Live on Bloomberg TV

00:00Max this is just one of those I suppose contagion effects if you will if Tencent is holding off on this on this bond offering here with four billion dollars. Maybe we'll see others. What are you looking at here in particular which is of concern as we get more and more news coming out of her on. Well absolutely. We're keeping a very close eye on what's happening with what wrong because of course you can expect credit spreads to widen given what is happening and uncertainty is what really the market does not like. And that's exactly what we have right now. So expect the rumblings to continue declining. Expect the whole Chinese bonds to continue selling off with credit spreads widening. And again not the ideal environment to come up with a new bond. Some might still do it but some of them will also hold off waiting for a bit more clarity and potential tighter spreads. And we can't rule out haircuts. We was really looking at this entire industry and it's a warning to that industry. But it also fits in with macro themes such as we could see more pressure on all this as we see more dollar appreciation. If we do see more dollar appreciation. Well first of all a haircut. Yes it cannot be ruled out. And that's exactly what is worrying the markets and that's why bond prices are likely to continue. Declining dollar appreciation is is part of the story. I guess a lot more might also be with respect to the narrative that especially with China. Even if you are a large player you then if you're an important player it's not automatic that the government will just come in and help you out and bail you out just automatically. And especially for a company which has a bit of a troublesome past like like viral appreciation it's probably going to be a little bit in the short term could continue longer term remains to be seen because of the massive fiscal and monetary stimulus. But short term debt appreciation could continue. Mike's on the one hand we have quarreling on the other. We have that planned down on TAC. I mean Ali Baba and now 10 cent also getting pretty worried. I mean is this all impacting investor sentiment towards their investments in China. Well definitely it will because it raises once again the issues that corporate governments or potentially some actions from the government could derail a very good equity story. Now that doesn't mean that there's not going to be the man. Because of course the growth story of a number of Chinese stocks remains extremely attractive. But that being said investors especially over the short term are probably going to be requiring a higher risk premium in order to invest in them because of this uncertainty with respect to what is happening now with these names. So we're seeing that sell off in China. That's impacting sentiment for emerging markets what are the chances that global actors could get hit as well. Eventually. Well eventually they will. Then how much time it takes before they get it because that's the main question. But short term especially U.S. equities are likely to remain supporter. And the reason is of course the huge monetary and fiscal stimulus. But also if you look at the U.S. the speed at which the vaccine rollout is being undertaken which is a big positive. And they're going to have a huge GDP growth just because of all of the stimulus that they're putting onto this. And all the pent up demand that the U.S. has for short term correction like the ones we've seen last month will happen. But that's going to be a buy the dip environment and definitely a good opportunity to enter. You know Max when you talk about Ms. You have to talk about the dollar and that dollar debate continues where how do you weigh on that. Well we've been strong dollar bearish last year but we have changed our mind about a month ago and the reason why we changed our mind is multifaceted. But first of all the interest rate differential which is going to be helping the U.S. should continue gathering support for the U.S. dollar. With Biden we're definitely having a different agenda especially with respect to the fact that they want to be seen once again as probably one of the major economies also in terms of a global presence and global importance and the floor in order to do that. That cannot be seen with a strongly weakening currency. And once again in the short term the just growth that the U.S. is going to have compared to the rest of the world is going to be much much higher especially with respect to the developed world. Therefore those should support the dollar in the short term. That's why we see short term dollar appreciation. Modest not huge. Then in the longer term of course the huge monetary and fiscal stimulus will continue. Wait therefore we do expect dollar to potentially over the longer term depreciate. There are risks ahead for all these markets are there not not least with the news we have today further sort of saber rattling taking place over the Taiwan Straits. And on top of that we've got these inflation expectations as well which at a certain point are going to start hurting the mortgage industry in the US. And that could be cause a lot of problems. You're absolutely correct. So at the bottom of all of this there will always be geopolitical tensions. Taiwan is one of the main ones like you've mentioned just now in terms of inflation and interest rate increase. That is what a spooked the market over the last few months. As of now we seem to be in a bit of a Goldilocks environment where by yes inflation expectations are increasing but not in a massive way. They for the moment could be offset by a big increase in growth in the U.S. The Fed is managing to walk a little bit of the middle line something dovish but not too much and definitely not sounding too hawkish. But clearly it's a very fine balance. Should we get especially with the next one or two months. Some very strong CPI numbers some very strong employment numbers higher than expectations. Then you're going to see once again the 10 year rates moving higher and that could pause. That could potentially create a hit to the mortgage environment which is then going to be hitting equity markets.

USD Positive Over Short Term, SGMC Capital's Bondurri Says

SGMC Capital Founder and CEO Massimiliano Bondurri says he recently changed his view on the dollar, turning from bearish to neutral and now positive - for the short term. He spoke with Haslinda Amin and Rishaad Salamat on "Bloomberg Markets: Asia." (Source: Bloomberg)

More From Bloomberg Markets
All episodes and clips

The David Rubenstein Show
The David Rubenstein Show: Peer-to-Peer Conversations" explores successful leadership through the personal and professional choices of the most influential people in business.
More episodes and clips