This is DAYBREAK.Asia. We're counting down to Asia's majormarket opens. And of course, we are watching the startof a very, very busy week for Asian central banks, as well as earnings.We are expecting holds across the board when it comes to these central banks,including the likes of New Zealand holding their meetings this week.We're also getting RBA minutes as well as a Fed meeting minutes from theirrecent gatherings as well. Also big week when it comes to earningsare some of the Chinese names will be in focus.Given the heavy discounting, given the.
Geopolitical tensions and theovercapacity claims that are at play there.And of course, semiconductors will be front and center as we get those invideo numbers. Let's get you to April Hong, who's inSingapore for the market opens overall. Yeah, on those and video earnings, it'sinteresting how we're seeing in the options pricing.It seems to suggest that investors not willing to pay that premium in order toparticipate in the rally of the marquee stock, so to speak.And we're seeing potentially that will be a driver this week.But on the stock market is a bit of a.
Mixed bag.We did get a bit of a tailwind from last week after US stocks eked out thosefresh records towards the end of the week, but also that added lift comingthrough for Chinese authorities as they mull those proposed plans for propertyto put a floor under that sector. And indeed, as we hear about how thePBOC is going to come through with funding for bank loans for state ownedcompanies that have been tasked with buying up these unsold homes ofdistressed developers, That is something else that we're watching in the AsiaPacific as well. So for now, we're seeing not that muchmoves on Japanese equities in South.
Korea.A bit of a climb. Dollar yen moving towards that one five,five, six level. Of course, something that we've beenwatching the later part of last week was that unwinding of those Fed rate cutexpectations. Let's play the ball and take a look atwhat we're seeing in Australia today, because we did see the ASX 200, ofcourse, ending the week with declines, a bit of a recovery.And the Aussie also has been in focus. Remember that jobless surge, that dataout of Australia prompting RBA rate cut bets?We'll be keeping a close eye on those.
Minutes later in the week tomorrow.That is, we're seeing the treasuries in the US climbing.Brent, of course, is also in focus after those fresh attacks over the weekend,putting those geopolitical risks out of Ukraine and the Middle East in focusagain. We saw weekly gains sitting just belowthe $84 a barrel handle now, Heidi. Let's bring our next guest who expectsthe market turbulence that we've seen to eventually moderate.Let's bring in Eugene Schorr, who is a macro strategist at State Street GlobalMarkets. Great to have you with us.And I guess that's an interesting view.
Because there's still quite a great dealof uncertainty in terms of how the inflation picture plays out from hereand how central banks react to that. There's certainly no consensus at thispoint in terms of when and if the likes of the Fed will actually start to cut.Right. Right.Definitely. So, you know, given recent events,there's definitely relatively higher turbulence compared to what we've seenin the past few months. But right now, what we have is it's moreof a, to your point, directionless a little bit.Given that investors are pretty much now.
Hugging neutral when it comes to bothflows and holding preferences they have. But I guess the sort of that the anchorof the market comes down to the Fed and a lot of that the race for pricing thatwe've seen. And right now we do see a little bit ofcool when it comes to U.S. data and a little bit of a more betterform of the Fed can actually enter into the year to face the later part of theyear. So that doesn't really help in terms ofanchoring market confidence a little bit.But also on top of that, we also had over the past week more positive newsout of China as well.
So all these factors come to help anchorthat the preferences for for risky assets.So even though, you know, we have turbulence that they were relativelyhigher in recent weeks, we do respect those too to moderate a little bit fromhere on the. When you catch your eye across Asia,where do you see some of the opportunities?At the moment, is it time for sort of another leg up when it comes to Japan?Are you seeing more opportunities in adjacent South Korea, for example, giventhe return of foreign inflows to that market?We're actually a little bit more sort of.
Conservative when it comes to the NorthAsia space. We see, you know, Korea, even though itdoes have the the the tech export benefit for for the overall economy,there is still sort of a little bit concerns around an overall China story.And investors can use Korea more as a risk proxy for its overall risksentiment towards North Asia. So where we like a little bit more isactually on the South Asia side. We do still like India given itsrelatively more stable growth outlook. So yeah, so that's where we stand interms of the overall Asia space. What do you like in India?Because valuations are not cheap at the.
Moment,right? Revolution is not cheap at all, but it'snot as extreme as some of the other marketsthat we've seen. And also to add to my point in terms ofthe overall growth outlook is still quite stable.It is still a relatively domestic driven economy.But also in terms of geopolitics, even though we still have the ongoingelection that's that's currently happening.Looking forward, we still expect more sort of market friendly reforms andpolicies out of the ongoing election.
So that definitely helps in terms of theoverall investor preferences towards the whole India space.But what about China? We've had sort of more incrementalmeasures from policymakers to support the property market.Did they convince you that that makes, you know, a pretty cheap entry pointback into Chinese risk assets? Right.So in terms of the overall China space, what we think is that what authoritieshave done, especially coming out of the Friday announcements, is definitely aright move in the right direction. But I think a lot of the uncertaintystill surrounds that in terms of the.
Funding gap, in terms of how effectivethose policies are, especially towards the lower tier cities where you have abigger disconnect when it comes to the structural imbalance of supply anddemand. And ultimately, what matters is howconsumers or home buyers perceive those measures or whether that changed theirpurchase preferences. So we're still a little bitconservative. What we're seeing is definitely that theright moves. But I think, you know, more can beexpected and more support is likely to be needed to have a more paternal rolewhen it comes to sentiment toward China.
Eugene, how much volatility are youexpecting when it comes to geopolitics? Obviously, the Middle East remains asource of tension, but are also heading pretty quickly into the Novemberelections. We've already seen tariffs beingutilised really by both sides. Right, Right.So the Middle East geopolitical situation is definitely ongoing.We do see commodity prices moderating a little bit in recent weeks.Of course, as long as there's this ongoing uncertainties in Ukraine orsurrounding the Gaza Strip, there is definitely elevated risk that thingscould hit it.
But when it comes to the US-Chinarelations, you know, heading into November election, as we approach that,of course, to your point at your political risk is likely to splayelevated. But I think for the Chinese side, thereis a certain understanding when it comes to a lot of these measures or rhetoricsheading into the election is in a way unavoidable.So, you know, on the flip side, we do have a lot more higher levelcommunications and meetings that we've seen in the past few months, definitelya lot more compared to the past few years.So what that helps is definitely sort of.
Putting guardrails or putting a floor onthe relationship. So there is definitely challenges goingforward heading into a November election and there's definitely a lot ofuncertainty surrounding that. But I think both sides, at least at themoment, doesn't want to make things too much worse from what we were from a fewyears ago. So that's that's pretty much where weare at the moment. Eating Chow, who's a macro strategist atState Street Global Markets with us. More to come here on DAYBREAK.Asia. This is Bloomberg.
From our studios in New York and SanFrancisco, our expert hosts of the data and analysis of other companies, youknow, and the startups to watch, plus the interviews you don't want to miss.Watch Caroline Hyde and Ludlow on Bloomberg Technology.The only daily business show dedicated to tech right in the middle of thetrading action every weekday only on Bloomberg Television.Context changes everything. Earnings season is here.This is a get out the popcorn moment across the board, just pummeling ofexpectations matter. That's really clear.Bloomberg is first to break the numbers.
Folks, we've got microsoft bell earningscrossing the wire. Alphabet, wow.Coming in way above expectations. It's driving in the opposite direction.And that's still to come with the smartest insights.It's just kind of damned if they do and damned if they don't.Is this their iPhone moment? I view this is Operation Kick the can toAugust. Continuing coverage on Bloomberg Contextchanges everything. Rescue teams in Iran are searching forPresident Ebrahim Raisi after the helicopter he was travelling in crashed.Siberia said dense fog in the region is.
Making conditions extremely difficult.Moments brain. Bloomberg's Michael Hayden.So what do we know so far? One of the foreign minister was also onthat same helicopter. Yeah.How do you know There were some there were also some regional officials withthem. It was a party of three helicopters.Initially, they said that the the president's helicopter had a hardlanding. Now it looks like they might be a bitmore serious, that it potentially was a crash.I mean, this is a mountainous region is.
The pictures we have is showing it'sdense fog. And there's actually a a Turkish dronethat's that's looking for and trying to help in the search search efforts.And it's actually broadcasting what is purportedly broadcasting on Twitter.And it just shows how dense the cloud is that It's very, very difficult to seeanything down there. So it's going to take some time forrescuers to get into the site. So that's all we've sort of got at thisstage. I mean, he was he was returning from theneighboring state of Azerbaijan that open the president visited by John, andthe president of Iran had opened a dam.
On the border.And then he was flying back from that when this incident accidentreportedly occurred. So this is a man who we've heard fromthe supreme leader, and this is a man who is widely seen as his successor.Yeah. And this is, I think, the probably themost important political issue, because at the end of the day, the supremeleader Ayatollah is he runs Iran. He's he's a decisive voice when it comesto politics, etc.. But Raisi was said to be groomed to takeover The role of the supreme leader is 85 years old.He's in his early sixties.
So it was sort of a natural next step.Now, if the worst has happened and he's died in this crash or something likethat, it potentially throws throes succession plans into into doubt.But still, at this stage, you know, we're kind of speculating because wereally don't know what the what the situation is on the ground there.But, yes, he's certainly seen as the as a supreme leader's man.And he's been very tough. He's got a history of a hardlineapproach when two years ago, when there was the protests in Iran, when a girlwas died in custody after being arrested by the morality police, there was aquite a severe crackdown there.
And historically, he's been involved inquite a few crackdowns as well. So, yes, he's a definite hardlinerthere. And Iran's opponents, as well aspartners, would be watching this very closely, particularly when it comes toIsrael. Definitely.Definitely. I mean, President Biden, the White Househas said he's been briefed on it. Israel obviously would also be lookingat it. I mean, it comes at such a such aserious time in in the region, given that Iran just undertook its firstbarrage against Israel as well, even.
Though most of those rockets were shotdown. We have, you know, the Gaza war that'sstill unfolding. And and we have Netanyahu as well, who'shaving some problems in his own war cabinet.So what it sort of shows is when you brush aside the war, we sort ofunderstand that even politically, what was the side politically, the MiddleEast is a very unstable place. Unstable seems to be a faircharacterization of what we're seeing with Netanyahu's war cabinet.Right. There's been sort of, you know, threatsand a lot of dramatic positions being.
Taken.But is is his is his own role in jeopardy at the end?My understanding is no. And that's sort of what our reporting isshowing as well, is that Benny Gantz, the opposition leader, I mean, Israelhas its normal cabinet, but also has a war cabinet that's prosecuting thecampaign against Hamas, and that involves Netanyahu, the defenseminister. And then Benny Gantz is from theopposition. And Israel traditionally does this afterwhen it goes to war, is the opposition in the government unite?And that has worked.
That worked very, very well initiallythat triumvirate. But it's been breaking down from allsides. They've been saying that in recent weekspeople are barely speaking to each other.Glad the defense minister came out last week with demands that Netanyahuactually come up with a plan for Gaza after the after the war.And now you've had guards. He's basically given Netanyahu anultimatum of several things he needs to see or plans for which he needs to seethe next couple of weeks or he'll withdraw.Now, that wouldn't be great for Israel,.
But Netanyahu holds a majority in theKnesset, and that just sort of started this summer period of parliament.But basically after about July, if his government lasts until then, it'sunlikely that any elections that happen until next year.What makes Michael hate that with the latest across that region and you can,of course, get the latest on what's happening in the Middle East and theother stories you need to know in this morning's edition of DAYBREAK Time.LOL, subscribers can find that at Daily Go.It's also available on the mobile in the Bloomberg Anywhere app by the big momentfor global politics certainly letting.
Ter is that to be sworn in as Taiwan'snext president in a few hours time. His inauguration address will be closelywatched for signs of how he plans to navigate the island's complexrelationship with the US and china. Our chief North Asia correspondent DavidAngle is in Taipei and joins us now. And of course, the key focus is how headdresses the. The one China issue.We've not heard a great deal so far from.Yeah, that's right. I mean, he will be sworn in within thenext hour at 9:00. The inauguration ceremonies are going tobegin outside the presidential office or.
It's actually the swearing in willhappen inside. He and his vice president candidate, itwas going to be shall be Kim, of course, more recently the Taiwan'srepresentative in Washington, D.C. So she comes with a lot of foreignexperience and credentials. So it will be a continuity candidacy andpresidency with lighting, taking over from tying when whom he was her vicepresident. And again, he know he won the election,but it was a three horse race that kind of divided up by three ways.And he did not win a very strong mandate at all.He got 40% of the vote, the KMT of the.
Candidate.He got 33.5%. And then there was the wild cardcandidate, Kobinger of the upstart TPP that won 26 and a half percent.But more interestingly, and maybe more importantly, in the early days of thiscandidate or of this administration, will be the divide in the legislativeyuan where they camped. The opposition took one more seat thanthe ruling DPP. So we'll talk about that in a littlebit. The big issue, obviously, as you justalluded to, Heidi, is going to be the cross-strait relations.He's going to give a speech today that.
Will likely talk about reaffirming thestatus quo in cross-strait relations with China at a time, obviously, thatBeijing is watching this very closely. They have labeled lighting to a numberof different things, including instigator of war, a dangerousseparatist. So they'll be watching his tone and hisword today. We've heard that he's likely to keep,you know, on about being, you know, a continuity candidate, but bringingstability to policy here in Taiwan. And there will be a number of guests,but it's more like the who's who of world leaders, because, look, it's no,no doubt that this the the pool of.
Diplomatic relations and those who willrecognize Taiwan as a sovereign state is dwindling.Actually, since 2016, Taiwan lost five different Latin American nations toBeijing, including Panama, Dominican Republic, El Salvador, Nicaragua,Honduras and here in the Asia Pacific, most recently January.They lost Nauru. In 2019, they lost Solomon Islands.So that pool of diplomatic allies has shrunk quite a bit.So the list of dignitaries is going to be here today includes the King ofEswatini as formerly Swaziland, the King Mswati, also the president of Paraguay,the prime minister of Belize, the.
President of the Pacific island ofPalau, the president of Marshall Islands, the Prime Minister of Tuvalu,and a few others, including representatives, an Archbishop from theVatican and a few U.S. guests, including the former Biden WhiteHouse economic adviser Brian Deese, the former deputy secretary of state underthe George W Bush administration. Richard Armitage, as well as the chairof the de facto embassy here, the American Institute of Taiwan, LauraRosenberger. So again, it's not the who's who.It's those who is coming here. Again, as Taiwan under DPP, maintains astatus quo relationship.
At least that's what they're trying tomaintain with Beijing and not necessarily rattled the sabers.But again, they are not engaging necessarily because they have not reallyascribed to the 1992 consensus, which essentially says we can agree that thereis one China, but we can disagree on what the definition of what one Chinais. So it'll be a very interesting day forsure to see lighting to this tone in his inauguration after his inauguration andtone of his speech. Our chief North Asia correspondent,Stephen Engle. Then we'll bring you, of course, thatinauguration lashing as inauguration as.
Taiwan's 14th president as happens.We get more analysis to with our guests in Taipei at those times on yourscreens. Other stories that we are followingtoday, another big political story that we're watching, China investigating itsminister for agriculture and rural affairs for what it calls seriousviolations of the law. Tolerance in is the latest high levelgovernment official to be investigated for alleged wrongdoing.It was appointed agriculture minister in December 2020.President Xi Jinping has spearheaded a sweeping anti-corruption campaign since2012, ensnaring dozens of Communist.
Party officials.Saudi Arabian state media says King Salman is suffering from a lunginflammation. The official Saudi press agency says the88 year old monarch will receive antibiotics at the palace in Jeddahafter developing a high fever and joint pain.King Salman has led Saudi Arabia since 2015.The illness comes with his son, Crown Prince Mohammed bin Salman, expected totravel to Japan this week. More to come here on DAYBREAK.Asia. This is Bloomberg.
Do you feel like this age of abundanceover the last few years of just how much was being made for my personal taste?I am thrilled at what I get to find every night if I have time to look forsomething. So I personally don't think too much wasmade. I think the customer will tell us whenthere's too much made and they won't watch things.And I think part of the misalignment I talked about before is imagine if thingsdidn't get picked up or movies didn't get made that people didn't watch or goto see. That's how it used to be.The customer decided,.
I do think there's going to be less madein the middle price range. I think there's going to be more made inthe higher price range because when you get to global events like Barbie orOppenheimer or, you know, Super Mario Brothers, it's it's worth the investmentand it's clear that the audience is there and they just need to be givenwhat they want. The middlewhich ends up, you know, quickly on one of the services in a way that we'rewatching movies that we don't know how they got made or when they got made andall of that. I think that that will probably becurated better, and I hope there's more.
Inexpensive things that give more peoplethe chance to express themselves and have their workseen. Take a look at how U.S.Treasuries are trading at the moment. And of course, it was a big week when itcomes to Fed expectations and a lot of pullback when it comes to these concernsthat the easing will come sort of later rather than as early as markets had beenbuilding. We've seen Barclays ditching a call toshort ten year treasuries, which has been one of the kind of recentdevelopments that we've been following. Some of the biggest bond market bears onWall Street are ditching that.
Recommendation to bet against ten yearU.S. treasuries.They say that the shift in positioning is happening after the recent rally islikely to curb any rise in yields. We've already seen this kind of bondrally build pretty quickly on inflation euphoria, but some of that, at leastglobally for other government debt, may actually face a bit more of a challenge.We have had global government debt seeing its best month of the year.Of course, the inflation print from the US showing a bit of an ebbing for thefirst time in six months, even if perhaps the details show that thesustained flight against inflation might.
Be a little bit trickier for the Fedgoing forward. Bloomberg Opinion columnist and QueensCollege Cambridge president Mohamed El-Erian says the Fed's delay of ratecuts to temper inflation runs the risk of falling behind the curve.He says it's not the real economy. It is the real economy, I should say,not inflation that will ultimately force the Fed to pivot.I think the big issue right now is that we as a profession and we as a marketare too influenced by what happened off the global financial crisis.We believe somehow still in the back of my mind that low interest rates, verylow interest rates are the norm, not the.
Exception.We believe that inflation is not an issue.So look, look what has happened to the Fed.The Fed pivoted on the basis of data. It was the opposite of the pivot theydid in December when they pivoted on the on base.And now they have to do a U-turn as they're doing the U-turn and say hi forlonger. The market is going the other way.So you saw what happened to the two, You saw what happened to the ten year.And then there are two really problematic issues that we don't talkenough.
How sensitive are the stubborncomponents of inflation to interest rates?They're not very sensitive. That's probably number one.Problem number two. What indications are we getting of theeconomy is slowly weakening? So it raises the issue that once again,the Fed is going to have to pivot this time, not on the basis of the inflationnumbers, but on the pieces of the real economy numbers.It will pivot yet again. And then there's the big issue that Iknow no one wants to discuss. Go on.And I insist I understand that fully.
Is is the inflation target the righttarget? We all talk about wanting to go back to2%. Every single quote you had this morningassumes that 2% is the right inflation target, 2% totally arbitrary.But I understand why no one wants to talk about this.But on this. But we should all realize that if we arepursuing the wrong inflation target, the risk of a mistake and that mistake wouldmean sacrificing growth unnecessarily. The risk of that mistake is high,especially when the low income people are most at risk.Bloomberg opinion columnist and Queens.
College Cambridge president MohamedEl-Erian there. Take a look at how futures in Europe areopening up. We are seeing a pretty solid set up herein Asia for the start of the session over in Europe.And of course, we have had a little bit of that pullback expected potentiallywhen it comes to certainly UK gilts and some of the European government bondsthat we've seen rallying alongside treasuries.This is a picture when it comes to the potential recovery that we see ineuropean stocks. Stoxx 50 futures, a bunch of that, aquarter of 1%, a muted upside for german.
Dax futures there as well.We did have a lower finish for the european session on Friday.A little bit of a pullback in Wall Street, but still, of course, certainmarkets notching record highs there. The commentary from central bankofficials and Fed officials sort of curbing some of that rate cut optimismthere. But those muted losses looking likewe'll be back to gains when it comes to the start of trading in Europe in thoserate sensitive sectors, the likes of utilities and real estate in Europecoming under some pressure, but some outperformance.Interestingly, when it comes to consumer.
As well as banks, we had the Richemont,the luxury company, of course, jumping after some leadership changes there.The ECB executive board member Isabel Schnabel.So warning that back to back rate cuts in June, July that the caution is morelikely to be needed. So a little bit of a caution therereturning to the European markets as well.More to come here on DAYBREAK. Asia.This is Bloomberg. We are seeing early Asian marketstrading broadly higher at the moment. Let's get some details now with AvrilHong in Singapore.
Overall,Heidi, we're seeing that tailwind from how US stocks eked out those freshrecords last week coming through in the Asia-Pacific session.Of course, this is driven by the corporate earnings resilience.And the big one we're going to be watching out for this week is and video,although something worth noting here is how in the options market, it seems tosuggest that that FOMO trade might be easing.Now, the other tailwind for Asia stocks has been, as of last week, the optimismsurrounding authorities potentially doing more for the real estate market.And indeed, that's what we got at the.
End of last week with Chineseauthorities scrapping the mortgage law, lowering the down payment ratio forindividual home buyers, and of course, the PBOC funding plan for bank loansthat will go towards these state owned enterprises and how they're likely tokind of mop up the excess inventory and the unsold homes.So those are the drivers for the markets in the Asia Pacific.And as you saw there, there was a lot of green on the screen.But something else that's worth noting as well is how we've seen even amid thescrapping of the mortgage flow, the reality is is already really, reallylow.
That is what we're seeing on the ground,Heidi. And, you know, as you mentioned,overall, part of the sort of enthusiasm we're seeing more support measures outof Beijing. Is there some concern that thesemeasures are a little bit too little, too late?I think there are some parts of the market that also questioning not justwhether these measures are coming in time, but also the size and how theywill be implemented. If you think about how some estimatesput the amount that will be needed in terms of vacant homes and to kind ofclear out the excess inventory, it's.
Talking about multiple trillions of youin this facility that the PBOC is pushing through.It is only going to, I think, help with about ¥500 billion.So there is a gap in that regard. And how will this all be implemented?That is another key concern. But in the meantime, we've really seenhow stock market participants have been very exuberant, as you say, enthusiasticabout these support measures of late in these trading volumes as of late lastweek really spiked, Heidi. A spring in Hong Kong as a partner andchief economist at GRO Investment Group. How always great to chat with you.And in particularly at a time where.
There's increasing scrutiny after almostthree years of this property sector downturn just dragging on, as Aprilalluded to the measures being proposed, the package that's been sort ofdiscussed would only address a fraction, a mere fraction of the properties thatare in question here. So does this make a meaningfuldifference to you in terms of boosting confidence?Yeah, I think the package the market was looking for asubstantially larger package be if you want to clear out the existinginventory, which means that, you know, in a normal property cycle it takesabout 18 months, right, for one.
Inventory cycle.So now the market has about two years, probably even more than that ofinventory outstanding in the market. So if you want to go from, you know, 25months to 18 months, right. So you need probably about 7 to ¥8trillion worth of money.So I think, you know, with the special long dated Treasury bonds and those, youknow, some of the reasons stimulus measure, including the rate discount, Ithink it amounts to about less than ¥2 trillion.So is a far cry from 7 to 8 you we're looking for.Yeah.
So you know is substantially a less thanwhat the market was looking for. But then at the same time, you know,this rally when it started, you know, since the the bottom just before theChinese New Year to today, you know, it hasn't got thatmuch to do with the property package. Right.So the market was rallying before this announcement.So I would say that, you know, even though the package is smaller thanexpected, that, you know, if it doesn't work, then, you know, there will be morestimulus coming on our way. So, yeah, it's interesting because ourquestion of the day is, you know, how.
Far will Chinese equities be lifted bythese property measures you're saying? What was kind of an irrelevant questionbecause this is not what the rally has been driven by so far.So if investors are sort of willing to announce that, ignore the kind of, youknow, death by a thousand cuts of what's happening with these beleagueredproperty markets, what are the actual property forces, the the positiveforces, I should say, that are driving, you know, valuations and potentiallypotentially a fundamental rerating of Chinese stocks?Yeah, Well, I think everyone knows that the Chinese market is very cheap.Right?.
So if you look at the recent numbers,it's not the property that is driving the economic recovery.It's really the manufacturing sector and and the export sector that is drivingit. So and because of that, you know, peoplewas focusing on the Chinese over overinvestment in some of the sectors,overcapacity, etcetera, etcetera. But it's really, you know, thismanufacturing sector, infrastructure spending that is driving this recovery.But then at the same time, you know, the consumer is still lagging.Right. So even though, you know, we're we'reseeing encouraging consumption numbers,.
But, you know, the consumer is still theweaker part of the economy. So if you look at the stimulus packageannounced last Friday, so it's close to ¥2 trillion worth of stimulus.And if you if you think of the property sector being part of the consumersector, you know, which is a very important part of Chinese consumption.Right. So when the Chinese household buy, buy ahouse, then, you know, they tend to buy all new furniture and other new cars,etc., etc.. So it's a very important consumptiondriver. So if you think of the ¥2 trillion worthof property stimulus as a consumption.
Stimulus rather than a stimulus for theproperty sector, then this sort of makes sense, right?So on one hand, you have manufacturing that is, you know, going all banana andthen at the same time, you know, you know, now you're trying to divert someof your stimulus back to the consumer sector as trying to help the weaker partof the economy and also to address some of the international concerns aboutovercapacity. And that way you actually get a morebalanced growth going forward, you know, rather than, you know, you only havingthe manufacturing sector and the infrastructure sector that is drivingit.
You know how I always enjoy reading youryour market views in your notes because they're quite philosophical.Right. You've talked a lot about the kind ofdualism which I guess you can extrapolate to talk about what's drivingChinese risk assets. Where do geopolitics fit into this?Because we've seen tariffs being maneuvered by really both sides in termsof now a kind of mainstream toolkit going into the election.Right. Does that have an impact meaningfully onChina? I thinkright now, you know, a lot of.
International attention is being focusedon the Chinese overcapacity issue. Right.Know, because if you look at the Chinese.TV sector. In the past two years, China had gonefrom a car importer into a sort of one of the biggestexporter of the world. Right?So it's cutting everybody else's lunch. So, you know, so unavoidable here.You know, you're getting criticism from me, from especially from Europe and alsofrom the US. And therefore, you know, you have allthis tariff negotiation going on.
So inevitably, if China doesn't doanything, then, you know, it would it will sort of induce even more criticismon, you know, how the Chinese government is managing its economy.So right now, you know, we're trying to make a tentative step to address thisproblem by stimulating the the consumer sector and the property sector while,you know, you know, trying to rebalance the economy.So, you know, it's it's still early days, you know, because we all knowthat, you know, 2 trillion is far from being able to solve it.But then at the same time, you also have to address some of your trading partnerscriticism about overcapacity.
So it's a balancing act right now.It's it's also a question of what can China do, right?Because things like EVs, that's right there in front and center for for theeconomic revival blueprint. That's right.Are there many options either in the short term or the long term?I guess long term, they can, you know, invest and produce more offshore alaJapan in the eighties and nineties. That's right.That's right. I mean, right now, you know, all theEVs, you're seeing a lot of Chinese manufacturers are setting up shops in inSoutheast Asia and also in Mexico as.
Well.Right. So many of the auto parts now isactually, you know, for the US market, for the North American market isactually being manufactured in Mexico. Right.So it's a very dramatic change from a couple of years ago.And also, you know, if you look at the economy right now, the manufacturingsector is clearly making money. Export sector is making money.But then I think the property sector, if you look at the rental yield in many ofthe cities, is well less than 2%. Right.So the ultra long dated Treasury bond is.
Yielding at about 2.2, 2.3%.So, you know, is actually even lower than the risk free rate in the market.So that is telling you that, you know, if you continue to sink even more moneyinto the property sector, you're probably not going to get a really goodresult. You're I would rather see the governmentputting money in the economy that is still working, that is to generatedecent return. That is the manufacturing sector andalso the export sector. How long?Always great to chat with you, Partner in chief economist, Agro InvestmentGroup.
And speaking of EVs, China has startedan anti-dumping investigation into imported pilgrim plastic from the EU,US, Taiwan and Japan. This comes as a state media affiliatedaccount earlier warned that Beijing was prepared to take countermeasures if theEuropean Union continued its anti-subsidy investigations into Chinesecompanies. The Bloc started a trade investigationinto Chinese made EVs, if you recall, earlier this year.Well, from semis to solar panels, stocks in some of the world's fastest growingindustries risk falling prey to another round of trade tensions between the USand China.
Our Asia stocks reporter Sammy Chowjoins us now to discuss the winners and losers from these tariffs.So how are we seeing investorsnavigating this landscape who are seen as the losers and the winners?Well, Heidi, the new tariffs were anticipated in the market, but what wasnot anticipated and what is really in focus is whether that is the fact thatthis might not be the end of it, because Biden and Trump are jostling to show tovoters who can be tougher on China. And so this might not be the end of thenew tariffs, but we might see more of them coming.And the whole focus here is whether.
Europe will follow suit, because thethree key, the new exports from China, 45% of them are consumed by Europe.Those are namely solar cells, EVs and lithium ion batteries.And that compared to the US, which consumes just 0.2% of the solar cellsand imports just 1% of the Chinese EVs. It's a massive difference there.So traders are going to be watching the moves from Europe coming there andespecially the EV space. We have seen BYD and B Audi's in focuswith although it again as I said just 1% is going to the US again we know the USis aware that it is building factories in Mexico that could perhaps be used tocircumvent those tariffs.
So that's in focus when it comes to thebatteries. Seattle is is in focus and especiallywith the SS batteries that they produce, it is possible that they might actuallyhave some upside because the tariffs for the US batteries actually takes effectin 2026. So there could be more purchases beforethat. When it comes to the medical equipmentthat came as a surprise from 0% to hiking to 50% suddenly, and thatactually drove and boosted a lot of the Malaysian glove makers.So rubber glove makers shares high last week.And along with the Kumho Petrochemical,.
That's a Korean company that produceslatex for these rubber gloves. So these are very interesting sectorsthat we're watching, especially when it comes to chips.There could be some more volatility in SMI, See, And solar, we are watching.Trina is Trina solar and long E but analysts are saying that there aren'tgoing to be a lot of a lot of volatility there.What else are you watching and certainly busy week are both from central banks onthe earnings front as well. The key sector that we're watching is,of course, property with the volley of newnew measures that's coming from the.
Government, the easing of the mortgagerules and the PBOC readying more of these measures.We're going to see how the equity reacts to this today, especially on Friday.We've seen the equity gauge of developers jumping almost 10%.So we'll be seeing as the market parses this news, how it's going to react tothis. We're also watching some of the travelstocks with Trip.com reporting its earnings on Tuesday.We'll be seeing how the market reacts to this mentality of first travel and thenspend it in China. Asia, stocks are put aside each other.More to come here on DAYBREAK.
Asia.This is Bloomberg. China's navy makers are taking longer topay their bills is the latest sign of stress in the increasingly cutthroatauto market. Let's bring in our age of transportreporter Linda, Lou and Linda. Of course, we're expecting a sell me liauto as well as xpeng. Tell us what we're expecting in terms ofthese numbers and why are we seeing the trend of a delayed payments to suppliersfor the upcoming earnings. With the chinese ev makers li auto todayand tomorrow, we're really watching for how well the gross margins are holdingup.
Now the China EV market has entered anew phase of price cuts with Tesla and BYD taking the lead.So far, Li Auto's gross margin seems to be holding up okay.Analysts are expecting it to be so around 20%.And also profit growth for this quarter. For Xpeng, the picture seems a bit moremixed as revenue is projected to grow, but still making a loss hasn't beenprofitable since it was founded. But for this quarter, its losses expectit to narrow. And if this wider trend of Chinese TVmakers taking longer to pay their pay bills and payables is really showing thepressure from this price war that's.
Eating into these producers bottomlines, really trying to now they're really trying to make their cash stretchand manage their liquidity. Yeah, it's interesting.If you take a look at the numbers, NIO taking around 295 days to clear itsreceipts payable, most of which is owed to suppliers versus 197 days in 2021.So that was 2023 versus 2021. How much further pressure do we see?And I guess what does this indicate for the wider industry and what does it dofor the water industry? The pressure is expected to persist.To continue to persist because there's really no end in sight for this pricewar we're seeing in the Chinese EV.
Market.And with the slowing growth for EVs in China and globally and the uncertaineconomic outlook in China, the competition is only going to get morefierce in China. And that means the industry is reallyunder this cash and liquidity pressure. Analysts we've spoken to said that allof these will be passed the hound from the EV makers to their suppliers andthen these bigger suppliers or parts that try to really stretch out theirpayments onto their own suppliers. So it's kind of this flow on effectwhere the smaller players are probably going to take a big hit and theindustry's consolidation will probably.
Speed up.Now, Asia transport reporter Linda Liu there.Well, Australian casino operator Star Entertainment says it's received inboundinterest from a number of external parties but has not had any substantivetalks. Let's bring in our global businessreporter, Angus Butlin. You know, this is a business that's beenunder pressure for quite some time. What's the latest in terms of potentialexternal interest here? That's right, Heidi.Star essentially has been forced to disclose that several suitors haveapproached it about possible deals after.
A newspaper report this morning thatHard Rock was leading a consortium that had madealready made a takeover proposal to star.So effectively, Star is in play as a takeover target at the moment.Hard Rock's proposal is still on details at the moment,but according to the report, it had proposed injecting fresh capital intostar, rebranding the company and critically splitting stars casinos inSydney and in Queensland off its properties.So it's a sort of it's a it's a break up play.Angus, what are the options when it.
Comes to what's available to Starr atthe moment? It's a company under huge amount ofpressure. You might remember in 2002,an inquiry in Sydney saying it was unsuitable to run the casino thereuncovered all sorts of of corporate wrongdoing, lax anti-money launderingcontrols. It had allowed Chinese companies toflout Chinese capital controls. It wasn't treating problem gamblers wellenough. And since then it's been operating undera government caretaker review like Government Monitor in Sydney, which isits flagship property.
Now it's in the middle of a secondinquiry and that will determine in July whether it will hold on to its casinolicence at all. So with all that in mind, it's not clearwhat a buyer would end up getting if it got hold of store.So it's really sort of approaching star. It is at its lowest ebb, if you like,its future futures hanging in the balance and it's almost a carbon copy ofwhat happened to Star's main rival here, Crown Resorts.It went through the same kind of inquiries and all this casinos.It was bought by Blackstone Inc, and this year it got its licence back inMelbourne.
So a similar kind of trajectory forStar. There's also been a number of hearings,investigations, probes, and a lot of which have revealed really quiteextraordinary things have been going on when it comes to Starr's leadership andand some of the strategies there. What's sort of the takeaway there?And I suppose are we through all of that in terms of has all the dirty laundryalready been aired and that there is a chance for kind of a new leaf to beturned with potentially new investors, new ownership?I think that that's all to be decided. Last week's story itself told thecurrent inquiry that it didn't think it.
Was suitable to run this casino.He argued for this current caretaker arrangement to be extended.And you're right, Heidi, You seen just remarkable testimony to this inquiry.We saw the chief executive and chairman essentially plotting against thegovernment appointed monitor inside the company, and they've subsequentlyresigned. So there's a there's a leadership crisisin store. There's, you know, an operationalcrisis. It's not clear whether it's fit to runthe casino. And that's not going to be cleared upuntil, you know, end of July when we get.
That report back from the inquiry.And also, we have, you know, the Queensland casinos in the balance aswell. They're waiting, obviously to see whatthe outcome is in Sydney before they make a decision on their caretakerarrangements. So with all that starts, the shares thatyou would expect essentially collapsed, they're down 60% in the last 12 months.Company is worth now less than 1 billion USD.Angus with our global business report on, we are expecting more developmentspotentially throughout the course of the day.We'll bring the latest to it when we get.
Them.But we do have more ahead here on DAYBREAK Asia.This is Bloomberg.
