This is DAYBREAK, Asia.We're counting down to Asia's major market opens.And Heidi. Pretty big eco week ahead.I mean, US inflation. Front and center for us, especiallyfollowing this University of Michigan survey results on Friday.But also, you've got those numbers coming out of China as well.Yeah, really, really dire numbers when it comes to credit demand.But you look at households or corporates.Right. And it kind of pours into view again,just the difficulties that Beijing.
Policymakers are working with, even as Ithink some parts of the market have really kind of run with a narrative thatwe've had a few good prints on certain parts of the economy, but clearly thechallenge is still front and center there.Yeah, absolutely. We've got the open here of Japan, SouthKorea and Australia at the start of the day here in Japan.We are watching the Nikkei 2 to 5 coming online this morning as the last closefrom Friday, but fairly flat so far. This sort of track, the session that wehad on Wall Street on Fridays, we said that University of Michigan surveycoming in showing a little bit of.
Deteriorating sentiment.It sets the tone perhaps for inflation numbers that are due later this week.And all important, of course, what it means for the Fed.Japanese yen, you're just continuing to track that slight decline.We did see it firming up, of course, following the two possible bouts ofintervention last week. But today we are getting a lot closer tothat 156 level at this point in time. And of course, that we're also keeping atrack on on whether that becomes a net negative for investors as well.BlackRock is the latest saying that the yen weakness could actually deterforeigners from Japanese equities, even.
Though we have traditionally seen itbeing a boost to the exporting names. Now, it's that big question mark whetherthe weekend is starting to hurt consumption instead.Let's switch on. Take a quick look at what's happening inKorea at the start of the day here. A bit of trade data to note because wedo get the ten day trade data from South Korea that drops on this day.We are just waiting for those numbers to come out.And exports, you can see there a gaining 16.5% on the year.A career, of course, a trade bellwether, not just for this region, but also forthe global economy.
Imports declining nearly 7% on the yearHeidi. Take a look.Well, in terms of how we're just starting to come on line when it comesto the staggered opening here in Sydney. Pretty flat at the moment for the ASX200. This is a market coming off, what, aboutthree weeks of consecutive gains? So perhaps a little bit of a breatherbeing taken there. One of the stories we're watching willbe NZ, the group really saying that confirming the reporting thatAustralia's regulator is investigating the execution of a government bondissuance last year.
ANZ saying the inquiries relate to theissuance of ten year Treasury bonds by the Australian Office of FinancialManagement and they are fully cooperating with us.So we're still trying to get a few more details, but a bit of downside, 3.6% tothe downside for ANZ Bank. They're watching bonds as well, ofcourse really traders who talk about Australian bond traders, but alsotreasury traders just waiting for that CPI to kind of feel or potentially gothe opposite direction for the market rally.We have seen, of course, that rebound for treasuries this month.The signs of cooling in the labor market.
Really at play there.Also watching oil edging a little bit lower this morning.Iraq's mixed messaging really putting the spotlight on what to expect fromOPEC. Plus, Iraq saying that they wouldn'tagree to more output cuts in the next meeting.That really raises the stakes in the run up to June 1st, which is when thatmeeting is scheduled to be. We've seen Brent trading under almostnow. Yeah, under that $83 a barrel, losingalmost one and a half percent in the Friday session.WTI at about 78 USD as well.
So much of the advance we've seen so farthis year for crude has been underpinned by the supply cuts from Opec+.So let it play. Quick look at treasuries, as Imentioned. Really it's a wait and see when it comesto the CPI print. The April Consumer Price index numbersdue out on Wednesday. It could be, though, really the biggesttest yet in terms of where this rally goes, these Fed expectations and wherethose the Fed cut expectations will fall as well.Yeah, that's right. Ramifications across a lot of differentasset classes.
But let's bring in our next guest whosays investing outside the outperformers is intriguing given market narrownessand a benign backdrop. With us now is George Morrissey, CEO andglobal head of equities at Princeville Asset Management.And George, what do you make of the dynamic thatwe're seeing in the market at the moment?Because that emphasis and that enthusiasm around big tech, around big abit around Asia as well, it just continued into 2024.Do you want to be looking outside of those names at this point in time?I do.
It's not as if big tech isn't compellingand intriguing. Everybody knows that there's been anincredible herding and momentum behind there.And we've seen last year was the strongest momentum year we've seen in along time. The first quarter was a very strongmomentum year. It's leaving opportunities availableelsewhere, especially in an economy, the global economy that's actuallyrelatively stable. When you look at the opportunities thatare outside, take or outside, is it about findingnew opportunities in those sectors or.
Downstream different applications, or isit just about looking at something completely different instead?So it's both. So one, there are the derivative playswith respect to everybody's loaded into the first order, plays in videos andthings of that that have just done brilliantly.But it's also the second order play. So, for example, Microsoft's investor isthinking of investing a $100 billion data center.Who is going to funnel all the work that goes into it, everything from bulldozersto copper. And so I think there's opportunitiesacross that.
And moreover, if we have a more stableeconomic environment, there's going to be a cyclical recovery in a lot ofactivity. And I think there's opportunitiesoutside of just things that are secularly driven.We actually just as I mentioned earlier, we had that University of Michigansurvey is coming out, though it did just show consumer sentiment starting toweaken a little bit. We saw it showing up in in results, forinstance, from Starbucks or McDonald's. Are you concerned about the U.S.consumer at all? For sure.And I think the US consumer's bifurcated.
In two ways.One, there's the high end that is still holding up, and it's holding up becauseequity values and home of home values have held in.And they can trade off of that and they feel wealthy.The folks that are not they're feeling inflation bite.They're fighting harder than than their wages are going up.And you're starting to see credit deteriorate.So you've got a two speed consumer in the US, and I think it's something worthnoting. George, the contrarian call on China hasbecome a little less contrarian in.
Recent weeks.But the data over the weekend, it sort of puts into sharp relief just themassive structural slowdown that the government is dealing with there.Right. Where do you see the opportunities?Valuations are still cheap, but how selective are you in this market?So I have a slightly different take on the China credit data.First of all, a headline. It's not great.We're seeing that slowing impulses, the sign of a weakaggregated economy and in the credit impulse reflects that.But it also highlight is one of the big.
Critiques of China for the last decadeplus, it's been heavily leveraged. You've seen a lot of spending going oneverywhere. It's a lot LED, debt financed.So to see a restructuring in a more healthy way, see less debt impulse isn'tnecessarily a negative from the long term perspective of China.And I also think what's really intriguing about China is it necessarilythe more cyclical oriented areas of the economy, it's the more secularlyoriented areas. We've got a lot of Chinese companieslike that that have fantastic business models where outside of China, thosebusiness models have been rewarded.
Handsomely.In China, they haven't. To me, that's the that's the opportunityat play. So I agree with a lot of what you'vejust said. But after the after the difficultrestructuring to to the new normal. Which of the sectors do you think willbenefit? So within China, frankly, I lovetechnology and communications. Those are the spaces where they've beenhit the hardest the last several years or the people had flown into them andthen have run away partly because of worries over government policy, whichhave felt pretty heavy handed with.
Respect to governing those sectors inthe last few years. That feels like it's alleviating.We're seeing actions that are much more balanced going forward.And there's also been a concern that that these companies are getting leftbehind their Western counterparts. And in some ways, they may be the otherhand, part of this whole global restructuring that we're seeing withrespect to geopolitical alliances is creating much more of a closed set forcompanies doing business within China and other companies within China thatcan serve the Chinese market, whether it's consumer business will be betteroff.
And I think a lot of the big Chinesetechnology companies are very well placed for that and are not priced forit. I'm glad you mentioned geopolitics.Obviously, we're so digesting the implications of thequadrupling of tariffs on Chinese EVs being proposed by President Biden.How much volatility are you expecting to come out as we get closer and beyondNovember? Do you think there's going to bemeaningful challenges for Chinese companies going forward?So first order, I think these tariffs that are being contemplated beinglevied, I think they're really just for.
Headlines and they're not reallyimpacting the economy much. You don't see Chinese EVs selling withinthe United States already. This is really for headline headlines.To be fair, I think a bigger concern is what happens post elections this year inthe United States, whether there is going to be any sort of rapprochementbetween China and the United States or will be a hardening of tensions.Right now, things are pretty bad. You know, hopefully they don't getworse. But I think that a lot of that thatnegativity is already reflected into Chinese equities.We've seen three consecutive negative.
Years.We've never seen that before. All you need is a bit a bit of less badnews to get things rolling again. Less bad news actually makes me think ofnew sentiment around China and it can be pretty anti-China in the US inparticular, and a lot of the guests that we speak to it just verydisinclined to invest in the market. Do you think that there's a fullunderstanding of of China's economy in other parts of the world?And do you think there's perhaps the chance that any opportunities are beingleft on the table? I think for sure there are opportunitiesleft being on the table.
I think one of the issues China has isit's relatively opaque that that lack of transparency is causing a great amountof distrust, especially when you see regulatory action upend things prettyquickly. And you've just seen people say it's notworth it, I'm going to move on with life.And they're ignoring some of the positive steps that are being undertakento get investor confidence back into China occurring.So I do think there's substantial negativity.I think that negativity is well overdone and it's creating massive opportunities.And what's interesting is there'll be a.
Lot of criticism over China actions froma regulatory perspective, whether it was with respect to the for profiteducational companies, whether it's regulation of the big tech companies.But we've seen that similar regulation happen in the West.We've seen certainly Europe attack big tech quite dramatically.We've seen the United States take out the for profit educational companies,yet Western investors shut those aside. And if it happens in Japan and China,they get very panicky. I think that's an opportunity.It was like, George, really great to have you with us.George Myers, CEO and global head of.
Equities at Principal Asset Management.Take a look at some of the early movers that we're seeing in Japan and also herein Australia. These are the ones that we've beenwatching. Honda, of course, they were expected tobe an outperformer out of the Japanese automakers reporting.And we do have some pretty positive numbers there that investors arereacting to is the upside of over 4%. In fact, that's actually off the sessionhighs of over 6%. That was the most in three years.We've seen trading volumes also triple for this stock as well after theyboosted buybacks, seeing another record.
Year on hybrids.When it comes to profits from hybrids, I should say, particularly in the USmarket and also two wheeler demand in Asia as well.So Japan's second largest automaker doing pretty well in the session today.We're also watching Tokyo Electron and actually it is actually doing quite abit better than perhaps expected given that full year operating profit andincome forecasts are all missing. Estimates are saying upside of about1.3%. They're also watching SoftBank expectingearnings, of course, a lot to go through.They're set to return to profit after.
That shift to AI and the demand forchips. That's really kind of what's atBloomberg Economics is certainly is expecting as well.We're also seeing that this selling of vision fund assets at play there as wellMasa really pivoting to Asia and chips and away from that aggressive the VCstrategy and taking a look at stocks that are moving in Sydney.NZ is really the one that we're watching most closely there as we see a NZ groupthis morning saying that the regulator is investigating an Australian bondissuance case there. When it comes to a downside, we'reseeing a little bit of pressure there on.
ANZ at the moment, down about three anda half percent. The execution by the bank of agovernment bond issuance is in question in terms of these ten year Treasurybonds by the Australian Office of Financial Management, they'll.Yeah. I will have more on the Australia topicahead of Australia theme. Hearing from the Treasury sees inflationreturning to target by year end. We're going to have an interview withTreasurer Jim Chalmers coming up later this hour and ahead of Tuesday's budget.But first, President Biden is said to hike tariffs on a range of Chinese goodsthis week.
With EVs in the crosshairs.We'll have the details next. This is Bloomberg. The Biden administration is set tosignificantly hike tariffs this week on some Chinese goods, including nearlyquadrupling duties on Chinese made electric vehicles.Our chief North Asia correspondent, Stephen Engle is here with the details.And Steve, as you were saying last hour, some of these these products that arebeing considered on big exports anyway to to the US.So is this sort of more bark than bite? Well, it's a lot of politics.It's an election year, you might have.
Heard in the United States and the UAW.And Trump has been harping on tariffs as well.So Biden is taking a little bit of a tougher line on.Of course, Xi Jinping's new three, which is the green tech exports and theirovercapacity. And of course, Chinese manufacturers whoare, you know, seeing their margins get crimped quite badly and theirprofitability is nonexistent right now. They're trying to export this excesscapacity. But Biden administration sort ofsticking their fork in the ground and saying, nope, not going to come herebecause, again, it's a political year.
Keep in mind as well, though, you know,only about according to Edmunds.com, only about 1% of all vehicles on theroads in the United States are EVs. And it looks like Detroit is kind ofpulling back from that wave of enthusiasm towards EVs.Tesla is seeing some trouble. Its stock is down 32% this year.Ford only made about 76,000 or sold 76,000 EVs last year.The pace of growth is down considerably overall for EVs.So as David Fickling, if you read his columns of Bloomberg opinion, he says,boy, you know, the industry or the country that made the automobileindustry is sort of losing its nerve.
Towards EVs right now.Now, that's kind of the backstory to what's happening with these tariffs.We're hearing from sources and it could be announced as early as Tuesday thisweek that the Biden administration will raise the tariffs on Chinese made EVs to102.5% from 27.5%. That's an increase of 272%.There also could be a doubling or tripling of duties on other productsmade in China, whether that's solar cells, batteries.We already heard about steel and aluminum.There might be a bit of a reprieve for solar cell manufacturing equipment asthat's been asked for by the U.S.
Solar industry.Steve, does this differentiate from what we've heard from Trump?Well, Trump wants even tougher tariff regime on these products, and he sort ofmocked Biden's goal of quadrupling the EVs of Chinese made EV tariffs.He says he probably raised it up to about 200% and warned about thepossibility of Chinese manufacturers making these EVs in Mexico and thenunder the U.S. Mexico-canada agreement, exporting themto the United States. That's why Trump says he would put 200%tariffs, not 102.5%. And again, Trump has said he wants toimpose across the board 60% tariffs on.
All Chinese imports.We'll have to see how that comes to play and whether that is a significanttalking point on this campaign that's sure to heat up over the next sixmonths. Chief North Asia correspondent David andgo there. Don't miss an exclusive interview withthe US Treasury Secretary Janet Yellen on the US-China relationship.But that's on Monday at 10 p.m. Hong Kong live on Bloomberg TV andradio. All of this comes as the Treasury isforecasting that Australian inflation could return to the central bank'starget band before year end.
Australian Treasurer Jim Chalmers toldus about the Government's spending priorities in his only internationalinterview with television ahead of Tuesday's budget.I think we've got to strike a fine balance in this budget between thenear-term and the longer term. Also making sure we can provide thatcost of living relief for people who are doing it really tough at the moment.At the same time as we invest in a future made in Australia.So it'll be a responsible budget. It will ease cost of living pressures,but it will also invest in the future. And obviously forecasting inflation atthe moment is is tricky.
It's tricky at the best of times.But what the budget will do is it will put downward pressure on inflationrather than upward pressure on inflation.Now we've made substantial progress here in Australia in the fight againstinflation, but it's not mission accomplished because people are stilldoing it tough. And so the budget will be very focusedon that policy. Over the past six months, six months orso since you've been putting this budget together.The outlook for inflation is has changed quite a lot.Has that changed your thinking on the.
Way you put the budget together?We're making that progress in the fight against inflation.We know that it needs to be the primary focus, particularly at the front end ofthe budget, and that's why you'll see substantial spending restraint.You'll see our cost of living measures designed in a way that takes the edgeoff inflation rather than adds to inflation, so that overall our budgetwill be part of the solution to inflation rather than part of theproblem. Now, moving on to a future made inAustralia that's going to be a big part of this budget.How does the future made in Australia,.
Does that differ from the IRA in theUnited States? Yeah, what we're trying to do here is tomake sure that Australia grabs the vast economic and industrial opportunitiesfrom the global shift to net zero and the sorts of things that we arecontemplating are not out of place in whether it's in the United States orindeed in most of the developed world. But for Australia we've got some hugeadvantages. Yeah, we've been dealt some incrediblecards, our resources by say, our industrial base energy, our humancapital base, our attractiveness as an investment destination.And so what a future made in Australia.
Is all of that is not replacing privateinvestment in the opportunities of the future but attracting more of it.That will require some public investment and we need to make sure we get valuefor money. For that, we've got our own unique setof advantages as the economy changes, the global economy and the pace of thatchange accelerates. We want to make the most of it.We want to create good, secure, well-paid jobs and prosperity into thefuture. And that requires us to renew andbroaden and deepen our industrial base. But you mentioned, obviously Australiahas unique advantages, but isn't.
Australia coming to light to this?I mean, a lot of the people will be competing against a lot of the othercountries. Our partners have had these policies inplace for quite some time. Well, we better get cracking then todayand we will on Tuesday. We have made substantial investmentsalready in our ambitions to become a renewable energy superpower, which isreally at the core of a future made in Australia, that the global economy ofthe future will be powered by cleaner and cheaper energy.And we've got a big role to play in supplying that to become a reliablesupplier of that energy.
But there is more that needs to be done.A combination of tax incentives, targeted grants, making sure that we'vegot the architecture to attract, to attract and absorb and deploy all ofthis private investment. You'll see a lot of that on Tuesdaynight. Now, on Critical minerals, which is partof this, asked $500 billion so far for exploration for critical minerals isthat all that we're expecting for critical minerals in this budget orshould we expect more on Tuesday? You should expect more on on Tuesday.Critical minerals are the opportunity of a century for Australia.This is genuinely a golden opportunity.
For Australia.Our critical minerals base is one of the reasons why there is so muchattention from global and domestic investors.But we need to make sure that we can attract and deploy, that the explorationis an important part of that. That geoscience opens open sourcescience to map Australia. Our groundwater, our critical mineralsopportunity is a big important part of it, but there'll be more.Speaking of global opportunities, China, we're saying say a few green shoots intheir economy, but for Australia we'd like to see a lot more.I'm sure from your conversations around.
The world ahead of side of this budget,but ahead of the rest of the year, are you expecting to see more stimulus inthe Chinese economy as the year goes forward?I think there's certainly a prospect of that and our budget will forecastChinese growth with a four in front of it, four in the near term, and if thateventuates, that'll be the weakest period of growth of of that length sinceAustralia. Since China.Began opening up in the late 1970s. And so the Chinese economy has beensoft. The property sector has been a big partof that, but not the only part of that.
And and that weakness has kind of offsetin our global forecast the strength we've seen in the US.That was the Australian Treasurer Jim Chalmers, speaking with Bloomberg's BenWestcott in Canberra. And we'll have more to come on DAYBREAK.Asia. This is Bloomberg. Some of the geopolitical developmentsthat we're tracking this morning in the Philippines says China has deployedvessels and divers to explore a shoal in the South China Sea for reclamation.The nation's coast guard says it sent a patrol ship to what Manila calls aScottish shoal to deter China's.
Activities.The area is close to the Philippines, Palawan Island, which directly faces thecontested waters. The development adds to growing tensionsbetween Manila and Beijing. The US says Israel risks fueling apost-war insurgency in Gaza, with thousands of armed militants remainingin the territory, even if Israeli forces invade Rafah.Israel says it now has evacuated the eastern part of the city twice and thirdof the city as it prepares to expand its military operation.Last week the US said it would withhold weapons that may be used in Rafah andcited evidence that Israel has breached.
International laws protecting civilians.Russian President Vladimir Putin has replaced his long serving defenseminister in a surprise move. Sergei Shoigu had been in the post since2012. The reshuffle is the first major shakeupof the Kremlin's military leadership since the Ukraine invasion and comes asRussian forces seek to capitalize on a battlefield advantage in the war.And we're going to be speaking exclusively later to French PresidentEmmanuel Emmanuel Macron about the war, trade, geopolitics and internationalinvestment. That's at 1 a.m.Tuesday, Hong Kong time.
Out of the rain.Take a look at how eye tracking, what, about half an hour into the start oftrading in Japan, Korea and here in Australia, a little bit of downside, apretty muted start to the trading week, really.Japan stocks, the Nikkei down by just about 3/10 of 1%.We're seeing a little bit of a boost when it comes to the costs beingbroadly, we're seeing downside for Australian stocks, about a quarter of 1%softer. This is a market, though, coming off,what, about three weeks of gains. So perhaps a little bit of a breatherbeing taken here.
New Zealand also down about 6/10 of apercent. This some of the stocks that we'rewatching, Shiseido is one of them. Of course, we're still in thethick of earnings season across many of these markets.Shiseido see a bump of about 6%. They're rising on that first quarteroperating profit beat that we're seeing. In fact, off the session highs was up byabout 7%, which is the most in about a year and a half.And against the broader declines that we're seeing in the topics that thoseshares are up about 11% this year. First impressions, according to thelikes of Nomura, saying slightly.
Positive.We're seeing that positive reaction across the share price.Olympus also gaining by about 5.7% there.One of the stocks we're watching here in Australia and seeing some downsidesreaction is ANZ, the lender, saying that the Australian Securities andInvestments Commission is investigating the bank's execution of a governmentbond issuance last year. Finance editor Adam Haigh joins us nowwith the details. So Adam, what's being investigated?What's going on here? Well, at this point, Heidi, what we knowis that ASIC's looking into the what.
Happened during the sale of somegovernment debt in Australia last year and ANZ role in that.So it's quite typical for banks. You know, typically through a through asyndicate, a number of banks together to be involved in the sale of of governmentbonds. But something seems to havepicked up some kind of irregularity in what happened in one of these sales lastyear. So what we know is that ask the mainmarkets regulator now is looking into one of these sales and last year andspecifically ANZ role in that. So that really kind of basic mechanicsof what's happened and what's come out.
In the last few hours.But really it begs quite a lot of questions now, which we will hope toanswer in the coming days and weeks about what really did happen during thetrading of this. Was it at the time?Was it something that happened subsequently?And indeed, what were the other banks that were involved in?This is just is this something that's just isolated to ANZ or were there otherfirms involved in in these sales that also look in some way irregular as well?So there are of the things we'll be looking at.And of course, the broader context here.
Is that this isn't the first time anAustralian bank has been involved in accusations of impropriety in in marketslike these. So if you cast your memory back a goodfew years now to the bank bill swap rate inquiries that were cases taken to courtby asset for not just ANZ but for some other banks as well around, you know,irregular trading that existed in those markets.So it does bring back memories of of some of those problems associated withwhat happened in those markets. But it's too early to tell just exactlywhat's happened. Now.We really need to try and dig into the.
Details and understand what was ANZ rolein this government bond sale and indeed what are the specifics of theirregularities that happened that have prompted ASIC's to look further andinvestigate? Just what's happenedat ANZ says that it's cooperating fully here.But do we get a sense of of what the investigation would really look like andhow long it could take and as well touch a bit more on the possible penaltieshere? Yeah, it's a little bit early to tellreally, Annabel, on all of those fronts, but clearly the bank is cooperating withthe regulator, as you would expect.
And the question is what that level ofinteraction and communication is. Are they really drilling down into somespecific one off irregularity that they found?Or or is it more about a series of events that happened over time?It's too early to know that yet. And therefore, it's it's really tooearly to to throw around any numbers in terms of what might result out of thisor any potential penalties further down the line.We just don't know enough about what happened, what went wrong and indeed whyit went wrong and to get any assessment of that yet.But of course, that's really what we'll.
Be looking at and some of the real keydetails that we'll want to drill into and and try and find out in coming days.That was our finance editor, Adam. Hey there.Of course, a story we're tracking close this morning and ANZ shares underpressure. Sticking with equity markets.See you Taking a look here at the the moves that we've seen really to theupside for China and Hong Kong stocks so far this year, up more than 9% actuallyover the course of 2024. So on a par with the S&P 500.That comes after three brutal years that saw major Chinese indices plunge morethan 40%.
Let's bring in our asian stocks.Reporter sandy chan joining us. And and sandy, there's been so muchoptimism around this. We've seen policy support coming throughfrom the politburo. There's been better economic numbersthat are coming out. How much longer or further can we gofrom here? That's why we've been seeing that rallycoming and it's on the back of those blazing tech rally.Of course, we're going to be seeing those earnings of Tencent, Alibaba,Datacom and Baidu coming all this week. And all these four companies actuallymake up more than a quarter of the MSCI.
China Index.Right. So they are the ones that have beenactually pushing these indices up to be on par with the S&P 500, just like yousaid. But and there are so many of the aspectsare coming in optimism, especially with the Chinese government rolling out moreof these good news, more of these are subsidies and these announcedannouncements in the property sector. And we have the dollar peg that the HongKong dollars and pegging to the US dollars.There's just so many of these aspects that are looking good for it for theseequities rally.
But then of course there are some of theconcerns. Some of the analysts are saying thatthere is a concern over these equities being overbought now that a lot of theforeign investors are just coming in and with this fear of missing out and thenthey're they're saying that it could be a bit of a tactical rally for the timebeing. So we still need to watch out for all ofthese matters, especially the geopolitical tensions with the US isstill the space that we're very watching very carefully.Tennis had to switch off a live feed for farm flows for stocks as early asMonday.
So we've we've had some sort of advancewarning of this. What are you watching in terms of theirreaction? That's right.So the Chinese government decided to switch off or they're planning to switchover as early as today. These live feed of the purchases andsales of the locals are local stocks from foreign investors.So in the past, we were able to trace that real time, but now they're going toturn it into a daily basis turnover release.So that's going to be on par with international standards.That's what the authorities are saying.
But it would be a difference there asnot every fund will be able to watch the real time data.Of course, the stocks were rattled. They rallied after this announcementbecause the retail retailers in China have been wanting for this to happen, asthis has fueled some of that negativity in the real time data.So we'll be see how the equities react to that today.And, of course, we're also watching Biden's tariff woes as he has.Our US colleagues have reported on Friday that he is potentially going tobe releasing more of that tariffs on solar cells, makers or battery makersfor China.
Sort of we're watching video Seattle andlong a-shares. That was our reporter Sam Mitchellthere. And we'll have more to come on DAYBREAK.Australia or Asia, rather. This is Bloomberg. For Asia.Earnings spotlight shifting this week to China's Internet giants.Alibaba and Tencent could report single digit revenue growth last quarter,according to analysts estimates. Bloomberg Intelligence is also expectingslower first quarter ad growth for better and better margins for JD.com.Also be hearing from Japan's mega-banks.
This week as well.They could see a jump in their annual profits.And the one we're watching later on Monday.SoftBank will probably report trimmed losses as the vision funds return toprofit. I'd say SoftBank as a strongly growingbut misunderstood stock and therefore undervalued.Let's get more insight with it. Richard Kay is a portfolio manager atComcast Asset Management. Richard, tell us why you're constructiveon SoftBank. Thanks very much, Heidi.I think that the two great businesses.
That are driving SoftBank today are ALMsomething like 20% of organic profits and then the Japan businesses which arethe telecom business the Yahoo and the line combination and that's growingsomething like 16 17% in organic profit terms and a company that's growing asstrongly as that but is misunderstood and is trading on real organic priceearnings probably single digit low double digits is a very attractiveinvestment proposition. Everyone talks about the vision fund youtalked about just now. Vision fund is massively important, butit's very hard to assess the vision fund quarter to quarter.As you know, they mouth to mouth, they.
Mark to market their valuations on theend. On the investee companies, it's a littlebit hard to gauge the overall direction. Just from that.We think the vision fund is going to be a massive long term story for SoftBankbut those two core businesses are beat. AAM and the Japan businesses are reallythe drivers right now and they're driving a very stable visible profitgrowth for which you don't have to pay very much for this for this for thismisunderstood company in our view. It's interesting we've seen a US listedportfolio when it comes to vision fund shrink by $29 billion since the end of2021.
It's been sort of a series of quietsales and writedowns. The strategy has really pivoted tochips. And is it no is it sort of any wonder, Iguess, that perhaps SoftBank is misunderstood given this big pivot awayfrom the aggressive VC strategy? It's a great question.How do you think you and it is true that SoftBank has changed a little bit itsdirection. It's done that many times during itslife. Remember that the exits that it's madeon the vision fund, the actual cash exits have all been positive.It's got a positive return on those.
So so the investment track is very goodand the money that it's made, it's deploying in in slightly differentdirections, including what you mentioned just now, which is Arm's proposal toenter. And I justthat's not a totally different direction.I'm obviously is the major almost exclusive supplier of of chiparchitecture for for mobile and increasingly server and applications togo into making chips is slightly new but it looks like they'll be usingoutsourcing arrangements they will actually be buying semiconductorinfrastructure themselves.
It's a slightly new direction, it's anew tilts, but it brings together all of SoftBank's amazing resources, obviouslywith other companies in the semiconductor supply chain and the manyuses of that semiconductor technology, including potentially automated drivingand on its ride share services and of course energy through many through manyenergy related investments that it's made.Yes, there's something of a change of policy, but the fundamental idea ofinvesting massively and early in pioneering and changing platforms, thatfundamental idea has always defined SoftBank and define SoftBank.Today.
If you're saying SoftBank isundervalued, what do you think is the true value then that investors should beputting on the stock? And there are two ways to answer that,Annabel. I think that if you simply look at theprice earnings multiple and look at the comparable multiple for, say, Internetglobal makers and the growth that this company is giving, it could easily be atwo bagger. It's probably 50% undervalued right now.Another way to answer the question is to look at the net asset value and all ofthese things we're talking about. AAM division fund stakes and so on andon a net asset value basis SoftBank is.
Probably even more undervalued than whatI just said it's probably 60 70% undervalued.So it could be more than the two bagger. And again I say this is one of the mostmisunderstood large Japanese companies. It's growing fine even on visibleearnings it's it's under undervalued and then the potential in the vision fund,in our view, is very large including in this new and.Instances of potentially moving to semiconductors.How many other misunderstood companies or undervalued companies do you seeacross Japan's tech landscape? Well, a ton is the simple answer.We've got about a billion U.S.
Dollars worth of investments in Japan'ssemiconductor space. Companies that make chips.Companies that make the equipment that make chips.Make the materials that make chips. And of course, SoftBank, which has allof this exposure to the semiconductor supply chain.And that billion dollars that we hold worth of Japanese semiconductor stocks,things from laser tech to Tokyo Electron to China to chemical to Coke Electric,recently listed company in semiconductor equipment.We think that those things are all undervalued and misunderstood, partlybecause they're in Japan and people.
Don't realize perhaps that they areglobal major companies and that they're indispensable to the supply chain.That when Intel TSMC factories were in Columbus, Ohio, and Taiwan or inArizona. These companies are vital parts of ofthe design and the manufacture which these global companies are using.And so we think that that semiconductor space generally is a particularlyundervalued opportunity within the Japanese market.Stepping back a little bit, the Japanese market the last year or so has been ledvery much by by a few sectors like banks and commodities stocks and cheap yenplays.
We think the market is probably due forsomething of a leadership change. And the semiconductor stocksundervalued, misunderstood, could well be new leaders of the market into thenext phase of the market's appreciation. We we suggest.That was Richard Kay, portfolio manager at Commerce Asset Management.And let's actually think about who the market leadership is being driven by inChina. And that's very much the tech space.A lot of the moves of the run up we've seen in Chinese equities predicated onthe moves that we've had in big tech there as well, and Alibaba, Tencent,among those that are going to be.
Reporting their results on Tuesday.Let's get a preview from our tech reporter, Jianping Wang, who joins ushere in Hong Kong this morning. And Jianping, let's just start withAlibaba here. What are we expecting and probably aparticular focus on the eye front as well?Yeah, we have Alibaba and Tencent reporting on the same day in four years.So it would be exciting. I guess like investors will really becomparing their results side by side actually for sweeping reading theirresults as a barometer for the Chinese economy, which isn't doing so great.We have a couple of issues before.
Alibaba is the bottom line is theire-commerce. And then on top of that, I have madeit's a large language model, open source.That means more developers will be using their services.And actually it's a strategy mirroring Microsoft.When developers jumping on the platform, it will contribute more cloud revenuefor Alibaba. So yeah, I guess in Alibaba's case, thee-commerce will give us a sign where Chinese consumer spending are standing.And then on the cloud side, we'll see if we can like compete against other modelmakers like like Tencent and like Baidu.
Yeah.Tell us about what we're expecting for Tencent.And, you know, these two companies are really pretty major barometers for thebroader economic recovery story. Yeah, fortunes.And the growth is pretty much center around which the only one.Okay. We have a TEDTalk style short videofeeding we have and we have live shopping and mini games that willcontribute to their advertising and in-game purchases.And also because we is has this mini programecosystem and that's also a major part.
For Tencent's crawl revenue.So it's sort of like Tencent's growth. It's too much put to one egg and at thesame time Tencent's main gaming business isn't doing so great.Its gaming portfolio is Asia and we have on of kings and peak peacekeeper elite.These are all years old. And the executives told us last time thegaming revenue will really be picking up from Q2.That means in this past quarter we'll probably still see a sign of weakness intheir bread and butter division. My jumping, as you said, Tencent,Alibaba, first time we've seen them reporting on the same day in a number ofquarters.
All right.That was a tech reporter there. Wang in Hong Kong.We'll have more ahead on DAYBREAK. Asia, this is Bloomberg. All right.Quick check on some of the results of our latest MLive poll survey.And this one here taking a look at whether the yen is still a safe havencurrency. And you can see here the majority ofrespondents saying that no and and a little bit unsurprising, of course.And some of the respondents that we had to that survey really citing Japan'sultra easy monetary policy and that has.
Been really driving that big weaknesswe've seen of the Japanese yen this morning around that 156 level.So the dollar still seen as the best haven currency, Swiss franc as well,getting about 23% of the votes. Let's change along because where we arealso looking at in the survey is inflation hedges.And actually this one was more of the interesting findings.No, the majority is saying that large cap or big tech is not aneffective recession hedge. But still, you've got nearly 40% assaying that U.S. tech stocks not only a bet on possiblehedge, as I said, against price.
Pressures, but also, of course, thatbet, that traditional bet on innovation and really key to the U.S.tax base has been some of the moves we've seen in in chip stocks andsemiconductors in particular. It does come down to that race that wesee between major superpowers. And you've got the U.S., the EuropeanUnion, that funneled nearly $81 billion in producing into producing the nextgeneration of semiconductors. And it does escalate that globalslowdown with China for chip supremacy out.U.S. industrial policy reporter MackenzieHawkins joins us for more on today's big.
Take in Mackenzie.We've seen so much money coming through from fromthe U.S., from Europe, even. We had some announcements from Koreaover the weekend, Japan as well. How much does that stack up against thethe level and the size of the investment that's coming through from China?It's a great question. So a lot of these countries are reallyplaying catch up to decades of Chinese industrial policy in this space.We've estimated, based on estimates from the Semiconductor Industry Association,China is on track to invest $142 billion into CHIPMAKING.That's compared to 39 billion from the.
US, which is the most robust programthat we've seen from the West. So it's a lot of catch up.But where we are seeing investments into different types of technologies in theUS and the European Union, they're pursuing the most advancedsemiconductors while China is doubling down on older generation chips.How are we seeing the issue of export controls come into play here?So until 2019, when the US blacklisted Huawei while was actually catching up toits Western competitors on the most advanced chip design technology.But with that initial sanction and then US sanctions on Huawei's chip makerSmic, and then sweeping export controls.
That were initially implemented in 2022and have ratcheted up over the past couple of years, that's really haltedChina almost in its tracks on producing the most advanced chips.And so the response that you've seen from Beijing is one to double down onstate aid to its prized technology companies, but to to focus on the areaswhere they can win. And in this case, that's an oldergeneration, semiconductors sometimes called legacy chips that are stillessential commodities, chips that go into every piece of technology you canthink of. And there's actually worry now from theUS and the European Union that China.
Will produce so many of those chips.They have the most chip plants set to open of any country in the world overthe next couple of years that that could create a glut.A US industrial policy reporter Mackenzie Hawkins on our Big Take.Let's take a look at how futures are setting up.This is a picture when it comes to trading in the U.S.Of course, it was a pretty lackluster end to Wall Street session that consumerconfidence, the consumer numbers, I should say, as well as that reallysetting up for expectations of inflation data out this week will really kind ofdetermine which direction this market.
Goes in.Actually looking pretty flat at the moment.We see tax futures up about 7/10 of 1% for the China.Futures also not doing very much. Of course, we're still reallypercolating through the disappointing credit data that we had from China overthe weekend. China trading pretty steady at thispoint. That is it for DAYBREAK.Asia. The China show is next.
