Spotlight on Asia

Wellington Investment Video Forum Livestream 3 March 2020

Speakers: Niraj Bhagwat, CA, Equity Portfolio Manager, Asia ex Japan Paul Cavey, Macro Strategist

Moderator: Philip Brooks, CFA, Investment Director ______

[Panel Discussion]

Philip Brooks: Thank you very much, Sashi, and good morning everyone. Thank you very much for joining us. So joining me on the panel discussion today, we have two investment professionals from Wellington here in Asia. We

have Paul Cavey who is based in our Hong Kong office. He is a macro strategist focused on the China market and

broader Asian markets as well. And we have Niraj Bhagwat, joining me here live in Singapore. Niraj is the head of our Asian equity team and a career investor in the Asian equity markets.

To kick off the panel, I thought we would start with the elephant in the room: the impact of the coronavirus. So

Paul, to start us off, could you tell us about the impact of the virus in China, what you are seeing in the economy there, and then maybe flow-on effects to the rest of Asia, and maybe the global economy as well?

Paul Cavey: Thanks. Well obviously, I mean, particularly after we have the PMI data here over the weekend, it is now realizing the economic impact of this on China is immense. We have never seen anything quite like that – quite like this, even I would say really in the 2008 financial crisis. And essentially, China’s economy came to a sudden stop during the course of February, and that meant that PMIs were down on the official version to under

30, which has never been seen in history. Even the Caixin PMI also fell very sharply. So we know that the economy in China has been affected very severely by this.

The other places that are being affected are obviously the neighboring economies in Asia. I guess foremost among

those would be Hong Kong, where there were just some signs after the protest that the economy was beginning

to stabilize at a low level, and now this has delivered a second blow, and essentially tourism and inflows from

mainland are completely stopped as well as they did in China. So those two economies are probably cyclically

most challenged by this.

Now, in China, it does look like there are some signs that the economy is now beginning to normalize and turn

around. The recovery, I think, remains very slow, and there still seems to be a lot of concern about the return of

migrant workers, but it does look like the worst is over in China, and the economy should be recovering maybe to,

you know, 85% levels over the course of the next couple of months or so.

Where I think the impact is now, and the focus now begins to move to is the neighboring economies, and I have

highlighted Hong Kong, but particularly Taiwan, Korea and Japan. Now all of those are going to be affected by the

manufacturing cycle and the disruption in the supply chain that has happened. Again, we can see that across the

PMI data, where there are some very strange movements in indicators that usually are quite well correlated, and this time around, reflecting the supply disruptions, they have already moved in different directions. There is also always the tourism inflows, particularly in Japan and Korea being very important. And, at the same time now in

those economies, the governments are taking the outbreak very seriously, and so domestic services activity is also

going to be very depressed.

One interesting observation maybe to finish with is, when we look at the outlook in terms of where the economies

might be over the course of the next 12 months, in China, in terms of the PMI, actually, it looks like producers are

quite optimistic. So they are expecting a pretty good outturn over the course of the next 12 months. In fact, that

12-month indicator rose to the fastest level in the last five years in the China PMI that was released yesterday.

On the other hand, if you look at Taiwan, that same indicator for the 12-month outlook actually fell very sharply to the depths we have not seen since 2015. So I think what that is telling us is the impact in China has certainly been extremely sharp; it is probably going to be quite short. In economies like Taiwan and Korea, the impact is not quite so sharp, but the impact is going to be more prolonged. So I think it is from here that we expect to see more damage being seen in these neighbor economies as the focus of attention begins to shift away from China, as the outbreak there seems to be coming under some control.

Philip Brooks: Thank you. So it feels as though – and Niraj, please chime in here as well – it feels as though there

is quite a different set of reactions from rate markets versus equity markets. So, you know, last week, I think rate

markets were starting to price in a pretty high probability of a global recession, versus equity markets, which I

think, are reacting at least today with the market movement that we have seen overnight – much more positively.

What is your take on that, Niraj?

Niraj Bhagwat: So obviously, you can see what has happened since the 2008 crisis right. I mean, the equity markets

are completely dependent on the rates, and what the Fed and really the central bankers are doing. And with this

virus, we are once again waiting for these guys to help us. So it is no different this time.

But, you know, I think Paul gave some great comments on the virus, but my view, I get asked that a lot about the

virus and what we are doing. I really think that - I am not a doctor; I have no idea. I know as much as the other

person who is reading the newspaper what is going to happen next.

So the way I am thinking about it is that I know that my markets are – have done nothing for the last two years;

they are down, and the last two years, they are flat. Meanwhile, you talked about the rates, the markets – the

cost of money is already much lower than before this started. And so what I am doing is when these markets are

lower, I am looking business-by-business, stock-by-stock to see where the opportunity is. Because just like every other – this is no different from every other crisis. You know, we are not going to get any memo saying, OK, the crisis is over, let us buy stocks. You know, the stock market is going to run ahead of it. So that is what I am focused

on.

Philip Brooks: So, in the market action that we have seen perhaps in the last week or two with the significant sell-

off, the rebound overnight, is your view perhaps that the worst is now priced-in? Maybe not over, but reflected

in market valuations?

Niraj Bhagwat: See, it is very challenging, right. I mean, I might finish this conversation, and god forbid, we have

some bad news coming out from some other country. So, I hate to say that the worst is over, but what I want

people to think about is that if tomorrow you get a news that this is over, are you going to regret not buying stocks

or certain businesses at least?

And that is how I am thinking about it – I am thinking about how there are certain businesses and certain stocks, which maybe the worst is already priced in, and which have great balance sheets and are quality companies. And if you are going to be buying them because they are cheap now, then you should be buying it rather than wait for those news, and I certainly think that a lot of negative news is kind of known in the sense that it is already being spread, people are trying to contain it, and it has gone across many countries. I mean, one example of that is, until recently, India, Indonesia were stock exceptions to the fact they did not have virus. Yesterday they had new cases of that. So I think it is really now known everywhere.

Philip Brooks: Yeah, we will come back to talk about some of the more specific opportunities that you see in equity markets, but perhaps, back to you, Paul. In terms of the reaction in interest rate markets, and the increased

likelihood it would seem that has been priced in of a significant slowdown, perhaps a global recession, is that a view that you share? Or as you mentioned earlier, that we are starting to see, I guess a return of some of the optimism in China, and maybe for other markets, the impact might be more lasting. But do you feel that we are at an increased risk of a recession because of the impact of the virus?

Paul Cavey: I think most certainly. I mean, there is obviously a lot of uncertainty about the path that the disease will take from here. But again, I mean we have never seen the Chinese economy slow as it did do during February, and that I think has severe – in fact, in itself, on its own, is enough to have big repercussions for the rest of the world. And I think those repercussions were not really appreciated enough until perhaps some of these numbers have started to be seen. But in addition to that, obviously now there is the disease spreading in the rest of the world, and we are seeing a big consumer and potentially a manufacturing reaction to that spread as well, so it is now not just in China, not just in Asia, but spreading to the rest of the world. Now it is possible that this disruption ends after you know, a short period of time, but I think the risks right now are still tilted towards a downside, in particular in terms of the economy.

The other market I think to be thinking about, in addition to equities and rates, is to think about what is happening with commodities. And there again, there is quite a big contrast, where everywhere you think, somewhere like

China, where some of the equity markets have performed quite strongly over the course of the last couple of weeks, metals prices continue to remain very low. So there is, I think, a lot of signs that economic demand is still and has been fundamentally affected by this, and it is going to take a while for that to lift. There might be some policy response in China; it is not going to be a V-shaped policy response as we saw in 2008, and therefore I think downside risk to the economy remains quite large.

Philip Brooks: Yeah. Niraj, you mentioned earlier too that the equity market response is at least, in part,

predicated on the idea that we will likely see supportive policies from governments around the world. Let us seek

your view on that as well. But Paul, to start off just from a policy perspective, you mentioned maybe not the same

type of policy response in China, but outside of China, do you think we are likely to see more of a concerted action

as we have seen in I guess, repeatedly over the last ten years or so?

Paul Cavey: Well yes. So I mean there are some similarities between China and most of the rest of the world, or

at least most of the rest of the developed economies, in the sense that policy ammunition is limited. So I have

been asking a bunch of analysts in the last couple of days what they expect to happen with credit growth in 2020

in China, and obviously credit growth has been like one of the key indicators of the economy for the last few years,

and what would it take for analysts to raise their forecast by five percentage points. So instead of 10% credit

growth, it would be 15% credit growth, and to give some context in 2008, it was 30% credit growth. Nobody will entertain the idea that credit growth is going to be five percentage points higher. It seems unimaginable for analysts to go down that road. Now it may happen, but the reason they are not forecasting that and they are very unwilling to do so is because of this cumulative impact of the stimulus over the course of the last few years, which is something that China, I think, rightly wants to try to get away from. And we can go back to some of the fundamentals in the Chinese economy.

If you look at the rest of the world, Japan is at zero and has been for a long time. There is now massive QE over the course of the last few years. Europe is at zero. Like there is simply not a lot of room for central banks to do very much. So you can talk about the Fed, and maybe the Fed is going to move, and obviously, that has been very much priced in over the course of the last couple of weeks or so. But again, I mean, given to the extent that China was a main driving force of the easing that happened in 2008, it is just extremely difficult to see that happening again.

Now this crisis is different from 2008, and so whatever happens, even if policy was the same then, the economy would look different. Nonetheless, I think that is an important differentiating factor between then and now, even though the economic downturn still looks like it is quite severe.

Philip Brooks: Yeah. One of the things that have been discussed in markets quite a lot in the last year or so is the idea that we might over time, see a transition of policy response from monetary to increasingly fiscal. Do you think that is something potentially that we are likely to see again, both in China and in Asia, but also in the rest of the world?

Paul Cavey: Yeah, I think it is something that is likely to happen. We have seen that again, that has been something that at least is happening a bit more visibly in China in terms of the way the government talks about the economy and what we can see in the published numbers. In Japan and in Korea, there is fiscal stimulus already in the system for this year. In particular, in Korea, the fiscal stimulus looks very large compared with anything we have seen, actually since probably the 1990s in Korea. And again, in the rest of the world, in the US and in Europe, it is really all about how much willingness and ability is there given the political obstacles to that. So I think we do expect that to happen, and in particular, if the economic data turn much worse – but it is probably still more difficult to push on the fiscal lever than it is on the monetary lever in somewhere like the US.

Philip Brooks: Yeah. And Niraj, from your perspective with equity markets, clearly some of the response at least is predicated on the idea of better policy support. But do you feel that that is necessary for the Asian economies, or are there opportunities for certain markets, certain industries, certain companies to do well without the need for policy response?

Niraj Bhagwat: So, before I answer that, I will just take a step back and I will say that what Paul said is absolutely right. I think that the room for response is nowhere like what it was in 2008; there is no doubt about that. But I think for equity markets to go up, you do not need that kind of response, right? The fact is that cost of money is lower, and asset prices will be higher just in response to that. There is just way too much money, and it is definitely not going into capital productive capacities, and I think asset prices will be going up because of that. I mean, you just have to think over the last ten years, of the number of crises in Asia, not just globally, and the number of times

GDP growth rates have been revised in almost every country, and yet asset prices have kept up, not maybe in a one-year period, but in the three-year period for sure.

So I think, A, to answer your question, certainly it helps sentiment that the central bank does have your back, so to speak, and you can afford to be a little bit more bullish in the equity markets. So I think that definitely helps the sentiment.

But I think the second part I would answer your question is, there are certain businesses and certain industries that do not need this support, right, and are going to do well anyway. And these have been doing well in the last five years even when GDPs have not been great, and I think will do well even more in the future.

I mean, I just want to give an example of SARS, when the way we all worked changed a bit. I remember when I was working, we did not have work-from-home, and now almost every office thinks of work-from-home, and I think even this current crisis, at some point, is going to pass, is going to be milder. But the way we live, the way we work is going to definitely have an impact.

And so, I will just give one example, there are education companies doing great business in China, and now they have been thinking about doing online services for the last many years, and most parents, rightly so, would not

buy it online because you do not trust your child to go and sit through an online program. Now with this virus, it is growing leaps and bounds. Is it not fair to say that post-virus, this actually continues to be sustained, and that has nothing to do with the central bank? So I think, to answer your question, it is a bit more detailed rather than just one-way.

Philip Brooks: Yeah, so maybe widening the discussion to outside of the impact of the virus, and to Asia more broadly, I suppose, across other markets in the region, what types of opportunities, what types of risks are you seeing today?

Niraj Bhagwat: So in some ways, I mean the virus has not impacted the other markets as much. I mean, famous last words, I hope it does not change. But, certainly, I think every economy is similar in the way Paul talked about

China, in that the growth rates are incrementally lower, and the room for policies, I mean – I think some of these countries have even less room on the fiscal side than China.

But there are opportunities everywhere, and that is what we try to focus on. So, there are either individual company-specific change opportunities where companies and businesses are changing response to what is happening, especially countries like India, for example. For a large country like that, there are massive consolidation opportunities happening given the face of low growth, or no growth. So the Indian real estate is a great sector to talk about, where it is a really bad sector, a bad, bad sector – you should never be invested in this, just looking at the macro. But we have been very much invested in this, because there are massive consolidation opportunities. And if you can find the right winners, I think you can make a lot of money for your clients. So, I think there are opportunities everywhere, really bottom-up, and focus on that, rather than saying, just buy everything in one country or one sector.

Philip Brooks: Yeah. Now I know in some of the positioning for your portfolios, you have been very strongly overweight in the Indian market for a few years now, but I believe there has been some trimming in the recent period.

Niraj Bhagwat: Yeah.

Philip Brooks: I would be interested to know, I guess, why the trimming, but also, where is that money going?

Where are you finding newer opportunities to reinvest?

Niraj Bhagwat: Yeah, and as you know, we are just bottom-up, and we are focused on trying to find the best businesses for clients, that is what we are really focused on. And as part of that, we took a lot of money from India in the last six months because a lot of our stocks, thankfully, had done well. And as it happens, we went and bought a bit more China, not perfect timing, but we certainly have not sold any of the stocks due to the virus. And

I would say, I would hate to generalize, but there are a lot more opportunities today in China given what the reaction of the asset prices has been to this virus, and we certainly are interested in many, many markets.

But I want to say even smaller markets, like you know, Thailand, you see the carnage; Malaysia, you saw the carnage in these markets, Indonesia now catching up in terms of weaknesses. So I think there will be opportunities everywhere. And so, when I look at businesses, specific stocks certainly make me excited at that level.

Philip Brooks: Great. Paul, in terms of maybe a silver lining, if there is one from the virus, are there parts of the

Chinese economy, or parts of the rest of the regional economy, that you are, I guess, more optimistic about, or that the transition will have, over time, positive impacts on?

Paul Cavey: Yeah, I mean I think as Niraj has highlighted right like, some of these trends in terms of digitization and online business, they seem like particular winners in China even before this, and now are getting an extra boost. And there is going to be stimulus in China, and a lot of that I think is still going to be focused on 5G in particular, so that whole sphere still seems like a very good position to be in China itself.

And if you kind of broaden the scope more broadly, the other economy that seems to be doing very well from a structural point of view is Taiwan. Although it may be more difficult to pay from an equity perspective, at least except for the tech chain, there does seem to be some good structural improvement happening in Taiwan, and

that is very interesting for the currency. And we have seen that particularly over the course of the last, you know,

few months or so where the Taiwanese dollar has outperformed a lot of the rest of the region, and has not sold

off as much in this recent downturn as some of the other currencies, so that would be a second area to highlight.

The third one I think would actually be Japan, although Japan does look extremely vulnerable right now because

of the consumption tax, and because of the virus that is now beginning to hit, and it is likely there is going to be a proper recession in Japan over this last couple of quarters. But I think there is also a lot of sign of structural improvement in Japan’s economy, which is probably underappreciated outside of Japan, and I think, if we get a period of time where the economy, the cycle is more stable, then I think that is going to present some interesting opportunities for clients as well.

Philip Brooks: Great, thank you. I should mention too to our clients watching us online, please do feel free to submit questions. We can see them via the iPad that I have in front of me, so please feel free to ask away, both from an equity perspective to Niraj, or more broadly macro to Paul.

So Paul, you mentioned that there are some interesting, positive changes starting to come through in the Japanese economy. What type of rebound do you expect to see there? And I guess the question that I have got in the back of my mind is, we have started to see in the last week or two quite significant responses from the Japanese authorities, so things like closing schools, I believe it is for the next month. Presumably, there is going to be quite a significant hit to the Japanese economy in the short-term as we have seen in China because of the impact of the virus. How long do you think that hit is likely to last?

Paul Cavey: Well obviously, there is sort of a deadline in Japan, which is the Olympics, at least in terms of the government’s mind. That is a very important event. There has been a lot of money spent; it is very important for

Japan on the world stage, and so on. So obviously the government, in an ideal world, would like things to be resolved before then.

But I think, you know, thinking about that question and about this timeline of what happens next, I think really the interesting issue is, how and when does the world begin to move away from this containment strategy over the course of the last few months to much more mitigation? It seems like in a lot of these countries, as it becomes more of a global phenomenon, that this new virus just becomes increasingly difficult to control. And it seems very unlikely that any other country can muster the kind of power and strength of measures that China has been able to use to bring the virus back to control over the course of the last month or so. And if that is right – and all the experts we speak to say that the disease is very easily transmittable – it is very difficult therefore to control, it seems more likely that over the course of the next few months, the world needs to move more from this containment strategy towards a mitigation strategy. And that would mean rather than trying to stop everybody from going out, just trying to say, well look, there is some risk to this disease; it is not risk maybe to everybody.

There are ways that people should be behaving which can reduce the risks of this disease but life essentially will have to start to go on again. And I think that is probably where we are going to end up going, but it is difficult to

call the timing of that. And particularly if we look at somewhere like China, where the government has invested so much political and economic capital in beating this disease, to start to then say, well actually, we need to live with this as part of life, it is obviously a very difficult political transition to make. But I think that is probably what we should be thinking about for the world, if this disease cannot be controlled, which does not look likely right now, then it is much more likely to move along that road. Maybe Japan is probably the country where it is closest to the mitigation strategy before the last weekend or so and probably is going to have a big incentive to move down that road again in the run-up to the Olympics.

Philip Brooks: Yeah, it certainly sounds like it and perhaps there is that growing realization, across both the Asian region and markets globally, that we will, over time, need to adapt our lives to living with this new virus. Perhaps that is also one of the reasons that we have seen the bounce that we have seen in the last couple of days in equity markets. I guess the understanding that it is not the end of the world, that there will be an adaptation process, and therefore the bounce that we have seen.

Niraj Bhagwat: Yeah. Well, I certainly have not been traveling a lot in these last few weeks. But I do not know whether Singapore is a good example of what might be the case everywhere. And you know, we have been living here, and there have been regularly new cases every day, but you just have to go last weekend and see the number of people in restaurants and go to East Coast Park and go cycling, and it was full. And the number of cases were new every day, and people are still asked not to go to offices and things like that; and measures are still in place.

But it is very different from what was the case two, three weeks ago. So I think people get used to it; people find ways to get around it, be more careful, but I think life continues, so long as people find ways around it. So I think that might be the template where other countries follow, hopefully so.

Philip Brooks: Yeah, absolutely. So perhaps, maybe turning to the stock-level opportunities. You mentioned that there have been significant responses in markets in the last couple of weeks, significant areas of sell-off. Are there increasingly parts of the market that you think are very attractive, both in terms of the longer-term story, but also in terms of the buying opportunity potentially today?

Niraj Bhagwat: Yeah so, I think I mentioned education in China, so obviously we like that; we own that, and we have been actually adding to that. I also think there are parts of I mean, hardware and technology, and Paul mentioned 5G, but you know, not necessarily playing the 5G theme so to speak, but just taking a step back and looking at hardware in general, and the fact that we all are producing more data, structurally so. And because of that, I think everybody will need more memory, and more chips for that. I think there are a lot of opportunities in semiconductors. So I think some of these companies are very attractive, some of them are cheaper now but

obviously there are other opportunities, you know, specifically in China and some are in the eye of the storm, with

the kind of travel, tourism. I mentioned education, eating out, and I am not saying I am buying every one of these places, but I think certainly, that is a great area to start looking at.

Philip Brooks: Yeah, absolutely. I guess, maybe turning to Southeast Asia broadly, what is your view of the markets, the opportunities, particular parts of the market that are more attractive, or less attractive in Southeast Asia?

Niraj Bhagwat: Yeah, these are smaller markets, so they do not have the range of opportunities naturally, as China and India do perhaps. I would say Indonesia is interesting in the sense that it is a narrow market than India, but certainly, I think has some great companies. We own some great companies there, and we are looking at buying more, so especially in the last one week, Indonesia is much weaker. And I certainly think that there might be opportunities there. In other markets, which are much, much smaller, we are looking at stocks, but I do not think we find the range of opportunities as much as we do with other countries.

Philip Brooks: Yeah, so maybe a broader question for you. There has been a lot of dialogue, in the markets in the financial press, discussions around investors de-risking their portfolios in response to this virus. Is that a view that you share that investors should do? Should people de-risk in response?

Niraj Bhagwat: Well, it is a very personal thing as an investor, I guess, and I cannot advise what they should be doing, but I can certainly say what I have been doing and how I think about it. Generally, when I look at any event that happens, I first of all say, if I had to make a wholesale change in my portfolio, that means my portfolio is not an all-weather portfolio – there must be something wrong about it. So, as a first step, I mean, talking about this virus, we have not made a single change to the portfolio as a result. So I do not know it is de-risking or not, but I certainly think that we have had the same businesses and same stocks, and at the margin, we have been thinking of adding to it. So we are absolutely fine with what we own, absolutely fine and I think, right from the start, our portfolio is meant to take care of, when there is a negative event, which of course nobody can anticipate.

And I do not know where they should be de-risking now, because I think the cat is out of the bag, and markets are down; interest rates are down. It is across headlines. I do not know where they should be heading - I would not de-risk now.

Philip Brooks: Yeah. Yeah, certainly from my own perspective, it feels like a good buying opportunity in markets today, given the level of pessimism that we have seen, the level of concern that we have seen in the last month or so in the wake of the outbreak of the virus.

Niraj Bhagwat: Well, not that it matters, but I mean, I am personally putting my money as we speak, so I think it is a great opportunity.

Philip Brooks: Yeah. Paul, maybe turning back to kind of macro and strategy in terms of positioning in China, in

the rest of the region, what are your broader views? Do you think that this is, you know, potentially a good time

to start allocating more to Chinese investments, given that we have seen a significant sell-off, and the government

is likely to explore whatever avenues it can explore to help support markets?

Paul Cavey: Yeah, I mean I do not have such a strong view about the equity market. Obviously, there are other

colleagues who look at that in more detail and have a more valid, useful perspective. But I think in a way we look at some of the other markets, I mean it looks likely, for example, interest rates in China – it seems more likely they still continue to come down rather than going up. So the domestic onshore market is an interesting opportunity in terms of bonds; like that is something I think is worth looking at. Right now, in terms of the cycle, it would still seem, in the rest of the region, that currencies are probably going to go weaker rather than stronger right now,

again because interest rates are coming down.

But I think we can see if we look through this crisis, then I think some of the other structural themes that I

highlighted earlier will start to come back, and things like the Taiwanese dollar then, relatively speaking, can

actually continue to do quite well.

In addition to that, I guess the other thing to be, as you mentioned, like thinking about is the policy response and

the impact that that may have. I mean again, it looks like that is still going to be more monetary easing in China.

So I think over the course of the longer-term, it would still seem likely to me that the renminbi has to be weaker.

But in an environment where the Fed is cutting rates, the urgency for the currency to move actually is not that

strong, and right now, if anything, the short-term indicators pointing to the renminbi going stronger rather than

weaker.

Philip Brooks: Great, thank you. So, apologies to our clients, it turns out that my iPad that was in theory receiving client questions was not receiving them. I now have a device that is working. One of the questions that clients seem to be most interested in, and we have touched on this at least in part, is opportunities in the tech sector, and Paul, you mentioned that 5G, particularly the 5G opportunities in China, could be an interesting part of the marketplace. Niraj as well, mentioned some of the backup infrastructure, the technology side for memory. Are there other parts of the tech industry that are more attractive? Are there also potentially some risks to parts of the tech industry with the seemingly ongoing trends towards deglobalization?

Niraj Bhagwat: Does Paul want to take it or I can go?

Philip Brooks: Yup, sure, why don’t you go first? Paul, chime in.

Niraj Bhagwat: So, obviously the second part you mentioned is a real risk, and we certainly think about it. It is not new, it has been going on for a year and I think it is structural - whether Trump is in office or not, does not matter, and I think it is structural. So certainly, one of the risks that we think about when we look at a business, and the companies I mentioned are not at risk because of that, because of their competitive advantage in the business, and I think that is what clients should definitely think about. The second thing I would think about is, try to think about your competitive advantage of the business. So, I question some of the competitive advantages the smartphone supply chain companies have, especially in the light of the fact that there is not much growth overall for global growth in smartphones. I mean at the end of the day, everybody has a smartphone, or at least a smart- looking phone. So, I would say to try to focus their opportunities in hardware, but also look at software, and look at the other parts of the tech chain, not just the hardware. Or you look at internet and software, which is, I think, going to have tremendous opportunities across.

Paul Cavey: And I guess, I would just maybe add that, it is one of the things that, you know, I have talked about it a little bit, and mentioned before that this Taiwan story, that maybe can be differentiated with somewhere like

Korea, where there does seem to be, I mean, if anything, there is this deglobalization story, but Taiwan actually remarkably seems to be a winner from that.

And the things that seem to be playing out is that unlike in Korea, there are clear signs of manufacturing returning

to Taiwan from the mainland, both because costs have gone up because of the trade dispute, and now even

because of the virus, it seems some production has come back to Taiwan. And the third thing domestically is some

repair of the banking sector, so that is a slightly different issue.

But I think it is important to remember that in this environment, where there are some of these big global themes

like deglobalization, it is not clear that everywhere is a loser from that. Even in economies which are very externally driven and should be more hit by some of these trends in a negative sense - that actually does not always happen.

So, I think there are a lot of opportunities that these big trends present.

Philip Brooks: Great, thank you. So I think we have got time for one last question and one of the ones that has

come through that I think is a really interesting one is about innovation and disruption. Are there parts of the

market that are particularly interesting to you from an equity perspective, Niraj, where there is more innovation

and disruption happening? Or indeed, are there beneficiaries or other parts of the marketplace that are much less

prone to disruption that are attractive as well?

Niraj Bhagwat: So, I think there is disruption happening at every level, so obviously, you can easily relate to the

fact that there are sectors which are more prone to disruption - technology is an obvious one, internet; but I think

there is disruption happening culturally as well – I think people often tend to ignore that. There is a cultural change

happening across parts of Asia, but there are generational changes happening, where people who started the business, or the grandfather who started the business, are handing over the reins of power to the younger generation. And that disruption in terms of change of thinking, change of management thinking, has dramatically different outcomes for people like you and me as investors, and I think that is where, also if people forget that there are opportunities. So obviously, I would say technology is an obvious one, but I would say for the broader gamut of businesses, there are dramatic changes happening, as there are all the structural problems that we talked about.

Philip Brooks: Great, thank you very much. Well, I think we are out of time for our session, but Paul and Niraj, thank you very much for sharing your thoughts. And Sashi, I will hand it back to you.

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