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00:00Let me start with what's happening in Japan. So given how big of a market player right now the bogey is in the domestic the job market. What does this mean for the equity space and for the bond space. When you have such a big player we have never seen this with any other central banks. You're right. I mean typically you don't. Monetary easing which is what a beauty is doing and continues to do should be positive. The Japanese stock market. But on the flip side what's happening is the Japanese yen is getting hammered and it has come off significantly to a 20 year low. And I think that's not necessarily the best piece of news for the Japanese equity market because it diminishes the attractiveness of Japanese equities. Even GDP to some extent. So we are actually you know neutral in Japan at this juncture. We don't underweight neutral in Japan. But you know given what's happening in Japan given the fact that you know you're taking different calls from other central banks it doesn't look like a pretty picture. We're hearing also from your GM members side excessive effects moves increase business uncertainties that they must communicate their aim of their policy. Clearly Vasu given the weakness of the Japanese yen. You mentioned the challenges for Japanese equities. What about for other export dependent economies that also compete against Japan. Does that have any bigger implications when it comes to some of those exporters whether it's in China or South Korea. Well you know yes the currency markets in Asia have weakened because of the very strong U.S. dollar debt. Typically should all go well for exports in Asia. It makes Asian exports perhaps have to some extent more competitive. But on the flip side what's happening is also that you know the weaker currencies is resulting in greater imported inflation which is not what Asian central banks want to see at this juncture. So Asian central banks are likely to tighten even further. Going ahead given the higher inflation numbers we're seeing in Asia. And again that is not a very pretty picture for Asia for Asian equities. So you're cautious on these equities at least in the short term. Just taking a look at these BMJ minutes it seems the intent here is to seize this opportunity to get inflation going in Japan. Is inflation in Japan something you're thinking about. It feels like something we haven't talked about for a very long time in terms of it getting high. Well you know yes you're right. Inflation in Japan has been fairly low which is why the beauty has been trying to stimulate the economy. But at the same time the inflation numbers have been picking up. I guess you know the pickup in inflation is a global phenomenon. It has not picked up in Japan as much as elsewhere. And I think what's worrying is the you know as I was watching the program earlier it's one of the community that said earlier you know essentially what the beauty really wants to see in terms of inflation is demand you know push inflation. Right. Instead what you're seeing is a cost push inflation happening in Japan. And you know that's not the ideal situation for the Japanese economy all of the markets. Visit I just wanna ask you a question we're putting to a lot of our guests today. What do you see as being the biggest tail risk for markets in the second half of the year. Well you know in terms of risk for the markets in the second half of this year essentially no slowdown in China recession. You know I think these are the factors that are probably going to impact the markets. You know in the second half of this year recession is still playing out. I mean the risk of recession is still looming on the horizon and the voices on recession are getting louder and louder. Well just looking at your Bloomberg you know probability analysis and you know the probability of a U.S. recession has gone up from 15 percent at the beginning of the year to almost 30 percent right now. So I think recession is the biggest risk at this juncture. And we've not sorted that question out and place out. You know that I think the markets could actually see further downside. In fact in the coming months.

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OCBC Bank Wealth Mgmt's Menon on Markets and Strategies

Vasu Menon, OCBC Bank Wealth Management Executive Director, Investment Strategy discusses markets and strategies. He speaks with Paul Allen and Shery Ahn on Daybreak Asia. (Source: Bloomberg)

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