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The Macro Brief – Talking points from the HSBC Global Investment Summit
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From the future of globalisation to growth opportunities and monetary policy, Murat Ulgen, Global Head of Macro Strategy, joins Piers Butler to discuss the key takeaways from this year’s event in Hong Kong.
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Transcript
Introduction to HSBC Global Viewpoint
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Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
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Speaker
Make sure you're subscribed to stay up to date with new episodes. Thanks for listening, and now onto today's show.
Welcome to Macrobrief Edition from Hong Kong
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Welcome to this special edition of the Macrobrief. I'm P.S. Butler and we're coming to you from Hong Kong, live from HSBC's Global Investment Summit. This is the third edition of the Global Investment Summit and it's bigger and better than
Engagements at the Global Investment Summit
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ever. 5,000 clients have been attending discussions and debates with world experts and key decision makers.
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And also we've had our very own Arts Research Cafe where our analysts have had packed schedules meeting clients and I've been able to drag one away from his packed schedule on global head of macro strategy, Murat Olgun. Murat, welcome to the podcast.
Is Globalization at a Tipping Point?
00:00:55
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Thank you very much, Piers.
00:00:56
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So I thought today what we would try and do is extract the key highlights in terms of macro messages from from the Global Investment Seminar. And I thought the place we should start at is Globalisation.
00:01:10
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And there was a session asking the question, is globalisation at a tipping point? And actually I thought, was that the right question? Is globalisation at a tipping point or is globalisation changing? Perhaps you have some thoughts on that
Future of Globalization: New Trade Routes and Agreements
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first.
00:01:22
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Absolutely. Thanks very much again. And you know before I start, fascinating conference as always. Really, really very busy, very active. Lots of great meetings with investors, with our colleagues. So I totally enjoy it. um Globalization, well, i think it's a recurring theme, isn't it?
00:01:38
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It's been there for a while, obviously discussed in this edition of Global Investment Summit as well. Look, there are question marks. Is globalization on a retreat? Is a reversing? is on a tipping point.
00:01:50
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But actually, the reality is probably different. And the numbers are clearly not saying this. Global economic activity is holding up pretty well. I mean, now obviously, there are challenges and fresh challenges with the Middle East conflict. But when you look at the global trade, it is actually growing pretty nicely. That's right. In 2025, global trade actually increased, didn't it? 100%.
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And I guess the right question is, is globalization adapting to the new world? ri react is it shaping is it Is it changing shape and form? I guess that's
Europe's Growth Path Amidst Energy Crisis
00:02:19
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the right question. And the answer is yes. I mean, clearly there are certain challenges, you know, tariffs, you know trade tensions, etc. But there are new trading routes.
00:02:27
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There are new trade agreements. There are intra-regional trades. There was a lot of reference to inter-Asia trade growing significantly. 100% this has been discussed in the sessions that actually when you look at intra-Asia trade, it's still probably at the beginning phases, only 24% versus European, intra-European trade of 60%. So there's massive room that you can cover. i guess globalization is there.
00:02:49
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It will continue, it will carry on, but probably in new shapes and forms. So you mentioned Europe and I wanted to come on to that. There was a session on Europe asking the question, the path to growth. And it's fair to say that the energy crisis, if it were to go on, would hit the European economy hard.
00:03:05
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But is it also a catalyst for changes in Europe, much needed changes, but are we likely to see those? Yeah. I mean, it's no secret that Europe is exposed to the recent energy shock and energy crisis, if I may. And clearly, it's a major energy importing region.
00:03:20
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So we all know, we calculated, you know, we we make our forecast, etc. But you might argue, and that that was one of the themes in the session, it's also an opportunity. for Europe to come together, for Europe to act together on energy security, on general security, defense, fiscal spending, defense spending. There have been you know issues that have been discussed and clearly we're seeing some real action coming
China's Domestic Consumption and Economic Strategy
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through. you know Germany is filling its quotas in terms of fiscal spending.
00:03:48
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It is forthcoming. It is gradually making an impact. And you know this is the country which actually has a lot of room to spend with relatively low public debt. It absolutely is an opportunity as well at the same time for them to act together and deal with this sort of you know joint risk.
00:04:05
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So there was a session on China and India hosted by your colleague Fred Newman, are where again they looked at growth challenges and one of the challenges was how to stimulate domestic consumption. Why is that such an important factor? Yes. Well, I mean, if if you look at things over the last six weeks or so with the fresh challenge of Middle East conflict, China is actually really doing well.
00:04:25
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The more prepared, there have been a lot of push towards renewables, EVs, et cetera, a lot of reserves of oil. And you can see also the market reaction with chinesequ Chinese equities, Chinese renminbi holding up very well. It actually has been you know gradually appreciating and a major anchor for stability. um I guess there are always room for improvement, of course. And clearly, if we see an environment because of all these fresh challenges that global activity slows a bit and foreign demand is dragged down, then China has the room to stimulate domestic demand. This has been discussed. you know Things like payroll tax cuts could help. There are already certain you know measures in the works to help you know households to reduce their precaution savings, channel them more into investments, prop up services. I think there clearly are an
US Growth and Monetary Policy Insights
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opportunity there as well. They need to be leaning more towards domestic demand.
00:05:15
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So we had a standing room only session with Dr. Janet Yellen, former US Treasury Secretary and Fed Chair, um and she looked at the outlook for US growth and monetary policy. What did she say and how does that sort of tie in with your own view from your team about US growth and monetary policy? Sure.
00:05:34
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Great session. Obviously a very prominent person in the Treasury, at the Fed, you know, fantastic macro views. I mean, she was very clear that we are faced with the risks of ah lower growth and higher inflation at best.
00:05:47
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And we see obviously how the recent situation pans out. She has talked about the fiscal challenge in the US. She has talked about the challenges of the Federal Reserve with the new incoming chair, you know, how the interest rates would shape up. she still expects one more rate cut from the Fed towards the end of the year, which actually is a slight contrast because our economics team, they're not expecting a rate cut. But obviously, you know, market pricing keep changing, changing, you know, all the time, depending on the headlines, depending on the new information and data. but But I guess, you know, if I take a step back and talk about our own views,
00:06:20
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U.S. economy is still holding up pretty well. And U.S. economy is more energy-sufficient. And there has been strong carryover momentum from previous big investments in AI team, hyperscalers, infrastructures, and they're still ongoing. And actually, you might argue there's a bit of a setback.
00:06:37
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There is a bit of a headwind coming because the gasoline prices, diesel prices have gone up a lot since the start of the Middle East conflict. But there are offsets. U.S. consumers are getting $20, $25 billion dollars per month tax rebates.
00:06:50
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That's that comes from the big, beautiful bill.
US Dollar's Status During Geopolitical Tensions
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100%. the bit one big, beautiful bill, OBBA Act, is kicking in earnest for consumers at the beginning of this year. There's a major offset, and you can see consumers still resilient. Labor market is still doing all right. Quite resilient indeed, yeah.
00:07:06
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Real estate market is softening, but gradually. so So there are really a lot of offsets and resilience. And you know we see US activity doing all right. Obviously, there will be some fallout on inflation from the current you know rising oil prices and energy price and energy costs. But you know looking at the monetary policy, that's where we have perhaps a slightly different view with Dr. Janet Yellen. Our economists are not expecting a change from the Fed this year and next.
00:07:33
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ah We can't talk about the US economy without talking about the US dollar. And there was a session with the former chief economist of the IMF, Dr. Ken Rogoff. What was his view on the dollar and do we agree with it? Well, I mean, he he raised the questions, relevant question. it's you know It's been discussed all the time in financial circles with investors.
00:07:51
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What is the status, the dominant status of the US dollar over the past few years with you know a lot of uncertainties, ah sort of you know changing policies, and obviously US's twin deficits and now rising public debt.
00:08:05
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and And we've seen obviously US dollar softening up until the start of the Middle East conflict and then has regained a bit of ground. Now, our view is, our FX strategy, they still see US s dollar on a softer orbit, if I can put it that way. But I guess the recent episode has also proven that you know when there is a sort of a pressure on the markets and when there's a risk of episode, US dollar is still the preeminent currency that everybody wants to go to. Perhaps that's the imperative to generate dollar cash, the dash for cash. We've even seen gold prices coming in lower. I mean, you would expect in ah in an in an escalating Middle East conflict or a geopolitical situation, gold prices would go up. but actually, they went much lower because there was this urge to generate US dollar cash. So was the US dollar more of a safe haven than gold?
00:08:53
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I mean, in this episode, yes. I mean, not not only versus gold, but generally speaking, it had the upper hand, as RFX writers are putting it. And in episodes like that, you still see ah demand for the US dollar.
Emerging Markets' Resilience and Investor Sentiment
00:09:06
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So I think, you know, from our perspective, this is a very long-term trend. I mean, there there are clearly some alternatives gradually emerging. But I guess you always ask this as the question when I'm faced with the sort of debate whether US dollar is reserve currency, is actually gradually declining or not, there are always two sides of the coin.
00:09:25
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You can have trade in other currencies, that's the current account, but when it comes to the capital account, demand for the assets from your proceeds you earn in trade, where do you put it?
00:09:36
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And then you go to the U.S. markets because they are still the biggest deepest and most liquid, particularly the Treasury. So is an ongoing debate. Perhaps we're, again, slightly in disagreement. We do see so for US dollar, that's our center of case.
00:09:49
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But episodes like this, when there is risk aversion, always shows you that it's still the safe haven that where investors go to generate cash. So let's talk about some of these client meetings that you've been having. ah You published a global macro strategist just before the GIS and you talked about escalation and de-escalation scenarios.
00:10:11
Speaker
Where were the clients positioned in your conversations with them? Sure. So, I mean, first and foremost, Clearly, things have improved a lot over the past few weeks, which is great news. I mean, now we're in a phase that we call this more sort of negotiations. You know, there's a ceasefire and hopefully there will be a deal. So that is much better than the initial phase where, you know, there was more sort of escalation.
00:10:35
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So we're kind of in a de-escalation phase. And in de-escalation phase, investors generally are quite happy to add on risk. I mean, we've seen equity markets reaching their previous all-time highs. Credit markets have stayed very tight. Even in FX, there was a bit of a whiplash. i mean, we've seen dollar strengthening because of the reasons you just mentioned, you know, urge to generate cash. But now dollar is on a soft footing again.
00:10:57
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um And emerging markets, that's very interesting. As you know, we you and I, we discuss about emerging markets all the time. they proved to be very, very resilient. Yes, over the past six weeks, when there was more risk, we've seen some differentiation.
00:11:12
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We've seen investors flocking into Latin America, for instance. They seem to be very detached, far away. the Little links with the Middle East, their own story, more idiosyncratic. But now, emerging markets are making a comeback.
00:11:24
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which was the message from our emerging market sentiment survey a couple of weeks ago in the middle of the conflict. So I'm really impressed and pleased by the resilience of emerging markets. I guess if you remain in this path where things continue to de-escalate and hopefully improve, we will see further demand for high-yield assets, emerging market local debt, and I think equity and credit will still remain supported.
00:11:47
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Did it make me fair to say that, historically, you and I have been around for a long time, that emerging markets was a cyclical story and that when there were signs of trouble people would just leave them, that there is a structural story that has played out and is really coming through?
00:12:00
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So, Piers, you know what, I would really want to believe in that, and I actually do. You know, the reasons are very fundamental in nature. Emerging markets have gone through thick and thin and all sorts of cycles in Christ in the past.
00:12:12
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But you know when we have started um sort of this new environment, you know trade tensions, you know inflation, supply chain problems, et cetera, we've seen a lot of emerging markets actually addressing their imbalances.
00:12:27
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Now, you look at emerging markets now, there is relatively low deficits on the on the budget balance, on the current account. but i mean There are still a few exceptions. But generally speaking, imbalances are in a much, much better shape.
00:12:40
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The debt levels are much lower, the sustainability is not a question, and the policy mix, most important, the monetary and fiscal credibility, is very strong. So we've seen this before the conflict. Obviously, there was an interruption with the conflict, but before the conflict, the risk premium of emerging markets has really come down. The spreads between EM and DM, they were compressing for a good fundamental reason.
00:13:02
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And this was a big test. And you see what? You know, For now, emerging markets are proving to be pretty resilient.
Investment Themes and Market Adaptations
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We see and hear still a lot of interest for emerging markets, and that actually makes me very happy.
00:13:14
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Anything else on investors' minds that struck you in your conversation? Of course. Now, up until this conflict, clearly that there were other themes driving the market. We've written about it, you know, we talked about it, like AI investments, whether these are changing shape from infrastructure to software to AI enablement. you know, AI adoption, you know, whether those sectors you know will will actually flourish, et cetera. And clear a private credit is a big question mark.
00:13:38
Speaker
And the team has published a lot on that. Now, with the situation calming on a relative basis, investors are going back to those teams and asking us questions about AI, about AI investments, about private credit and things like that. We've been asked a lot about how political events can have an impact on markets and the economy. And obviously we know there's an important election coming up in the US, a midterm election November. I've been even asked about French and German election next year and what it means for the markets, for policy and for the economy. So we've gone back to some of the old teams and there are some fresh teams too. So you'd say that the investment horizon would shorten quite a lot at the start of the conflict and start to lengthen again? It does seem to be the case as volatility subsides. So I was going to ask you this question. If we were we were both at the yeah GIS last year, we cast our mind back 12 months to today, would you have imagined waking up this morning to a headline from Bloomberg that the S&P 500 was at an all-time high? i mean, it's kind of is that a sign of resilience and adaptation of the markets? think it is. Or are they overconfident?
00:14:41
Speaker
There is definitely an element and component of resilience, which obviously is very pleasing. I mean, global financial markets, global economy, they show resilience you know after every hiccup.
00:14:53
Speaker
You know, and I've discussed in this podcast, we talked about resilience of trade. We talked about resilience of emerging markets. um And I guess this is a permanent feature that investors adopt, companies adopt to new challenges, new trading environment, and emerging markets have improved their fiscal and obviously also you know domestic inflation growth issues, budgetary issues, current account balances.
00:15:19
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They've come down with a lot of reforms. This is true for some other parts of the world. And they all eventually culminate in a much more resilient global economic and financial environment.
Podcast Conclusion and Engagement Options
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Which is pleasing to see, but you know, obviously let's see and let's hope this continues.
00:15:35
Speaker
Well, that's all we have time for today. Thank you for giving us a flavor of the discussions that have been taking place over the last three days. If you want to hear more about the yeah GIS, follow us on LinkedIn. Hashtag HSBC Research. We posted a lot of content.
00:15:47
Speaker
Also, don't forget about our sister podcast, Under the Banyan Tree. Harold van der Linde and Fred Newman are the hosts of that podcast, very popular as well. And of course, as ever, if you have a question, askresearch at hsbc.com. Please email us and do our best to to answer your questions. And with that, goodbye from Hong Kong.
00:16:05
Speaker
Goodbye and thank you very much. Thank you for joining us at HSBC Global Viewpoint. We hope you enjoyed the discussion. Make sure you're subscribed to stay up to date with new episodes.