Bloomberg Break of day: Asia 03/11/2024

This is DAYBREAK, Asia.We're counting down to Asia's major market opens.And Heidi, I've got to tell you, it is a great day to be in Tokyo today becausewe just had that Japan GDP figures coming out in the last few minutes.Revised numbers for the fourth quarter and telling us that actually Japanmanaged to avoid a technical recession. So something very, very interesting tonote as we count down to that BOJ decision.And you just ahead could actually be setting the stage perhaps for the BOJ topivot away from its easy policy settings.Finally.

Yeah, just one more piece of the puzzle,right? As you get that incremental sort ofdrumbeat towards, if they will, they when will they get on that path topolicy normalization. We know the wage negotiations wrap upthis week as well. If you take a look at the direction whenit comes to the upside bias and JGB yields, certainly that case is reallystarting to build with the additional momentum.We did have that report as well that the BOJ is considering scrapping the SEC.But about take a look at certainly equities are kind of trending in theopposite direction.

Yeah that's right.You've got the station. It was sort of set for US stocks orrather Japanese stocks by Wall Street. Again, we had that slump into the closeon Friday. So we had a pretty mixed jobs reportcoming out. But but certainly the expectations theFed are going to be set by the US inflation print that's due Tuesday.That could show a bit of an acceleration.Again, certainly telling us that the Powell unlikely to have that base caseready to turn firmly dovish. So that sort of plays into the dynamicswe have for Japanese equities, saying.

Both the topics, the Nikkei 2 to 5dropping more than 1% so far and we tracking those tech stocks inparticular. There's the US side.And then there's also what's happening with the Japanese yen because you'restrengthening here again, we've had gains against the greenback for the pastfour weeks or so. Back below that 147 markets where we hadreally been trending around the 150 region for quite a period here.But but the the numbers that we're really tracking today, as we said, it'sall about Japan escaping technical recession in the latest period.So GDP expanding at an annualized pace.

Of 0.4% in the final three months oflast year. That reverses an earlier point 4%retreat that initially had been reported.So certainly something to keep an eye on.And again, as you say, those ramifications.What does this mean for the BOJ? Could we see any sort of policy shift assoon as the March meeting? So that's Japan.But let's shift now to what we've got for Korea here, because we're alsotaking a look at what's happening with trade numbers that are just coming outbecause we've seen that deficit coming.

In at $1.26 billion.We've also seen imports as well dropping more than 28% exports is really the onethat we should be keeping an eye on here.And we saw that dropping again, 13.4% on the year.Japan or Korea rather, really seen as a bellwether when it comes to exportsdata. It's also one of the first to reportgiven we get these early numbers coming through, but certainly exports, that'snot a good number there to see it in contraction territory.We have seen it rising over the past period here.But Korea there, the exports or trade.

Numbers, we're keeping an eye on aweakness coming across in the equities landscape as well, Heidi.The weakness here in Australia as well, after we saw stocks, stocks reallymanaging to end the week, climbing the most in five weeks, largely on sort ofthe optimism when it comes to the REITs outlook.We are seeing a down day here in Australia.Sydney stocks are off by just about one and a quarter of 1%.We're seeing the biggest laggards is energy down by almost 2%, but reallyjust about every sector are in the red. But materials and energy, very growthsensitive areas are leading those.

Declines.Watching the Aussie dollar 66 at 23 is where we're trading when it comes to theAussie and we are expecting to see more of that benefit when it comes to theweakness in the US dollar that we've seen over the past couple of sessionsplay out here in Asia, particularly of course when it comes to the yen, butcertainly some of the more growth sensitive sort of China sensitiveproxies like the Aussie see a little bit of weakness there.Despite the softness in the US dollar that we see looking at oil, as Imentioned, it was one of the biggest losers as we see sort of sector wisehere in Australia, seeing Brent trading.

Just under $82 a barrel, holding on tothose losses ahead of US inflation data. We also have reports from OPEC and theInternational Energy Agency due out this week that could give some clues on thedemand outlook. Those monthly market reports will beclosely watched, but we did see that decline of over 1% for Brent in theFriday session, and that's really covering through that possibility ofmore heated US inflation that is expected on Tuesday, also posing to bequite a key risk for monetary policy. So we are seeing quite a bit of cautionthere. But last week, I should point out, wasactually the least volatile weeks as.

2021 for oil as we continue to see kindof the the juggling of these. Supply and demand factors for traders.Taking a quick look at treasuries and of course, what we get out of thatinflation number this way will feed into expectations when it comes to Fed speakand Fed expectations as well. The US CPI really firmly in focus atthis point as as sort of how bond traders will be watching the next bigmove. This is the own, if you will, SuperTuesday of sorts. We've got the fresh inflation data andthat will fade through to when the Fed might start cutting rates.And of course, it comes on the back of.

What was ultimately a little bit of aconfusing picture given by the jobs report on Friday.Well, Anex says that most sectors, when it comes to the equity markets, will besupported by positive earnings revisions in the next 12 months, is bringing youBello, who's a portfolio manager at Tribeca Investment Partners.And you guys are always pretty pragmatic, so you do still see ampleopportunities going forward? Look, absolutely.Look, we think the equity market is not doing gloom, as many have suggested.We think the fundamental looks good, particularly for some of the cyclicalsectors.

Now, the valuation may be a little bitstretch for some of the growth names, particularly when it's AI or techfocused. But we do think majority of the sectorare doing quite well. The latest reporting season, earningsseason around the world have really demonstrated that the analysts were tooconservative. You know, the earnings recession thatwe're looking at or consumer recession we're looking at is not as bad asexpected. We will see a slowdown in consumerspending and corporate earnings, but the expectations are far more pessimisticthan expected.

So we do think next to a month forcyclical sectors is actually looking pretty good.So you're looking pretty balanced because even as you say, yes, valuationsfor some of the growth tech related namesare looking pretty peaky, but the narrative is still strong.Oh, absolutely. So I do think that this whole thematicis real and as investor, you just cannot ignore it.You know, you may well say it's too expensive, but you've got to be that inone way or another here industry is a little bit harder to play.But in the US this your playground is.

Enormous.I think that those sort of sectors, it is a buy on the pullback you knowprobably chasing it is a little bit difficult.But on a buyer the pullback is very important to have it report as a part ofthe portfolio, while at the same time you pick up some of the cheaper sectorswhere the earnings will be upgraded and valuation will grow in the next 12months month last day of the MPC today, normally, of course, investors will beable to glean a little bit more from the Premier's press conference that's beenscrapped. Is that worrying for a China investor inthat we didn't really get much detail as.

To how they plan to support that 5%target. Look, that's the thing.So it is somewhat disappointing and then that's why you're seeing quite a lot ofoffshore investors selling China wares domestically.It does seem like the the commentary supporting a bit of confidencedomestically for the domestic consumer. You know, it is disappointing we didn'tsee a big stimulus, but I think expectations were pretty low for that.Investors will look forward to more details about the rate cuts, which is asignifies and also potentially what else is to come through.I think the risk at this point is a.

Little bit of negativity about, youknow, what's the upcoming quarterly result for the Chinese companies becauseof the tough stance on financial fraud and the like.So we'll probably will see more losses. And, you know, and what the governmentis doing in terms of support for the equity market over there.So, you know, the bit of uncertainty, but net net, it's in line withexpectations. And what do you think investors willsort of be most focused on? Do you think it is that earnings storyor do you think if we get any sort of right that's been indicated, as you say,is that going to be something that sort.

Of prompts perhaps, if not a pick up, atleast stopping the selling? Of course.Look, I do think the Chinese market is is very attractive and the economy isrecovering, but just very slowly, the rate cut will come as indicators end up.But the thing is, it's really about the consumer having more confidence inspend. We saw a glimpse of it at the ChineseNew Year travel stats and the like. So we do think it is happening.It's just in the slow way. But as investors are looking into China,the valuations look very attractive and as the consumer recovers, I do thinkthat more confidence will return to that.

Market.So which sectors are you sort of looking at in particular then?Look Absolutely. So for that market you absolutely wantto focus on the services and you know, so the likes of travel, the services,because the next few years there will be huge sort of not revenge spending buthuge catch up in some of the loss spend over the last few years.The consumer want to spend and they want to travel around.And so that is an area where you really want to put a lot of focus, a lot ofattention. And I do think these will benefit thesurrounding markets as well, you know,.

Markets like Australia and the like,because, you know, we generally a big take big intake of Chinese tourist andtravel and students. So those are the proxies that you'll bepaying when it comes to the Australian market.Absolutely, yes. Andin terms of the property sector, do you see that as being an impediment tomarket sentiment improving? Look, in terms of the.Sector. So if we're talking about China isimportant because it's a it's where locals, you know, the local individualconsumer will be focusing on.

I do think as things stop getting awhole lot worse and a lot of negative news headlines out of the way andthere'll be enough support for that space.It stabilizing. It is getting better.So we think net net, the fact that the Chinese market has been very strong fornot very strong, the improving for for quite some time.I do think the confidence is returning and the for the other market, look,property is important. You know, I think you know here inAustralia that, you know, our property market is picking up quite strongly aswell, just given, you know, just given.

The sort of traveling and immigrationstats and the like and the shortage of the of the build here in Australia, youknow, the pipeline is actually looking very strong for for this sector.So yeah, so every market is quite unique where sense.That was done by Lew, their portfolio manager at Tribeca Investment Partners.And we're just 10 minutes into the session so far for Japan and Koreatoday. And there's some notable losses that arecoming through in the session so far. Actually, every sector is in the red,but I.T. is among the sectors that's mostunderperforming in the session so far.

What's driving that is actually what wehad in the US session to end the week. So it was weakness came through.We saw the likes of NVIDIA and other tech stocks dropping, but Nvidia downmore than 5% and that was the biggest decline since May 31.It is that story. Perhaps we've got valuations sittingaround a two decade high, a bit of profit taking coming into it, a bit ofjust broader uncertainty in the direction for markets.But you do see that weakness coming through for tech stocks so far.Samsung, you can see there was SoftBank, rather, but it's down more than morethan 4% at this point.

And that's the biggest decline sinceNovember. Let's switch over because there'sanother name that we're tracking in the session today, and this is actually onethat's moving to the upside so far, the Japanese pharma company Eisai.What's happened here is that Eli Lilly, it's a competitive or competitive pharmacompany that's listed in the US. It's Alzheimer's disease drug is facingfurther delays in gaining US approvals. Regulators want to hold a hearing too,to see how safe the therapy is, how well it works.And so this is actually something that isa negative overall for it for, of.

Course, dementia patients.But but Eisai, given it, does have its own Alzheimer's drug that's alreadyapproved, it is gaining off the back of that delay for its competitor, Lilly orEli Lilly, too. But that is one of the other stocks arefocusing on today, Heidi. Still ahead here, what everyone expectsto both the Fed and the ECB to start cutting rates in June.This senior economist will be with us later this hour.Before that, though, will be headed back to Beijing as China's National People'sCongress draws to a close today with an ambitious growth target and a freshwarning about property speculation.

This is Bloomberg. China's annual session of parliament.The National People's Congress wraps up in Beijing in a few hours with perhapsmore emphasis on what leaders did not do and say than what they did.Let's get over to Beijing. Chief North Asia correspondent StephenEngle is there with us. And as you said earlier, sort of more ofa whimper than a bang to the conclusion of the NPC this year.Yeah, I think the NPC and I've covered a lot of them was a bit truncated thisyear. It was just seven days instead ofbetween ten days to even two weeks in.

Some cases in the past.So and there's not going to also be a press conference today at the conclusionof the National People's Congress. Of course, much has been made aboutthat, how the Premier Li Chung, will not be addressing the media.So we can't necessarily get some clarification.Yes, they're fairly, you know, scripted. And, you know, the playbook is prettywell known, but at least we get to put questions to the premier, usually to getclarification on the policy that he gave us a week ago in the work report.The work report two was sort of truncated last Monday or last Tuesday.You know, just under an hour.

Sometimes they go well into a secondhour. And also an interesting point, too, whenI say it was truncated for the first time since 2019, Li Chung last Tuesdayin his work report, omitted the very common phrase that housing is to belived in, not speculated on. That is something Chinese Partyofficials have been talking about consistently since about 2016.In fact, as you know, kind of a precursor to what we've been seeing isthat crackdown on speculation and, of course, overleveraging in the propertymarket. He left that out, however, in a pressconference yesterday by the Minister of.

Housing and Urban Rural Development, LeeHong. He said we must adhere to the very endthe belief that housing is for living in, not for speculation.So at the very end of the NPC, they kind of regave new life to that sentence that they've been uttering since 2016 to kindof hammer home the point that they're not going to ease up on their crackdownon the property sector. And it is a it is atopic that was not really mentioned much other than seeking high qualitydevelopment. They did not talk a lot over the courseof the last week about the problems in.

The property sector, which are huge tosay the least. Yeah, huge.And something that is going to be persisting for perhaps multiple years.Steve But properties so closely tied as well to consumer confidence andsomething that perhaps policymakers could take some heart in is that we sawCPI rising in the latest rating. Yeah, it's the front page news in theChina business newspaper today and CPI a better than expected.We basically broke five consecutive months of CPI deflation.Keep in mind, we're still in deflation on the factory gate, on wholesaleprices.

But CPI did break the pattern as it rosefor the first time since August, up 0.7%.The consensus estimate was 4.4 0.3%. So it was better than expected.But keep in mind, you know, February and January are always aberrations on thesekind of numbers simply because, you know, the lunar New Year holiday.And yes, we had record travel. We had record spending, not per capitaspending, but overall spending. We had record box office receipts.So there were some really good indicators coming out of the two weektravel period in February that really boosted those numbers.Now we have to see whether that's going.

To carry over.And traditionally it does not carry over.It's great headline number. It's front page news here because itshows sort of an ending of the trend of deflation.But it does not necessarily is not a harbinger necessarily that things aregoing to be better going forward because consumer confidence is still pretty weakhere. Yeah.That was bloomberg Stephen Engle there. And Steve, really, to your point here,because we've got the latest Bloomberg Markets live poll survey coming out andit's still suggesting a lot of investors.

Are concerned about china's economic andalso its financial problems despite beijing, of course, again targeting thatgrowth of around 5% for the course of this year.The poll also found that 30% of respondents still do not have anyexposure to China whatsoever, with another 20% planning to pull back overthe coming 12 months. Here's what some of our guests have beensaying about the problems that are facing the world's second biggesteconomy. Our view is that one should not investin China. I don't think it's an investable per sehigh dividend, and clients asking for.

Income definitely will still continue toplay and be very, very careful. If you're investing in China right now,we think the economy is going to steadily continue to slow down for thenext ten years. I think the biggest risk here is policymaker complacency. It is not clear what the overall generaldirection of policy will be. Long term stimulus is important, but Ithink China has passed the stage where they want to throw a lot of money, builda lot of leverage. We're in a new paradigm.The leadership's economic priorities are completely different.It's very difficult to restore the.

Market confidence.The sentiment is really bad. I talk to my friends in China and theyare talking about that. There is no hope.I think it's going to be a hard challenge to bring the foreign investorsback to China. For more, let's bring in our asiaequities reporter Charlotte yang in hong kong and charlotte.I think when you stack up what came out of the NPC, you put it against thestructural, the cyclical problems that are in China's economy.It really does seem like there's not any catalyst here to to have any sort ofmarket rebound.

Yeah, I think that's what we see fromthem live. A poor survey with over 230 respondents,including retail traders as well as professional investing community.You know, when they were asked whether you plan to increase your China's assetsposition in the next 12 months, we actually see equal about equal size ofrespondents that say that they plan to increase as well as or decrease.So I think this shows you that, you know, even though the Chinese equitymarket has been rebounding over the past month,the NPC as well has not been able to give investors enough confidence.And you have about three quarters of the.

Survey respondents say that they aresomewhat of very concerned about the problems of China's economy, as well asthe market spilling into the other rest of the rest of the world.And this kind of underscores global investors concerns about, you know, dueto the size and the importance of China's economy, the lack of in theabsence of a strong stimulus, the kind of slow economic recovery as well, makeit vulnerable, especially to economies that rely on China as a key exportdestinations. And I think and also another thing thatstood out from the survey is that we have more than half of the respondentssay that they expect that amongst time.

The key results from National People'sCongress will be irrelevant for the equity market.I think this confirms, you know, given that this consent forms that goingforward it will be hard to find the one big houses that will be able to improvethem. Market sentiment on a broader level.There are some concerns from respondents that we're going to see that the Japanification of not just the Chinese economy, but what we saw reflected inmarkets. Right.Yes. There are also a growing number ofrespondents say that they see the risks,.

Sizable risks of China equity marketfour into the kind of extended slump we saw with the Japanese market in the1980s and also with, I think, you know, the NBC was a big as people wereexpecting to buy, even though the economy growth palace was seen as veryambitious. There was a big gap between that lappedamong investors mind, you know, how to achieve that GDP.And with that especially the we can expect a fiscal target according toMorgan Stanley, that could create, you know, elevated, elevated volatility forthe market because that could spell a year for the earnings.And I feel like because of this low.

Earnings recovery, as well as the lackof a strong stimulus from the macro side, is why some banks might beconcerned about the extended slump for the equity market for China.Our Asia equities reporter, Charlotte Yang there in Hong Kong.You can get a roundup of the stories you need to know to get your day going.In today's edition of DAYBREAK, Bloomberg subscribers can get that atdaybreak. On the terminals is also available onthe mobile in the Bloomberg anywhere app.You can customize the settings. You just get the news on the industriesand assets that you care about.

This is Bloomberg. You're watching DAYBREAK.Asia taking a look at some of the latest political stories that we're trackingthis morning. And President Biden has warned Israelagainst invading the city of Rafah in southern Gaza as cease fire talks withHamas remain deadlocked. Washington had been hoping for abreakthrough in the negotiations before Israel's Islam's rather holy month ofRamadan, which began Sunday. Biden says the US will continue to leadinternational efforts to get humanitarian assistance into Gaza andpush Israel for more rounds to deliver.

Aid.Australia will scrap import tariffs on a wide range of consumer goods from Julyin a bid to ease household expenses and business costs.The Government says almost 500 of what it calls nuisance tariffs will beabolished on goods, including washing machines, toothbrushes and pens.It estimates companies will save almost 20 million USD a year in compliancecosts. India has signed a free trade pact withfour European countries that the Modi government says will create 1 millionjobs in 15 years. The deal with non EU countries,including Switzerland and Norway, has.

Been 16 years in the making.India gets private sector investment commitments in return for the Europeans,securing easier access to Indian markets and products.The Biden administration is said to be weighing sanctions on several Chinesetech companies, including chip maker Changjiang Memory Technologies.Sources say the Commerce Department is considering adding six men and fiveother Chinese entities to the so-called entity list, which restricts companiesaccess to US technology. Six May competes with the likes ofMicron, Samsung and SK Hynix. Coming up, Aberdeen discusses its ratesoutlook on why expects both the Fed and.

The ECB to start cutting in June.Its senior economist is joining us just ahead also to discuss the outlook forthe BOJ. We'll have more ahead on bloomberg.This is Bloomberg. A lot of risk aversion here in the earlypart of the Monday morning session here in Asia.Take a look. A sea of red really across the board.The Nikkei 2 to 5 off by just over 2% that we are seeing, of course, quite abit of fluctuating expectations out of the Bank of Japan.We had the revised GDP data suggesting that the economy avoided a recessionjust a week before that Bank of Japan.

Meeting there.And that will just be one of those additional data points kind of in playas we get into further expectations and the cost base also of softer by abouthalf a percent. We had some pretty poor trade data outin the last hour or so. We're also seeing downside here inAustralia. But this is the biggest intraday declinewe've seen for Australian stocks in about a month.All sectors dropping, but really especially being led by a lot of thegrowth sensitive sectors, including the likes of energy as well as miners.The biggest laggards down almost 2%.

Apiece.The Kiwi stocks also following the broader trajectory of the region.And of course, when it comes to some of the other movies we're watching, ofcourse, the dollar Weakness in Strength story continues to play out as well asJGB yields headed towards those November highs.That classic exit is in place. But take a look at Asian chip stocks inparticular as we continue to sort of watch the thenarrative when it comes to Nvidia on some of the valuations that we've seen.We did see, of course, in the past week and video saying that biggest drop sinceAugust.

But of course some profit taking perhapsafter an almost 20% six day gain there. We are seeing the likes of SK Hynix thatone of the biggest losers up about 3.6% an advantage over almost 6% lower there,though. Yeah, Heidi, that's certainly one of thebig sectors we're tracking this morning. But on the eco front, it's that bigwatch on Japan's GDP because we had that revision coming through for the fourthquarter numbers earlier and it did reverse a quarterly contraction intopositive growth and importantly as well, avoiding a technical recession.So that outcome could support the case for the BOJ to end its negative interestrate policy this month or the next as.

Well.Let's bring in our Japan economy and government editor Paul Jackson here inTokyo. Paul, start us off here because yet wehad it in negative territory for the preliminary readings.It was reversed for for the for the one that just came out this morning.What was it that really created such a difference there in the preliminary inthe final readings? Well, it's a common pattern that we seein the GDP data coming out of Japan is that after the preliminary figures arereleased, we get a survey of capital spending by companies and the spendingfigures that the Ministry of Finance.

Released were kind of gangbusters light,very, very positive in terms of business spending.So that suggests companies are a lot more upbeat than was previously thought,and they were spending a lot more. So I think economists had all expectedreally that we were going to flip back into positive growth in the lastquarter. And, hey, you know, for a central bank,if you're trying to, you know, pave the way for an interest rate hike and youwant to move that, it's a lot a lot better look for you if the economy'sgrowing at the time rather than contracting.I think the history books would look.

Pretty challenging for Mr.Awada if he raises rates while the economy is contracting and things thendidn't go well. So that's the kind of thing you want toavoid as a central banker. We can get to the DOJ more in just amoment. But I want to also understand first,because the reading came in at 8.4, but the consensus from the survey had been1.1% expansion. So why was it actually a bit weaker thanwhat economists had been expecting in light of those CapEx numbers?Well, I think that overplayed a little bit how much the capital spending wouldimprove the revised figures, That point.

Number one, I think there are stillsigns of, you know, concerning weakness in the economy, and that's the privateconsumption. You know, inflation has been eating intohouseholds purchasing power. They've been able to spend less andwe're still seeing that happening. Now, that's an interesting point becausethe Bank of Japan is saying it's looking for a positive growth cycle where, youknow, inflation is feeding wages and improved consumption.So at the moment, there's not a great deal of evidence that we've got theimproved consumption because the private consumer spending has been falling forthe last three quarters.

Yeah, the demand side does look prettywobbly, Brad. And I do wonder when it comes to thespring wage rise demands, are they going to be strong enough to give the BOJ theconviction that they're going to want to say,hey, look, I think that the BMJ is not going to be derailed from going aheadwith this rate hike either this month. All next month.And I think what we saw with last week's average demands released by Ringo, thetop union federation, is that the wages are going to come in strong now.That result is due Friday. Most of the unions are filing the wagedeals.

Many of them are on Wednesday.Figures will be collated. They'll come out Friday.And I think we're going to see a pretty big number.And that combined with this GDP figure, I think we've got plenty there tojustify a possible move in March, but that's still not a done deal.All right, Paul, that was Paul Jackson there.Now, Japan economy and government entity here in Tokyo this morning.And let's get more on the outlook for the BOJ and bring in our next guest.This is Luke Bartholomew, senior economist at Aberdeen this morning.And.

And Luke, as we were just discussing,there were Paul perhaps the stage could be set now for the BOJ to pivot orchange its policy settings as soon as this month.I'm curious, what's your view on that? You know, I think every meeting is live,Right. That's the key message when it comes tothe Bank of Japan, whether it's March, whether it's April, a lot will depend onwhat the Shinto looks like on Friday. I mean, I think it is true that itwouldn't have been a good look, so to speak, had the Bank of Japan tightenedwhen it turned out that the economy was still in recession.With that recession being revised away,.

Maybe that makes March a little bit morealive. But I think, you know, really, does itmatter massively whether it's March or April, even a bit later than that?No, I think the direction of travel is clear.The tightening is coming and the Bank of Japan, therefore, is a stand outcompared to a lot of other developed market central banks.And there's a few different levers, of course, that you can pull on here.Where are they most likely to focus shifting their policy settings first, doyou think? So I think it will be a simultaneousmove.

Both negative interest rates and yieldcurve control lifted at the same time. I don't think that there's anyparticular need to be clever around the sequencing of that.I mean, there had been some speculation that maybe yield curve control would bethe first thing to go. Perhaps that was more distortive ofmarkets. And clearly the Bank of Japan has beenbacking away from that for much of the last year or so.But I think at this point, they're quite happy to tell you if yield curve controland negative interest rates at the same time,like what's not clear in terms of the.

Direction of travel is China.Did you learn much as we wrap up the National People's Congress today, giventhat there seems to be less transparency as to how they plan to hit that around5%? Yeah, look, that growth target does seemvery ambitious, to say the least. And you're right, it's not obvious howit is going to be. I mean, we're looking for growth that'smuch closer to four and a half percent than 5%.Given the significant headwinds from the property sector, given the lack ofinterest in unleashing what you might call big bang, big bazooka stimulus,wanting to hold the line on de-risking.

There.So whilst will continue to see some incremental easing, I think I think theclear lesson is that, you know, more aggressive stimulus and that isn'tcoming. And for now, the growth target I thinkis pretty unachievable. Is the economy or asset prices facing ainevitable Japan ification, do you think, in China, or do you think thereis still an opportunity? I guess, notwithstanding what happensthis year with stimulus, to be able to lift from that deflationary demand cyclethat it's in at the moment? Yeah, I think something like, you know,a 30 year battle with disinflation and.

Deflation, that's connotation by thatphrase. Japan ification is probably a bitstrong. I think maybe the risks of that areslightly overdone. You know, when Japan fell into itsdeflation trap, it was already a rich, very well developed economy.China is not at that stage of its development.There is still plenty of low hanging fruit to pick when it comes to catch upgrowth and development. It still has a number of importantdrivers of growth, both the traditional ones, about moving people into higherproductivity sectors, but also, you.

Know, more forward looking moderndrivers of growth around the green transition in the technology sector.And on top of that, policy makers have learned an important lesson from theJapan ification experience. And whilst, yeah, Big Bang stimulusisn't happening, I don't think that policy is going to be so weak that itallows for, you know, the economy to fall into a very deep deflationary trap.US inflation numbers, that's one of the big data points that we're looking aheadto this week. We're likely to still see thatmoderation trend intact. But how do you think that that number isgoing to stack up against that jobs.

Report we had Friday in terms of theoutlook for the Fed? Yeah, so January was a big inflationmonth across CPI, pi, p, c, all of those measures a bit stronger and thatreignited some concerns about this so-called last mile on inflation.I mean, my sense is that the employment report on Friday, the payrolls report,helped ease some of those concerns. It's been described by a lot of peopleas mixed. But my take is that it's actually apretty good report from the perspective of the Fed, consistent with the economystill taking a loan, but underlying wage growth easing somewhat.And I think that this week's inflation.

Report will sort of confirm that story,that whilst there will be bumps in the road on inflation, that we shouldn't beconcerned about an aggressive pick up in inflation from here, the underlyinginflation dynamics are going in the right direction.It's been interesting to track, of course, with all of the global centralbanks, but that sort of race between that, the Fed, the ECB, who would becutting first. Now it seems like markets are sort ofaligned on when we'll start to see any sort of reduction.Yeah, it has been quite the horse race over the last couple of months.I mean, so I think we're broadly aligned.

With with markets where they've got toin terms of a June start for both the ECB and Fed.I mean, it is worth saying that whilst they'll be cutting around the same timethat they will be doing so for for rather different reasons, I mean, theEuropean Central Bank will be easing policy for the pretty straightforwardreason that growth is extremely weak. I mean, the eurozone seems to have justabout avoided a technical recession by the skin of its teeth, but theunderlying health of the economy is extremely weak.And therefore that sort of doing the job of getting rid of inflation.So the European Central Bank cutting for.

Economic weakness reasons, whereas theFed is cutting much more from a position of strength if the US economy continuesto be pretty solid. It's just that we've had this verystrong supply side environment which has allowed growth to be strong andinflation to fall at the same time for much of last year.And so the Fed can be taking its foot off the brake with those inflationconcerns fading even as growth stays pretty solid.Look really great to have you with us. Luke Bartholomew, senior economist atAberdeen. Well, coming up, is Asia's earningsspotlight shifting to iPhone.

Manufacturer Hong Kong?This week, we'll be discussing how Apple's China woes could impact thoseresults next. This is Bloomberg. Foxconn's public arm, Hong Hai isheadlining Asia's busy earnings week. The maker of Apple iPhones will reportresults after sales of the product fell in China quite sharply in the first sixweeks of the year. For more on this is bringing ourbreaking news earnings specialist Rachel Yeo.So, Rachel, we know that Apple's got a number of woes and plunging sales inChina is certainly one of the big ones.

Are we starting to see that play throughto suppliers like whole high? Yes, we are seeing on high offeringinsights to China's tech sector amidst a weak economy.So the company does face some challenges.After Apple reported episodic iPhone sales in China has dropped 24% over thefirst six weeks of the year. And also Hon Hai also reported an 18%slip in sales for the first two months of the year.So this is concerning because Hon Hai gets half of their revenue from Apple,so its outlook during its earnings will be the one to watch over the comingweek.

It's not just of course, Hon Hai.It's actually quite a number of big companies as well.Cathay Pacific. You've got the make or battery maker,rather, Seattle. They're also on the docket.So what are we expecting from those companies?Yeah. We are expecting Cathay to extend annualgrowth annual profit as they continue to recover from the pandemic.The carrier will also benefit from pent up passenger demand, as in Chinaopening up last year. Passenger has under more passengers hasbeen steadily rising throughout the US.

Well, so there will be some advantagesover that. And alsoCathay is also expected to resume paying dividends in 2024.So investors may be keeping an outlook for cash flows for Seattle.We are expecting to see revenue of our spending, see profit rise for 2023 asthe company continues to benefit from its new energy business in the long run.The battery maker should be able to brave price competition thanks to itsscale and cost advantages. They are also able to capture the growthof electric vehicle sales in China as well.Rachel.

We're also watching Samson at earnings.Can you tell us more, given they've been eyeing the exit in terms of delistingout of Hong Kong? Yes, we have some nice potential plansto delist from Hong Kong. Eco signaled the likelihood that theyhere they may see smaller scale gains in the greater China region as compared toother regions as well. But in terms of fit so full yearearnings itself, we're expecting to see a jump in revenue as the benefit from aresurgence in travel demand. That was our breaking news.Anything that. Rachel, you.The latest corporate headlines that.

We're tracking.Bloomberg has learned that Reddit and its investors are looking to raise asmuch as $748 million in an initial public offering.Sources say the social media platform plans to sell shares in a range of 31 to$34 each, seeking a valuation of a such a six and a half billion dollars.Red has been working toward the listing since its initial filing in 2021.Saudi Aramco is raising its dividend despite lower profits to help thegovernment plug its budget deficit. The total payout for the fourth quarterhas been set at around $31 billion. If it maintains its pace, payout for theyear will be up 66% percent since 2021.

The world's biggest oil exporterprovides much of the Saudi government income via generous dividends.More ahead on DAYBREAK. Asia, this is Bloomberg. We're heading through the morningsession so far. And one group of stocks that is reallystanding out to the downside here are the tech names and ones that are linkedto the chip sector in particular. Here you're seeing that drop comingacross the likes of Advantech's, SK, Hynix, SoftBank.All of these are really seeing quite a bit of weakness.It does track the the Wall Street.

Session because we had a decline comingthrough for Nvidia. So down around maybe perhaps down around5.6%, not maybe, but it was down to the Friday close.A little bit of profit taking still because you had a big run up over thepast five sessions or so and that shot there over the past seven days, you'restill up 10%. And when you take a look at the gains,say, over the past year, you're looking at an upside of 280%.Now, there's a key investor that's really missed out on that, and that'sCathie Wood, because she sold NVIDIA Holdings ahead of that giant rally.We asked the ARK investment flagship.

Innovation ETF, the CEO of that, CathieWood, whether she regrets that decision. We wrote itmost of the way up. But I'll tell you what we did, and thisis as a portfolio manager, it's not one action, but thewhat what it causes in terms of another action.Last year we sold a in the flagship in video and put it into Coinbase.Coinbase, I believe, is up as at least as much as in video, and it is much lesswell understood. The whole crypto movement, the cryptoasset movement. Bitcoin has a new asset class and soforth is not well understood or or.

Completely accepted out there.So we prefer to go where others are not traveling as much.And you know, as we were moving out of in video, we're saying, okay, regulatorsare trying to crush Coinbase here and we were buying it on every dip in videohave to happen to be one of the sources for for that purchase.So it's not just what we do on the sell side.It is what we do on the buy side that that you have to look at.And yes, we do hold it in the more specialized funds, but we've been takingprofits there as well for reasons I just described.Yeah.

And to be fair, you're right.Coinbase is up about 620% since the end of 2022.So that compares with about 530% gain in Nvidia.Is there anything, though, Cathie, in the Nvidia story that would make yourethink the name and want to become more aggressive on it?Yes, the price came down a lot. We would you know the the rate of returnexpectation or a split would a split do it because I know we've never.No, no, no that wouldn't change that. Would you change anything?No, no.Split adjusted then.

Then the price.So, you know, if you look at our portfolios, what we're trying tocapitalize on with a Palantir, for example, are the next stages of this AIrevolution. What we're seeing in the GPU side ofthings is NVIDIA. All praise to Jensen won.I mean, just unbelievable company execution, vision and so forth.And, and it's not over. It's going to last a long time.But there are there are going to be many other companies benefiting from A.I..The productivity lift alone is going to be massive the most massive productivitylift in history, we believe.

And so this A.I.revolution is going to be broad based and is going to benefit a lot ofcompanies in the on the GPU side, of course, we have AMD as competition, butmany people do not understand that there's a lot of other surreptitiouscompetition evolving out there. Each of the Hyperscalers is evolving itsown chip strategy. You have a Tesla that has designed itsown chip for A.I., chip for the specialized, more specialized autonomousdriving opportunity. And I think you're going to see a lot ofcompanies developing more specialized chips.We know that in video, of course, will.

Segment the market as well.So we just think that a lot of the assumptions for in video, you know, thatthis is in various market and it's not alone that those are changing.Ark Investment CEO Cathie Wood, speaking to Bloomberg's Carol Massar.Take a look at some of the stocks that we're watching.When the market opened in Hong Kong and across mainland China in the next hour.And watching, of course, all these chip and related names in video and othertech names fell in the US on Friday and made significant profit taking.We're already seeing that reaction across some of the relevant names inKorea and Japan there as well.

Also retail fashion related sectors,Gap's retail and wholesale peers. Also in focus, a reported fourth quarterearnings that exceeded expectations are watching for some of those suppliers andrelevant names in the Hong Kong and mainland China sessions as well.In the next hour, we'll get more analysis as well.Of course, the curtain falling on China's 2024 NPC session here whileautonomous research from the event underwhelming.That is it for DAYBREAK. Asia markets coverage continues with thestart of trading in Hong Kong.

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