Can the Asia Equity Rally Continue?
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From the Trump Xi meeting in China to the global race for advanced semiconductors, North Asia is increasingly at the center of both geopolitics and markets. So what's driving the region's momentum, and can it continue? Welcome to Exchanges, the weekly show where I find out how we here at Goldman Sachs are making sense of the most consequential events impacting economies and markets. I'm Allison Nathan. My guest today is Tim Mo, chief Asia Pacific regional equity strategist and co head of macro research in Asia in Goldman Sachs Research. We'll be discussing the implications of the Trump g meeti
Well, thank you so much for having me.
So, Tim, let's start with last week's much anticipated summit between president Trump and China's president Xi Jinping. What stood out most to you from those discussions?
I think the key takeaway is that it appears no harm was done. I know that sounds like a very low bar, but if you wanna classify the various presidential meetings, US presidential meetings with Chinese counterparts, there's an accepted scholarly classification structure of six different levels ranging from most positive and consequential to most negative. And this was in the middle with not really a lot of major change. But against the background of tension geopolitically globally and concern over US and China friction, just having calm in the relationship, I think, was appreciated and desired
So that is an encouraging takeaway. I think no harm done. I like that, Tim, in the way you put it. If we think about the Chinese equity markets, they have struggled to sustain momentum despite some periodic support measures, and we have seen many rallies. We just got another set of economic data out of China. It wasn't particularly encouraging. What do you think global investors will need to see before confidence in China can really meaningfully improve?
So I think there's really three key points to make here within the ever complicated Chinese equity spectrum. The first is that there's a really big difference between onshore a share equities and offshore commonly known h shares. And if you look at the performance this year, a has outperformed pretty meaningfully. It's up close to 10% year to date, whereas the MSCI China Index, which is our favorite measure of offshore equity performance, is down 2% year to date. So there's a decent spread between those two. We've been much more positive on a, and happily so, for a few key reasons which in bri
It's an interesting point you make, Tim, because China is one country where more inflation is actually received positively as you explained. But when you think about this, though, you said China complicated market. If you were gonna think about overall sentiment right now, we have seen it very low on China. In recent years, we've seen it much higher on China. Where would you put investor sentiment at this point?
I'd say pretty much midrange, maybe over the fortieth percentile around there. And I can say that with some degree of confidence because, number one, we've got very good sort of higher frequency metrics in terms of hedge fund positioning, both gross and net and also mutual fund positioning. And hedge funds are at roughly around the fortieth percentile. Obviously, jumps around from week to week but around that level in terms of net exposure where exposure to Japan, Korea, Taiwan is like at the 100 percentile. So I think that people are more dialed in there, but it's not as low as the single dig
You mentioned the very positive sentiment in some other North Asia markets, and, ultimately, that ties to their outperf
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