But good morning.
Half an hour away from the opening bell here in Hong Kong, in Shanghai and in
Shenzhen. Welcome.
You're watching the China show. I'm David Ingles with Yvonne Man.
Our top story this morning, Asian stocks are gaining led by Japan's post holiday
bounce. Traders betting that a Fed rate cut this
year is still on the cards. And we got the RBA looking set for a
hawkish hole when it makes US policy decision later on.
Also, had President Xi Jinping meets Emmanuel Macron in Paris calling on his
French counterpart to help fend off a new Cold War and China's property and
consumer sectors in focus with tech hub Shenzhen easing home buying rules and
Labor Day holiday tourists keeping a tight grip on their wallets. All right.
We'll get to all of the holiday data on the like in just a minute.
But you take a look at what the risk action and risk appetite here this
morning. You are seeing a slight bit across
equities here. In fact, we're actually still high
around those two year highs when it comes to Asia Pacific.
Stocks here and we are on track, I think about one and a half percent away from
hitting the highs that we saw in 2023 as well.
So certainly one to watch here today. You take a look at how Nikkei is doing
with Japan, really driving that charge here today, coming back from that
holiday strong. It seems we're up about 1% in Tokyo.
Big earnings coming up this week, the likes of Toyota Tokyo Electron.
So key to watch here. Nintendo also reports a little bit later
on today, Cosby is doing a fiery bit here, are seeing close to 2% gains.
Taiwan just coming online, also doing quite well as well.
So certainly the appetite for equities is still there relative to what we're
seeing across bonds here this morning. I really study what it comes to the
Treasury market here. We did hear from some Fed speakers
overnight, didn't really move the needle too much.
The RBA could be potentially next because they are set to hold.
But there is one in the loan group there that maybe thinks a rate hike could be
in the picture here today. I believe it's capital economics just
given how inflation has picked up. And are we going to see the RBA lean a
little bit more hawkish here? You're seeing the Aussie hold its gains
of late here at $0.66. Aussie yields not doing a whole lot
here. Pretty steady leading up to a decision
in just about an hour or two. We're watching also dollar yen.
So we did hear some comments from Qantas on here saying that, look, the
government need not intervene if markets are orderly.
Is that sort of a test for some of these traders here to really kind of, I don't
know, bring this trade a little bit higher?
Again, I'm not sure, but you'll see still seeing that strength of are
hovering around that one 53.54 level here right now.
We're also watching Brent markets and crude in general.
So it looks like these truce talks in the Middle East have basically faltered.
And so we are seeing a little bit of risk premium coming back into these oil
markets. Iron ore at one continues to be a strong
trade despite seeing a bit of weakness here today in Singapore, where basically
we briefly touched around 120 and then also dollar and futures are watching
very closely as well. I think we've reached pretty much the
20% gain since the April lows of late rather than do a whole lot.
Maybe we're just tracking some of the gains that we saw in Hong Kong
yesterday, just given really the momentum and the buying was back on the
onshore markets. We'll see if we see a second day of
this. But right now, futures are heading a
little bit lower here. This morning.
We talked about some of those travel data.
So, yes, spending was up, number of bookings and travel was also up.
But Stockton had interesting note, Dave, you break it down, too, per visitor
spending still not quite to those 2019 levels just yet.
Yeah, I think people are too busy taking pictures and spending, which is really
you know, that sounds like banter, of course, which it partly is, but it
certainly just underscores the changing of habits and this longing for
experience more than that extra handbag, if you will.
We're up ten straight days now. The Hang Seng index could do day 11.
We'll see what happens with that foreign exchange reserves.
Data comes out today, both Hong Kong and China.
We'll talk more about the third bid in a moment.
There's a turnover actually in a mainland actually top four 1 trillion
renminbi for a fourth straight day. Might that be an indication of increased
participation in this market? Yvonne talked about where you are and
iron ore prices are down exceptionally well amidst these last ten days or so.
We're watching that. And of course, all the things that come
through out of President Xi Jinping's trip.
Of course, over in Europe, Italian automakers keen to 900 bucks their first
time, I believe, going back to early February.
Yep. This talk, all things markets,
especially when it comes to China, when you take a look at, you know, really
what's behind this rally and want to talk to should we run our opinion column
as well about this fierce rotation that we're seeing.
Let's bring Lilian Leung China Income Fund Portfolio Manager at JPMorgan Asset Management. How real do you think this bull market
is right now? Well, I think sentiment definitely has
improved because I think investors are getting more slightly more confidence
about the policy direction, especially on property market, because I think in
the past people are still very skeptical about
whether the policy will be effective. And now we've got a little bit clearer
kind of picture about the overall policy direction and with the, I would say,
stronger hope that some of the ultimate problem can be
solved. Not sure within like 1 to 2 months, but
then the direction is that you're on the way.
So I think that's the key change over the last month or so where when, you
know, investors start to feel like we finally get to the right direction to
solve the problem, in particular for property markets, I think that's the key
turning point. You're right, there is some a lot more
clarity beyond the short term that investors see.
We'll talk more about income strategies in in a moment, but just generally
speaking, to take us into that, do you think this rally supported by earnings
and what we've seen so far, because at some point investors will also start to
look for a fundamental story here? Well, I think ultimately, as you said,
you have to be supported by the earnings revision.
We haven't seen debt up across the board, but actually within certain
sector, this has been actually very slim.
And I mean, it just we have been suffering loss of the rating a little
bit. You can you can argue part of it is like
non fundamental related. And now we are basically reversing that
kind of trend. And next step up, we need to be
supported by earnings ratio. And and when would when we were going to
see that. It depends on how effective the policies
is going to stabilise the fundamental of the
economy. I think that's the key.
What are some of the sectors that you think are a little bit more resilient
given this earnings season we've seen so far?
Oh, definitely. The upstream like the energy, some of
the major, some of the leaders, even within the consumer discretionary
sectors, they have been holding up very well, in particular on the cost
efficiency side. Even though revenue may not be that kind
of super, but the operating efficiency improvement have basically to keep the
margins on the upward trend and beat kind of market expectation.
Right. And that takes a straight into, you
know, dividends, you know, margins and dividends.
And from an income perspective, does it make more money?
Are you getting the proper dividend yield right now?
Yes, because in the bond market, there doesn't seem to be anything there.
Well, I think one of the things we have been arguing is that we are actually
seeing our income or dividend kind of source coming from a wide spectrum of
sectors. I think in the past it's mostly from
like banks. Some of the utilities is still the core
parts of the kind of yield sources, but now we are able to diversify to like
consumer electronics, information technology,
industrial wide spectrum of financial space.
I think this sector, this kind of change has been very supportive to drive over
on the only positive to China income strategy, but I think it will be a key
pillar to support the sustainability of the rating of the overturning market,
because it probably showed us a return. A more stable kind of total return
profile should be like one of the key support to the drive that we had were
rating. Yeah.
Yeah, we were just talking yesterday with our, our strategists about that
equity risk premium that China has, which might be better than most markets
in Asia here right now. So does that mean that you're tilting
more to the equity side versus the stock side?
As of right now, I might say, yes. We have been taking our equity to over a
position like two or three months ago. On the relative level, I try to get a
valuation versus like fixed income. And we are still overweighting that
equity at the moment because as measured, either we are potentially
seeing potential earnings revision upgrade and also from a shareholders
kind of return perspective, we are seeing lots of companies improving to
show this return which basically will be supportive to to our overall training
comes. Right, Right.
And what changes what changes have you seen in the SGB space that have made you
overweight? Push yourselves over weight to equity
markets. And I'm getting to, you know, one of the
other stories which hasn't really gotten a lot of attention, this pushback from
officials in the SGB market, that maybe things are getting more divorce or
fundamentals. Well, I think is it's more about
relative valuation at present. It's because like for equities, we have
seen to potential upside not only from like the earnings revision but also the
way they provide to show this return because there's still lots of company to
able to increase dividend payout and make a more sustainable kind of payout
more explicit kind of, you know, dividend payout policy, which basically
will have invested to navigate the potential total return profile for
investing in China's equity. Or is this in the past we only bet on
like valuation kind of changes. Right now we are able to see potentially
more long term as again, basically navigate your, you know, expect to
return much better or less volatile go away.
Yeah. We've seen in this rebound what's really
been driving it is well you mentioned property tech is certainly one factor as
well. I mean are you are you looking into more
the growth sector here right now as well?
Yes, I think in particular, after kind of like share price, kind of, you know,
collapsing in the US to like, you know, 6 to 9 months ago, we see a lot more it
names with more I would say attractive valuation right now.
So in particular to hot work they're more exposed potentially.
They're also part of the beneficiary of the API kind of food and beverages to
quite attractive from our perspective. So we are basically to be more, I would
say, position into this base. What, what are you seeing in terms of
just what strategies are more in favor now because you run income strategies,
for example, and increasingly you are being able to add tech into your
portfolio. I'm wondering with the rally recently,
there's chatter into market that these are people are buying index funds.
It's the best companies, it's a growth companies.
And I'm wondering, do you think that comes at the expense of income
strategies, given the current nature of this rally?
I think we seem a bit more balanced, kind of flowed recently and I would say.
The income stretch. I think one of the core advantages that
because we have like mixed asset kind of asset class, we grew as a location and
also our stock picking, which supposedly would be less volatile than the overall
market. So basically our I would say return
profile would be less volatile than the over just buying into like equity
investment. So it depends on, you know, what kind of
investor who like some investor who might not want to be at that kind of
high volatility within the pure equity market, then it would be this kind of
like the strategy they would go for. Yeah, we all need less drama in our
lives, right? There we go.
Lillian, thank you so much. Let's draw more income portfolio
manager, China Income Fund at JPMorgan Asset Management.
Right. Just ahead, your shows will get you guys
up to date here on the president's trip in Europe as trade and security talks,
of course, persist and progress there with the French president and also the
EU chief. Details of those discussions coming up
next. We're also going on the opens of trade
in Shanghai, Shenzhen and Hong Kong. It looks like futures are pointing
slightly to the negative side of things. We're down about a half of 1%.
This is the China show. Happy Tuesday. We discussed how to make real progress
on market access. I remain confident that more progress
can be achieved. At the same time, we stand ready to make
full use of our trade defence instruments if this is necessary.
And that was the European Commission president, Ursula von der Leyen's,
speaking during Chinese President Xi Jinping's visit to Paris.
For more on that trip, let's bring in Stephen Engle, our chief North Asia
correspondent. There's tensions between the two.
And how did how did the Chinese president address that?
Well, obviously, he's trying to fend off some of the consensus that is building
across the Atlantic with the United States, issues about overcapacity.
We had Olaf Schulz, the German chancellor, go to Germany, go to Beijing
a few weeks ago, and also brought up those issues of overcapacity.
And again, these are the issues that are key to domestic politics as well in
Europe. I mean, autos is Germany's biggest
export product, right? So they feel under threat by EVs in the
overcapacity of EVs. And the allegations, at least, of
subsidies to these companies and dumping allegations as well.
So, again, you know, there's mounting differences between China and the EU,
not only over Ukraine, which we'll talk about in just a minute, but these trade
issues. Trade has become a major issue,
obviously, and we've heard it just there from the U.S.
president, Ursula von der Leyen. And again, there's a tightrope being
walked with Macron as well as with the other EU leaders on this trip with Xi
Jinping. And this is what Macron I think we have
a full screen quote of what he had to say.
He said, Nobody dictates our trade, economic and technology policy.
We wish it to be a sovereign, which means independent.
So again, there's that fine line that these European leaders have to walk.
They are there is a rising chorus about issues of of subsidies to these Chinese
exporters of green products, which we've been talking about quite a bit.
But at the same time, people like Emmanuel Macron and other European
leaders still want to do business with the Chinese.
So that's that fine line that they have to walk and not necessarily and this is
what Xi Jinping wants to make sure on this trip, and it's a very calculated
trip to these three countries Paris, France, obviously Serbia and then
Hungary. They're not going to necessarily get a
parroting of the U.S. views on trade as well as perhaps you
agree. And it seems like trade, there's maybe a
bit more leeway on Russia's war in Ukraine.
That's where you're starting to see more, I guess, of a divide.
Yeah, And the people that were in these this trilateral meeting between Xi
Jinping, Macron and Ursula von der Leyen say that Xi Jinping sort of bristled
when some of these allegations, not necessarily allegations, but
assumptions that perhaps the relationship between Beijing and Moscow
has aided the war in Ukraine. You know, the whole issue about dual use
products that end up potentially on the battlefield.
So this is something that the European leaders have brought up.
Ursula von der Leyen essentially bringing this up not only in the matter
of trade, but on the issue of security threats to the European Union.
This is what Xi Jinping had to say about that.
First of all, he said, Beijing is not the origin of this crisis, meaning
Ukraine, nor a party to it, nor a participant.
He says we oppose this crisis being used to place responsibility on a third
country. Obviously, he's referring to China and
tarnish its image and invite a new Cold War.
And that, I would say, is probably Xi Jinping's biggest aim of this trip to
Europe, his first to Europe in five years, and that is to make sure and to
fend off the concern that America's geopolitical stance.
And also on the trade front, on overcapacity is not necessarily cemented
in the EU. All right, Steve, thank you for that
update there, Bloomberg's chief North Asia correspondent.
Stephen Engle we're taking a look at that fix here this morning and it looks
like we're back above that 710 handle for today.
So right now we're seeing a seven 2175 when it comes to your offshore rate as
well. We definitely saw that catch up from the
onshore markets yesterday coming back from that holiday.
But there you go. Seven 1002 for today, right?
Yeah, a little bit of dollar strength, in fact, coming through in the last 6
hours or so. That takes us into futures going into
the open 10 minutes away, give or take. And we're looking at futures doing this
ten year gives at 230 right now do we get a day two on the mainland?
Do we get a day 11 here in Hong Kong? We'll find out in a couple of minutes.
A preview the trading day ahead in a couple of minutes.
This is Bloomberg. Right.
Going into the Hong Kong and mainland China open, Hong Kong looking slightly
underwhelming, maybe more unconvinced. We'll see.
It's early. We'll see what happens here.
Of course, in terms of data today, we're getting the reserves numbers coming
through. But apart from that, we're looking at
all things markets given this rally. And we'll see if that pauses today
that's been taking place over the last, what, ten weeks or so.
Here are some stories that we're tracking for you today.
Citigroup has shifted the work hours of some of its staff in Kuala Lumpur to
align with those in the U.S. The move is part of efforts to ensure a
smooth transition to a one day settlement cycle.
Said he has also created a task force that will solely focus on the process,
also known as T Plus one, and it joins dozens of other financial institutions
preparing for the shift. It comes into effect on May 28th.
Nomura is targeting 20% revenue gains for its global markets unit over the
next few years. Units Head told Bloomberg they expect 25
to 30% growth in macro credit products with equities with the rest coming from
wealth management. The business has returned to profit
after three years of losses. That included a $3 billion hit from the
Archegos scandal loose. Its shares fell sharply in extended
trading after the EV maker reported a worse than expected results in the first
quarter. The adjusted loss of $0.30 a share was
worse than analysts expectations for a 25 cent loss.
The company is contending with production challenges and uneven demand
for high end EVs. Palantir's shares also falling after
hours as its annual sales forecast failed to impress the AI software and
analysis firm nudged its revenue forecast slightly higher and raises
outlook for adjusted operating income to over $868 million.
Palantir has been one of the outstanding stocks amid this current AI frenzy.
Right, right. Going into the open today, the Tuesday
Open. So we're looking at some weakness
trading sideways here across these markets in Hong Kong.
In fact, yesterday for the better part of the session, things did look iffy and
then we just managed to close higher for the day.
So that's day number ten. Doubtful.
We'll see. What if we get a day 11?
You BP out with the notes? I think it was out late yesterday
talking about how the rally not yet backed up by earnings expectations.
And certainly when you look at 12 month projections in MSCI China, just to be
more specific, we're still seeing that somewhat rolling.
I want to see rolling over, but it hasn't reversed higher on an index level
just yet. Right.
PBOC draining some money out of the markets today.
Foreign 40 billion in renminbi, open market operations.
That takes us into the money story. The chart you're looking at is turnover
measured in renminbi on the mainland. Obviously, we're looking at five years
here. That yellow line is at 1 trillion mark.
So yesterday, a fourth straight session of about a trillion turnover on short.
That's a daily amount. Now, the reason this is important is
because this has been a feature, maybe an insufficient but adequate and an
unnecessary at least feature in previous rallies.
So we've seen this spike above 1 trillion back in 2020, 20, 21, 2022, and
of course back in five. So I think a good indication of
sentiment here. Yeah, And you got to wonder, I mean,
after north of 20% gains on MSCI China, what's next?
Is this really something that is sustainable?
There's a spark, a rerating, or are we still just talking about tactical
rebounds here right now? Yeah, well, the fundamentals stories
have yet to really come together, right as far as that.
In fact, on that very note, almost the news gods are dropping this on the
property story. S&P excuse me, talking about how the
property market is still searching for a bottom.
So I'm looking at this press release that's just dropping in our inboxes
right now. In fact, we'll talk more about the
property story. And if you got those new home sales
right, didn't look good either. Not the big cities, 37, 30, 39% drop in
April. Yeah, those actions were watch a little
more in the renewable energy space along agreeing to add CITIC securities.
CG and mining also rated do outperform the high tech international.
Morgan Stanley had a interesting note when it comes to the liquor maker's as
well so raising its price targets for two of them So we are here and Ludo Joe
other factoring in what we saw in the earnings were 2023 and of course the
first quarter results as well. And what they're seeing in volume
growth, the price target for young air raised to 182 still maintain that
overweight, but certainly that could maybe continue with this bull case when
it comes to these liquor makers here today.
The pre market is looking like this year right now.
So property continues to catch this bid here today, watching very closely some
of these names. Syfy Holdings is up one and a half
percent or so so far. Travel stocks as well.
You dig under the hood. I mean, the numbers are strong, right?
Travelers made 28% more trips. Spending only rose about 13 and a half
percent from 2019 levels. But maybe per capita spending still not
quite there yet. So we're watching very closely.
But Trump was talking a lot about the data about outbound and inbound travel
was pretty strong this holiday. Yep.
And there's. Shares their record highs, I believe, on
Trip.com going into the open today, 3 minutes away.
You're watching the China show. Good morning. Welcome back.
Your watching the China show. We're kind on the open of markets.
A CSI 300 was able to rise to those October highs yesterday.
Coming back from that holiday. It looks like right now momentum
stalling a little bit, especially what we're seeing in these Hong Kong markets
after the stellar 20% more gains as well that we've seen in offshore markets.
So we're unchanged in the Hang Seng here right now, a 721 handle.
So some weakness coming through back into the Chinese currency here this
morning. And Dave, really, we're still tracking
what's been going on. Everything from property data, from the
travel data, still maybe showing some signs of weakness still yet.
We were getting a lot of pockets of information coming through which we'll
try and put together. So, you know, on the property side of
things. And there's still a Shenzhen story which
we haven't really gotten into a lot and then relax in some rules in certain
parts of Shenzhen. And also when you look at some of the
monthly revenue and sales numbers from developers, certainly not well, I guess
in many ways underscoring the point out of S&P just earlier on that the property
market has yet to find a bottom in China.
More on that in a moment. You're open is looking flat right now
after really coming back strong from the holidays.
Right now, a glance at some of your big movers and the biggest stocks onshore
right now. Flip the boards, please.
Let's have a look. And by the way, while we're flipping the
boards, I encourage just to mention that two were trading closer to 900 now for
the first time since early February. Weakness coming to in Hong Kong.
I guess just to give you an indication of how far this rally has come onshore,
CSI or Shanghai Composite, it's about 15% from the bottom.
This is about 20%. This is about 30%.
This is about 25% from the lows. So we've actually come quite a bit.
Let's take a look at property, hunting property very, very closely.
Look at that. And of course, some of the other
benchmarks on the property counters, CSI 300 Real estate index, Shanghai Prop,
China real estate. Our big gauge, of course, on the back of
news that Shenzhen is actually loosening some of these restrictions.
Now, what is the underlying reality here?
A couple of things that we mentioned, right?
So we're putting some data together. New home sales.
This is based on data out of wind and also Macquarie, and they put that in
that specific report. So what we're looking at here is you're
looking at three years, right? 20, 24, 2023 and 20 2019.
And effectively, as you can see, we're at the moment as of April and May, we're
actually below trend. So year on year, still looking at
declines here on sales of the 30 largest cities right now.
What are we seeing in the biggest of the biggest right, Beijing, Shanghai,
Gwangju and Shenzhen, your tier one cities.
We're looking at weekly numbers. And based on the weekly numbers, it's
still showing some weakness coming through here.
And yet we have the terminal chart. I think we can get that up for viewers
to see that. And yeah, here we go.
There we go. This is the yearly 2017.
You do see the trend lower. So we're looking at weekly numbers to
32. You compare that to the same week last
year. All four major cities even are still
seeing declines with the biggest declines in Shanghai, the least declines
out of Beijing. Yeah, maybe why We're seeing some more
home relaxation, you know, necessarily home buying relaxation.
I to say in some of these Tier one cities, S&P, we just talked about that
note that came through here talking about, look, this property market is
still searching for a bottom. We're getting a little more details
about this. They're saying a double squeeze looms
for China's property market. Structural factors, which Dave has been
talking about, are still squeezing rate of developers strains that are unfolding
alongside a continued sale slide. That's after what we heard from
Shenzhen, the tech hub in China, joining other major cities in easing home buying
rules that authorities try to revive this real estate market for.
Well, let's bring in our Bloomberg Intelligence China property analyst
Kristy Hung. So first was Beijing last week,
Shenzhen. Now how significant are these measures
now? Right.
So we expecting Shanghai could be next to relax its home purchase restrictions
in the suburbs after you mentioned Beijing and Shenzhen?
And then we're also expecting in the near term, 42 cities in China could
remove their home purchase restrictions altogether.
But as we have sat here before, it doesn't matter how much easier the
government's making it for people to buy a home that won't overcome a lack of
confidence. And this that's a lack of confidence on
home price, home prices. You know, if people are not expecting
home prices to rise, investments are not coming in.
And that's also a lack of confidence about a job.
You know, a survey in March is showing that 57% of white collar workers in
China are worried about losing their jobs in 2024, 57%.
So, you know, these are telling you how, you know, sentiments really weak on the
ground. And also, if people are buying a home,
considering to buy a home at the moment, you know, they would very likely think
about second hand homes instead of going for developers pre-sales.
Yeah, because they can see that the building exists already.
Right. It's felt already.
What did the dynamics tell you then between the prices we're seeing in the
secondary market and how does that then educate us in terms of.
Where we go with the primary market. You've done some research on this.
Yes. So based on official data from Angus,
we're seeing since the peak there's been a 10% decline in home prices in the
secondary market fastest 3% decline in new homes.
While we think that reality we're seeing on from projects on the ground, we're
seeing steep declines in the official data.
But that's nonetheless telling you that, you know, in the secondary market, home
owners, they have bigger flexibility to cut prices and that is really where the
true picture is showing. But whereas in the new home market,
because prices are heavily regulated by the local governments, some cities have
before stopped developers from taking too steep a price cut.
So that is not showing you the true picture.
And that's also hampering developers ability to slap price and slash prices
to boost their sell through, to boost and shore up the liquidity.
The Politburo meetings, people seem to think that that was maybe a turning
point, that maybe policymakers are finally in the right direction in
tackling the supply issues and really trying to potentially reduce inventories
from these developers. Do you see it that way?
I think the concerns we have right now is there's a lot of secondary supply in
the market. You know, we have the housing boom in
2016 to 2020. A lot of people bought new homes, but
with a home price expectation changing that, looking for the exit, they're
offloading their new homes that they bought into the
secondary market. You know, in Chengdu, Chongqing, talking
about over 300,000 units listed in the market at the moment for each city.
That's also the case for Shanghai. You know, that's an ocean of new homes
coming in. And on top of that, there's new home
inventory from developers. So, you know, at the same time, demand
is dwindling. You know, how do we handle that?
And that structural imbalance is the very reason why we're still very
conservative on the sector. Kristy, thank you.
Kristy Hung there at Bloomberg Intelligence, China property analyst for
us this morning. And from the property to the consumer
sector, we've got travel data. So we talked a little bit more about
this. Finally, we got some official numbers
from the culture and tourism industry for what we saw in that five day Labor
Day holiday. And it sort of paints a mixed picture,
right. Trips dropped 28%.
Spending was up 13 one half percent from 2019 levels.
Outbound trips and inbound trips both saw about 1.9 1.8 million.
So you're seeing not just outbound, but also inbound travel as well.
They didn't give us last year's figures for those to mind you, but also you got
some from, you know, data from trip. Some of these agencies talking about low
people are just opting for maybe cheaper places, maybe not so much Tier one also
just going from maybe just best value for money sort of trips as well.
So Jen did more of the crunching of the numbers.
The concern is that per visitor spending is still below 2019 levels, which means
in general people are only keen on traveling, but not so much on spending
money. Yeah, well, let's get a better sense of
how this affects sort of. So that's the macro.
How does this affect the micro at a corporate level?
We're joined right now by Angela Han Lee. Of course, she's an intelligence or
senior impact gaming and hospitality analyst today joining us.
She's been traveling herself out of Singapore.
Angela, what do you think? And Yvonne laid out this sort of
discrepancy in in in the data. Right.
More trips, but less spending. What do you think is behind that
phenomenon? Yeah, we are seeing that like people are
spending money to go out from China. So the urban tourism is very strong
during the holiday season. I think the major improvement this year
might be mainly because of the increase of flight frequencies.
I guess you guys may have noticed that the minimum annual leave requirement in
Chinese five days is actually very short.
And even when I talk to people of my peers, they still only have five days
after working more than ten years. So I think that means that the holidays
are very important for them to travel, and the flexibility to travel like a
plane along show is very, very low. So for that reason, I think the flight
increase in fly frequencies has been a key factor why people actually decide to
go out from China this year. Also, given that like of some currencies
like a Japanese yen is weaker, so they want to spend more money like outside.
But on the other hand I think go I agree that like some sentiment is not good in
China. That's why people might be like go
willing to go to a county level cities or say even villages to explore like a
natural adventures or maybe just going for like a music festival despite those
young people. Yeah.
I mean, you only got five days. You got to make the most of it.
The housing market, though, as we're just talking to Kristi.
Angela is still weak. You know, does this imply that consumers
will keep being cautious when it comes to spending?
Yeah, I think I have an idea that, like, if people already bought both of
properties of flats or maybe they are suffering because because the rate is
going up and also the even they cannot sell the properties.
But if you talk about those people who have just started working or even like
or who are still at twenties, then they haven't bought the house yet.
So maybe given that the price is that volatile, they might feel like maybe I
don't even have to buy the flat. And you also noticed that the marriage
rate and both rates are going down. So they kind of feel like maybe I just
enjoy my solo life. They in that case, I feel like they
might be willing to allocate more more like a budget or spending for
themselves, like an experience driven ones.
That's why I think I in China you are still seeing that the the concert ticket
prices is going up and people still travel to different places to go to the
to like to join the concerts. So I think there are some discrepancies.
Is there like the people who are having more than 30 years old might be
suffering something from property issues, but like a less than that, maybe
you still have more willingness to spend just their like.
They are not they are not like overtly enough because they adjust to the
working. Okay.
So spending really just about a little more on the concert tickets.
We're not so much on buying and shopping.
Angela, great stuff. Thank you so much.
Angela Han Lee of Bloomberg Intelligence, senior gaming and
hospitality analyst, joining us out of Singapore this morning.
We got plenty more ahead. This is Bloomberg. Okay.
So about 12 minutes into the session and, you know, things have started to
stir up. Is that the right verb grind?
Yeah. Oh, still grind.
Yeah. But yeah, I mean, it's green, so we'll
we'll take it. We'll see.
We'll see how we end the day. But that said, this is day 11 too, on
Hang Seng index, right? Yeah.
Day two for CSR 300, at least for now. But yeah, we're getting closer to at
least we reached those EUR today highs for for the onshore market there.
We're focusing on some of the geopolitics as well.
Oil's catching a slight bit here this morning.
The Asia session. Israel rejecting that cease fire plan
backed by Hamas, saying that as far as the falls far short and that's
operations in Rafah will continue as of the latest now from a Bloomberg
reporter, Bill Faries. Bill, how do these talks break down what
happened? You know, from the Israeli side of
things, what do you think fell short in this deal?
Well, you know, we've known for weeks really kind of the broad outlines of the
deal that's been discussed. It would involve the release of
potentially dozens of hostages by Hamas, perhaps hundreds of prisoners from
Israeli jails. It would involve a six week cease fire.
That's been one of the common themes running through these talks.
We don't know specifically what led to this latest breakdown.
There are The New York Times, for instance, is reporting that there were
minor changes to the Israeli US draft proposal.
And the big the big hold up has largely been centered around whether this cease
fire would become more of a permanent end to the war.
Israel has pushed back on that. They say their goals are still to go
after the Hamas leadership and those thousands of Hamas militants, they say,
are holed up in Rafah. They do not want a cease fire to be seen
as the end of the conflict. Hamas, on the other hand, is hoping they
can win this down and have Israeli troops out.
So that seems to be where the where the disagreements remain.
But where it leaves us now is really in a bit of a limbo.
We don't know if they can have a breakthrough in the next few hours or if
we're going to see some of the fighting drag on for weeks again.
Yeah. And Bill, so in the meantime, should the
assumption be and we know the US has been opposed to this, I think France and
China put out a statement, their statement or it was reported earlier on
out of Xinhua that both China and France also oppose this.
Can we assume that the operation still continues there, of course, in Rafah?
I think so at this point. Israel warned residents of parts of
Rafah to leave that area, head north to Khan Yunis and get out of the way
because they were planning to do more bombardments.
We've seen them strike some targets. We haven't seen the full ground
invasion. But Israel says it plans to go forward
with this. Whether that's a negotiating tactic to
try to get Hamas to back down at the last minute.
We don't know. But they do have their troops ready and
they do say that going in as part of their objective.
Bill, thank you. Bill Faries there, a reporter with the
latest on what's going on in the middle east here.
Some other major stories that we're following from around the world.
U.S. and Philippine marines have conducted
rare military drills on the southeast asian nations, northernmost inhabited
island. Immediate island sits just about 160
kilometers south of Taiwan. And the inclusion of that is this year's
drills highlights the role the Philippines could play in any potential
China U.S. conflict over Taiwan.
The U.S. is adding a tank destroying drone to an
asylum in an effort to prepare for a possible conflict with China.
The switch Flight 600 is the first of a new wave of lower cost autonomous
weapons. The Pentagon is publicly acknowledging
its funding through its replicator program.
The weapon is known for helping Ukraine push back on Russian advances.
The Canadian government will now require people lobbying or acting on behalf of a
foreign government to register that activity publicly.
The move comes after allegations that China attempted to meddle in the last
two Canadian elections. Other amendments will also make it
easier to prosecute activity related to illegal foreign influence.
We got three more. This is Bloomberg. Welcome back.
Shares of ANZ. There we go.
Bottom of your screens. So the conversation is a buyback and a
profit, miss. We're down over 1% or just under 1% over
there in Sydney. The bank has also just announced, as we
were just talking about its 2 billion Aussie dollar buyback after first half
earnings missing estimates. Group CEO Shayne Elliott told us where
they are actually seeing pockets of strength in their businesses.
We came off a record 2023 and what really delivered here, you know, revenue
was flat at a really, really strong level, expenses well managed and
importantly, it really shone through, I think, the value of having a diversified
portfolio. As you know, the Australian retail and
small business banking market has been subdued and we experienced that like our
peers. But we had really strong offsetting
performance in our institutional and international business.
So I actually saw a lot of strength in the result and I think we're very well
positioned for the environment. You joining us on our big day, of
course, after four and a quarter points of hikes.
How are you kind of seeing the mood when it comes to clients, customers and the
broader economy and how that's impacting your business?
Yeah, sure. So clearly, there is some stress on the
economy. I mean, that's you know, that's to be
expected given the interest rate rises, cost of living pressures, etc..
So the market is subdued, particularly here in Australia and New Zealand.
And we see that and we see that with customers, more customers struggling,
although the number of customers struggling is still, you know, from an
historic point of view, relatively low. So then we have these hardship programs
like all the banks, so people are finding it tough, call up the bank and
that's the hardship. The number of people in our hardship
program is point 3% of all our customers.
Now, it's devastating for those point 3%, but it's 0.3%, 79% of our customers
and home loans are still ahead on their repayments.
They have paid more than they are required to do and 50% are ahead by more
than three months. So there's a remarkable resilience still
sitting in the economy, although things are subdued with competition pretty
fierce within Australia. How vindicated by your international
strategy? And I'm wondering if you can give us an
update. Given there were discussions with
pension funds to bring in to India investment in the special economic zone
and also maybe an update on how procurement of licences is going in the
Chinese market for ANZ. Yeah, great.
So look, the point of difference ANZ is way the most diversified of the major
banks in Australia. We have four great businesses, New
Zealand, our retail business here in Australia, our small business banking
here in Australia and of course institutional.
And probably the piece that we really shine and change that point of
difference is it is institutional, which services some of the world's best
companies, biggest companies around the region of Asia Pacific.
And we operate in 29 markets around the world and that business really came
through very strongly. So I do think now it's been hard work.
Now you can't just turn up in Singapore or India or China and expect to get a
fair go. You've got to work really hard.
And we've worked really hard building a strong foundation with the right
customers, knowing and investing in things that we think we do better than
others, which is facilitating the movement of goods and capital around the
region. So we are in all the right places we
need to be. We've got all the licences we need to
have and more importantly, we have the customers that we need.
That was the ANZ group CEO Shayne Elliott speaking to us just a short time
ago. Of course, you can turn to your
Bloomberg for more on this to live. Go to get commentary and analysis from
our expert editors. And of course, we're tracking everything
from the Milken Institute, the RBA decision coming up in just a few hours
as well. Yeah, lots of events taking place
concurrently. There we go.
That's the word I was looking for. RB is coming up, so we're looking at the
Aussie dollar. And by the way, so the level you're
about to see on your screens is actually quite near this high.
We hit back in March, and certainly the assumption that any hawkish pivot or
statement out of the RBA might actually push that beyond that peak.
We also did get Philippine inflation earlier on towards the lower end of
forecasts at 3.8%, although the Bangko Sentral came out with a statement too
that the risks to the inflation outlook continue in their view to lean toward
the upside. Right.
That's a brief look at currency markets and of course the Bank of England is of
course on deck as well. This week.
Cable is doing one 2557 Chinese markets doing this.
And we're now just coming off highs a little bit on the Hang Seng index is at
$300, is still seeing some upside right now.
Yeah, and interesting enough, HS tech is actually selling off a bit here today.
Usually they're the bigger, bigger driver of profit taking.
Maybe maybe there's a bit of profit taking going on in the tech space here
today. Coming up really in the next hour,
watching very closely our top of the Fed.
A lot of Fed speak this week. I think it's nearly 12 speakers that
have been going to be well, I think nearly I think I think 11.
They're set to be talking this week alone.
So T.Rowe Price, Thomas Poullaouec joining us why they continue to
expect two rate cuts this year. So I think we've gone from whether we're
going to get these rate cuts to when are we going to get them.
I think that jobs report at least shifted the narrative just a little bit
to maybe September, September, November, November, December 12 speakers.
That's one for every day of Christmas. And by the time we get to that, we might
actually get a rate cut. So, you know, we were talking about the
Milken Summit earlier on. Right.
So Jenny Johnson, head of Franklin Templeton, actually said we probably get
one, but the probability of us getting two is a lot less than us actually
getting no cuts at all. Okay.
So one at best is what she had to say anyway.
And we'll see what the 12 say. So or zero or two.
More than two. Yeah.
Yeah, that's interesting. Okay, we'll see what happens.
We'll get to digest some of the latest Fed speak as well.
Williams Barkin to speak. All right.
Well, want more on the way in the next hour?
You're watching the China show. Welcome back to the China show.
Here's a look at the site of the half hour of the session here.
And looks like we're back in negative territory here when once more.
But yes, we talked about. Right.
This rally has been gone for some time now.
We were thinking it could get to an 11th day, but certainly things might be
looking a little bit overstretched to take the MSCI China, though we're still
slightly flat here right now, but we'll see how this all plays out.
But CSI 300 at least, I think we're doing a little bit better there.
DO Yeah. I mean, this market, as you can see, is
moving quicker than our you know, we can type headlines out, but it was actually
a few seconds ago to defend ourselves. Of course, we were on track for an 11
day of of gains. We'll see.
We'll see. Right.
We've been bobbing between gains and losses and to Yvonne point.
Right. Overextended.
You know, you're getting a lot of momentum coming through.
I mean, ten straight days that that's what that does, right.
So, you know, measures of momentum. Good example before I talk about this
hour, as I you know, your Bollinger bands do indicate maybe it might be time
there to maybe take some of that froth off the table.
More on that in a moment. And again, bottom of your screens, we're
looking at, of course, some of the property names listed in Hong Kong.
You're getting some news out of Shenzhen and then relaxing some of the property
restrictions and home buying restrictions following what we got out
of Beijing. And our analysts, Kristie Hong out of
Bloomberg Intelligence, actually thinks Shanghai could be next.
Right. Broader read across these markets Right
now we're looking at Asia-Pacific. Japan is coming back online today, shut
Friday and Monday, and that's pushing the benchmark now at quarter 1% to the
highest level in about two years or so. So I guess this is really on a lot of
things here, the China story and of course, of one you also have these hopes
again are back that the Fed could cut at some point this year.
It may be boosting what we're seeing as far as equity markets go.
Yeah, even if it's as far away as November or December or even September,
when we get very close to that U.S. election.
Yeah, we did hear from some Fed speak overnight.
The Bank of New York president John Williams saying that rate cuts will be
based on the totality of the data. He did speak at a panel at the Milken
Institute Global Conference in Beverly Hills.
For me, it's really looking at the totality of the data and not just
looking at an employment report or a CPI or other piece of information.
You really want to make sure we're looking at the broad picture.
We have the maximum employment and price stability goal.
So we want to, from my perspective, see all the data and information speaks to
all of that. And really, you know, as the data come
in, hopefully we'll be moving in the direction we want to see both on
inflation and in terms of restoring balance to the economy.
And then we'll make our decisions based on on that,
we're joined here in sets, Thomas Poullaouec, Head of Multi-Asset Solutions
for APAC at T.Rowe Price, normally based in Singapore.
But we see him enough of course, and quite regularly here in the city.
I want to talk to you about the Chinese markets in a moment.
That's been one of the main stories. But you know, why don't we start with
the macro backdrop and the Fed and can we still trade on the assumption that at
some point this year easing begins? Look, if you look at the probability,
what we see is that on average it's about 1 to 2 rate cut, but you have a
wide range of probability around that and even 20% of probability is still
betting on a rate hike by the end of the year.
So I think that's the kind of things that you need to take into account, is
that you have an average which is still pointing to some kind of easing by the
end of the year for us. Our US economist is still betting on two
cuts for this year, but what we see is that there are still a wide range of
assumptions and as it was said just before, the data will be key and we
don't think that we will get perhaps enough data by the summer to get the
first rate cut in July so that can be postponed to the second half.
And in that case, you might be left with only one cut for this year.
Okay. So and the narrative seems to be last
year was we're going to head into a recession.
We still haven't seen that. Now it's more about inflation.
How does that change the overall playbook for you, especially when it
comes to multi-asset allocation? So, look, a little bit of inflation is
not too bad for equities because equities and things are in nominal
terms. And you can see that, for example, the
in the US, the earnings growth for this quarter was about 6% compared to a low
bars that that was at about three or 3%. So definitely earnings outpaced
expectation. And part of the story is some of the
price hikes that came at the beginning of the year.
So there is a bit of inflation that can help equity and we can see that the data
is also now signaling that, yes, the economic growth is still quite weak but
getting better. And we can see that PMI are moving
higher. That's true in the US, That's true
globally. When you look at global PMI, you can see
that we are. 50 right now.
So it's something that points to a reacceleration in the short term of the
global economy and that supports equity of our bonds in our portfolio, whereas
specifically in equity markets. So the largest overweight that we have
remains Japan. That's a long term story around
copyright governance. But of course the weak yen is also
helping the export sector. I feel that when you look at some
pockets of Asia, you also see some strength, according to us, that will
come from, for example, South Korea on the back of this uptick in global
growth. So the export sector also can do well.
But you have also the story that is really benefiting that market.
And then if you are more adventurous in Asia, you have Vietnam.
Vietnam is also 80% export driven. You have a very cheap market after some
issues last last year and you have the possibility of you are a long term
investor of inclusion in the yen. So you have a broad range of markets.
There's still a lot of interest enough to get back into China right now.
Thomas No, I think China is structurally challenged by the property deleveraging.
Yes, you have a tactical bounce, but that was coming.
Remember, we were talking about the price earnings of Chinese stocks being
lower than the price to books of NASDAQ. So of course the valuation was so cheap
that people get back in. You have a lot of short coverage coming
on right now, so that is helping the market as well.
But look, you have a property sector that is still impacting consumer
confidence and we see weak prospects given that the year the growth is still
helped by exports. Yeah.
So stimulus is not there to to be big enough to really be a catalyst for
consumer spending. And some of the markets that you
mentioned, you're overweight. And so Japan, Korea, Vietnam, maybe to a
lesser extent, you mentioned the currencies is a boost to Japan.
But I'm wondering how you're hedging currency risk right now.
If you're a dollar investor, you know, you look at some of these markets and
you probably worried where the one is, where the yen is, for example, where the
dollar is trading, where the yuan is trading, if you long onshore markets in
China and wondering how you're looking at that.
So we are hedged on the Japanese yen, for example.
And we we we started a year on north a view of a weak US dollar, but we changed
that view right now so we we can see that the US dollar is really supported
by the interest rate differentials that is quite large and still expected to be
meaningful. So growth is also quite reasonably
resilient in, in the US. So you have interest rate differential
which is on the positive U.S. dollar into a gross differential,
positive U.S. dollar.
So that's why we are hedging excellent currency from the US based investor.
You're still favoring value overgrowth, though, right?
Yes. So so because we are looking at a
broadening of market leadership, of course, the story last year was begins
with the max seven. But we can see that value sector can
benefit from the uptick in economic growth.
And we are modestly overweight.
That is. What about the fixed income part of your
portfolios? I know you're mostly overweight equity
markets, but sort of within fixed income.
You know, even if the Fed cuts in December, it doesn't mean inflation
can't hit your bond returns before December.
Should I look at inflation protection? Should I go long duration?
The opposite. What's what's the call?
So we agree with your point about inflation protection.
That's something that we need to own in our portfolio.
But we do that through the short part of the curve.
So as that would be more short term tips.
And then we are underweight duration still in the portfolio.
We we see the risk of yields moving higher and with that we are left with
credit. We still see value in in debt and also
in high yield where you can capture the carry and in the low volatility
environment, that's what you want to be and duration.
How are you looking at that right now? So duration we are underweight.
To be fair, that's perhaps in some of our portfolio, our largest risk
allocation to be underweight bonds where we see yields moving higher.
But until the end of the year. Right.
For investors and I guess it depends on what type of investor profile you're
speaking with. You know, people talk about fine, where
let's say six months from the Fed cutting rates at best, how do I look at
all in yields right now? Is it time to lock those in?
If I'm in this for the longer term? I think if you are an investor that is
looking at 2 to 3 years and you want to, you're happy with five, 6% that you can
get in credit markets, you can you can build a buy and hold with very safe
credit analysis. So that's definitely something that we
see. Quite a number of investors doing in
China and in Asia, where they are happy to just lock in the yields for now.
And that's definitely something that I would recommend.
I saw more short term duration credit to pick up an extra spread and you can get
about 5 to 6% depending on how aggressive you want to be.
So modest. Overweight on equities over bonds.
Now, should I be looking at other asset classes, commodities, even cash right
now? So Bitcoin, Bitcoin
cash remains still and an asset class that you can own given, as we said, 5%,
you have an inverted yield curve. So it doesn't make sense to take too
much duration down. On commodities, I think it's a bit of a
mixed picture. We would be quite positive on on sectors
like copper, which is definitely benefiting from this infrastructure
rebuild and new energy. But on the other hand, I think oil had
quite a good run and we might see some oversupply.
We can see a build up in inventories. So in the short term, maybe oil could be
a bit more challenged near-term. All right, Thomas, great to have you
here in Hong Kong. The Thomas Poullaouec there, head of
Multi-Asset Solutions, APAC at T. Rowe Price.
I'll take some live pictures here right now.
Take a look. First of all, let's talk a bit more on
what's driving this bull market in China.
We have a big discussion with our team as well from Bloomberg Opinion as well
as buy. But they take a look that these are live
pictures that we're seeing when it comes to Modi's home state of Gujarat, where
we're seeing he's headed to vote in this very heated Indian election campaign as
well. Bring in an update next.
This is Bloomberg. All right.
Watching some of the biggest decliners in the Olympics.
First, I'm sorry, but grainy, though. Yeah, there you go.
There you see Prime Minister Modi there voting in his
home state of Gujarat. As we get ever closer to this very
heated Indian election campaign. So certainly there he is just about to
cast his vote. I wonder who he's voting for, David?
Yeah, I no line two went straight to the front.
Of course, it's early in the day. Yeah.
This is home state, of course. Okay, I guess.
And he gets dibs on everything. Yeah.
I'm guessing people know who he is. Yeah, right.
Of course. There we go.
If they don't, he's in trouble with the elections, but.
Okay, that's a bit of conversation. Let's have a look at what's happening
across these markets. 45 minutes into the session here in Hong
Kong. And some of the big decliners have been
really some of the big winners of late. Right.
So Meituan was actually up 80% almost before today.
And really, how far has its rally gone? So when you look at it from the bottom,
which was late January, early for that, we put together a chart that tracks
basically not all but all the major benchmarks here.
It's really a favour in favor of growth, in favor of Hong Kong listings.
So we're up about 30% on the Hang Seng tech index.
We're up by half on the CSI 300 and on the Shanghai Composite.
But as you can see, it's been it's been very, very well for many of these
benchmarks from that bottom, of course, back in February.
All right. So where do we go from here?
She'll be with us here on set. Our Bloomberg Opinion column is.
And also joining the conversation is Marvin Chen, our Bloomberg intelligence
equity strategist. Marvin, let's start with you.
There's a lot of momentum in this market.
Can it continue? Yeah, we think some of the comments from
the Politburo and the timing of the third Plenum can kind of sustain this
momentum going into the summer. And I think this structure, this focus
on structural reform is something this rally has been missing so far.
So we think back to that February, we've been really
rebounding off short term measures such as a know short sale banning market
intervention. But the underlying economic problems
such as the property sector still exist. So now markets have kind of stabilized
and we're seeing more focus on the structural medium to long term reforms.
And I think the timing of the plan fits into this narrative of stabilizing
markets and then buying time for leadership to kind of focus on more
structural reforms is something that markets are looking for.
Shuli, your column today talks about the mood that's shifting here in Hong Kong.
What do you think is driving it? There are two fears that are driving
investors repositioning. One is the fear of getting caught.
Another fear is the fear of missing out, getting caught in the sense that we all
know coming through 2024, everyone loves Japan, hates China, and everyone is
piling on to semiconductor stocks because of the rally, etc..
Right. And then like just two weeks ago, tsmc's
earnings disappointed and we realized the chip upcycle is not may not be as
strong as investors had hoped and the yen sliding past 160 means that the
dollar based investors, they are just not making as good returns.
On the other hand, just like what mom was saying, China finally has the date
for the for the platinum, which means that they seem to have a plan for its
economic future. And the people seem to think that the
the economic policy paralysis is over. And we all know China is very, very
cheap. So people are just rebalancing and
trying not to be so lopsided, basically. Right.
And Marvin, that takes us into I want to bring you back in because you're looking
at the earnings season as well. And at some point, investors will look
for earnings because the market's so cheap, I believe they're probably not
there yet. What are you seeing as far as the
earnings season goes? You know, so far, first quarter earnings
have been tracking a slight contraction year over year.
We do think this is somewhat of a base effect because, you know, consumer
sentiment was still pretty positive in the first quarter due to reopening.
But overall, we do think we also are seeing some downward revisions, but
we're less concerned about the downward revision because we see that as
consensus, which is still at 15% growth for this year, kind of moving towards
our estimate of 10% this year. But overall, we do think GDP growth is
going to kind of features the earnings growth later this year.
And we do see a potential for a Goldilocks scenario where improving
China inflation helps drive margins in earnings this year, while easing
inflation in the US allows for the Fed to cut once or twice.
Okay, so how's university position right now?
What are you looking at? Well, you know, the regulators have been
highlighting shareholder returns, so we think that's exactly where investors
should be focusing on high dividend yield.
So these sectors, such as energy and utilities, the other form of shareholder
return is buybacks. Right?
So here will be the China tech sector, Alibaba, Tencent come to mind even after
the April rally. If we look at HS tech versus like the
Nasdaq 100 or the next seven, we're still trading at a 30 to 40% discount.
And you know, there has been signs that. China Tech is back to business.
So we do see some room for valuation convergence here.
Yeah, that story has actually not gotten a lot of attention.
Tension's actually led to some of the buybacks here that have taken place.
Yeah. So Alibaba, Alibaba buybacks have
actually been larger over the past couple of years.
You know, they've recently announced the expansion up until 2027, I believe.
But yeah, both have been buying back very strong.
And some of the newer e-commerce platforms are also
announcing buybacks this year. Surely when you look at let's take it
back, say 18 months, two years, the market in Hong Kong, sharp rallies, then
sharp declines. What does it tell you about where we
are? I just think Hong Kong is a very funny
place in that there are no like a dominant investor bases, right?
Like the Americans, the Europeans, mainland Chinese and local investors.
There's no single dominant force. And as a result, a lot of factors can
affect the Hong Kong stock market like a feather rate hike.
US trying to draw political attention to China's economy, even local investors,
random rumors. And I just think it's amazing that that
positioning has been so light and there is hardly any good news.
I mean, we are also we all hope for good news, right?
And then there's not much it doesn't take much for Hong Kong to coming
through a bull market. It just shows that the people really
have fled this market. Right.
Shuli. Great stuff.
Evolving opinion columnist also Marvin Chen of Olympic intelligence joining us
here for that roundtable. We got plenty more ahead.
This is Bloomberg. Right now.
The IBM CEO says its air unit has booked more than billion worth of business
already. In fact, this year, a rebellion to me.
Arvind Krishna spoke to us at the Milken Institute Global Conference taking place
in Beverly Hills about the regulatory landscape for A.I.
and also the broader tech space. I think every regulator is worried about
three topics, not just safety and regulation.
They're worried about innovation. They're worried about competition and
they're worried about safety and regulation.
So when you take those three together, the airlines have opened really come
together to help you foment innovation. So I think that that actually helps the
regulators to think about what is going on here.
Well, of course, there will be some guardrails that are always put.
But in my experience, open technologies have always been safer and more secure
than closed technologies. Is one of the risks that maybe you're
obviating with your emphasis on open architecture, that some of the I'll call
the big guys get an advantage and really have an entrenched position.
But I use the concept of a walled garden.
When you have a walled garden, how those areas and technology has been more
innovative or less innovative outside of walled garden has always been less
innovative. And so I think that it actually helps
you create more competition. Does it avoid regulatory locking of a
certain one or two players? Likely.
But isn't that good for all of us? Are you pro regulation?
I am pro regulation as long as it is light touch and allows innovation to
happen. I absolutely would be pro regulation if
regulation tries to reduce innovation. I think that's a problem.
What about the distinction between regulating the technology as opposed to
regulating the uses? We had Sam Parmesan or somebody you know
well on who said he thinks regulate the uses, don't regulate the technology
because that will impair innovation always.
How can you regulate the technology when you don't even know where the technology
can go? Two years ago, we heard of a large
language model. If we come out with our technical
instruc lab. Six months ago, nobody had heard of
that. There will be another one.
And another one and another one. So I think trying to regulate the
technology implies that the regulator and the and the policy folks believe
know more innovation can happen. I think that's a bad bet to make.
That was the IBM CEO, Arvind Krishna, speaking with Bloomberg's David Westin
there at Milken. Some of the other stories that we're
tracking for you today, Citigroup has shifted the work hours of some of its
staff in Kuala Lumpur to align with those in the U.S..
The move is part of efforts to ensure a smooth transition to a one day
settlement cycle. He has also created a task force that
will solely focus on the process, also known as T Plus one.
It joins dozens of other financial institutions preparing for that shift
that comes into effect on May 28th. Nomura is targeting 20% revenue gains
for its global markets unit over the next few years.
A unit's head told Bloomberg they expect 25 to 30% growth in macro credit
products and equities or the rest coming from wealth management.
The business has returned to profit after three years of losses That
included a $3 billion hit from the Archegos scandal.
Right. We're looking at a couple of movers
here. Some rare earths are actually and this
is there we go to my right. We're looking at some gains.
There are two two, two, two, one, two, two, eight and a half percent.
Really, a price hike in the industry might be boosting the earnings outlook
for some of these. So just watch it very closely.
Today. We're looking also at some of the movers
across the region. And speaking of an earnings outlook,
fast retailing over in Japan is actually seeing substantial gains going into the
lunch break, three and a half percent April sales.
I do have the company statement here coming out and talking about that and
unique Uniqlo, Uniqlo, Japan. Sorry, just looking at where we go
because we're coming off a unique look at rare earth.
Uniqlo, Japan is very strong. That's according to SBC.
Nico and their products are also selling well.
Is it already some? It is quite warm in Tokyo.
Yeah, I heard plenty of the weekend. They're not sure to me.
Any surprise there? Yeah.
Unicharm 1.4%. Nintendo is also seen 2.6 and of course
ANZ with earnings losing to buy back missing earnings.
Plenty more ahead. This is Bloomberg. 11:29 a.m.
in Tokyo. Japanese markets are having their lunch
break in just a minute or so and looks like we're still seeing other day of
gains here, a north of 1% when it comes to the Nikkei, 2 to 5.
And we're watching very closely that weakness coming back around 154 levels
here right now. So certainly watching very closely.
We had condos saying, look, we're not going to intervene if markets are
orderly. So is that testing the resolve of some
of these traders here this morning? You those are taking up just one basis
points and your job market here right now in the Asia dashboard, What we're
looking at, we're talking about two year highs when it comes to Asia Pacific.
Stocks here, if you take a look at the Asia extra span, we're about one and a
half percent or so away from any of those 2023 highs.
U.S. futures are flat here.
The dollar is catching a slight, slight bid here.
But if you look at sector by sector, it looks like tech.
It looks like energy. Real estate is doing decently well here
today, where you're seeing a bit of more of a sell off is the consumption space,
the health care space as well. So certainly, you know, there's a lot on
tap. There's an RBA decision coming out and
some earnings to Yeah, it's it's on RBA right so yields have been pushing lower
of late might be down to the fact that treasuries have been doing well.
We were looking at the Aussie dollar in fact earlier on because it might be a
chance that if they do strike a hawkish tone the Aussie might actually be taught
that high were bad back in March. I think we have a chart of that which we
can show you later on, but it's a weird split because hold mostly there's one or
two economies that actually think that they might actually sneak in a higher.
I believe if you look across the G10, with the exception of BOJ, they probably
might be the most hawkish. Yes, the RBA won't be a pack region here
right now. So are they going to still be able to
squeeze one in is the big question here? Of course.
But, you know, it really shows the inflation picture, what we saw in the
first quarter that really kind of delayed the prospect of these rate cuts
for Australia. So, yeah, there's that kind of trend
lines that we're seeing and how we break basically broke below back above, I
should say, that trend line when it comes to the currency here right now.
So let's get a bit more about what is expected.
Of course, seems like most economists still think we could see those rates
holding at a 12 year high when it announces that policy decision just a
little bit later on from now. Our very own Swati Pandey economics
reporter joins us for more. Swati, what else are you looking out for
today? One of the key things that we will be
watching out is the tone of the statement, especially the last
paragraph, which has a little bit of guidance, which they had tweaked in the
March statement to say we are not ruling anything in or out from further
increases in interest rates cannot be ruled out.
So they dropped any reference to further increases in interest rates in the March
statement. So whether they bring that back or not
is going to be really critical, especially because we had an increase in
inflation. It was a stronger number for the first
three months of 2024, and that really took markets off guard because it was
worrying that the disinflation trend that we had seen over most of 2023 was
had kind of stalled. Right.
And you know, that's it. So I guess my question is, has the RBA,
I guess in many ways the narrative in Australia, has that gone almost
independent because we've seen global, you know, these rate cut backs getting
pushed back to the Fed every day. We talk about that and I'm wondering how
the conversation is ongoing in Australia or might that depend actually what on on
that last paragraph that you mentioned, part of that statement that's due in
about an hour or so from now? Yes, that is right.
And in fact, after the March meeting, we have not heard from the RBA officials at
all. So it's been a long hiatus.
The RBA will also release its economic forecasts, which which comes out every
quarter. So that will also give an indication of
where they expect inflation to be. Current forecast implies inflation will
not come back to the 2 to 3% target until the end of 2025.
So if they are able to keep that, I think interest rates will have to remain
around the current levels. However, if it looks like they will need
to increase interest rates to ensure inflation is in the path of inflation is
intact, they will probably talk tough and may signal further increases.
So market pricing is for 25 to 40% chance of a rate hike by August.
Economists are not predicting a rate hike the first rate cut from November.
But markets markets see the risk of a rate increase.
So that is a possibility. Yeah.
Tell us a little more about what we're seeing in terms of the inflation
pressures. I mean, there's still some stickiness
and some components like rents, insurance, for example.
Do you think that's enough, Swati to worry the RBA?
Look, if when we saw the February forecasts inflation forecast, it showed
inflation around 3% in December, by December 2024 and around 3% by December
2025. And we've read we thought why is it
taking a year for inflation to remain around that 3% level?
And now when we look at the stickiness and rents and insurance, education and
some of these services component, it looks like the RBA knew what it was
doing when it drew that longer path for inflation to return to the 2 to 3%
target. And I think if it looks like that is
going to be the case, if inflation if inflation continues to be high but
within sight of the target and around that 3% mark by 2025, the RBA will not
be too worried. Whereas if it looks like it's going to
go up, three and a half percent remains around where it is now, it's going to
really worry them. Right.
That Swati Pandey there, of course, in Sydney for us, giving us a preview in 2
hours time, of course, is the RBA. And if you are on the Bloomberg, of
course you can turn to your terminal for more on this.
This actually comes on line, I would guess a bit later on.
Gets busy. Of course, as we approach that decision
to leave you go on your Bloomberg terminal.
Yeah. We also heard from the ANZ group CEO
Shayne Elliott. Talk a little bit more about now his
view on the strength of the Australian economy.
Take a listen. Clearly, there is some stress on the
economy. I mean, that's you know, that's to be
expected given the interest rate rises, cost of living pressures, etc..
So the market is subdued, particularly here in Australia and New Zealand.
And we see that and we see that with customers, more customers struggling,
although the number of customers struggling is still, you know, from an
historic point of view, relatively low. All right.
Shayne Elliott there, ANZ Group CEO, giving us his assessment of where we are
on the economy. They just released, of course, earnings
few hours back by back. But I guess as far as the bottom line is
concerned, Right. Plenty more ahead.
This is. Right.
Welcome back. So just over an hour into the cash
market session here, at least as far as now is concerned here.
So we were up ten straight days and Hang Seng looks like we are taking a much
needed break. In fact, we'll see.
Okay. We have a few hours left, of course, in
the session. It's been an hour still only on share.
Markets have been just coming off highs a little bit, as you can see, were
trading flat right now. Now, speaking of Hong Kong, let's get
more on this criminal proceedings taking place here in the city against Saigon to
Capital Management. The hedge funds founder, of course,
Simon Saddler and a former trader. Now, the firm has long played a vital
role in helping Wall Street banks unload chunks of stock dominating one of the
certainly market's last old school businesses.
Our hedge fund reporter Bei Hu, is with us here to talk us through this.
Well, let's I guess for our viewers who might not be as familiar, who is Segantii, let's start with that background. Segantii was a is a firm that was founded in 2007 by a
trader to call Simon Sadler before founding them firm.
He worked for firms including Dresdner, HSBC and Deutsche Bank.
Unlike other Asia hedge funds who typically buy stocks and hold them for
fundamental reasons. So he is more trading oriented firms,
particularly known for its willingness to participate on a large scale in
equity capital markets. Deals at the peak managed about just
about $6 billion in 2000. 21 now oversees about 4.8 billion.
Okay. He was known as sort of the the block
trade king in this region. Can you just explain a little bit more
about these block trades? BLOCK trades are actually it's a vaguely
a loosely defined idea involving somebody unlocking a large block of
shares in listed companies. But in private transactions, it could be
the companies selling new shares. It could be a shareholder insiders,
corporate insider selling shares or could be a large institution.
So the tricky thing about block trace is often times, you know, like the price
sensitive information that's involved A how to safeguard that information.
Yeah. And usually it's obviously not a good
thing. But how is information shared before a
block trade? It's obviously problematic.
And what is the CFTC? What are regulators doing about it, too?
Sure. Oftentimes, the banks involved or even
the banks anticipating a deal, would go to a certain group of investors and
trying to gauge their interest in the pending deal.
And it could be a hypothetical deal at that point of time.
So usually they are not allowed to share detailed information until that investor
is taken across the war, which means signing an official pledge now to act on
that insider information. But oftentimes, even before you get to
that point, they have to share something of a location with hedge funds or other
investors to entice them to participate in the deal and be taken
across the wall. And that's where the danger lies,
because oftentimes the regular participants in this market, like the
banks, have a calendar of the lockups that are ending and who are the
potential sellers. So the little information that the banks
share can help them. Guess
who is the selling shareholder, how much, how many shares are going to be
shared. And you know that word when they can
actually act on that information. And the ICAC is trying to tighten the
so-called rules on market selling by bringing this kind of information
sharing on recorded channels and demanding that investment banks keep
records of such information sharing. We've talked about how this is quite a
high profile case here in Hong Kong. What do we know about the process of all
this? It's going to be quite drawn out.
Yes. So the only other case that I can
remember involving a non-corporate insider was the criminal conviction of a
morgan Stanley former Morgan Stanley managing director many years ago.
He was initially the initial SBC announcement was in 2007.
He was initially sentenced in 2000. As far as I remember, he finally.
SPC won on appeal in 2012. So it's going to take a while.
Yes. All right.
Thank you so much. Great to from you and your team on just
what's been going on and the overall culture of surrounding society as well.
Bloomberg hedge fund reporter Bei Hu, there of course, you get more on the
insider's guide to the money and people shaking up the finance hub in our new
Hong Kong edition newsletter that's out every Thursday.
You can sign up through our website, bloomberg.com slash newsletters.
We have plenty more ahead. This is Bloomberg. All right.
You want to do this for me? Okay, I'll do it.
Okay. You're going to get more TV than you.
State Street. See, Ron O'hanley here says the capital
markets have been showing strong resilience, really, in weathering
serious challenges in recent years, from worries to the actual pandemic.
O'hanley spoke to us at the Milken Institute Global Conference taking place
in Beverly Hills. Before I talk to you about the future,
let's just talk about the recent past. I mean, if you think about the what the
world has been through in terms of the challenges it's faced and any kind of
challenge in the real economy translates to the financial economy.
So we've had a pandemic, you know, a once in a century kind of pandemic.
And we saw we've also had drought, war break out in Europe.
And if you think about how capital markets have actually adapted to that,
how you've seen underlying economies repair themselves, and again, the
capital markets is very much a function of what goes on in the real economy.
And you've seen, I think, extraordinary resilience in the real economy relative
to what any of us would have expected. What do you think was behind that
resilience? Not to sound jingoistic, but I think a
lot of it was the US led the way in terms of certainly in the repair of
supply chains. I mean, what we were talking about in
the middle of 2020 was the potential for this going on for four or five, six
years and the rebalancing would take that long and in fact, really led by the
US corporations, but also just large corporations around the world.
It was really led by large companies figuring this out and saying, What do we
need to do here? You know, it's interesting that you
bring that up, Ron, because if you think about the pandemic, companies, global
companies are rethinking their supply chains.
And that has led to a new kind of investable idea.
Walk us through kind of the new investable ideas coming off of the
pandemic and just a lot of things being different.
Well, let's just stick with supply chains for a moment.
I think that maybe with globalization we went a
little bit too far because supply chains became highly, highly optimized with
very little built in, if you will, slack or for that matter, capacity for the
unexpected. So what you're seeing now is really a
much more resiliency being built in supply chains, that of having single
source that might be double source, triple source.
You're seeing some activities being brought back to countries reshoring.
And it's not so much a those aren't political statements as much as they
are. Now, what we really ought to have a
little capacity in whatever country here in the U.S., here in Germany, here in
the UK. And then finally, we're seeing
opportunities being created by other for other countries where it may be that a
country like China had it all or had a large portion of it.
And China is not going to lose everything.
But you're starting to see other countries in Southeast Asia.
All of these represent investment ideas. We're seeing a lot of more things shift
into like South America, Latin America. One thing I want to ask you, we were all
focused this weekend over the annual meeting out at Berkshire Hathaway and
Warren Buffett, Warren saying Wall Street creating kind of a casino like
atmosphere. He's talked about this before for
investors. Do you agree with that assessment or how
do you see it? So I think there's there's a concern
about market valuations and it's really a concern about a relatively small
number of companies that are seeing lots of valuation expansion driven by things
like A.I. and the belief of AI.
So a couple of things I'd say about that.
If you if you take the S&P 500 index, right, which is cap weighted and it's
just equal weighted, you actually say it's actually not that overvalued.
And by the way, there's opportunities in lots of other companies.
Right? You were talking about seven companies
in the S&P 500. So that would be point number one.
Point number two, which I do think we do need to think about.
I'm old enough to remember the advent of the Internet.
And if you think about the midst of that, all of actually if you think about
the mid to the late nineties, there was that same kind of excitement, same kind
of exuberance around a few companies. The Internet was going to change
everything and it was going to change everything right away.
And then 1999 and 2000 came and we could find ourselves in a situation like that
again, because the the hype of a technology
oftentimes isn't met by the actual implementation of it.
So if you ask me, what do I believe? I think that artificial intelligence in
all of its forms will be a fundamental, a fundamental game changer for many
industries. Is it going to happen overnight and is
it going to kind of reflect the valuations that you're seeing in a few
companies? Probably not.
Yup. And that was State's CEO Ron O'hanley,
speaking with her colleagues Carol Massar and Romaine Bostick there at the
Milken Conference as well. Some big news to tell you about.
That's really we're getting a little more updates here when it comes to
Amazon. So this is about us.
And they're spending a $9 billion investment expanding US cloud computing
infrastructure in Singapore. So the outlay, it's going to be done
over the next four years as we're hearing, doubles Amazon Web services
investment in Singapore. And it's really how they can try to
accelerate the adoption of A.I. as well.
We've seen us expand beyond just us, a lot of tech companies as well.
Microsoft, Apple included, have been growing their presence in Southeast Asia
as well. So there you go.
Big investment heading into the Lion city.
They did. They had made that announcement just
now. In fact, they're at their ASEAN summit
in Singapore, where, by the way, they actually established the first data
center in the region as a region in the Asia Pacific.
So there we go. Doubling down on the capital really
underscores the growth potential here of the sort of Asia narrative, particularly
in Southeast Asia. Yeah.
All right. Let's turn to your China brief right
now. A look at what's making headlines in
national newspapers and trending on social media.
Chinese state media are still focused on President Xi's visit to France, though
Shenhua quoting him saying that China does not have an overcapacity problem.
He made those remarks at a trilateral meeting with French President Emmanuel
Macron and European Commission President Ursula von der Leyen.
She later said that the EU is prepared to deploy all tools to defend its
economies if China fails to offer fair access to its markets elsewhere.
An editorial in the Global Times is focused on the strategic significance of
ties with France. It says they're at the forefront of
China's relations with Western countries have always focused on the long term
interests of both nations. The China Daily reports on the May Day
holiday numbers, as well as saying the travel boom highlights the country's
economic vitality, with tourists flocking to popular domestic
destinations such as Chongqing, now that province.
So get this, 5 million plus visitors over the holiday, an increase of 50%
from last year. Smaller cities, including Yangzhou
Luoyang, also saw a rise in tourism. The Global Times quotes.
Experts say that this trend reflects increasing diversity of tourism
destinations and structural changes in the travel market.
So you get a lot of people going to these Tier one cities still.
But I think Trump said this as well. They're opting for maybe cheaper
options, maybe tier 2 to 3, maybe little bit more, you know, out of the off the
beaten path being experience. You know, you know, there's so much to
explore in China. I saw a couple of my friends posting
that fantastic travels in Yunnan, for example.
Right. It's really more great weather
nature, I guess, deeper to your point. Right?
So we did have some data coming through here on the trends.
So we are getting anecdotal opinions on what the trends are looking
like. Now we have the numbers to actually back
that up, official numbers coming out of the Ministry of Culture and Tourism,
talking about how total trips are actually up 30% this year compared to
2019 levels, I believe. Yes, spending is up 14 outbound inbound
trips. But as you can see, right, the
discrepancy between you are getting a lot more growth in volume and not too
much spending. Yeah, so they're going there, but
they're just not spending. Yeah, as much.
Yeah, but outbound and inbound seems to be strong.
I think Trump was saying, you know, you look at these long haul destinations
like us, Australia, UK, we're popular, Hong Kong, Macao, Southeast Asia, Japan,
South Korea, most popular when it comes to these short distance trips as well.
Middle East countries somewhere the 300% surge in bookings.
So that was going to trip. Yeah.
Jane Sun mentioned that talks about a lot.
Yeah. I think the dropping of the the visa
restrictions really made that made that happen and also like just the increased
connectivity between the businesses. Yeah, business community and markets do
speak of markets. There we go.
MSCI China on your screens. This is really a look across sector
performance today, consumer discretionary and communications
services down about one and a half percent, which we should mention.
Those two sectors have actually led this rally on the way up.
So maybe some profit taking today. This is Bloomberg.
