– This is the script of CNBC's news report for China's CCTV on July 7, Tuesday.
Welcome to CNBC Business Daily, I'm Qian Chen.
Volatility in Asian equities will remain elevated into the first Fed rate hike, said Kevin Tay from UBS Wealth Management.
"Given the measured pace of hikes that the Fed envisages, we believe domestic liquidity will likely be ample in Asia. Investors should stay the course and remain selectively invested." - that's the advice that UBS is giving its clients.
So where are the pockets of opportunities, as we approach the start of the rate hiking cycle?
UBS's highest conviction equity market remains to be India, for its cyclical growth recovery, ongoing policy easing and commitment to structural reforms, most recently demonstrated by the lower-than expected rise in the minimum support price hike for paddy.
Tay says markets in Taiwan and the Philippines are worth watching as well.
As for China, UBS thinks policy easing remains supportive of a constructive stock market. Given the significant volatility and signs of stretched valuations in segments of the onshore markets, however, they remain neutral on MSCI China in the tactical asset allocation.
[Kevin Tay, UBS Wealth Management] "I don't think it's gonna end anytime soon, because you get this market going up, largely because of liquidity, because of leverage. And all of them actually are running right now, then you get the margin redemption coming though as well. So this is actually going on for quite some time. It's not a bad thing because you don't want the index to be too high, and it was really very very high, in the first place, it was certainly a bubble building up."
China's Market Booster Shots
JUNE 27 PBOC CUTS RATES
JUNE 29 PLAN TO LET PENSION FUNDS INVEST
JULY 1 PROPERTY ALLOWED AS COLLATERAL
JULY 3 MARGIN FINANCING RULES EASED
JULY 4 IPO's FROZEN, STABILIZATION FUND PLANNED
JULY 4 BROKERAGES TO BUY $19.4 BN IN STOCKS
However, all of these have NOT been very effective to stop the plunge of the Chinese bourse. Tay says it's the herd instinct that's acting on the market.
[Kevin Tay, UBS Wealth Management] "When you get a situation like that, when there's a lot of negative sentiment there, there's just so much that the government can do because everybody is panicing. Clearly, there is herd instinct right now that is acting on, people are getting out, they just rushed out of the door."
Tay prefers selective sectors with earnings and policy support - financials for example will benefit from the ongoing policy easing, Hong Kong-listed small-mid caps should be in focus given the upcoming Shenzhen-Hong Kong Stock Connect, while Chinese companies that benefit from state-owned enterprise (SOE) reforms and a 'going global' strategy should also outperform.
On the other hand, analyst Puru Saxena said if there's anything we can learn from the past, the 1998 stock crisis in Hong Kong might provide some lessons.
[Puru Saxena] "If you look at the margin financing itself, the latest number we saw, we've only seen 10% deduction of the margin financing of the outstanding debt from about 2.3 trillion to about 2.05 trllion. So this thing could fall furthur if the Chinese government doesn't step in 120730 itselt and start to buy Chinese equities itself like the HKMA did in 1998."
CNBC's Qian Chen, reporting from Singapore.
VO: "FC6 9" / "FC6 2" - Show beauty shots of Bali's beaches, temples and rice fields // 5"
103023 BALI'S ANCIENT TEMPLES AND PERFECT BEACHES HAVE LONG ATTRACTED DREAMERS. 103031
VO: "FC6 5" Show Hubud sign, rice fields // 6"
BUT NOW, AN UNUSUAL START-UP SPACE IN UBUD IS HELPING ENTREPRENEURS TO EAT... PRAY...CODE. 103038
Search "Hubud PTC"
BEST - S PTC: 15:50:35 Co-working spaces are like the Uber for office spaces, and who would have thought you'd have found one of the world's top ones, right here, in the jungles of Bali. 15:50:45
VO: "FC6 5" Show rice fields, cafe, people interacting and typing away at their computers // 18"
103052 WITH ITS HIGH SPEED INTERNET AND VERDANT RICE FIELDS, HUBUD - OR HUB IN UBUD - IS BRINGING THE DIGITAL AGE TO BALI'S LAID BACK LIFESTYLE. 103103
THE ISLAND IS NOT JUST FOR BACKPACKERS ANYMORE. 103108
103112 MILLENNIALS ARE GLOBAL NOMADS.... WHO THEY ALL SEEM TO TRAVEL WITH THEIR MACBOOKS IN TOW. 103117
103125 THAT TREND IS TURNING UBUD INTO A BURGEONING TECH HUB. 103129
"Hubud Wall" + "Hubud Wall1" + "Hubud Wall2"
Wall SOT: 13:37:20 P: Most of our members are between the ages of 25-39. And what we're finding is that people in that demographic are kind of rejecting more traditional ways of working. 13:37:28 They're rejecting corporate jobs, they want more control over their work. 13:37:33 // 13:37:37 They're able to travel and work at the same time, through spaces like this. 13:37:39 We're not the only space like this in the world. // 13:37:45 So it's definitely a growing phenomenon, and I can't imagine it's going to stop any time soon. 13:37:50
"Hubud Dystra" + "Hubud Dystra1" + + "Hubud Dystra2" + "Hubud Dystra3"
Dykstra SOT: 15:10:02 G: Well, Hubud is like a little oasis. // 15:10:11 It's inexpensive to be here, // 15:10:23 There's amazing people here, and they have the best internet in Bali. 15:10:27 // 15:10:33 Everyday they have skill-sharing sessions. There's a little cafe here so you can interact with the people that are here, you learn about the projects that are going on. It's really kind of a collaborative space. 15:10:47
Search "Echelon 2015 broll" - Show the crowd, activity, networking at Echelon // 10"
103129 AND WHERE THE CODERS GO...THE MONEY FOLLOWS. 103133
103133 VENTURE CAPITAL FUNDING FOR TECH COMPANIES IS FLOWING INTO ASIA -- FASTER THAN ANYWHERE ELSE in the world. 103142
Y:/ Insert CB Insights graphic // 11"
103142 IN FACT, THE OUT OF THE TOP FIVE CITIES SEEING THE MOST GROWTH IN BOTH DEALS AND DOLLARS... ONLY ONE OF THEM IS NOT IN ASIA. 103150
103220 SO COULD THE NEXT SILICON VALLEY BE IN ASIA? 103225
"Hubud Lauria" + "Hubud Lauria1" + "Hubud Lauria2"
SOT: Vincent Lauria, Golden Gate Venture: 124110 V: The past year's been phenomenal. // 124645 There's a lot of opportunity here, and there's a lot of what I would call innovation - people thinking differently because they have to solve problems that don't make sense in the US, that don't make sense in Europe. 124656 // 124153 V: There's definitely a lot more money flowing in and around Asia.
VO: "FC6 5" Show Hubud pple sitting in a meeting, participating in a workshop // 15"
103245 AND HUBUD IS AT THE FOREFRONT OF TRYING TO CAPITALIZE ON THAT - 103250
NOT ONLY IS IT BRINGING TOGETHER PEOPLE AND IDEAS 103254
IT'S ALSO LAUNCHING "TURNPOINT" - TO HELP ENTREPRENEURS TAKE THEIR IDEAS FROM CONCEPT TO COMPLETION. 103302
Wall SOT: 13:31:39 P: We found a lot of our members were lacking the skills and lacking the confidence they needed to become digital nomads and freelancers. // 13:31:50 So we're offering a series of courses, here in Bali, to give people those skills, and to give people the confidence to be entrepreneurs and freelancers. 13:31:57
VO: STARTUP ASIA FOR MICHELLE - Show young, Asian entrepreneurs at Blk 71 // 10"
103304 SO LOOK OUT SILICON VALLEY. 103305
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