Biden Pledges ‘Ironclad’ Commitment to Japan, Philippines | Bloomberg: The China Expose 4/12/2024

All right.I think we made it. And I think it's Friday.Oh, we'll get there. 30 minutes away from the opening bell inHong Kong, in Shanghai and Shenzhen. You're watching the China show.I'm David Inglés with Yvonne Man. Top stories this morning.Stocks in Asia edged higher following a tech driven rally on Wall Street.The Hang Seng index on track for a third week of gains, testing those 2024 highs.President Biden declares the US commitment to defending Japan in thePhilippines is ironclad as concerns grow about China's actions in disputedwaters.

And a Bloomberg scoop, Apple is said tobe preparing to overhaul its entire MAC line with A.I.focused in-house processors. All right.I certainly see a little bit of relief after, of course, yesterday and the riskoff moves that we saw post U.S. CPI.The PBI prices didn't move the needle as much, although you still saw a bit ofroiling in that bond market in the U.S. But we did see that U.S.two year yield briefly touch that 5% handle just around 493 here this morningin the Asia sessions. That's giving stocks at least a littlebit of a lift here.

This morning.We talked about how the tech stocks really helped kind of buffet some of theconcerns that we saw just a few 24 hours ago.So certainly we're watching very closely the tech space here in Asia.We're not quite seeing that in the costs with of course, with the.Okay. Just came in steady pat when it comes torates, Singapore as well, the market didn't do much and when it comes topolicy as well. But the ECB is one to watch.Right. What we heard from Madame Lagarde whenthe clearest signal yet that perhaps the.

Central bank may be ready for that Junehike as June cut, I should say, coming. So what does 726 for euro dollar hereright now 153 territory for dollar yeah we heard from Suzuki sun once again isbasically the same sort of lingo when it comes to how they're watching some ofthese excessive moves. They're not ruling out any options hereat the moment. So that's not really you're still seeingsome strength, but still at 153. And gold continues to be theoutperformer. Look, futures are up 1% or more herethis morning. Did we just broke out of that 24 100level U.S.

Futures are flat and we're watching veryclosely some of these commodities as well, Brent, still at 90 bucks, iron orejust above that 107 level in Singapore. In terms of the set up for China heretoday, of course, we're still coming down to those trade numbers, which couldbe coming out a little bit later on than usual, I think any more so in theafternoon, then the morning here today. We're hoping to see maybe continued goodnumbers, but then again, the headline numbers might look a little bit weakerjust given the year on year comparisons. But the futures are looking like thisright now. We're slightly to the downside here to28 for your Chinese ten year yield and.

Seven 2561 for China this morning.Yep. So we're looking at the fix coming outtoday and certainly given the strategy from policy makers to stabilize thecurrency, it's that's opening up just really almost a generational gap betweenforward points and ends. If we can get to the into the weeds ofthat a bit later on in the show as Yvonne is pointing out, why is Golddoing that anyway? We have a perfect guest coming throughin the next hour of the China show. Suki Cooper joins us to talk us throughher targets in gold and whether or not you should bet the house on this andeverything you own.

Let's take a look at where we are losingstreak on the CSI 300. I think we're now six days.Their turn over has been rolling over, interestingly enough, in a week wherethe dollar has hit its highest level of the year, yields our highest level sinceNovember high was actually come down in Hong Kong.We talked about this record forward gap and of course, we are in the window.Speaking of trade numbers coming through, we are also in the window forcredit numbers to come out. Could come any time between now and thenext few days or so ago. For More's wrap of the week that we'vehad, let's bring in Mary Nicola, our.

Online strategist, joining us out ofSingapore this morning. And Mary, it seems like we're seeing alittle bit more risk put on the table here from investors.But certainly this week of central banks hasn't quite dominating the narrative.What's your overall sort of take from this week?Yeah. The main thing here is about thedivergence between the ECB and the and the Fed and the continued reinforcementthat the Fed is going to stay on hold, that they're not going to be in a rush.But then you've got the dichotomy of the ECB, who some members were actuallylooking for a cut as soon as this month,.

And now they're more focused on June.So that pressure and that divergence in policy is going to be one of the keythemes that's going to weigh on euro dollar.And we are going to see that the dollar continues to to gain momentum,especially when you see the two year yields reaching nearing that 5%, thatconstant drift higher in the in the short end in the US is going to continueto keep the dollar very well supported in the near term.And then on the other hand, you've got equities, and equities seem to likewhat's going on in in yields and continue to drive higher.But really the test for equities is.

Going to be earnings season, which kickoff this as soon as next week and really to gain momentum.And that's where you're going to see if there's true fundamental support forequities. Absolutely.I think you hit the nail on the head there, Mary, because certainlyI'm just going to use that your dollar reference to get this line out.The ringgit is down as much as point 6%. Biggest drop since fab the box on Pat's.We're also getting some excuse me some lines coming through out of out ofSingapore. Do you think this dollar outperformancekeeps that narrative of U.S.

Exceptionalism intact for now, equitiesor currency markets? Absolutely.And the data had reinforced it. So whether you looked at the labourmarket data, whether you looked at ESM, and then of course, next week we haveretail sales. So you've got a string of US data thatreally highlights this U.S. exceptionalism.Now add to that if earnings comes in and you see strong guidance from companiesand you see outperformance on the earnings side as well.So that exceptionalism in the US is going to continue to support the dollar.Not to mention the fact that you still.

Have the other other countries, let'ssay take for example, the eurozone and the eurozone is showing continuedweakness in growth. One of the reasons why you're hearing alouder chorus from ECB, ECB members to cut is really to support growth wherewe've had very, very lackluster growth over the last year.And that rate and obviously overly restrictive territory is weighing ongrowth in the eurozone, prompting them to want to see a rate cut sooner ratherthan later. And of course, that just leaves folksstill quite vulnerable in this part of the world.And we're watching very closely this.

Renminbi.I mean, what could be the driving forces for the renminbi in the next 3 to 6months? Yeah, it looks like there's two opposingforces really dragging on the on the CNY.So obviously you have dollar strength and obviously for our dollar strengththat's really weighing on Asian currencies and including the CNY.But then you've got policymakers who are really drawing a line in the sand onthat 710 level for the fixing. So these two opposing forces are reallyconflicting for the CNY. But there's if you look at it, there'sno real fundamental reason for the CNY.

To rally.If you look at economic data, whatever is coming through is not showing thatthere is a strength in the in the China economy or there's a revival of strengthin the China economy. So next week is going to be absolutelycritical with the deluge of data coming out from China, whether it's retailsales, GDP, confirming whether there is any fundamental support for the strengthin the currency. But that looks so far to be unlikely.We'll see. Yeah.Mary, thank you so much. Mary Nicola laying out for us even as welook ahead to next week, medium term.

Lending facility, one year lending rate,trade numbers coming through. And, you know, the PMI numbers werelargely on point. We should be getting maybe some decentnumbers coming out next week anyway we can.There's a weekend in between, so we can think about that come Monday.Let's bring in our guest this hour, Stephenson, head of research at HSBCShanghai. He's with us here on set.It's very nice to see it's been a while. It's busy week for HSBC.Of course, we had the the Global Investment summit.How busy were you?.

How many meetings that you have thisweek? I probably got 20 meetings.In the meantime, I want to take the opportunity to thank both of you forhelping out at our first you know, Jack mentioned it was fun.Yeah. Okay.What's the sense on China? I think it's fair to say that over 3000guests attended the G8 as came away from the conference, less negative ormarginally more positive. I think this is also consistent with myglobal market intake, our way meeting with100 global institutions.

The reason is because if you look at thefunds inflow, right, the outflow has essentially stopped.And then from end of February, for the first time, we're seeing foreign notonly money coming in through the stock Connect investing in A-share market.I would say that's more driven by tactical considerations, i.e.the Chinese equities are very cheap and in the meantime, the performance forChinese equity space is starting to improve entering into the Year of theDragon. So for those technical reasons, majorityof the clients who are still significantly underweight in China, thethinking to partially close to underway,.

How do you look at amongst the clientsthat you that are from all over the world?Right. It seems like the closer you get toChina, people are a little bit always more positive.What about the US domiciled funds, the UK funds?Are they warming up as well? I actually would say the opposite.I.e. the domestic investors is probably evenmore pessimistic than offshore investors.The reason is because if you look at the performance of different in thisindices, the ADR index in the US and.

Also the Hansen Tech index in here haveperformed slightly better than the CSI 300, CSI 500.But there are differences, right? You know, in terms of the different typeof investors, I would say the managers is probably more positive on Chinabecause of the comparison between China and India, which has been the bestperforming market price to perfection. The valuation gap is huge.So more and more year managers have started to notice the valuation gap.And then this is followed by global value investors.And then again here the consideration is relative value, right?China Internet versus, you know,.

Magnificent Seven.So for value investors, they are definitely taking actions.Right. And you mentioned tactical stillis is the is the main strategy or do you feel that there's some of the structuralfunds are coming in for a longer period of time and hopefully staying in thismarket? I think that will still take time.All right. You know, fundamentally, I think globalinvestors are still concerned about the insufficient domestic demand in China,which is, you know, precisely why I think the US only as late as yesterday,then DRC officials talking about how is.

Trading replacement subsidy program forconsumer goods, including auto including household appliance and the homefurnishings could be released in the coming days.So China definitely will lead the kind of demand side measures in order tosustain market variety and to make, you know, global investors, you know, lessconcerned structurally and also for a medium to long term perspective.So we're seeing a some of a better rally in China this year.I mean, what is going to drive this next leg up?What factors do you still need to see? Okay.Yeah,.

The next leg up, could it be driven by,you know, both regulatory development I Visa V, you know, how they're trying toreinvigorate the capital market. And I would say on that front, China,Korea, Japan, regulators, they're doing similar things in South Korea.It's called the belly up program. Right.And in in Japan, they're starting to work on corporate governance like threeyears ago. In China's case, you know, since theseries, a senior chairman took over. He talked about how, you know, tightenup IPO quality, how companies should pay more dividend and in the meantime, domore share buybacks.

More importantly, you know, cancellationof those shares bought back. This could helps to address one of.The key issues chronicle issues in the Asia market, i.e.excessive equity offering and as a result of that, equity dilution.The second but secondly, I think it's also afundamental right. It has to boil down to better economicdata. Now has to be boiled down to upwardearnings revision. Hmm.All right. One more with Stephen should there.Coming up, head of research at HSBC.

Shanghai.Still ahead, Apple said to be gearing up to overhaul its entire Mac lineup withits A.I. focused in-house chips.You have details in that Bloomberg scoop coming up.We're also coming down the open to trade in Shanghai, Shenzhen and Hong Kong.Futures were slightly on the back foot here this morning on Friday, but we areset for a third straight week of gains for the handset index.This is the China show. Happy Friday. Your remedy fix.Just crossing the Bloomberg here this.

Morning.And as Dave just mentioned in the break, it's frozen at 709 67.What are they going to let it go? Are you or what you did there?All right. Seven 2554 You're offshore right herethis morning. And we're focusing a little bit more onthe geopolitics this morning. Yeah, the big meeting trial at theselast few hours or so. Certainly a lot of headlines comingthrough out of Washington since you have the U.S.of Japan and you have the Philippines saying that they are committed to a freeand open Indo-Pacific, Not a statement.

Comes after the summit between the threethe leaders of the three countries following increasingly assertive Chineseactions in disputed waters. United States defense commitments toJapan and to the Philippines are ironclad or ironclad.As I said before, any attack on Philippine aircraft, vessels or armedforces, the South China Sea would invoke our mutual defense treaty.Facing the complex challenges of our time requires concerted, concertedefforts on everyone's spot, a dedication to a common purpose and an unwaveringcommitment to the rules based international order.China's current external stance and.

Military actions present unprecedentedand the greatest strategic challenge not only to the peace and security of Japan,but to the peace and stability of international community at large.For more, let's bring in our chief North Asia correspondent, Stephen Engle.You heard it from the president, iron clad.How important was it to come out of this meeting to show this united frontagainst China? I think this is an importantdevelopment. I'm not saying it's necessarily going tolead up to a buildup of U.S. troops in the Philippines.Believe me, I've heard sources in.

Washington talk about that.Some people within the Pentagon would like to see an increase of militarypresence permanent on a permanent basis in the Philippines to fill that gapbetween, of course, U.S. troops that are permanently based inKorea, in Japan, and then in Guam further off in the Pacific.There's a gap there. The Philippines and Palawan is closestto the Spratly Islands in the South China Sea.We do know, of course, that Subic Bay was closed down in 1992.But since 2015, 2016, the U.S. military, US Navy has been using SubicBay, the deep water port, as a resupply.

Port, as well as when there are wargames or exercises in the South China Sea.As recently, these three nations, as well as Australia, had exercises lastweek in the South China Sea. So, you know, I think that is theconcern perhaps by China and others that there is a precursor here for a buildupof U.S. troops or military presence in thePhilippines. I'm getting way ahead of myself.But that is the kind of the take away that this trilateral meeting has focusedso much on the security threat in that part of the world.And have we heard from Beijing?.

We have through global times and statemedia. We do have a full screen graphic wherewe can bring that up of basically state media as a mouthpiece.The Global Times beneath the active pursuit of cooperation, peace andsecurity, says the Global Times in an editorial.An undercurrent of confrontation, danger and conflict flows.Interestingly, as well, The Global Times today published an article, an exclusiveinterview they say was with the former Philippines president Rodrigo Duterte,saying, you know, be careful in Manila under Marcos getting too close to theUnited States, the US will not die for.

Us.So it's it's interesting. It's a lot of rhetoric right now, butwith the US, Philippines and Japan showing a united front, bringing thePhilippines into what's already been a united front, we've seen with SouthKorea, Japan and the United States, now the Philippines as well, of course, withthe South China Sea being such a flashpoint right now.But the point. Thank you so much, Stephen, and ourchief North Asia correspondent. They're wrapping up the tri laps thattook place a couple of hours back. Let's talk about markets and pivot backthere and we'll look at maybe does is.

This in any way something to consider?Is this affecting the commercial interest for some Chinese companies asyou look at this sort of bifurcated world?Stephen Sun is still with us, head of research at HSBC.Chen, How not to get into the weeds of geopolitics.But certainly when you have two big economic superpowers raising barriers toeach other's markets, are you seeing that show up as far as earnings andearnings forecasts are concerned? Yeah, certainly.I think that's one of the key investors concern geopolitics.But hopefully, you know, all this.

Negatives are already in the pricereflected in the highly this, you know, the depressed valuation in terms ofearnings. I think what matters more is how Chinais going to stimulate domestic demand, which is actually the root of this, youknow, geopolitical tension, if you will. China accounts for over 30% of a globalmanufacturing market this year. But if you look at the global marketshare of consumption, China only accounts for 15%.So this is based on how they should stimulate domestic demand.And hopefully with that kind of development, this could alleviategeopolitical tension, trade related.

Dispute as well.And then that's very important to look at.You know, the trade in replacement, the subsidy, the equipment renewal programsthey talked about at the two sessions. Now we're starting to see more details.Firstly, on the equipment, the renewal. The PBOC has committed half trillionrenminbi credit support to that program. And in the meantime, for the trade inand also replacing the subsidy, it could be substantial, right, because anystimulus in terms of impact through the multiplier effect has to reach trillion,right. In order to be meaningful for theeconomy.

And I think the details, should it bereleased by the Minister for Commerce very soon.Okay. All right.We'll have more from him. Stephen Sander, head of research at HSBCChennai, really focusing on, of course, that consumption upgrade.Now, you take a look at how futures are looking like we're still in negativeterritory, I believe, when it comes to the way here today.There you go. We're down about 7/10 of 1% of the HangSeng as well. So could be continuing declines that wesaw on Thursday.

Seven 2559 for your renminbi.Putting more ahead. This is Bloomberg. Welcome back.You watching the China show. So we're about 10 minutes from the theFriday reference rate of the day and certainly unchanged has been, I guess,the the key strategy coming out of the PBOC to really anchor the currency areone of the ways they're anchoring the currency.And what that's done. And it's emerged this week and we'rewrapping this up of course since it's Friday is a new subplot.Right.

It's encouraging, I guess, in some waysbecause that's brought down the cost of shorting the currency.It's encouraging, I guess, in some ways more speculators to come in so offshore,which is freely traded, mostly that you're seeing a shift forward.The gap between the two is now at a record.It's watched that and how that evolves moving forward, because certainly as youfight the currency, the tide of the currency markets, that then creates anaberration. The other one that's come up this weekvery, very quickly, it's high bar rates. Despite yields picking up high, moremortgages are tied to this in Hong Kong.

Have actually if on for a good use ofcourse are borrowers seven month low on the specific one fund.All right something to watch of course not quite seen the spillover to howeverwhich is probably a good sign for us here in Hong Kong.We take a look at how this market is set up here on this Friday morning.It looks like we are poised for some declines at the open Hang Seng down 7/10of 1% in the premarket. The open is next. Welcome back to watching the China show.We made it to Friday. It felt like a long week for me.I don't know about you guys, but.

Certainly we made it.We're still dealing with some declines here when it comes to the pre-market inHong Kong. So we're set for maybe two days oflosses. Still, though, we're on track for athird week of gains when it comes to that benchmark.ABC futures have been flat here. No movement when it comes to that fixhere. So certainly we continue to watch thatpolicy support and we are trade data coming out later on as well.Dave. Yeah, that and we are also in the windowfor credit numbers coming through,.

Right?So that's perhaps also an indication of of the way this economy's headed.More forward looking indicator. We're set to open lower generallyspeaking. But you know, the gains from from lastFriday have been enough, at least as everyone is pointing out, to nudge manyof the benchmarks here in Hong Kong. Hang Seng Hang Seng, China, for example,to the highest just about of the year. Three weeks of gains, right?Declines at the open or weak is coming through.Let's see, 3500. We've been stuck at about these levelsfor the better part last three days or.

So.We have an option coming out today. By the way, China, i think it's 20 myproducers might help me out might be coming up out of the screens right now.A couple of billion on deck as far as that's concerned.Shanghai crude is picking up a little bit as with iron ore prices.Now we're looking at other things moving.Thank you so much. 2029 bonds.There we go. Bilibili was a big mover up, a big moveup yesterday in the overnight session. That should be coming up top of yourscreens.

There we go.Follow through there. Young china outlining.Joe, we want to see you outlining the buyback and a dividend program comingthrough at least 3 billion over 2024 to 2026 was the number given.We're looking at some of the gold mining plays.Gold bottom of your screens. We should be trading at 2400 last wechecked. There we go, 1.3%.Thank you. Flip the page.Airline stocks in focus, maybe a geopolitical angle to this.We're looking at declines here and we're.

Also looking at EVs very much in focus.Xbox has been moving all over the place this week so far.That should be coming up. Neo also want to watch as well.There we go. And I'll leave you with a look at, Iguess, as we wrap up. The week offshore has done better thanonshore. The turn over one to watch, perhapsmoving forward as the market in terms of price has sort of stagnated as well.We've started to see this taper off a little bit.That's your 15 day moving average of China stock over turn over 1 trillion.We've been touching that Fed early.

March, but since prices have come down,that's sort of abated a little bit and maybe that picks up divine.Who knows? All right.Still with us is Stephen Site, head of research at HSBC.And we talked about how, you know, people are getting a bit moreconstructive when it comes to China. How do you how are you putting money towork? What are you recommending right now?Okay. Investors are trying to balance between,you know, the high dividend yield stock, the value group, and versus, you know,quality growth sectors such as the.

Battery, solar, health care, consumerelectronics, home appliance, so on and so forth.What's going to shift that balance is certainly, you know, the demand sidestimulus measures. Take this Cash for Clunkers program asan example. There are over 300 million cars on theroad in China. Right out of that 11 million, They donot meet with today's emission standards.And out of that, 11 million, 7 million are 15 years old, i.e., they need to bescrapped. So if this program comes through, mostlikely it would be comprising of subsidy.

From the central government and localgovernment and OEM manufacturers. So three parties to contribute to that,which could be material. Right.And we estimate this could swing the auto demand for a -2% growth to positive3% growth if additional 1 million car could be sold.Okay. So those are the areas where we couldconsider adding exposure, any areas to avoid,you know, the most likely, I think, steel would it be coming from theupstream sectors in the materials space property giving.You know, the earnings in a downward.

Revision has been significant andprobably not over yet. You mentioned it's not, you know,quality growth could be better than not just these as always with highdividends, but but also the trade. Why?Because everyone still seems very focused on anything that's attached to ahigh at the moment. Yes.In China's case, obviously, China also wants to catch this air train.So that's why if you look at the hardware space, software space inHollywood space, there are companies in the Asia market doing a lot of things,the optical transceivers that are.

Related to server.So, yeah, I mean, that's a very valid investment theme last year and then thisyear as well. The key difference this year will be tosay, you know, given the experience last year, once you are hitting that earningsseason. And then the story needs to be eitherrectified or proved to be false. So that's why I think your message willbe more critical this time around when looking at the AIG related theme sharemarket as well. How much upside and I'm looking beyondthe next six months, how much upside do you think there is in this market, giventhe fact that, you know, revisions to.

Earnings have yet to budge?It still remains in deflation. Property, as you mentioned, still anissue. Yes.What confidence to investors have in this market beyond three, six months?Okay. So we would think that in the next 6 to9 months, we're still seeing 5 to 12% with upside with more upside for, youknow, growth indices. I think this is mainly to be supportedby earnings growth that's going to come through this year.So remind you that majority of the companies have reported their earningsso far for 2023.

We're probably talking about a flattishor slightly down scenario for last year. So this year, most of the consensus withgood earnings for Asia market around 15%, which is quite reasonable.You know, if you average out to the two years 20, 23 and 2024, it's roughly 7 to8%, which is similar to nominal GDP growth or in line with, you know, growthof money supply. How we always talk about how how muchthe Fed really does influence Chinese markets.I mean, I'm just wondering, given what the currency is doing here right now,there's a lot that there's not a whole lot that the PBOC can do to reallyarrest these declines right now.

How do you think that impacts overallrisk sentiment in the equity or an appetite?Yeah, from dollar investors to yes, certainly.I think, you know, the timing of Fed rate card has been continuing to bepushed, Paul, towards the end of the year and the magnitude has been cutagain and again. This is in general not positive for EAMEin terms of funds inflow. And specifically our Asian strategist,Harold has been talking about a potential rotation out of Japan toChina, but that's depending on when the Fed is going to come out.And together with that, when the Yeah,.

We'll start to appreciate, you know,against the US dollar. So this is how the Fed could actuallyaffect, you know, capital inflow into the China market.Yeah. Okay.One of the other things that's come up, I think it was Morgan Stanley and theteam of Laura Wang and Jonathan Gardner that keep bringing this up.And the reason why they remain cautious on this market is when you look longerterm at China, you know, return on equity has been just nowhere to befound. And I'm wondering how one gets over thathurdle and looks at this market as cheap.

Because it's cheap for a reason.But is it cheap that could get more expensive in a sustainable way whenreturn on equity, as we were pointing out, has just been trending lower.Yeah, certainly. I think, you know, a lot of theinvestors they share with this concern in the medium to long term, they'restill looking for more structural reforms in order to sustain the market,the rebound. Chief among them is still how do youincrease income for Chinese households? Right.I talked about this 30% of global manufacturing market share versus 15%consumption.

This is owing to the fact that incomegrowth for Chinese households has significantly decelerated post-pandemic.Right. If you take a longer time horizon forthe past 15 years, China's GDP has actually quadrupled.But during the same period, if you look at the minimum wage growth in China, ithas only doubled, i.e. the income growth has yet to catch upwith the GDP growth. So to reverse this kind of, you know,structural issues, you would need the structural reforms relating to howbetter slice the, you know, the pie of GDP among household government and alsocapital.

This also requires, you know, toredefine the role of the government. Right.The fiscal the so-called fiscal reform and the this is also related tohousehold registration reform. How do you incorporate the 203 hundredmigrant workers for them to fully settled in the cities they're living andalso building social safety net, so on and so forth?All of this would need a a road map to be laid out at events like, you know,the third Paul Allen that every single one has been so anxiously waiting for.That's right. And a very quick there's a followedsuffice to say,.

Can we be confident in the ability ofpolicymakers to see those reforms through?Because it seems that this will take a lot of time.Yes, I think the answer is in a short period.The short answer is yes, although I think a policy correction orself-correction generally takes much longer time than what investors wouldlike to see. But eventually, I think it will stillhappen. It's not a question of if, but just one.Fantastic. Stephen, it was great to see you.Let's do this again sooner.

Stephen Center, head of research at HSBCShanghai. Wow.He worked 40 minutes there on Chinese markets.Lots to digest. We barely scratched the surface.He can narrate ebooks. Yeah.VOICE There we go. I think we have some things comingthrough of Korea. Yes.Some interesting lines coming through in the statement here right now.And we're about to get into this presser at the top of the hour.But the Bok tweaking the language when.

It comes to keeping that restrictivestance for a sufficient period now, previously was sufficiently long period.That's why you're seeing that weakness in the yuan here this morning.So it looks like they're leaning a little bit more on the dovish side,which is quite surprising because given where we've seen when it comes toinflation picking up in this economy, again, the tech cycle has turned morefavorable. So the economy is actually lookingpretty good. And we also have a lot of change withinthe committee as well. Yeah, that's important because coming upin the next hour is actually the press.

Briefing.So they'll unpack this. So they've kept rates unchanged.They've kept rates unchanged since January of last year.It was only in the meeting before today's meeting where we did get a votesplit. If you ask economists the latest surveyand this is as of late fab, is that that rate cut comes second half, thirdquarter or fourth quarter of next year. So maybe a little bit more meets on thatspecific bond territory. Bloomberg By the way for more on thisdeal I they go commentary analysis on the back of Korea rate decision plentymore ahead.

You are watching the China show happyFriday. Well, Apple shares climbed in New Yorkafter a Bloomberg scoop revealing the company is prepared to overhaul itsentire Mac lineup with focused in-house chips.We're also watching some of these Apple suppliers here in the region.Still a mixed bag here this morning. Let's bring in our Asia tech executiveeditor, Peter Ahlstrom to walk us through the story.So tell us more what we know so far. So we're hearing New Macs.I hope everybody's excited about that. Yeah, this is actually a pretty quickrefresh for Apple.

Usually they take a little bit longer,but they have been struggling a bit with a growth in their computer products.Macs in particular have been a little bit slow, a little bit sluggish.iPhone, of course, has been the star for so many years.That's gotten a lot of attention. And now what we're seeing is this prettyquick refresh of the Mac lineup, as you say, the full lineup of Macs with an M4chip that's going to have eight capabilities, of course, is the hottesttechnology out there. And they're hoping that with this newchip, they'll be able to tempt buyers to be able to come back and start buyingnew Macs, both the laptops and the.

Desktop computers that they've had.It's been a bit of an issue because in the last fiscal year, demand for Macsfell about 27%. Usually it's been kind of a bright spotfor them, but that was a problem they tried refreshing with new chips, two andthree chips last year in October that didn't really revive demand.So they're trying again with these AM4 chips, which again are going to havemore capabilities. They're hoping to tap into this demandfor AI services across the board and see if that lifts sales a little bit morethan some of these past efforts. Yeah, because the bit to your point, theline up with the three chips, this these.

Are just five month old products, if I'mnot mistaken. So do we have a timetable of when thisnew lineup is then going to be planning on according to what sources have beentelling our our reporter, they're planning on introducing the new lineupof AM4 chips later on this year. So it is a quite,quite quick refresh for the brands. They're going to have three differentmodels of them for computers that are going to be out there, low end, 14 inch,higher end, 14 inch and then a 16 inch also.So they think that that's going to be able to tempt buyers back into themarket.

The trouble, of course, is that onceconsumers hear that these new computers are coming with new chips and they stopbuying the existing laptops, so it may hurt a little bit the demand at thispoint, but they hope that it's going to revive it going forward, right?Yeah, as long as I would imagine it's within the fiscal year.Peter, thank you so much. Peter Hellström, there are Asia techexecutive editor, of course, here with us in our Hong Kong studios.Now, investors. Speaking of and we almost brushed onearnings there. Speaking of earnings, the first quarterearnings are coming up.

Earnings season and major US banks arekicking things off. JP, Citi, Wells Fargo all reportinglater Friday. Our colleague Sonali Basak has more onwhat specifically to watch, starting with net interest income.At the end of last year, Wall Street players took turns predicting a slowdownafter a record haul of more than $250 billion on expectations that the Fedwould start cutting interest rates. But three months later, that hasn'thappened. In fact, economists are reducing theamount of expected rate cuts. So when it comes to net interest income,JPMorgan is set to win big, partly.

Because of its size compared to peers.Expect earnings of about $23 billion in the first quarter.That's almost seven times more than the industry estimated average.Investment banking has benefited from strength in US equities, debt issuanceand deal making. And again, Jp morgan has the edge with aprojected $1.8 billion in fee revenue, up 10% from a year before, punchingabove its weight, though, as Bank of America arrival, which is likely toreport $1.3 billion from investment banking, up 14% from a year ago.And finally, we'll want to hear any updates about how big banks plan tocounter exposure to commercial real.

Estate problems.Wells Fargo is the one to watch here as its share of CRE lending is the highestversus its largest peers. Bloomberg Intelligence says a 2% writedown to CRC loans would reduce Wells Fargo's 2024 earnings per share by about13% before accounting for reserves that have already been set aside.I'm Sonali Basak for Bloomberg News, so that's the earnings preview there.Meanwhile, we're tracking what's been going on in Morgan Stanley.So we saw the shares fall the most in five months in the U.S.after a report that U.S. regulators are examining its moneylaundering controls.

That's according to the Wall StreetJournal. The SEC is among those looking into thebank. Let's bring in our finance and investingeditor, Patrick Winters. He's with us here this morning on thestory. Patrick, how bad is this for MorganStanley? Well, yeah, I mean, this appears to havebegun at some point last year, but has now broadened to include othergovernment agencies, according to The Wall Street Journal.And of course, that's pretty bad for Morgan Stanley because wealth is one oftheir biggest businesses.

So Morgan Stanley and UBS several yearsago pinned their whole kind of business model around wealth manager.The stable revenues which you get from managing money for rich people.And that can kind of offset some of the really good revenues you can get frominvestment banking, but also some of those surprise losses.So I think that's kind of one of the reasons why the shares have beendropping. And Patrick, maybe just put this intocontext for us. How common or otherwise are theseinvestigations into the wealth unit? I think they happen pretty often.If you look back specifically at this.

Kind of investigation, which appears tobe about clients which are outside the US, but if you look back to UBS, that'sone example. They had this big probe into helpingFrench clients evade taxes. They tried to fight it for years andyears and years. I think they were fined 5 billion.It was a pretty bad thing for them.And then Deutsche Bank also had some issues in the US and Credit Suissebefore it was acquired by UBS. If you looked at the litigation report,it was gigantic and it was like Reading War and Peace.So they had their own issues.

So all the banks have these issues, andI think Morgan Stanley is definitely not the only one, but it's not the kind ofthing which a wealth manager wants. It's it's built around stability.You know, it wants to be not the Goldman Sachs, it wants to be the stable bank.So if you then have a big probe that kind of cuts into what the businessmodel is supposed to be. Patrick, thank you.Patrick Winters, our finance and investing editor in Singapore for us.Some other corporate stories we're tracking at this point.The largest US airlines are asking the White House, the Biden administration,here to block new flights for Chinese.

Carriers, citing what they calledBeijing's anti-competitive policies. The Airlines for America Trade Group andseveral unions have made the plea in a letter to the secretaries of state andtransportation of flights between the U.S.and China are growing but remain well below the average 340 per week.That was a rate pre pandemic. Now, US federal agencies have beenordered to analyze emails, reset credentials and secure Microsoft cloudaccounts over concerns about possible Russian hacking.The directive was issued earlier this month by the US Cybersecurity Agency andmade public on Thursday.

The agency accuses a Russia statesponsored group called Midnight Blizzard of trying to compromise some Microsoftcustomers. Good news may be Taylor Swift, her musicback, and Tik Tok. Despite an ongoing dispute between herrecord label and a social video platform.The timing coincides with the upcoming release of Swift's next album.That's too, of course, next week. In case you didn't know, Universal MusicGroup pulled its music from the platform back in February after failing to comeup. I've come to terms rather, on a newlicensing agreement.

Okay, plenty more ahead.This is Bloomberg. Right.So we could be getting any ball any moment now, really.We're on watch for trade numbers coming out of China, March numbers, dollar andalso renminbi, maybe as a way to contextualize and look ahead to this.You know, one of the leading indicators, not a comprehensive one, of course, newexport orders for March. This is the PMI numbers which mightactually indicate or orders further down the road and not so much for March.But in terms of trend, things have been picking up.If you base it simply on this, this.

Specific sub gauge actually rose to thehighest level in 12 months. Just keep that in mind as we look aheadto these trade numbers, which, as we mentioned, could come out any time now.Right. Just for a brief look at MOVERS, we'reabout 23 minutes into the catch market session here.We're looking specifically at some of these EV plays as well, includingXiaomi, of course, which recently toss its hat in the ring here, Morgan Stanleyout with the new price target for the stock, 20 bucks a pop at 1660 right now.Do the math on what that implied. The implied upside is for that.The rest, though, as you can see, some.

Downside, mostly xpeng and also NIO onthe back of Ford. That price cut driving, of course, thestart up sell off right. Very quickly, are we doing Korea, Are wedoing China? We can do either we can do let's seewhere we go with okay, let's look Korea. Why not?So weakness coming through in the currency right now.Interestingly, in case you missed it a couple of minutes back, read headlinescrossing the terminal on this tweak to the statement.They removed one word. If you can spot what that word is.They removed the word long from a.

Sufficiently long sufficient period.It's not clear, by the way, from that graphic what that means in terms of justto give you more context, how much they need to wait for restrictive the policyto remain restrictive. There we go.Okay. Very quickly, China's looking like this1.2% to the downside. Hang Seng index.We are still on track at these levels to close higher for the week, which wouldthen take us to three straight weeks after China.Some strength coming through in the currency there as well.Right.

Coming up here on the China show, we'lltalk all things precious metals with Suki Cooper from Standard Chartered goldcourse trading at 2400 and all things cross asset, asset allocation, should webe concerned with inflation? We're also talking Korea with Jp morganasset. This is number. Welcome back.You're watching the China show yet? We made it.It's Friday. So before we head into a weekend of deepsleep, maybe a housewarming party is hitting the beach, hitting the bar orwhatever floats your boat.

Maybe a good book or flat across the seais our three hundreds. And you know what?We've been seeing losses every day this week so far.We'll see how we end. MSCI China down 7/10 of 1%.That's really where you see the bulk of the gains anyway.And we're still waiting for trade numbers to come through here.Yeah, you're seeing more of the declines really in the Hang Seng market.We're down more than 1% here this morning, so it's debatable whether weget to that third weekly gain here today.We'll see if we get there.

But the rest of Asia is looking likethis year right now. And it's it's pretty slow going.I mean, the U.S. CPI numbers didn't do as much damage asthe CPI prices on Thursday. The dollar's pretty flat, although we'restill talking about the highest in the year.Yep. On both to the growth lines on both theBloomberg dollar index and the dollar index and this case at least catching abad Korea on the back foot here. Some interesting lines coming at youfrom the block. We're about to hear from the governorhimself about how they're taking away.

And changing some of the language here.So instead of saying rates are sufficiently good to be stay for a longperiod of time, restrictive levels. They took out the long.So the market's taking that as a little bit more dovish this morning.Yeah, it's coming sooner, maybe rather than longer or later or later, they'llclarify that the terms the press briefing begins, as you want us pointingout this hour as well. In the meantime, though, let's let's seewhat we can dig into as far as the Chinese markets go here.Joining us here on set, Charlotte Yang or Asia equities reporter to tell uswhat are you guys busy with on a quiet.

Day like today?Yeah, today is quite quiet. You know, the Hong Kong market actuallystarted falling after hitting a hands in China enterprise index since it's headedthat 20% milestone. It's now a second day of decline.I think the few names, the big names that was bucking the trend, today's Callme which are Morgan Stanley, raised its price target after IPTV sales.I think overall sentiment is a bit cautious after, you know, the consumerprices and also producer prices came as a disappointing yesterday.And also I think people quite cautious about export data coming out thisafternoon.

And we I think economists are showingthat it's a decline for the month of March, about 1.9%.But more important, I think, is the data down next week as well as earnings.Yeah. Tell us, what about next week's sort ofbreak? You talked about the GDP numbers and thelike. We also have some big earnings comingup, too. Yeah.So next week looks very busy with data. GDP is one also, I think also becausewe'll be on the new home prices and use home prices as the biggest headacheright now for the market is still the.

Property sector but right now those.Yeah so that's one thing to watch. And also we're also kicking out of thefirst earnings season, even though the last one just ended was Monday.I say it out of the Chinese battery maker, they've only to importaftermarket and remember that they had a big jump last time.So this time everybody will be focused on how their sales and earnings aredoing. And especially with the EV sales batterycells slowing expecting for this year. All right, Joe, thank you.And there with just a quick sort of summary of what's really going on anddriving these markets here today and.

Next week, let's talk a little moreabout the renminbi, because certainly there's a lot of nuances that you'reseeing within these markets about where things are going to go.I mean, you take out the premium to borrow dollars in China's local marketshas jumped over the past month. It's another example of the resurgentU.S. currency's global reach and persistentheadwinds facing the renminbi. Let's bring in our affects or rates.Reporter Tanya Chen. So so what are people saying about thisyear right now? Yeah, so I think you guys have beencovering it really well in the last.

Hour, but basically, you know, fundingcosts are rising onshore and that normally justthat's just tracks with what we're hearing out of the US.Right. This robust economic data, theseexpectations when the Fed will cut rates are getting shifted back.And conversely you're seeing the same in 12 month pause on the yuan, right?Those are dropping because they're just these expectations that the dollar iscontinuing to rise. What analysts are saying is that thiskind of supply and demand imbalance is just really just heaping more pressureon the yuan woes.

The PBOC may have to kind of go back toan old tactic they used last year where they would cut the forex reserverequirements at the banks and this would basically kind of replenish dollarliquidity into the market, relieving some of that yuan depreciation pressure.Last time this was in September and I think that rate is around 4% right now.Yeah. And you know, comparing it to September,of course, the the reference rate to the estimates are have surpassed thoselevels. In terms of the spreads, I think it wasyesterday we did get some news that some of the state owned banks were sellingdollars at specific levels.

In other words, have we have we entereda new phase of the so-called intervention here?Yeah, I think that's a great question, because what I want to draw you back tois this yuan reference rate, right? Like, as you said, that gap between theestimates and what they said, it is at record.But if you think about where they've just been setting the facts kind of inthe last recent weeks and months. It's still just the same level as thesub 7.1. Right.And so you kind of have to take into account the fact that the gap iswidening just because on the spot rate,.

It's it's weakening.Right. And so it's not necessarily a verystrong signal from the officials yet that they're like, you know, warding offthe U. On barriers like we want to strengthenthe yuan. It's nothing like that at this point.And you did see savings going back into the market last year and this year, butnot as forcefully as last year, I think. I don't know if you remember this, butlast year they were telling some of the institutions to sell right at thereference rate at the beginning of the market.So you would see them kind of like.

Selling at the reference rate at like7.09. And then it would just kind of weakenlike, you know, several pips right after that.So I think the other thing to watch for is what you were saying.I think if you see any moves from like Japan or any of the other kind of majordeveloped markets, but if you've seen any moves from Japan that could reallytrigger the PBOC, you'd have to re assess whether or not they're defendingthe right range. There we go.Tanya, thank you so much. Tanya Chen, graphics and rates reporterthere.

Right.Just ahead. Gold.What are we doing now on price? 1224 100.Yeah. There we go.24, ten. What's going on?Okay, Heightened backdrop of geopolitical risk.You have inflation and that bad smell lingering.Standard Chartered joins us to talk us through where she sees prices goingnext. And actually, at this point in time, howdo you play the gold story?.

There we go with Suki Cooper.This is Bloomberg. Welcome back.We're going to get into the weeds of gold right now and really try and figureout what's going on here. Fresh record of U.S.inflation, of course, this week, although calming market nerves as far ascuts go, may be continuing to push the price of spot gold higher, even more somaybe as a hedge of March producer prices, I wasn't getting slightly theunexpected. There you look.Year to date, though, don't forget that if gold is doing well, don't forgetabout silver, which actually has done.

Better than gold.Let's try and figure out what's going on.Joining us now is Suki Cooper, precious metals analyst of Standard CharteredBank. Suki, a pleasure to have you on theshow. And quite timely.Maybe you could take us through, you know, from the plausible theories tosome of them which are bordering on fantasy.What do you think's behind this move up in gold?This gold move has been fascinating for a number of reasons.We haven't seen a new risk events.

We haven't seen a new catalyst that hastriggered this rally higher, which in our view makes it more prone tocorrections and makes price action likely to be more choppy.Typically, when we see a move of this magnitude, it tends to be driven byeither Spector's positioning in the first instance and then followed throughby stickier demand, whether that's ETF or physical demand following through andpushing gold prices higher. So this move has been interestingbecause we had a small window this week where we started to see inflows, butthat was quickly disappeared and reverted back to outflows.Instead, what we've seen is a large.

Increase in tactical positioning andeven then positioning isn't at all time highs.So there's still scope for further growth.If we're looking at whether positioning is overcrowded, whether it's ETF,whether it's coin demand, but it's tactical listening at the moment itisn't. But one key dynamic that has supportedthe complex is the fact that central banks have remained net buyers and theyhave been so for more than the past year.So what's perplexing is that we're we're seeing all these successive all timehighs, Suki, as you mentioned, despite.

That, the real yields are remainingelevated, the dollar's still strong. And even with the markets repricing andpricing out the possibility of cuts this year, gold continues to edge higher.So so do those drivers, are they not as relevant now?What are going to be the key drivers to look out for?With the gold market, market sentiment almost becomes even more important thansome of the macro data releases we see on a week by week basis.And when sentiment is positive, we see gold's focus becoming much more fickleand it will switch to following rates, cuts, expectations, the timing orwhether it's safe haven demand and.

Geopolitical risks, or whether it'sinflation and whether inflation remains sticky.And therefore gold can act as an inflation hedge.So at the moment, given that sentiment is so positive, it's really sightsidestepped any of these headwinds and only looks at what the two factors are.But also I think what is interesting in the current rally is that we're stillseeing many buyers in the markets, whether it's appetite in China, whetherit's continued central bank buying, whether it's attach positioning.But we're not seeing as much selling as you normally would when you see pricesat least water levels.

So we haven't seen a surge in recyclingsupply. We haven't seen some of the normalsellers of the physical market dropping off a cliff, even though prices are atall time highs. Instead, volumes have come down, but wehaven't seen a huge wave of selling counteracting that upward momentum.Suki to pick up on one of the things you just pointed out there.The demand coming out of China. What specifically are you seeing interms of buying coming out of China? So we tend to track a number of factorslooking at retail appetite, looking at the official sector appetite and acrossthe sector as a whole.

And what we're seeing at the moment isthat the Shanghai Gold Exchange premium remains relatively elevated, suggestingthat underlying demand is still healthy. In January we had record gold importscoming into China. So overall appetite remains strong.Partially, you could have said that was the buying leading up to the Lunar NewYear. But but we did see a slowdown in theimmediate aftermath of the Lunar New Year.But then appetite picked up again. And even when we look at central Bankofficial sector buying, we had the March data released earlier this week andChina continued to add to their overall.

Reserves but at a lower volume.So what we're seeing at the moment is that there's a lack of alternativeinvestments potentially that continue to buoy appetites in gold.So China is the one area where we're seeing a pocket of strength, wherephysical demand and other regions such as India and across Europe is startingto weaken. Okay.Tell us about some levels that you're watching out for now.Right, Because we briefly touched 2400, I think maybe a few months ago.People thought that was crazy. What levels are we looking at now?How much more upside really are we.

Talking about?I think given the fact that this is not being followed through by physical flowsor by ETF holdings that we can track. It's very difficult to track where thatupside momentum might come from. And given it's much more choppy, this isthe upside at the moment isn't being capped, but the downside is being verywell supported. So we think that the flow of gold, whichhasn't really been tested, is still quite well supported at these sort oflevels. So the upside have been at the moment,but there's still scope for further growth.We could still see tactical positioning,.

Pushing prices to even get to higherhighs, but it's difficult to call what that level might be just yet.And how would you recommend playing gold at this point?Spot physical ETF miner whatever derivative for example lookwe given that we're commodity focusedanalysts it's difficult to say whether gold is a better product and say some ofthe stocks. But what we are seeing at the moment isthat investors are much keener at the moment to invest in tactical positioningand the ETF continue to fall. So there's not as much appetiteinvestment.

The ETF coin demand has been very choppyas well. So maybe that retail demand has comeoff, but it does look like investors are not keen to shoot gold at these currentlevels. And there's a whole raft of factorsthat's buoying that appetite to gold. It's not just the expectations of ratecuts, but the continued uncertainty around geopolitical risks.So at the moment there's appetite to buy gold and at the moment it looks likeit's really coming from the tactical investor side,what's really, you know, globally overshadowed what silver is doing,right?.

We're just showing those year to dategains. And that's actually in some waysoutperformed this year when it comes to silver Suki, I mean, obviously, we'vebeen waiting for this catch up to happen.But, you know, how much do you think silver should cost right now?So those are interesting precious metal, because on the one hand, it has the samedrivers as the gold market. It pushes gold prices higher and we seea supportive macro backdrop, but also it has a huge industrial component.And when we look at silver from an industrial component standpoint, theoutlook is very positive.

Looking at growth from the photovoltaicsector, we're looking at some electrification of vehicles, 5G networkrollout. There's a huge potential of growthunderlying supported and demand growth for the silver market, but the investorside hasn't really been keen to catch up until now.And. Whereas, gold ETFs have been lacking, sorates are really picked up. So the silver market with things that wecould see prices potentially extending their gains towards $30 per ounce, butwe saw this as a target that would play out over a longer term basis and not asquickly as it has done.

And Suki just to build in that too.If you could talk us through a little bit more about your outlook for, youknow, industrial demand for not just silver, if you could also mentionedthings like palladium and platinum as well, if you could,looking at the sector as a whole, we were expecting a recovery when it cameto both platinum and palladium, at least in the short term.When we look at some of the end usages, I think some of the demand trends hadn'tnecessarily filtered through for the OEM space because stocks were elevated asthey were an abundance of supply across the supply chain meant that even when wewere seeing a pickup in underlying car.

Sales, that wasn't necessarilytranslating into stronger demand for the patent space.But now I think we're entering a period where some of the stocks have been rundown and we're more likely to see a more direct impact on the downside support,at least for the patents next, and letting the floor higher for bothplatinum and palladium. So we think that there is room forgrowth for both platinum palladium, but we think over the longer term, i.e.beyond 2024, that's when some of the supply concerns will start to kick infor perhaps platinum and often see more upside risk for platinum.And then where at the Palladium, the.

Demand will start to weaken and thenmore like to see palladium surrendering its premium over theplatinum markets over the next few months.Suki Cooper, thank you so much for joining us.I know it's getting late over there. Precious metals analysts at StandardChartered Bank who sort of recap some of these lines that we're hearing here.So this press briefing, what the Bank of Korea is happening this morning andwe're hearing a little bit more from the governor.So, so far, we're hearing this rate decision was unanimous to hold rates.Five members favored a rate as three and.

A half percent over the next threemonths. So still holding for that time, onemember open to a rate cut in the next three months.So you're starting to see within these members, some are also looking at maybea reduction in borrowing costs pretty soon.So maybe they are leaning a little bit more towards cuts now before, you know,compare to the last meeting, certainly clearer than at a statement.The open is not so much developed because the vote was really just fourfor this. We'll have more on this.This press briefing in case are for our.

Bloomberg clients who do want to keep aneye on this as we head for a short break and check it out live.Go on your Bloomberg terminals. And on top of this, you have other diaryentries, of course, coming up later today.So do check out that function on your screens and continue to track what'sgoing on there at the Bank of Korea. Plenty more ahead.This is Bloomberg. So let's talk about KKR, the co-CEOs.The company say China's consumer sector remains a sweet spot.That's despite the sluggish recovery. But they're actually avoidingpolitically sensitive sectors like air,.

For example.That job and Scott Nuttall told us exclusively about their current focus onAsia, including this revival that's taking place in Japan.The issue for us is really an area we've been building and growing for twodecades now since 2005, and an area where we as a firm have a really, reallydominant position, the largest alts manager in Asia today.So we've grown from 18 billion of um to 65 billion of our, um, in the last fiveyears in Asia organically. To give you a sense of the type ofgrowth, it's the fastest growing part of theworld today.

60% of global GDP growth is coming outof Asia. The most exciting consumer trends arecoming out of Asia. So it's a natural place for us to befocused as private equity, as infrastructure investors, as real estateinvestors in Japan in particular is exciting.It's around 40% of our business in Asia is Japan.Just given its two decades of deflation, it's coming out of this long economicmorass. And the the implications for Japan areprofound in terms of where savings are going, in terms of corporate governancereform, the opportunity for us to really.

Buy great non-core businesses from bigconglomerates. So it's a very target rich opportunityfor us. Yeah, and it's not just in our assetmanagement business. If you look at the life insurance andannuity market in the US, it's a $4 trillion market.In Japan, it's 3 trillion. So it's a massive market across a lot ofwhat we do. And so we see opportunities to expand inmultiple parts of KKR and Japan. A lot of people are focused on Japanright now. KKR has a more dominant position.There's also a lot of focus on China and.

What to do with that.And a lot of people are saying we're getting out.You do have a significant presence in China.How do you think about how that lives, given the geopolitics of the moment,which are highly uncertain? And our approach to China, I think hasbeen consistent since we started our business there.We have three offices in Beijing, Shanghai and Hong Kong, so we arecommitted to that market. But the complexity of investing in Chinais obviously much higher today. Our focus over the last two decades hasreally been focused on the consumer.

Segment of China, the growing middleclass, the urbanization trends in that marketplace.And that's the sweet spot of the opportunity for us.So we've invested in retail companies, branded consumer goods, health care.We are not leaning into these high growth areas that are geopoliticallysensitive, like semiconductors, like A.I..So we've avoided a lot of the areas that are currently creating a lot of turmoilin the market, and we're sticking to our knitting consumer services.All right. That was our co-CEOs job.And Scott Nuttall, they're speaking.

Exclusively with our colleague LisaAbramowitz in New York. All right.Some breaking news continuing here when we talk about this Vioxx decision.So the governor now saying the board is now open to a rate cut if CPI slows inthe second half. So they're saying now that the board ata crossroads on whether to signal that policy change.But still, that second half rate outlook still difficult.They're saying, yeah, that's a big if. Right.Yes. If if that's not really saying a lot, tobe.

Honest.But that said, of course, that underscores the uncertainty surroundingthe path of inflation, because inflation in Korea actually is still hoveringabove the central bank's target four one, which is why when you look at swapthe swaps market, you're not seeing anything priced as far as rate cuts.Let's see if that changes, though, with this comment coming through.It was interesting earlier in the statement, they mentioned core inflationlikely to slow to the 2% level at the end of the year so that they have alittle bit more of a framework of when they might hit that target, but stillunsure when U.S.

Policy pivot will start.So that's also a question, the second half as well, whether they can actuallycut before the Fed does or if they're willing to do so, or are they justwaiting to follow the Fed. So, yeah, I think he said commentsbefore at least he ruled out the first half of any sort of rate cuts.But maybe is the first time we're hearing maybe what the second half mightlook like. Yeah, one member is open to a rate cutearlier on in the next three months or so.The others might be more comfortable beyond a certain time frame.Some questions coming through as well.

Towards the back of Korea.Governor, we'll leave it there for now. We'll keep things in Korea first andjust pivot and look at the equity markets and Samsung Electronics.We're down about a 10th of 1% there. That's on the back of this progressreports that Samsung is preparing to take the wraps off this $44 billioninvestment in US chip makers, chip maker.And that could come as soon as next week.There we go. So we're looking at that.Any sort of reaction? And on the latter, not so much.As we speak Apple suppliers in focus.

Yeah this is Bloomberg show from ourMark Gurman talk to you about they're looking to overhaul the entire Mac linewith air focused chips so we could be seeing some new MacBooks pretty soon.And so it seems like that's really helping in and benefiting the supplychain here in the region. Look at Luxshare precision.That's up close to 2% right now. A goal as we could talk about continuingto talk about the gold price here. And we come off a little bit, but wewere at 20 for ten at one point this morning.We're back below, well just around 24. But yes, the miners still loving thatjob doing mining up some 6%.

Still ahead on the China show, Jp morganAsset Management coming through, talking a lot more about Korea is in the sightsof Marcelo Chao. Should explain why this is Bloomberg. Oh, yeah.There we go. Is it raining or are the windows justneed a bit of cleaning? Maybe.Maybe both. Maybe both are.Maybe just need some sleep. Really?Glasses Looks fine to me. It's probably that.Probably that I do need to order contact.

Lenses, so do remind me to shoot them.A message. I ran out of one of the boxes that'sbeen waiting for me. Let's go.Half of 1% to the upside here on the NIKKEI.2251 53 right now. And at this level, if you normally oh153 153 on dollar yen, not much movement there, but yeah, you know, the big movethis week has certainly also been in yields right.We were this ten year yield following the CPI print out of the US up seveneight basis points where we are currently.Now what's interesting also is that.

While bond markets have yet to fullyretrace losses, equity markets have almost gone completely back and they'veactually done quite well with the exception of some equity markets.Yeah, I mean, Hong Kong certainly is seeing hit here today, but the rest ofAsia is looking a little bit better. But we're really been dragged down bythe Hang Seng were down one and a half percent there.Asia as well, also down 1.4%. So but mostly speaking, we are actuallyseeing some green with Japan, with other markets as well.So certainly we'll watch very closely what goes on.U.S.

Futures are flat.There's not it's quiet, as you can see, sector by sector.It's mostly red, though there is still a bit of downside when it comes to theenergy space here as well. But textile catching a slight bit hereas well as health care, industrial still in this part of the world.Let's bring in Marcella Chow, our global market or the global market strategistat Jp morgan Asset Management. Should we start with Korea?I guess, yeah. It's interesting, just given what we'rehearing from the Bank of Korea, maybe it's interesting that, you know, a ratecuts are coming in the second half.

Why are you looking at this market soclosely now? Actually, you have the whole in the pastfirst quarter, we have seen how the boost continues.And actually Korea has over 46% of this equity market fundamentally linked tothe AP, so on. That's so in that sense and also thewhole tech upswing. So on the export side, a supportive andso that is like a tech North Asia story of Taiwan Korea.But on on also the value side, we also see the value corporate copper program,which is similar, mirroring what Japan has been doing for the past ten yearsand was the reason I say legislative.

Election market views this as a negativeto this whole program. I will.We are still believing that as a positive in the medium to long run, wesee that as a process, not a particular event.So and as should be supportive, especially as we continue to see moredetails hopefully coming out in May where the government willannounce more details on the program. So on that side, and most importantly,valuations actually fair is 11.3 times compared to 15 year average ten times.And actually earnings growth for 2024 is a 77% expectation, 77%, which is a greatincrease, great leap from around 50% a.

Year ago.Right. And come and 2025 as well is going to be24% is very encouraging earnings growth expectations numbers and whether themarket's ability to reach, let's say 80% earnings for let's call it 80% is hingedon the chip cycle. Do you think the chip cycle has turnedbecause you mentioned almost half of this market, the earnings areconcentrated on one specific sector, which is chips.Yeah, indeed. And we see it as a memory cycle as faras near bottom. And actually we see that inventory hasbeen improving, etc..

And so and actually the ten day exportnumber that just came out is quite encouraging as well.So all those continue to support both not just it's like a dual track, so thevalue side and also the growth side. So the Korea story I think is worthlooking at. Admittedly, it may not be like anear-term 6 to 12 ones, but we see that actually was this fell off program andupside potential give investors more time to build and and to add more valueat more into better names. So maybe I will to take a step back nowand look at equities in general. Mean is this still an environment to getinto equities just given what we've.

Heard this week?Well, data continues to be very, very strong in the U.S.and continue to see this roiling in the bond market right now.Indeed. And actually, when we try to recapbecause we just put out the second quarter guide to markets, we see thatsurprisingly one Q has been a very robust market.And for equities particularly, we see that in the first quarter, not just us,we see that Germany, Japan, France and also Latin America actually allbroke record for the first quarter with like.Pretty gains.

And also with when I last came, I talkedabout how we expecting market breadth to broaden out and as realized.And it's not just within us as a cross country, across different sectors andacross different styles. So this is something that have a robustmarket and all of the themes broadening out and also the market broadening outis actually quite a healthy fundamental improvement.So going forward, especially even though right now inflation remains stillsticky, there are still different rate cut expectations, rate cut calls, etc.but the next will still likely be a cut. So and the backdrop is still going to beencouraging is let me look at the other.

Side of that.Is this market, the US market in particular due for a correction,there might be some consolidation that monetary and dispersion continues tooccur and with the broadening happening out, it means that there might be someconsolidation going forward to broaden it out to not just those top ten, butmore into those 490 companies that have solid fundamentals.So consolidation would definitely happen.And what we see with the Magnificent Seven as well, we saw that dispersionand the resulting dispersion and the market reaction that as well.It's not no longer the Magnificent Seven.

As we last talked about, the ones thatare no longer as encouraging. Right.So that that will happen as well with the broadening out of fact across us andacross also different markets. Just this week, though, I mean, justwith the strong inflation print, it looks like there's going to be a lot ofcentral banks around, in particular in this region.They're are to go do a lot more in preventing a slide their currencies,just given how strong the dollar is. How do you see that playing out?Right now, we do see lots of like verbal intervention, of course, from differentcentral banks and going forward as a.

Share of US dollar.We continue to believe in the medium to long term U.S.dollar will weaken, but in the near term of inflation prints and how resilientthe economy is, and also potentially with the interest rate staying higherthan longer, alluvial is a bit more neutral right now for U.S.dollar. And so this suggests that there might bemore weakening of recourse to light Asian currencies and that that maysuggest that there might be even more federal intervention that's needed toprotect the currency, etcetera, and prevent capital outflows.Right.

And so if you could elaborate on that alittle bit more, do you think central banks, not just the BOJ, not just thePBOC, will need to really step up beyond what we've seen already, beyond verbalintervention? Are we entering a phase where the dollarstrength is becoming a real problem for the economies right now?Because some dollar and in terms of valuation is still over value.So we do see that needs to be corrected, etc..And in terms of Asian currencies, I think with regards to verbalintervention, I think the most key is the credibility.So if is follow through with credible.

Actions and market trusted it and go forit, go, go, go with what the central banks have been doing, then that thatwill be a credible action to do and a credible reaction from the market aswell. But right now, I think going forward,we'll continue to see how what's actually us going forward is still goingto be a rate cut. So it depends on how much cut is goingto happen and going forward. Still, fundamentally, we are seeingstill some sort of volatility of geopolitical risk rising, etc..So in the medium to long run, we'll still see somewith overvalued and the US dollar was.

Still see it coming down a bit, butnear-term it might still be quite neutral on that, right.On fixed income, it's been an eventful week.Yields have been pushing higher. And I'm wonderingshould should investors abandon duration at this point or should we just stick tothe short end of the curve? Should we should we stay away from fixedincome at this point? What's the what's youradvice? What's your prescriptive?I think we continue to advise investors who monitor the duration, given how atthe beginning we suggest advocating like.

To increase duration, given howinterest rates might be coming down early and expect it.But right now the call has changed a bit.And so that I think right now the what investors are questioning as well, ifthe tight spreads are, is it going to go even tighter?We believe right now the spreads, they are limited potential for it to go eventighter, but it will likely stay tight. Okay.And compared to pass episodes when it is this tight, actually, even with it andhigh yield actually continues to call these and analyze total return for IG,we see around 3% higher, around 4%.

And on a.Fourth quarter. We've seen actually very decent returnin it. We got actually around 7.7% from each ofour past two quarters. And with high, you actually got 9.1%above average yields of around 5.6% for IG and also 8.4% for HIU.So going forward, we expect yields to stabilize, but spreads might stillremain tight given how copper fundamentals remain really sound.Yeah. Have a good weekend.Thank you. Marcela, thank you so much.Marcela Chao, global market strategist.

At Jp morgan Asset Management.There is plenty more ahead here on the China show. Now to the battle for global supremacy.In Chipmaking, the U.S. took a crucial early role in developingthe technology that underpins today's AI revolution.But a Dutch firm now holds a monopoly on the process, while Asian manufacturersdominate production. Bloomberg Originals has been looking athow the U.S. dropped the ball.This is arguably the single most important machine in the world rightnow.

Technologically, economically andgeopolitically, without the global economy would slow.The pace of technological advancement would stutter.They cost $200 million each, and of the 200 or so that exist today, just ahandful on U.S. soil.What's more, successive U.S. administrations have had to scramble toensure that none of this all into China. And that's despite the fact that much ofthe early work on the technology originated in the U.S..This is a story about where physics meets business and has a massive impacton the world's economy.

So how did the United States manage tomiss out on this colossally important piece of tech? It's called an extreme ultravioletlithography or EUV machine, and it produces the world's most advancedsemiconductors. Even technology is the only reason thatwe have iPhones that are as fast as they are.The reason that we have this A.I. revolution with chat bots and the devicehas turned the only company that produces it, the Dutch firm ASML, intoEurope's biggest technology firm. Lithography is how circuit patents areengraved onto chips.

This is a very, very important part ofthe process of making semiconductors. The scale of extreme ultravioletlithography machines is mind boggling. Each device is the size of a bus, but itis designed to etch patterns onto chips that are billionths of a meter across.How they do so is a remarkable feat of engineering.A high powered laser is fired at a tiny target of ten droplets about 50,000times a second. That creates a plasma that emits extremeultraviolet light, which has a wavelength of 13 and a half nanometers.This light doesn't occur naturally on earth.In fact, it's absorbed by most.

Materials, including air do.The whole process is conducted in a vacuum and a series of mirrors reflectand focus the EUV light. Each mirror is coated in layers ofmolybdenum and silicon and polished to a smoothness of less than one atomsthickness. That's important because any blemishreduces the quality of the chips being produced.Midway through this process, the eve light is reflected by a radical thatcontains the pattern of the circuits that are to be etched onto the chip.These are then reflected and focused even more to make the pattern eventinier before hitting the silicon wafer.

Each wafer is etched with billions ofsuch patterns. The problem was it's so difficult to do.The semiconductor industry is always racing to make things smaller, and itsability to keep doing that helps the global economy keep growing.Now, some of the layers of materials that go into making semiconductors areone atom thick. You don't get thinner than one atom.Semiconductors eventually faced a problem where they were really gettingto the limits of physics. In the 1980s, scientists started tothink that EUV light might be the best way to get to that atomic level.The US government, through what I call.

The national labs, has always beenhelpful to the semiconductor industry at sort of underwriting some of thesefundamental advances. In fact, the Department of Energy endedup putting tens of millions of dollars into EUV research at three labs acrossthe US to make the jump from research to reality.An alliance was formed with companies including Intel, AMD and Motorola thatmatch any government spending. In 1999, a little known Dutchlithography company called ASML joined to remember that in the 1990s, theJapanese were a major threat to U.S. dominance of the chip industry.The US government, through its weight.

Behind ASML over the Japanese companieswho were really leading in Photolithography at the time ASML wentall in. They reckon the tech could be readycommercially by 2006 if technology is really a moonshot.It was incredibly expensive and incredibly complicated by 2012.Progress had been made, but more was needed to look like EUV actually mightbe possible. But ASML actually needed lots ofinvestment, so they turned to their customers.TSMC, Samsung and Intel decided, Wow, this stuff is really important.We better put some billions of dollars.

Behind it to make sure it actuallyhappens. And Intel was the biggest contributor tothat. It was really thanks to our smallstubbornness that they took years and billions in funding to actually produceUAV technology as we know it now. Finally, in 2017, ASML begins shippingthe machines in meaningful numbers. But despite the billions of dollars ofinvestment from American companies like Intel and the U.S.government, the first generation of devices all went to TSMC and Samsung.And it wasn't because ASML didn't want to sell machines to Intel.Intel thought that Eve was really.

Important, but like its competitors,they saw the issues with it. That was a decision they made, and it'sa decision that cost them massively. Essentially, the then-CEO BrianKrzanich, didn't think Intel could make EUV work profitably and would be finewithout it. Intel was the biggest company in townand the industry dominated the industry for multiple decades.Everybody else was playing catch up. This is the scale of which Intel andTSMC have been able to make chips. Both have consistently got smaller, butwith Intel leading the size reduction until 2018, when TSMC overtook Intel forthe first time, the reason was at its.

Core pretty simple.TSMC was making chips with the heavy machines and Intel wasn't.Soon after Samsung's Galaxy Note ten smartphone hits the market, the firstconsumer device featuring chips made with the EUV process Apple follows.But then that's a problem. Huawei, which was the world's largestsmartphone maker at one point, was buying chips from TSMC.The fact that Chinese device makers were making some of the most advancedsmartphones caught the attention of the American government.Huawei is something that's very dangerous.You look at what they've done from a.

Security standpoint, from a militarystandpoint, it's very dangerous. One of the ironies of EUV is that a lotof the underlying technology originated in the United States, but the direct andindirect beneficiaries of that technology haven't really beenconcentrated in the U.S.. You had a company in mainland Chinabuying chips from a company in Taiwan using equipment made in the Netherlands.It's vital cog in the wheel was made by a company in another country, one thatthey couldn't directly control. So it took a lot of work by Washingtonto persuade the Dutch not to allow ASML to export EUV to China.The details of how ASML did not shift to.

China have really been a little bitobscure. All we know is that they statevehemently over and over again. We have never shipped EUV to China.In 2012, Intel was 15 times bigger than Nvidia and almost twice as big as TSMC.That's when it first invested in ASML. But Intel's failure to move early on EUVhas allowed a number of rivals to overtake it.Intel's growth has stalled as TSMC and especially in video have boomed.Intel's leadership team under Krzanich really gave away the keys to the kingdomand that caused a knock on effect. Inside Intel, Krzanich left some of theother leadership was replaced and there.

Was kind of a scramble to get thatcompany back on line. And one of the conclusions that newleadership came to was We need EUV. We have a very strong partnership withASML and our plans to now stay on the leading edge of EUV usage are wellunderway. That's Pat Gelsinger, Intel's currentCEO. He's throwing the company's weightbehind the next technology. The new new thing in the world of EUV iscalled high numerical aperture or high and a EUV.To give you an idea of how important this is.Intel has been loudly touting to anybody.

Who listen, they've got the first highend a machine. There's a lot at stake, the USleadership in semiconductor. And the success of President Joe Biden'sCHIPS Act, which has set aside $100 billion in subsidies for thesemiconductor industry. We will enable advanced semiconductormanufacturing to make a comeback here in America after 40 years.Politicians have finally woken up to how important semiconductors truly are.And Intel's entire plan to turn the company around is predicated on the ideathat they can actually get government funding to build semiconductor plantsand become a leader again in.

Semiconductor technology. There we go.Bloomberg subscribers, of course, can check out that original documentaryagain any time on the terminal. Also, Bloomberg.com, it's also up onYouTube later Friday. Fantastic work, of course, from gettingplenty more ahead. This is Bloomberg.

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