivers
04:17for metals, as opposed to broadly, you know, base.
04:20So which metals do you expect to rally, Seth? Let's put it that way.
04:23Well, you know, copper is still hot, after being kind of in the doldrums. And, you know,
04:34zinc and some of these other metals that have been used a lot, lithium, is obviously not a
04:39base metal for batteries, has subsided quite a bit. The issue in terms of some of these other
04:48base metals is related to infrastructure investment, and construction, and autos.
04:56So it kind of depends on how those particular industries are going to do.
05:00Just one last point, Seth, and you spoke broadly about the impact of what could happen in China,
05:05impacting all or, you know, hitting all Asian markets, but the specific India view,
05:10what is the specific India view emerging at this point? Because it's being looked at for now,
05:16sometime vis-a-vis China. So even as China continues to contract,
05:21how do you think the flows are going to be and the view is going to be on India?
05:26Well, I think those numbers you were showing for the aggregate numbers for September were pretty
05:32amazing. And what's most amazing that both domestic and international investors have to be
05:39observing is look at the number for domestic investors. You know, 10 or 15 years ago,
05:46this didn't exist like this. And foreign investment and money flows from foreign investors
05:52could just roil the Indian market. And the growth and the relative stability of domestic
05:59investors has completely changed Indian market dynamics. So yeah, you can see that fund flows
06:05were negative from foreign investors, but four times, three and a half, four times bigger
06:11by domestic investors. This didn't exist. And domestic investment is going to continue
06:19over the next decades. So for those reasons, I think that, you know, lower interest rates,
06:26continued problems in China are positive for India.
06:30Okay. Thank you so much. Sait R. Freeman there talking about, you know, what is the kind of
06:36impact we're going to be seeing. As far as India is concerned, well, the flows have been coming in
06:42and IPOs are moving them to a large extent. And don't forget that you have big IPO set up
06:48for the next few days.