Get In Now! (Guest: Leonid Mironov)

Leonid Mironov argues that the Trump Chinese tariffs are ultimately beneficial for China, highlighting significant developments in the Chinese market that many overlook. He points out that the Hang Seng index has risen nearly 25%, driven by financials and dividend stories rather than just major companies like Alibaba. Mironov explains the importance of the "hukou" system, which affects access to government services based on residency. Recent reforms aimed at lifting hukou restrictions are transferring benefits to consumers and improving urban livability. He notes that social safety net reforms are increasing subsidies for both urban and rural populations, with notable growth in consumption in tier three and four cities, attributed to higher disposable incomes from government payouts.

The discussion shifts to China's economic landscape, where a transition from an export-led economy to one focused on domestic consumption is evident. Mironov cites a strong GDP growth rate of 5.3% for the first half of the year, surpassing earlier predictions, and emphasizes the importance of recognizing these trends early. He also touches on the implications of the National People's Congress and ongoing fiscal reforms, including hukou reform. Mironov believes that the tariffs introduced in April have overshadowed other discussions, yet he maintains that the current situation is positive for China, despite frustrations from other Asian countries like Japan.

The conversation also addresses the relaxed export rules for NVIDIA chips and their implications for AI development in China. Mironov observes that while the US strategy aims to keep China reliant on NVIDIA, China is focusing on its own advancements. He concludes that the current challenges are prompting necessary changes in China's consumption measures, with domestic demand becoming a strategically important asset in economic discussions.

The conversation highlights ongoing improvements in China's economic structure, particularly focusing on pension reform and the introduction of 401k-style savings systems. These reforms are seen as crucial for market dynamics, especially in relation to the U.S. market, with the speaker expressing a bullish outlook on China due to multiple converging reforms. Comparisons are drawn to Canada, where short-term challenges from U.S. policies may lead to long-term gains in competitiveness and productivity.

The discussion also touches on the differing European approaches to China, with some advocating for strong ties with the U.S. while others seek a balanced relationship with China. Business lobbies from Germany, France, and Spain are mentioned as they pursue workable frameworks with China despite concerns about market flooding. An example is provided of BMW collaborating with Chinese firms to tailor vehicles for the Chinese market, indicating potential for a more balanced trade relationship between China and the EU.

The evolution of the Chinese economy, particularly in the automotive sector, is noted, with Xiaomi vehicles gaining recognition and diminishing differences between Chinese and Western smartphones. Innovations such as Huawei's new laptops with foldable screens and projected keyboards are highlighted, alongside advancements in high-speed train development at lower costs than in California. The partnership between BHP and CATL, focusing on battery technology for excavators, showcases rapid technological advancements across various industries in China.

The competitive environment in China is clarified, with the country selecting targets for competition among firms rather than specific champions. The electric vehicle market is discussed, noting a significant reduction in manufacturers due to market dynamics, with BYD emerging as a leader. Despite some lag in semiconductors, China's pace of innovation in high-tech sectors is acknowledged.

The performance of the Chinese stock market is examined, particularly the financial and medical sectors benefiting from recent reforms. The medical industry, including biotech and medical device manufacturers, has seen substantial growth post-reform, aided by a centralized procurement system that has reduced prices and favored larger, quality-focused companies. Biotech advancements are linked to the success of cancer drugs and GLP-1 treatments.

The conversation shifts to hard tech industries, including excavators, engines, electrification, copper mining, electric vehicle manufacturing, and robotics. Anticipation builds for the Shanghai Auto Show, which will feature a dedicated robotics section. Stock recommendations in the robotics sector are discussed, with DoBot identified as a notable player in collaborative robots, and comparisons made with UB Tech, which focuses on robotic hardware.

The discussion concludes with a focus on copper mining companies in China, highlighting MMG, Zijun, and CMOC as significant players in the market. Zijun's stock growth from $1.92 to nearly $22 is noted, reflecting the positive trajectory of the sector. The conversation highlights the rapid growth and efficiency of companies over the past six to seven years, with CMOC identified as a mid-tier company that is efficient but more expensive than Zijun. MMG's volatility is noted, having nearly doubled since the liberation tariff lows. There is optimism regarding Chinese assets and equities, particularly in the financial sector, with a focus on brokers, exchanges, and fintech over traditional banks.

The discussion transitions to Indonesia as a macro investment opportunity, emphasizing its long-term currency undervaluation and changing capital flows. The new president, Pravovo, initially disregarded stock markets but has shifted his perspective to recognize the importance of currency value, influencing economic policies. The introduction of the S.R.B.I., a national bank-issued debt instrument, aims to attract foreign investment, although it is primarily purchased by locals. The release of domestic liquidity from this instrument has been significant, benefiting banks by providing funds for lending and lowering their cost of capital. The central bank is also positioned to lower interest rates, creating a favorable economic environment.

In Indonesia, reduced central spending has impacted the construction of a new capital city, but a new 300 billion rupee infrastructure spending plan is being approved for various projects. The Jakarta Composite Index reflects the current economic situation, with fiscal expansion and monetary release contributing to growth. While concerns about currency depreciation exist, a stronger currency is desired for consumption. Investment options in Indonesia include ETFs like EIDO and VanEck. Indonesian banks, particularly Mandiri, are performing well, benefiting from positive economic factors.

In contrast, Thailand faces challenges such as political instability and the reversal of cannabis laws. The discussion notes that developed Asia and emerging markets are experiencing similar economic conditions, except for India, which has unique historical factors. The strengthening of Asian currencies is making intra-block trade more appealing, facilitated by the Regional Comprehensive Economic Partnership (RCEP). Economically, countries like Japan, Korea, and China are on a similar trajectory, despite differences in demographics and government policies.

The conversation concludes with a light-hearted segment where Leonid Mironov shares his album choices and selects trader Ed Thorpe for his adaptability to market environments. He also mentions his Substack, "Panda Perspectives," where he writes about China and Asia, with plans to expand coverage on commodities and semiconductors.