China will likely meet its GDP target but it won't be enough for the market: CIO

A big day for in Dallas with your summit to this afternoon. We’ll get to that in just a bit. I want to 1st get your outlook on China. The news today being that Fitch has cut its ratings outlook on the big China banks as well as Alibaba and Tencent and this is a similar cut following that of the China sovereign rating just last week. I want to get your take on what your investment thesis is for China, given yesterday we had better than expected GDP read for Q1 coming out 5.2% is China investable? What is the outlook? Great question. I think the downgrades itself is nothing surprising following the sovereign downgrades and Fitch followed Moody and so this is a natural progression. I think obviously they downgraded the systematically important banks, the public banks, state banks and so that’s an extension of the sovereign downgrade. And I think the underlying cause is the concerns about the balance sheet of the Chinese government, which is public finances and then the growth prospects of the Chinese economy. And there’s that is where I think there is a clear difference between what the government’s priorities are and what the market is hoping the government does. And that is the result of the, you know, the response to the market to a relatively strong GDP growth number. That’s a price on the upside because I think the government is driving public sector investment, especially in the first quarter. So that we start with a strong growth number that sets us up for success for the 5% growth target, which is very different from what the market wants, which is more stimulus, whether it’s monetary or fiscal, which will drive earnings and growth in, you know, the market and the economy. And so I think there’s still a a broad gap that exists and I don’t think it’s been narrowed as a result of either the GDP numbers or the fish downgrade. I think that going forward the market is likely to be continue to be disappointed because the government is constrained the strong U.S. dollar and the high interest rates in the US is limiting their leeway to cut monetary you know policy and stimulate the economy from that perspective. And then obviously, the state of the balance sheet limits their capability on the fiscal front and the underlying economy remains relatively weak with domestic demand and retail numbers continue to weaken. There is a continued disinflationary environment in China, which is a real challenge for the government. So I think it’s going to be a tough challenge for the government. I think they will meet the GDP target, but it’s not enough for the market. So we’re seeing this sluggishness in China. The market is not going to get what the what it wants is what you just said. Now here in Hong Kong. We’re seeing some sluggishness here as well, which brings me to ask you why this doubling down in Hong Kong? You’ve launched a a full app. You’re having a big investment summit here today. Why the expansion here? Yeah. I think we need to separate the cyclical aspects of the economy and the structural growth that we’re seeing in especially the wealth market in an especially an aging economy and a developed large rich economy like Hong Kong and where China wants to eventually get to. I think that there’s tremendous potential for the wealth management industry that Hong Kong is developing very well. I think private banks have a significant presence here. We feel that wealth management for individuals and families is something that is critically important for the future of society. And one of the key areas that we focus on that is very unique to us is the focus on retirement and pension and trying to secure the future of individuals. And that is an area where I think we’ll have a lot of upside because pension assets are only growing structurally and people need to prepare better for retirement. And that’s where in Dallas comes in. That’s what we have successfully done in Singapore and we want to do that in Hong Kong with in the future also an MPF as well.