Bloomberg Damage of day: Asia 02/15/2024

This is DAYBREAK.Asia. We're counting down to Asia's majormarket opens. And, of course, a lot to contend with.Despite this, of course, still being quite a holiday in trading.We've got Japan. Those numbers are quite surprising.Slipping into recession certainly clouds the way forward for the Bank of Japan,particularly with how strong the yen has been.And of course, we're also kind of looking across the the continuedpercolation of Fed messaging and how that sort of side of things continues toaffect markets.

We're seeing a bit more of an uplifttoday. Yeah, Japan's an interesting one,though, isn't it? Those numbers most unexpected.And we got inflation as well. So was this stagflation or were youreally doing violence to the word there? A lot of earnings out of Australia aswell. Yeah.And some of those earnings, you know, despite being pretty good news storiesbeing clouded by the broader kind of macro outlook and some of these concernsover the Fed's trajectory. Right.But let's get you straight to the start.

Of trading in Japan.Before ahead of that, we do have some more breaking numbers out of Singaporeat the moment. We're seeing GDP numbers for Singaporecoming in at 1.2%. This is, again, slightly softer on theheadline as well, 1.2%, seasonally adjusted quarter on quarter expectationswere four 1.4% and also certainly easing quite significantly from the 1.7% in theprior reading year on year. The headline GDP number at 2.2%, that isa miss. On expectations of two and a half percent, these, I should point out, of the fourth quarter final readings and quitea pullback.

I should mention from the previousperiod that we've seen as well the annual GDP year on year, they're comingin at 1.1% that was for the full year of 2023, at least in line withexpectations, but also a little bit of a softening there.And we have seen some signs of sort of weakness over the past year.There's been some hope from the Prime Minister that we've heard recently,hoping that some of the strength of the recovery across industries likeconstruction and retail services will kind of help support the broadereconomic recovery there. But let's get you to how we're seeingtrading in Japan just in the first few.

Minutes or so of trading.This as we continue to process the really the data showing that Japan'seconomy unexpectedly contracted for a second quarter at the end of 2023, That,of course, meaning that it slipped into recession.This is the first two straight quarters of of of slippage that we've seen since2018. And that really does create somequestions as to how the Bank of Japan times that potential first rateincrease, the end of negative rates. And that's also been complicated by theweakness that we've seen in the yen as well.Right.

Do it early on.We might see a little bit more support for the yen, the GDP shrinking at anannualized pace of 4/10 of a percent in the last three months.We had that revised three and a half per cent contraction than the previousquarter. So also I should mention Japan's economythen slipped into the fourth largest in the world, just behind Germany.Now, all that being said, we are still seeing some pretty reasonable gainsthere for the Nikkei, 2 to 5, up about 7/10 of 1%.We're still a couple of percent away from getting to that December 1989 high.So we probably won't be hitting that in.

This session at least and early andholding pretty steady at that 150 level. Taking a look at Korea as well, because,of course, this has in a lot of ways been the stronger stock story, almostmore than the rally that we've seen, of course, in Japan.And that's really been on account of the turnaround, like going from Asia's worstperforming market to really the best on a lot of these hopes on regulatoryreforms, local regulatory reforms and driven by inflows from overseasinvestors. The equity benchmark for Korea has nowbecome Asia's best performing gauge. This month, more than $4 billion oflocal shares both being scooped up by.

Global investors in Korea.There's plenty going on in markets today.Let's take a look at how we're tracking here in Australia.The broader ASX better by about 9/10 of 1% right now.A real mixed bag, though, just to give you a couple of examples.The world's biggest mining company, BHP, not having a great day off by at onepoint a quarter of a cent right now. This is after a posting, a two and ahalf billion dollar impairment charge on its nickel assets.We have of course seen a little bit of weakness for nickel prices.A couple of other big movers though,.

Wesfarmers Origin both reporting verystrong earnings reports. So they're both higher in the earlygoing. You see the Aussie dollar slipping alittle off the pace, $0.65 us at the moment.Of course, at the bottom of the hour we're going to be bringing you jobs dataout of Australia. If it hits 4%, that would equal a twoyear high. Looking at crude prices as well, thatbacked off a little. US crude inventories have risen by a bitmore than expected 12 million barrels. That's the most since November.Standard Chartered, meanwhile, has been.

Saying fundamentals point to Brentexceeding $90 a barrel on tightening supply and geopolitical risk.So take a look at US treasuries as well. Not a lot of movement, a slight declinein yields. We didn't hear of us from AustanGoolsbee a bit earlier from the Chicago Fed.Talking about those CPI numbers that we saw out of the US a bit earlier.He said, look, slightly higher inflation data for a few months.Don't worry about it. That is still consistent with thecentral bank's goal. All right.Let's get to our next guest.

Vasu Menon is managing director ofinvestment strategy at Ocbc Bank. So I want to start us off in Japan if wecan. We've just had those ratherdisappointing GDP numbers. I know you're quite bullish on the Japanrally. A lot of it's been fueled by the weakyen. Do you think that the rally in Japanesestocks has still got some gas in the tank?We think there is more upside for the Japanese stock market.In fact, the way the Nikkei is responding to the GDP numbers thismorning, it's up.

It seems to be a case of bad news beinggood news. You know, the weaker than expectedeconomy has given rise to hopes that perhaps the Bank of Japan will notincrease interest rates in any significant way this year.Even if it does once or twice, it will not do anything as aggressive as the Feddid. And that is seen as a positive, atailwind for Japanese equities. But more than that, I think you havesignificant corporate governance reforms has taken place in Japan over the lastseveral years. Of course, a weaker yen, the easiermonetary policy, the decent corporate.

Earnings, the undemanding valuations putall that together still makes the case for more upside for Japanese equities,which are relatively unknown compared to U.S.equities. Just want to get a little more on yourthoughts about the next move for the Bank of Japan, because that weak GDPread. To what degree has that thrown a spannerin the works for the normalization of policy in March or April?Well, you know, it is still possible that the Bank of Japan could liftinterest rates in April, that our best case scenario at this juncture.You know, I don't think that derails I.

Don't think the latest GDP numbersderail that expectations. But don't expect the BOJ to do what theFed and the ECB and beauty did. In other words, continue to increaseinterest rates in a constructive fashion.I think they will hike rates once or they will adjust the rates once anormalized policy for a limited extent and then wait and watch because Japanhas been mired in deflation for a long time and I think the BOJ will be carefulin the way it mortal threat cautiously. And it's quite clear that, you know, thedeputy governor of the Bank of Japan said recently, in fact, last week hesaid that, you know, monetary policy.

Will remain accommodative even if theynormalize policy, implying that rate hikes will not be significant, even ifthey do happen any time soon. Yeah, but what about China?As we start to see the Hong Kong back online, China coming back online as wellafter the Lunar New Year holidays? Do you see prospects for more stimulusand policymakers actually delivering what investors have been asking for?Well, that's a tall order. I mean, the policymakers have beenannouncing piecemeal stimulus measures. It's quite clear that sitting being isgetting more involved, you know, in the economic management of the country.And, you know, you have the NPC that's.

Coming up fairly soon.That means that, you know, probably China is going to have more stimulus.Down the road, you'll see more stimulus on the cuts.But the big question is whether they'll do the bazooka, the big bang.Something very significant that will provide a backstop, but a floor on theailing property market. I think that's critical because withoutthe property market stabilizing, I think it's hard to see the Chinese stockmarket rebound in a sustainable, significant fashion.So that's a positive watch. What about the U.S.at the moment?.

Do you think valuations are given someof the concerns over just how much easing the Fed is going to deliver?Well, you know, if you look at the overall valuations, they seem high, butthat's partly because technology stocks have done extremely well.They form a big component of the S&P 500 index and some of the other major U.S.indices. So if you take away the technologysector, then the valuations are not as high.But even then, I think the technology, sorry, is intact and we think that ishere to stay will continue for several years.And so we seem upside for U.S.

Equities, yet neutral on U.S.equities. We are more positive.And Japan is clearly more owned than Japanese equities.But having said that, the Fed will take the lead in cutting rates.And, you know, the U.S. market is, after all, a major stockmarket in the world. Global fund managers are cash rich,individual investors are cash rich. And so money will gravitate to what'sthe the largest stock market in the world in one way or another as interestrates come down. So it sounds like a bullish outlook, butyou still see a mild recession in 2024.

Why is that?We see a potential formal recession in 2024, possibly in the second half ofthis year for the US because interest rates have increased significantly.I mean, they've gone up by more than 5% since March of 2022.And historically, that sort of sharp increase in rates.You know, that's have an impact on the economy.Not seeing that happen just yet, but we think that it could happen.But the positive takeaway is that it's going to be a mild recession because thecorporate sector, consumers and households have strong balance sheets.So put all that together.

Economy won't fall off the cliff, but itwill still slow down and possibly slip into negative territory.But then it'll come out of it fairly quickly and we don't think that's a gamestop. A game changer for equity investors asfar as U.S. equities said.Andy Fastow, always great to chat with theinvestment and managing director at Ocbc Bank.Let's get you a quick check of some of the movers that we're watching.Earlier, just about 10 minutes into the start of cash rating, Japan's RENESAS isis the semiconductor maker, of course,.

Trading a little bit softer?In fact, 3.3% lower than that agreed to by the design software firm Altium for5.9 billion U.S. dollars.This is a 34% premium to the last share price.And this is a solidly listed design software firm that's actually based inSan Diego. So they'll be acquiring shares of Altiumfor that cash price of 68 of 50 Aussie dollars apiece to be financed by bankloans and cash. We are also watching Sony, which hasjust started to see a little bit of a move there.We're seeing Sony preparing to partially.

Spin off its financial unit in October2025. We're seeing shares not reactingparticularly kindly to that seven and a half percent, though this is a part ofthe broader focus plan on the growth of its other businesses.Entertainment image censoring as a priority businesses.So the company essentially reversing course after taking the unit privateback in 2020. But they're also concerned about theseunderwhelming PlayStation five sales. And that led to the outlook cut.We're seeing that stock under pressure today or we got a big move to look at inSouth Korea.

Kakao, the online news entertainmentleisure portal up by 11% now. This is on a very strong fourth quarterearnings report. Operating profit, 189 billion won.That was about 40 billion won more than expected.Sales were a slight miss, but the total business revenue that also declinedslightly, game revenue kind of flat, but music revenue up very strongly, up bymore than 100%. So a strong earnings report there fromKakao. Let's take a look at Rakuten as well.Shares, they're jumping more than 11% in record time, boosting its full year netincome guidance.

The new forecast beat the averageanalyst estimates third quarter net income.Meanwhile, 79% of initial full year guidance.So Rakuten shares responding very positively there.Still to come, Donald Trump seemed to be considering scaled back commitments tosome Naoto members if he gets re-elected.We'll have more on that story later in the hour.But first, Defense Minister Prabowo Subianto looks set to become Indonesia'snext president. We'll have an update next live fromJakarta.

This is a bloodbath. Reserve Bank of Australia GovernorMichelle Bullock says rate cuts overseas will have implications for RBA policy.And a Senate testimony today. Let's bring in economics reporter SwatiPandey join us now. It's a treat and I guess this is a newnormal to have so much communication from the RBA head.What was most interesting for you? So this Senate appearance was just righta week after Michelle's like longer parliamentaryappearance. That one went on for 3 hours as well.This one was shorter.

It also involved smaller parties.So the questions were quite obscure. And they were asking they were askingher questions about the government's tax cuts, about price gouging by government,by companies, and whether that is responsible for inflation.There were a lot of questions about what's happening overseas.And Michelle reiterated that services inflation remains a worry, even thoughwe are seeing a big fall in goods inflation.So she did try to reiterate that hawkish message as well.Of course, a lot of what happens is beyond the control of the RBA.What does she have to say about some of.

Those overseas countries that are easingpolicy and particularly growth outlook in China?So she actually thought it was good for Australia's economy if countriesoverseas are cutting interest rates because that pushes the Australiandollar relatively higher, which is positive for inflation, an inflationaryoutcome for Australia also. So she was actually she she said we arelooking at what other countries are doing, we are looking at inflationarytrends overseas and she believes that Australia is also seeing similar trendsas as us for example, where goods inflation has come off.But so this as is taking longer.

So I think she kind of signalled thatthey would really follow and look closely at what the Fed would do andthen act from there. How closely are they watching Chinagiven I mean, historically such a close correlated economy?Australia has actually done pretty well. That's true.There was not a lot of discussion around China, but Bullock did mention thatwith the COVID China economy slowing down, that it on paper that does haveimplications for Australia. But China has actually been buying a lotof Australia's iron ore coal. In fact, there was data out recentlywhich showed after the barley tariffs.

Were removed, China became the top buyerof Australian barley as well. So we have actually benefited fromChina's demand and the fact that China is continuing to pay top dollar forAustralian goods. So another trade is a trade surplus,yes, but another budget surplus likely to come.All right, Economics reporter Swati Pandey there.Indonesia's Defense minister, Prabowo Subianto, has declared victory inpresidential elections. Unofficial tallies show the formergeneral securing nearly 60% of votes and that's putting him on course to leadSoutheast Asia's largest economy.

Chief international correspondent forSouth East Asia Haslinda Amin joins us now from Jakarta.Has. That's right.Indonesia on the cusp of a new president, an ex general with acheckered past now about to take power. Let's join my partner in crime who wasalso had proposed a victory party, Faris Mokhtar, our correspondent here inJakarta. It was quite an interesting take thetone, the speech, the message and what stood out.It was, you know, you rightly pointed. You know, all this points out to usbecause, you know, as compared to 2019,.

You know, when he lost to Jokowi, youknow, he had prematurely declared victory.You know, he was fiery. He threatened to social unrest, callingon his supporters to take to the streets.But last night, it was a completely different proposal.You know, he told his supporters they need to stay humble, do not be arrogant.And he promised to defend and protect all Indonesians, you know, includingthose who didn't vote for him. You know, and and also, you know, hetalked about how the country has got to come together.You know, he didn't prematurely declare.

His victory.Instead, he was really measured and calm.Wait until almost 100% of the votes have been counted.It was really a stark change. He was presidential.But the thing is, we have seen the real trouble in the 75 days of campaigning.He reigned in the real Pro Bowl, but we saw glimpsesof that. You got to wonder which Prabowo wouldemerge as the president. And I think, you know, we will actuallysee that, you know, in days or weeks to come, because now he's actually, youknow, very, very close to becoming.

President.I think what's interesting is that he saw what happened, you know, in hiscampaign in 2019 and and Indonesians were embracing of that fiery, rousingPrabowo. Will they want a leader, you know, whocan calmly and in a more measured way, just like Jokowi did, lead the countrytowards better economic prospects. We talked about Jokowi.Of course, Jokowi played a huge part. Some say that Jokowi, his popularitymeant 20% additional votes for Prabowo. Talk to us about the significance ofJokowi, how he's become so powerful and how he is likely to continue to play arole.

I mean, if you remember, we you know,you interviewed President Jokowi last year and Twist.Yeah. And, you know, you ask, you know, whatare your plans, You know, after you stepped down in October and he was like,you know, I want to spend more time with my family, you know, play a bigger rolein environment, you know, But then he also said plans might change.And I do think his plans have changed. You know, what you saw in thepresidential election that concluded yesterday is, number one, the Jokowioutsized influence. And I think it answered a lot of thecritics questions that he is indeed.

Bigger than his ruling party, because,you know, for years the ruling party has mocked him, you know, have questionedhim that he wouldn't be where he is without them.But he showed and also, you know, his contribution to the boats, to Prabowo.I mean, he secured close to 60%. That was higher than what Jokowi got inthe last two victories in 2014 and 2019 when he won the presidential polls.It also shows that Indonesians want the path that they're on right now, morepragmatic, more focused on economic growth, less of a instability.And because probably were promised all that, that, you know, he will continueJokowi his policies, that wouldn't be,.

You know, a massive departure ordeviation. People want that.And at that point, also, you know, adding to the Jokowi factor, wantingcontinuity, it is also because maybe Indonesians do not see the alternatives,the rival candidates as inspiring enough.And so why break it? You know, why fix it?Exactly. When it's not broken, it is about jobs.It's about the economy. It's about continuity in policies.Now, you have looked, Mokhtar, covering the Indonesian election, along with ourteam here.

And of course, we're awaiting theofficial results to be announced in a couple of weeks, hopefully.Paul. Heidi.Our chief international correspondent for Southeast Asia Haslinda Amin there,Indonesia government reporter Faris Mukhtar.Really dissecting the result of the Indonesia election.Well, the result, the preliminary results from the quick count that wehave so far. Live coverage, of course, of theIndonesian election continues today. We'll be speaking with guests, includingfrom the world campaign team and a.

Former Indonesian trade minister.This is Bloomberg. Ford Motor says low cost Chineseelectric vehicles are a colossal strategic threat that will ultimatelyarrive on US shores. For more, let's bring in auto reporterKeith Naughton. So, Keith, why does Ford see China EVsas a threat? Well, they have a huge cost advantage,Paul. The bride seagull, for example, costs$11,000, whereas the average price of an electric vehicle in America right now is$60,000. So the worry is that they'll come in andundercut everyone on price and really.

Kind of take over the market.Why are we also hearing that Chinese automakers are looking at building EVsin Mexico? Right.So President Trump during his administration, imposed a 27 and a halfpercent tariff on Chinese made EVs if they were imported directly to theUnited States. So China's finding a workaround.Biden is apparently looking for a factory site in Mexico.Several Chinese suppliers have already set up shop in Mexico.That way they can come in to the United States through the USMCA tradeagreement, which means there'll be no.

Tariffs.And so that is the way China is kind of backdooring into the US market.You've got some involvement from Tesla here as well, encouraging Chinese autosuppliers to set up in Mexico. What's happening there?Yeah, So, you know, Tesla, you might recall, has a giant factory in Shanghai,a Gigafactory there. It's how they've really penetrated theChinese market. They have a great group of suppliersthere. So they're encouraging those suppliersto come to Mexico where where Tesla is building another new Gigafactory tobuild its low cost model.

And so those Chinese suppliers arecoming and setting up shop around that factory, and that's just building theChinese auto and auto supply base in Mexico, which is really growing. IBEX Autos reporter Kate Thorton therein Detroit. Take a look at how futures in Europe areopening up at the moment. And this as we see a little bit more ofa recovery, an uplift in the Asian session.Is it potentially a bit of a positive handover as we get into the start oftrading in Europe? We did see an advance in that Wednesdaysession after the slide on Tuesday, we.

Saw the UK benchmark outperforming onthese bets that the BRT will deliver on right cars, European futures fromGermany to the euro. Stoxx 50 looking pretty positive rightnow. This is bloomberg. All right.You're seeing live pictures of Sydney Harbour, rather murky day here.We are awaiting the unemployment numbers for the month of January.We do have the Aussie dollar looking fairly stable ahead of that.These are normally on time and they're a little bit late today.The expectation is for the rate to pop.

Up to 4% if that happens.That would amount to a two year high. We have heard from the RBA recentlysaying that it does see the labour market remaining tight and the centralbank here not ruling out further tightening.We're seeing the Aussie dollar there dipping lower, which does suggest we areperhaps going to see a bit of a move here in the data and we've got thenumbers just dropping now, an employment change of well, this is a revisedemployment numbers for the month of December.We're getting this coming in backwards at the moment, a contraction of 62,000jobs back in December.

That is an improvement on the 65,000 jobcontraction that we saw that month. But we still don't have those Januarynumbers. But you do see there the Aussie dollaredging lower 6482 against the greenback at the moment.Let's just see if we can look elsewhere. We've got the jobless rate actuallyticking up a little bit higher than expected.We're getting those numbers now to 4.1%, so that's going to really change thedynamics for the Reserve Bank. That is a much higher reading than wewere anticipating and it does suggest the back of pricing has probably got itright that the next move from the RBA is.

Going to be down full time employmentchange. Also getting an old number there.Employment rising, 11,000 jobs for the month of January, full time employmentup. The participation rate that's declinedslightly. The number of people in work or lookingfor work now 66.8%. But the headline there for you, theunemployment rate ticking up more than expected to 4.1% and the Aussie dollarlosing a little bit of ground. Now later on, timely though, we getthese numbers. We will be speaking with the managingdirector and CEO of Wesfarmers, Rob.

Scott, on the firm's latest earnings.Wesfarmers is the biggest employer in Australia, so it will be interesting toget his view on the jobs numbers and outlook as well.You can catch that interview. 12:30 p.m.Hong Kong time. Heidi Yeah, let's take a look at how allof this is playing into markets and that miss when it comes to the jobs numbersthat you just went through, Paul really having a play when it comes to bothequities as well as effects trading, we're seeing equities, the ASX 200extending that gain to almost 1% after that jobs data.We also see that pullback in the Aussie.

Dollar as well, giving back some ofthose that earlier strength that we saw as the jobs numbers misses estimates.We have also been hearing from the RBA governor this morning as well, talkingabout inflation expectations being really well anchored at around two and ahalf percent, but flagging the concerns about them becoming unanchored and someof those downside risks, including the Chinese slowdown as well.So on the balance of things, this potentially, potentially gives marketexpectations a little bit of a push that perhaps will have a softer than expectedapproach when it comes to the any the risk of further hikes fromthe RBA and perhaps more pricing when it.

Comes to sooner, a more rapid easing inthis part of the world. This is what we're watching when itcomes to the rest of markets trading at the moment.Japan, we still look a couple of percent off from that 1989 high that we've beenreally waiting for. And now potentially that is furthercomplicated when it comes to the Bank of Japan side of things with the economy,with that GDP number that came out earlier in the hour showing that theeconomy has slipped into recession, that path to policy normalisation may be alittle bit more complicated going forward.We're also watching some of these.

Movers in terms of Sony, in fact,falling the most in a year after cutting that PlayStation five and as well asthat revenue outlook there as well. Some restructuring within the group, nothelping the investor reaction to that outlook.In particular, 7.8% lower, the biggest intraday fall since February 2022 afterthe company trimmed its revenue forecast, Sales of the PlayStation fivecame in roughly a million units lower than expectations.Also watching some of these other names in Japan, including the likes ofRakuten, that's one of the outperformers jumping on the segment profit comingthrough from Internet services in.

Particular, raising that profitforecast. Let's get more now on the as yetunofficial Indonesian election victory for the Defence Minister, PrabowoSubianto. Let's get back to Jakarta where HaslindaAmin is with our next guest has. Well, Heidi, now the question really iswhat a pro bono presidency would mean. How would policies look like with him atthe at the top? Let's get insights perspective.Douglas Ramesh, managing director at Power Group Asia Indonesia joins me herein Jakarta. Good to have you with us.Thank.

We meet every five years now to see youagain. 60% endorsement.I mean, what does it say? It's an extraordinarily strong mandate,to be frank. It's significant outside of all of ourforecasts, but it's fundamentally stabilizing the strong senses.Let's just get on with things. Voters wanted continuity.They wanted one route. The business community was happy withone route. So it's a vote for continuity from theIndonesians and frankly, from the business community as well.You know, in past elections it was about.

Ideology and people were debatingfiercely. But not this time round.Why not? Not this time around.And what's so striking has been about this election.The business, the foreign business community would have been just fine withany presidential candidate because the correct assumption was they were allsupportive of the pragmatic moves that Jokowi administration has made toimprove the investment climate. No one is saying that Indonesia has analternative path to development. So in that sense, any outcome would havebeen just fine.

The focus now would be on his cabinet,in particular, who the next finance minister would be.How are you looking at it? Because bear in mind, PDP still leads.It's very popular and I think the board would be under a lotof pressure to bring everybody in. Well, I think that a president proposalhave the same desire to bring as many of his potential foes into the cabinet aspossible, the same desire that the same decision that Jokowi made after hisfirst 18 months. He was a minority president.Remember, they, when he got elected, couldn't get much done any of that upwith what Indonesians call a fat.

Cabinet.So bring in as many players as possible. It's fundamentally stabilizing and italso sets up expectations of essential continuity in terms of overall policies.However, make no mistake, a president will be his own president.He's not going to be simply a third term for Jokowi.But what does that mean? I think it means broad continuity interms of emphasis on infrastructure. I think a significantly expandedemphasis on social welfare and human development.And this is going to be extraordinarily expensive.So but Prabowo is on the record.

Throughout the campaign with veryexplicit promises of a very ambitious and expensive project that he wants toimplement to improve Indonesian welfare. We're going to have to have a somewhatdifferent. Fiscal approach to that.Probably we need a bit. Indonesia will need a bit more, a bitless obsessive focus on its 3% deficit limit that it's imposed on itselfvirtually since the Asian financial crisis.How should the international community, international investors look at this?I mean, when you take a look at Indonesia, it is important.It is significant because of the.

Resources it has is one of the biggestexporters of everything from coal to nickel.Yes. And we're seen how a ban on nickel, forinstance, drove prices higher. I mean, what impact would have Boeinghave on that aspect of Indonesia, specifically on the minerals and mineralmining exports? I think it's now a given.All policy leaders, including those in President elect Prabowo's team, wepresume President elect Prabowo's team, would be supportive of the so-calleddownstream policies, a notion that you shouldn't just dig up Indonesianminerals and export them without adding.

Value domestically.Every member of the political elite supports this position.Why? Because they look back at the last fiveyears and they see that it's delivered success, that there has been moreincoming domestic investment focused on the downstream industries.Foreign investors don't necessarily always like it, but they've found a wayto make it work. How do you see Prabowo navigatingIndonesia's relationship with the US and China?Some say, you know, Prabowo win is a China win.And if you consider the possibility of.

Trump coming back in power, how mightthat look like? So I think that's I, I think under thepresent proposal, my sense it's absolutely not a win forChina. It's not a win for anyone except him,his coalition, and hopefully Indonesia. He will be immensely pragmatic,continuing along Indonesian tradition. Indonesia wants to have balance in itscommercial and foreign investment relationships as well as in itsinternational political and diplomacy relationships.So we can expect that if anything, a president proposal will be somewhat moreskeptical towards geopolitical concerns.

In Asia-Pacific.Remember, as defense minister, he was responsible for the largest militaryexercises held on Indonesian soil since World War Two that involved American,Australian and other so-called allied troops.So I think we can expect probably a warm relationship with the United States anda continuing warm relationship with China as well.Not to mention that Prabowo as Defence Minister bought a lot of US jets.Yes. Cancelled a major purchase of Russianweapons, actually. Yes.Douglas, thank you so much for your.

Insights today.That was Bo there, M.D. at BAA Group, Asia, Indonesia.Well, Heidi, we all await how that presidency from BOA would would looklike. Yeah.As we of course, the wait for official results which may be a couple of weeksyet poll all the focus is on really on what the what the next period of reformthe post Zarqawi era will really look like.That was Haslinda Amin there in Jakarta. We'll of course, be continue ourcoverage of Indonesia's elections. The implications for investorsthroughout the course of the day.

Speaking with the Prabowo campaign team,as well as a former trade minister and the reaction from Schroders, Indonesia.Former US President Donald Trump is said to be considering scaled backcommitments to some Nieto members as he attempts to return to the White House.Sources tell us Trump is also looking to get Ukraine and Russia around anegotiating table. Bloomberg managing editor Derek Wallbankjoins us now for more. And Derek was adding to get sort of anidea of what you know. Trump foreign policy 2.0 will look like.And to be fair, a lot of the criticisms he's made of nature could be seen as asfair.

Yeah.I mean, there is a 2% of GDP spending target that NATO allies have committedto that if I'm being honest, many of them don't meet.And it has been a source of concern within the alliance.I think for a long time. The US puts up the bulk of the fundingfor for NATO's, generally speaking. But I think that a lot of a lot ofcountries you saw sort of more around like 1.4, 1.5%.That started to change after Russia's initial invasion of Crimea and youstarted to see that tick up. Donald Trump during his presidency madethis threat,.

You know, made a real big deal of theidea of getting people up to 2% and said he was going to rethink.You saw a lot during the Trump presidency about making big grandthreats to try and spur actions with potentially cataclysmic consequences.There usually was some resolution well short of that, although there were someinstances where he followed through with some of those threats, you know,launching a trade war with with China being a great example of this.But this is sort of more for the same here.Now, the alliance overall, as they say, has gotten has gotten more spending onthe table, particularly on its on its.

Eastern front.However, a lot of the allies on the western side of the alliance still wellshort of those targets. I should also mention that Trump'sremarks on NATO's have been met with criticism by the Biden campaign, whichsays that he is insufficiently committed to the NATO alliance in ways that arehelping Vladimir Putin and Russia right now at this moment with the war inUkraine. Yeah.Derek, some pretty serious questions about potential President Trump'scommitment to Ukraine as well. He's talking about bringing an early endto that conflict with Russia.

How does that come about?Well in Portland, I think you've got to read this in in context of all of theremarks that Donald Trump has been saying about the conflict.Full stop, Right. Democrats and some Republicans had beenwanting to give a lot of extra assistance, 60 billion plus dollars toUkraine in terms of military aid, but that's been held up by Republicans loyalto Trump who who have been resisting on that.So Trump is is is trying to figure out a way to bring this to a conclusion.But if he were to do that at that point, the counterargument goes that would bedoing so when Ukraine would be more at a.

Moment of weakness rather than at amoment moment of strength, being able to push backmore forcefully against against Russia. So there are some some concerns thereabout how that about how that does and also sort of how you would get thistogether as well. Right.Ukraine has said that the conditions for victory are all of their lands back,including some of the things that Russia took earlier in the last decade whichwhich we're not particularly close to. Whereas Putin has his own objectives.How do you even get that closer to the table?I think there's a lot of questions.

There.But for sure, the biggest question, if you were to get towards a pushing fortalks is at what positions of relative strength do those talks come and howdoes that actually get there? Donald Trump has said a lot of things,though. I think I think one of the bigger pointsI would make here. He said a lot of things and you do startseeing the world taking him a little more seriously now that we're movingclose to an election where polls say he is at worst a coin flips chance awayfrom returning to the presidency. All right.Bloomberg's breaking news managing.

Editor, Derek Wallbank there.Okay. We have plenty more to come on DAYBREAK,Asia. Stay with us.This is Bloomberg. All right.Japan's economy has unexpectedly contracted for a second straightquarter. So we have a technical recession andthis rather clouds the BOJ's path towards ending its negative rate policy.Let's get more on this with our Japan eco and government editor Paul Jacksonin Tokyo. So, Paul, that wasn't in the script.What's the path ahead for the BOJ?.

That's right.This is not the result anyone was. One thing.This is the perfect headache for the DOJ.After all this carefully coordinated build up to this first rate interesthike, interest rate hike since 2007. And then just as you're expecting thegreen light to come on and say go, it stays red.And not only that, it's worse. Now, just think about this.We've got 34 economists gave us their forecasts for GDP.Only one said there was a chance of contraction.It's quite a few around around zero, but.

Only dye with securities called acontraction in that quarter. So we're in technical recession, whichcentral bank in the world wants to raise interest rates when the economy is in,contraction is in recession. It's not a good look, is it?So the optics are not great. But I would caution against saying thatthis means, okay, no no rate hike until the summer, until we've got a quarter ofgrowth. I think we're still on track.But the obviously, this does complicate the picture.And if we look at overnight swaps data, since the figures came out, we we'll seethat the kind of probability that market.

Traders have for a rate hike by Aprilhas dropped from about 73% to about 63%. Let's just keep an eye on howexpectations change. But certainly I think the DOJ is goingto have to do a lot of explaining if it wants to carry on with its rate hike.With an economy in recession, is there some angst with dollarstrengthening weakness, too? Does that complicate the outlook?Because, you know, that's a is an easier way to give support to the yen if theywere to move sooner. Yeah, well, I mean, if they move sooner,that does that does help the yen. But then, you know, you've been doingthis incredible monetary stimulus.

Project for more than a decade.Do you really want to be looking as if you're you're responding to some yenmoves right at the last minute? It looks like kind of knee jerk reactionat the wrong time. So I think the optics don't don't lookgood for that. And don't forget that the weekend doeshelp on the on the trade figures. And let's face it, that's the only thingthat was good in the results today. I mean, consumption is down.Businesses are spending less, households are spending less.And it's for three straight quarters. Does that look like a positive growthcycle to you?.

It doesn't to me,less like the market. There's still going gangbusters.Right? Thanks.We can help Japan and Korea economy and government added.So Paul Jackson there in Tokyo talking through those are really prettysurprising GDP numbers, a recession for Japan.More ahead on DAYBREAK. Asia, This is Bloomberg. China has listed in the U.S.made gains amid a broader market rally, a potential sign of upside for Chineseequities.

Let's get a preview of the market openin Hong Kong. Asia equities reporter Charlotte Yangjoins us. Andyou would be very optimistic indeed to be pinning your hopes on a followthrough. Translating into any kind of permanentboost to sentiment here. I think so.For the real show, which begins next week when our short market resumestrading. So for Hong Kong.At the moment, traders are really what they really are trying to grasp is thisconsumption data we got so far, you.

Know, about the first few days ofChinese New Year. And yesterday, you know, we saw a boostin the tech shares with made one, some orders showing positivity there.And today we're watching closely watching the hotel stocks with Chinesestate media, as CCTV has reported, you know, some order growth more than 60% ayear. And we're also watching the airlinestocks, which Citigroup says it is showing the air travel is showing astronger recovery momentum. You know, if we compare it with thegolden week last year, so the consumption stocks we're closelywatching.

That's for sure if it's trading.Charlotte. Of course, foreign investors very coolon Chinese assets at the moment. Can you give us a sense of what theshort interest is looking like? Yes.So we are saying that, you know, so a lot of the financial products providersare also grappling with investors changing appetite for Chinese equities.And we saw a direction last week just issued a leveraged emerging marketfocused exchange traded funds that exclude China.And this comes as last year the top selling and ETF is one that from iSharesMSCI Emerging markets includes China.

So a lot of the you know investors atthe moment are choosing to stand on the sidelines and investing and but excludetheir China and position. And for the more China focused fundmanagers at the moment they're going defensive and going after those moredividends focus stocks at the moment until they see they say that they see,you know, more fiscal policies that support the real estate sector as wellas we see what kind of more supportive measures which could come from thesecurities regulators. And so so a lot of the investors arewatching see at this stage. All right.Equities reporter Charlotte Yang there.

Okay.Let's take a look at some of the stocks we're going to be watching when marketsdo open in Hong Kong in a little over 30 minutes time.Tech stocks, we'll keep an eye on them after gains in Hong Kong on the marketsreturned yesterday from the lunar new Year holiday.Many lives Hang Seng listed shares in focus after fourth quarter profit beat.Analysts Estimates were boosted by strong insurance sales in Hong Kong andCanada. And Pingan insurance is one to watch aswell after being cut to sell by CLSA. And Paul, we were just talking through abit of a shock when it comes to those.

Labor market data.The numbers out of Australia are out. We're seeing that reaction in the slidein yields here in Australia. We saw hiring edging up, butunemployment climbed to climbing to that two year highs.So really a little bit of a signal of Australia's cooling labour market andprompting bets of an earliest interest rate cut as well.We saw declines in the Aussie dollar drops, traders really bringing forwardbets on that first rate cut to September from November.We're seeing three years on from bond sliding after the data came out,extending that opening forward downward.

Just about nine basis points.The bond futures for the three year jumping as well over ten basis points.The ten year yield falling about nine basis points there as well.The Aussie dollar holding pretty steady at this point, just hovering sort ofaround that 64 level.We saw the RBA last week holding the key rate at the 12 year high and perhapsthis weakness in the labor market prompting expectations that easing willcome sooner rather than later. This is Bloomberg.

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