This is DAYBREAK.Asia. We're counting down to major marketopens just a few seconds out from the start of trade for Japan and SouthKorea. But pull the attention.So much going to be focused not only on what happens in Tokyo with the DOJ, butalso there's an attention really coming down to China's markets.And we saw the season 300 hitting a five year low in the prior session.Yeah, that's right. It wasn't just the CSI 300 either.As stocks in Hong Kong also taking a beating.The Hang Seng fell below 15,000 points.
On Monday.This is a level that we haven't seen since way back in 1997 and the handover.So we've heard from China's premier Li Keqiang, calling for forceful measuresto address this noble And just one of the reasons that we'veactually seen a lot of investors pivoting away into Japanese markets andwe've seen that Nikkei rising nearly 10% over the course of this year alone.Part of that also coming down to what's been a very dovish BOJ.And today we do have a decision due in the next few hours now and theexpectation from all the economists we serve and we've got Steve there on theground.
Steve Engels, I won't get through thedetails but is for a hold. No change is expected.But the messaging that we get from Governor Awada is going to be reallycrucial to watch as well what he signals around inflation and where the pricepressures are starting to take hold in a sustainable manner.So that's the start of trade here that we're seeing for stocks.We've got the Japanese yen continuing to hold at that one.48 marks a bit of weakness. Something else that's been helping theexporters, some of the stocks are watching in the session today.Well, Sony is going to be one of those.
So we do see that trading online just alittle bit higher so far. Yesterday, the big news was Sonyofficially called off its planned 0 billion merger with Zee Entertainment inIndia. They are actually seeking $90 million ofa breakup fee. But it's been two years that we'vetracked of drama and delay in that deal, but not going ahead.Let's change now. Take a look at what's happening in Koreato start the day. That focus is going to be also what camethrough in the Wall Street session. So we saw further gains for US stocks.Investors really focusing on economic.
Resilience.Also the outlook for earnings over this coming week.Magnificent seven one to watch, tech stocks continuing to push ice.The Nasdaq futures there fairly flat. We are seeing some gains coming throughfor the course, be the Korean one, fairly steady there.Something else that does have a bearing on the outlook for Korean equities isalso the the health of its major trading partners.China, of course, one of those. And we have seen, as we said, thatbenchmark there slumping to a five year low.And policymakers as well in China really.
Trying to stem that slide, promisingsome sort of policies to do so, pull. But certainly China's economic health,something that weighs on Australia, too. Yeah, very much so.Although we've got a reasonable optimism on the ASX today and even the materialssector, which is so reliant on China, as you say, in positive territory, thebroader ASX up by almost half of 1% and materials are doing okay today, betterby 4/10 of 1%, just a couple of sectors in the red there we are seeing theAussie dollar. Well, the slipped off the pace a littlebit. It was just below $0.66.US yesterday has eased off a little.
More.Yields have been gradually falling as well.Crude's an interesting one, 7462 for a barrel of New York crude at the moment.Now the number of ships passing through that strait between the Horn of Africaand Yemen continues to decline. Fun fact that strait is called thebubble Mandeb Strait roughly translates to the gate of grief.How appropriate. So we've got yields falling inAustralia. As I mentioned, if we take a look at USyields as well, the ten year also pulling back some of that from some ofthose highs that we saw towards the end.
Of the week.We did hear from Bill GROSS a little bit earlier on the PIMCO co-founder.He's saying, look, the Fed shouldn't keep policy restrictive for too long orcould end up in a recession and about. Yeah.And that pull back is something that's perhaps taking a little bit of pressureoff the BOJ as well because they are expected to keep their main monetarypolicy settings steady later on Tuesday. Is that decision, as we said, just a fewhours away now? Our chief North Asia correspondent,Stephen Engle is outside the BOJ headquarters in Tokyo.So, Steve, as we said, nobody really.
Expecting a change today, but we couldget something in the inflation outlook possibly.Yeah, that's right. That's what the nikkei is reporting thismorning, that the boj could revise its outlook for fiscal year 24, which startsin April and fiscal year 25, which of course is the following year.On the CPI front, right now, the forecasts are for 2.8% growth in CPI forfiscal year 2024 and 1.7% for 2025. So a drop off is expected.However, the Nikkei reporting that they believe in this review could upgrade itsinflation forecast for 2025 fiscal year to 2%.So from 1.7 to 2%, that would be an.
Interesting indication of the BOJ'sassessment that inflation, you know, higher inflation is potentiallysustainable. Keep in mind, Japan's inflation hasstayed above the BOJ's 2% goal since April of 2022.And yet, Governor, you and the other board members here at the DOJ are stilla bit cautious. Most economists feel that conditionsright now, the inflationary conditions and the economic growth conditionsindicate that they could hike right now, come out of negative interest rates forthe first time since 2007. But again, the doves sort of outweighthe hawks on the BOJ right now.
In fact, the six board members, two vicegovernors and the governor all lean on the side of dovish on this becauseagain, they don't want the political blowback of basically dialing backstimulus too early like it like we've seen in the past.And right now I guess the signs are not indicating sustainable inflation justyet. And what we have to look for is wagegains because the center, which is the annual wage negotiations betweencompanies and the unions, start in March, They should be concluded byApril. And if there is a significant hike inwages, that is a precursor for raising.
Interest rates at the DOJ.So we'll watch for that again. So that's why most economists areexpecting and the April exit from negative rates.And that would also, you know, 34 out of 50 economists surveyed by Bloombergexpect April to happen, out of 45 out of 50 expect for sure by July.Yeah, that's right, Steve. We do have a chart that illustratesthose expectations and pretty heavily weighted towards April.But if we think about July, why is that sort of considered as an option B interms of going for a hike? Yeah.Beyond July might be a little bit too.
Hard to predict right now, but most sayit's going to happen before July because any time after that would probably Imean, all signs are indicating that the ECB and Fed will likely cut by midyearor thereabouts. So the Bank of Japan would like to seethemselves hike before the other two big central banks start cutting.And keep in mind, you know why way April looks interesting is, you know, there'sthere's been pressure on the households of Japan right now, and that's why we'renot seeing it in the first couple of months of this year coming out ofnegative interest rates. The households essentially have seentheir pricing power weaken considerably,.
Whether it's due to higher, you know,input costs because of energy costs have gone up their their real pricing power,their real wages have gone down. So until they start seeing a hike inwages, they're going to kind of continue with this catharsis mentality, keepingtheir money under the mattress. So, again, the BOJ is likely to remaincautious for now. But then again, as we get those wagenegotiations going by the end of by April, we could start seeing hikes.All right. Chief North Asia correspondent StephenEngel there at the BOJ headquarters in Tokyo awaiting that decision.Well, the annual Goldman Sachs Global.
Macro Conference is underway in HongKong. Let's get back to the event where ourmarkets co-anchor Yvonne Man standing by with our next guest.Yvonne. Yeah.Paul, You know, there's a lot to talk about, including Japan, but I want totake a ten mo go ahead of Asia macro research and chief apex equitystrategist joining us here in Hong Kong. Tim, it's good to be here back here athome. All right.I want to get to Japan in a minute, but really, we've got to talk about the selloff in China.
It seems like there's this whole renewedintense selling here right now. Are you seeing signs of panic?What's going on? Well, there's definitely signs of acapitulation event. And I think that there are a couple ofthings that explain it. One is, I think there's a clearrecognition that China is facing significant structural challenges.Those are, I'm sure, well known, but they're, I guess, broadly more inconcern, concerns over the property market, over dad, over demographics,over slowing growth and so forth. There's also been concern that there hasnot been as forceful a policy response.
As people have been hoping for.And so there's been this progressive slide in the market punctuated byoccasional rallies. But when the actual policy, which hasbeen hinted at, doesn't fully come through, then people have been sellingthat. And then the last thing I'd say is thatthere are some technical factors in the market now which particularly this lastweek or so, have been exacerbating the downturn, and that's that there's avariety of derivative structures, retail snowballs and so forth.And we're hitting knock in levels where the hedges against that have have to beunwound.
So there's some for selling in themarket and I think that's yeah, and people know about that.So either the selling itself or the recognition that that selling is to comehas caused the market to come down even further.You take a look at a Hang Seng right now, the sub 15,000, I mean we're backto handover levels, correct valuations, I think everything is below 0.9 book.Right. Are we reaching a bottom evaluation?Well, I think we certainly are. If you have any contrarian inclination.The the the bells have to be ringing and just to put some numbers on that.So the we look at the MSCI China Index,.
It's the broader, I think morerepresentative and index, but it overlaps with Hang Seng quitesignificant. So that's down 62% from its February 22and high as of last night's close, we were at 7.9 times consensus forwardearnings to benchmark that were 18.3 times at the peak in February 2021.And the low just before the 55% reopening rally was 8.1.So even below with the reopening evaluation terms with the reopening lowwas. So I think we're at levels where themarket is pricing in a great deal of distress.And that suggests to us that there.
Should at least be a chance for somesort of contrarian or even if it's a bear market rally, it could be asignificant one that could become a neutralized.You're on your underweight in Hong Kong. Correct.And now you're still overweight. A-shares A-shares.And we were more cautious on the A-shares.We've been differentiating between those two and H What at what point does thisbecome somewhat problematic? Is this systemic in some ways, right?And what needs to change? Right?Is it still figure stimulus that's going.
To arrest these declines?Well, so we just put out a paper this morning thinking about or addressing thequestion of what would be needed in order to turn the market around.And there's a lot of different areas you can talk about for to put it all intosort of more manageable buckets. I think three large categories.One, I think there needs to be a more sufficient policy response, but not justdiscussion of that, but also implementation.And the market right now is in a mode where there's been a lot of promising ofpolicy action or indications of that, but not as much delivery on it.And so I think the psychology is one of.
You could call it show me the money.You have to show me the evidence of that.I think the best evidence would be actual monthly economic data indicatingthat there is some bottoming or stabilization in terms of overalleconomy. And that could either be through supplyside actions or demand side stimulus or some sort of policy response is numberone. Number two, we're right into thereporting season. I think the delivery of corporateprofits is going to be important because if underlying profits can come throughat these valuations, then sentiment may.
Stabilize.Yeah. And thirdly, I think that the politicalrhetoric or the political news flow probably needs to come down somewhat.I think there is market concern of a renewed intensification ofanti-corruption and so forth, and I think that is also causing some distressamong market investors. You mentioned earnings.I think MSCI China earnings projections for this year are around quitemid-to-high teens. Is that ambitious, do you think?Right now? Very ambitious.So there's good and bad news here.
But the bad news is that the consensusis looking for 16% EPS growth for MSCI for 2020.For this year, we're at eight. So there's a biggest gap between ournumbers and consensus. So that suggests there still is a roundof downgrades that have to come. The better news, I was just in Europelast week seeing a number of investors is that I think the buy side, theinvestors are either at our numbers or even a bit lower.So I don't think that the downgrades will be as market injurious as you mightotherwise think. I think that I think that's been prettymuch priced.
Obviously.We mentioned about this intra regional disparity where North Asia has donewell. China, Thailand, on the other side ofthis. Does that continue in terms of whatyou're hearing, in terms of foreign investor sentiment?For sure. And just to put some numbers, though,the MSCI index, the MSCI Asia Pacific Ex Japan index was up 5% for 2023.Underneath the surface, there was a 35 percentage point difference between thebest performing markets Taiwan, Japan, Korea and so on, and the worstperforming, which are Hong Kong, China.
And Thailand.And interestingly, that's carried through just in the first three weeks ofthis year where China is down 10 to 12 and Japan in local currencies up six,seven and in dollars up three. So 50% if you keeping score dollars 15%in the first three weeks of the year. Phenomenal.Right. So really the point we're making is thatunder the surface of the broad index, there's a lot of alpha anddifferentiation opportunity that could reverse.But the point is you need to play the game under the surface as opposed tojust passively investing in the region.
As a whole.Okay. Favorite market here right now before wego in Japan, Korea, India, I'll give you three is those.Japan is the is the bottom up corporate change story.India, structural growth. Korea is the best cyclical recovery inthe region. Short, simple, short, simple.Tim, always great to have you back. Tim Moe, co-head of Asia Macro researchat Goldman Sachs, joining us here at the Global Macro Conference at the FourSeasons Hotel Bellevue. Thanks, Mona.We're going to have more interviews from.
The Global Sachs Goldman Sachs GlobalMacro Conference later this hour. We're going to be previewing theupcoming DOJ decision with the former DOJ research chief, Takashi Tanaka SuKeenan. Up next, the countdown to Tuesday's NewHampshire primary and whether Nikki Haley can make up any ground on therunaway Republican frontrunner, Donald Trump.We're live to Manchester, next. This is Bloomberg. The race for the Republican presidentialnomination heads to New Hampshire on Tuesday.It's a test for former U.N.
Ambassador Nikki Haley, who is lookingto establish herself as a viable alternative to frontrunner Donald Trump.Bloomberg's political news director, Jodi Schneider, joins us now fromManchester. Jodi, it's been really interesting towatch these polls in the lead up, because if anything, it seems like NikkiHaley has lost ground in this. So does that mean that she really didn'ttake any voters away when Ron DeSantis left the race entirely?Yeah, well, we won't know that until the voting tomorrow.However, it does look like Ron Desantis's exit from the race does notreally help Nikki Haley.
He was.He endorsed former President Trump right away, and he wasn't polling too well inNew Hampshire anyway at about 6%. And it's unclear if that will go to her.But given that he endorsed former President Trump, it's unlikely thathelps her. Her real case that she has been makingis to more independent voters. And in New Hampshire, about 40% ofvoters meet that criteria. So it's looking like Donald Trump willget most of the Republican voters. But can she kind of score withindependents? That's really the question.And if she can, she might be able to.
Come in a strong second, which willraise the question as to whether she should stay in the race.But if she doesn't, if it's a weak second to Donald Trump, it's really hardfor her to make the case that she should stay in this contest.Yeah, that's an interesting decision, because the next major primary afterthis is South Carolina, which is Nikki Haley's home turf.What are the implications if she doesn't win in New Hampshire and then headsthere? Yeah, well, beyond the embarrassment ofthat, there's the question of spending time and energy in a race you you'reunlikely to win.
And Donald Trump is ahead now there evenbefore whatever happens in New Hampshire.So it's really a tough situation for her.We'll see how she does tomorrow. You know, New Hampshire famously saysthat they are they they zig zag, that they do the unexpected.But unless she does very, very well tomorrow, there there really does seemlike there's this inevitable sense that Donald Trump is working his way veryswiftly to the nomination, the Republican nomination, and it will be amatchup again of 2020. So how much runway really does NikkiHaley have left then to try and convince.
Voters that she should be the one?Yeah, well, she's certainly been crisscrossing the state.She made an early pitch in New Hampshire.This was a state that she spent a lot of time in, a lot of energy, a lot ofmoney. She's, you know, still running thoseads. She's really made a strong case here.But the question is, you know, she wanted it to be a two person race.She wanted to be running just against Donald Trump.But his machine and his is really seeming to really have tied up thoseRepublican voters.
That Republican vote here makes it verydifficult for her. So we'll find out tomorrow.The polls open early in the morning. They close at 8:00.The AP says it will not predict and will not give a winner, willnot call a winner until all the polls are closed.All right. Bloomberg's political news director,Jodi Schneider in New Hampshire. Well, the US and the UK say they'veattacked a further eight who key targets in Yemen as the group continues toharass commercial shipping in the Red Sea.So let's get the latest from our.
Managing editor for breaking news inSouth Asia, Derek Wallbank. Derek, sincethe United States and Britain started targeting the Houthi rebels, how is thesituation for shipping changed in the Red Sea?Better, worse or all the same? Well, I think, Paul, the shippingsituation is the container in commercial shipping was trying to avoid the area.They're trying to still avoid the area going round Africa.That adds, Miles, that adds delays. That adds expense.So for the shippers, I don't think that the situation has meaningfully changed.It has made them maybe even more.
Resolute to avoid the area.Overall, the US is trying to find a solution to deescalate here to get theHouthis to stop launching attacks, to put in place pressure on Iran becauseIran has a lot of sway with with with these folks to get them to try and andde-escalate the situation. But right now, it's candidly, it's alittle bit of a mess. And and there's not a really obvious offramp on the table right nowas we go along. Now, all of this is sort of linked alittle bit to the to the Israel-Hamas war.And so one of the things that I'm.
Looking for here, Paul, is this sort ofif that's causally linked, as the Houthis have said, that it is,it can some resolution or some de-escalation in that conflict maybeprove to be a pathway for a de-escalation in the Red Sea?And then when it comes to de-escalation, I mean, we're sort of gettingconflicting reports here because we're hearing that Israel's deepening itsoffensive into Gaza. But then at the same time, Axios issaying that we could have possibly a path to a pause in the fighting as well.Yeah. Annabel, I think those those two thingsare really interesting and I do think.
They can live together in harmony in theimagination. Essentially what actually has to stop.Reporter Barack Ravid is reporting. Is that is that the Israelis haveoffered a deal that would be about a two month suspension of hostilities inexchange for every single one of the hostages being released over time.That's all the ones who are alive, as well as the bodies of the bodies ofthose who are no longer alive. There would be some exchange.There are some some Palestinian prisoners released potentially as partof that deal. But there has been escalating pressureon Israel, not least of which from the.
United States, to try and find adifferent pathway here. The idea used top diplomat Josep Borrellcame out and said just the other day that Israel is is not succeeding in itsobjectives, but rather it is, quote, seeding hate for years to go for yearsto come. And I think there is a real concern herethat the longer this goes on, the more intractable this becomes.Now, one of the things that I think I'm also interested here, you know, there'sa lot of internal Israeli politics going on.And one of the things that some of these folks on the side have has stressed isthat a full resolution needs to come.
With a path to a two state solution.And that is that is a very complicated thing, to say the least.All right. Thanks for your time.That was our managing editor for breaking news in South Asia, DerekMillbank there. Plenty more to come on DAYBREAK.Asia. This is Bloomberg. You're watching DAYBREAK Asia.A quick check on how currencies are faring so far in the session.A bit of dollar strength coming through against most of its G10 peers.But tracking that Japanese yen very.
Closely here because we're within ¥2 nowof 150, that's a level that we last saw back in November last year, certainlyraising the risk of any sort of intervention from Japanese authorities.But ahead, we're back to the Goldman Sachs Global Macro Conference in HongKong to discuss the outlook for the BOJ decision later today. Correct.I've got some breaking data out of Australia at the moment as businessconfidence numbers from the National Australia Bank for the month ofDecember. And we're seeing a bit of an improvementin business confidence rising seven.
Points to negative one.So we're still in contractionary territory.Business conditions, meanwhile, did slip by seven points to minus two.National Australia Bank saying that declining conditions led bymanufacturing and construction conditions remained weak in retail butelevated in services sector. But clear signs of further easing ininput cost pressures in the month as well.So an improvement in business confidence still in negative territory, though.Business conditions slipping a little bit in December.But the Aussie dollar, they're still.
Trading about 65 three quarters cents.First, the greenback. Billand Paul taking a look as well as what's happening in other currencies in Asia,because the Japanese yen really the one to be watching here today, we've seen itreally weakening. It's the worst performer formingcurrency so far this year, losing ground, of course, with that focus onthe BOJ staying dovish, then that decision due in just a couple of hours.No change is expected to the negative interest rate nor to its yield curvecontrol program. But but certainly one to be watching interms of the messaging that we get out.
Japanese equities, we're continuing tosee them push higher here. So up around half a percent.But something to note as well as just a bit of a a changing of the guard ofsorts, because we've seen Toyota now passing ten cent to become Asia's thirdlargest stock. We have not seen that since 2016.So it tells you not just how much investors are moving away from Chineseassets, but into Japanese ones in turn. And that, again, is a focus today.The annual Goldman Sachs Global Macro conference that's underway in Hong Kong.Let's cross back to the event where our markets co-anchor, Ron Man is standingby with our next guest Want.
Yup.It is really about the BOJ in the next few hours.Val. With me now is to talk us again aprofessor of economics at Joseph Massey University.He also previously served as the research chief at the Bank of Japan.So she's with us on. Thank you so much for joining us.I know every economist that we talk to at Bloomberg thinks that they're notgoing to do anything today. But what do you want to hear from theBOJ at this meeting? Okay.Yeah, Well, I think that so what we.
Would like to confirm that so that asfar as economic fundamentals are concerned, that's so.Well, the things are going so exactly or quite closely to what the huge effect.So that mean that so. Well, let me just explain one by one.First of all, as far as economic fundamentals are concerned, my judgmentis even this time in genuine meeting, the BOJ can lift the negative interestrate policy. So that is my judgment.This is a just my judgment looked at the judgment today.Yeah, even today. But given that so high command centerjunk associated with the US quake or.
Political scandal, I guess kind ofthing, I think that's. Well, at least as I need to agree that'sstill with the market in a sense that so this may not be a good time to changethe monetary policy. But that said that so.Well, if you think about it. So what do they happen to the next then?Then we would like to confirm this. As far as the fundamentals areconcerned, it is going so toward the direction what the DOJ is looking at.So so that sort of thing. I would like to to confirm with today'smonetary policy, you have seen economically, you're sayingfundamentals, whether it's inflation,.
You think that we've reached that pointwhere they could actually move. Are we really seeing sustainableinflation now? Well, I would say that's a well, ofcourse, as no one can say, that's what would happen in the future.Of course, that said that. So I just find that.So the data's so far we have seen in in the Japanese data that so I think that'sthe inflation dynamics seem to be changing quite dramatically from what Iused to see in the in my long career. It's a huge.So since the early 1990, I would say. So let me just give you a summaryexample, for instance.
So if you look at the sets of the coreCPI measure, excluding not fresh food and energy, excluding just as usual inthe other country, just excluding food, and then as a complement, the Decemberreading of that, that core measure of the CPI is 2.8% year on year, which isaccelerated from 2.7% in November. So contrary to the the 40% that so wellenergy component went up and coming down like this and the headline CPI, thiskind of thing is going up and going down.But if you just looking at the core measure, which is just like excludingthis water item, which is going up like this and also that.So I want to throw out one more example.
Is which yeah, so the there is variousways component there. But if you look at the the the mostimportant part of the wage component is Nikita's about Gazzaniga spinning Nikkeias well because of his statement which is mean that so there is no bonuspayment on this kind of thing and that is, well, that is kind of subject to theShinto spring in the region. Investors are saying, I was going to getto that, but but that number itself is already coming up to the 2% year onyear. Okay.It used to be to about 1% or something like that.So it went up to the 2% that I mean,.
That does seem to be changing.So just to the Mexican point of view, which is that real, real wages haven'tpicked up. In terms of the Shinto, though, whatsort of wage growth we need to see in order to secure that sustainable 2%inflation. Are we going to see better outcome thisyear in Shinto than last? Yeah, well, I would say that, so I don'thave exact number to be honest. And also that the DOJmay not have that exact number because, well, Shinto negotiation is also subjectto a lot of sins. Okay.And and.
And what they are looking at is what Isaid, in fact, so as well as Spain. That part is well, and you can check.Yes, that component is going that is quite important.But that said, that's as you said, it's still 2%.This to be quite efficient is 2.8%. That means India, which is stilldeclining. So maybe at some point of time.So this so well, because really, I mean, you can see I want to go up a little bitmore. And in order to see that so farcomponent of the CPI. So it seems like economists are bettingit's April that this is enough time for.
The DOJ to decide, look at the data andsay this is the time after Shanto to to normalize it.Are you now in the April camp? Well, I see.As I say, that's that is so because of the political scandal ask itself and myanswer patient is well WJ has a good picture already so based on myexperience in the BOJ. So while we have a lot of show businessanecdote and that's sort of the thing that has already been disclosing assetsas the regional economic report of this kind of thing.So that's sort of a lot of anecdotes suggest that.So labor market is really tightening.
Still so and and and there is some sortof indication that so well big funds at least try to increase their wage.Is there a risk of if the Fed's going to start cutting rates this year and theBank of Japan hikes rates, Is there a risk to the economy in any way?So you mean that. So if you that the BOJ lifted and theFed cuts at around the same time, how big a risk would that be?So I don't see any big risk. So so the Fed itself is so and doingtheir business. Yes.Yes. In accordance with the US economydevelopment and the Japanese is just.
Reacting to the Japanese inflation rateon that. So it's fine.But if I may add, one more thing is ifthat's that fed to loosening of the monetary policy is associated with quitesharp contraction of the US economy, then the story is quite different, ofcourse. But if it's in the ordering manner, Iwouldn't say that there is a big risk over there.You've worked at the DOJ for three decades, and so you said you workedclosely with the White House on two before he became governor.What do you think?.
How would you describe his leadershipstyle? And, you know, is there a need to kindof revamp the communication strategy around the central bank?I think that so he has done very good jobs already.So one thing that he has done already is I think that so he has articulated that.So policy, the action function of the Bank of Japan, that is really important.So so he wanted to say that so well, for instance.So he said that so well, he's taking information.So we come to a language that nutritiontargets and and the near economic.
Forecast itself is already there.Then he said that so inflation target is already achieved if this forecast ismaterialized. But what he said is he's not confident,you know, that's it. So but I think that's in thiscommunication style. He has really got to create that.So what's DOJ is thinking? But I must say, one more thing here is,well, he is a typical two hands economist to hand them The economist.I mean, that's he always mentioned that. So on the one hand, blah, blah, blah, onthe other hand, blah, blah, blah. And at the end of the day, you cannotunderstand what he is saying.
But this is his communication stylebecause he is really thinking about life is quite complicated.So, so, so as like, well, I'm going to need to do is have both had.Yeah. So it doesn't mean that so he's notshopping he's saying that so I'm going to do this or that you need to beaccustom with his communication style is always clutch his position until thelast minute and that is his communication.But he is doing a very good job at sort of behind me.So that is quite an important element. And the market minister meeting.So that is my point.
But you talk a lot.Thank you so much for joining us, especially that guy's a former reservechief at the Bank of Japan, talking about what he thinks the DOJ is going todo maybe the next day, today or the next few months, though.BELL But certainly, he says in terms of fundamentals, DOJ is ready.Yeah, it seems like everything's really set in place to to pivot away fromnegative policy settings, but a lot of focus on that decision later today.We're going to have more insights as well from the Goldman Sachs Global MacroConference throughout the day, including a conversation next hour with the bank'schief China economist.
Now, that is obviously going to bereally one to tune into given that huge amount of pessimism we're continuing tosee in Chinese equities. And yesterday, the moves in the sell offjust really extended in the session. So this chart here taking a look at theseason 301, tracking back at levels that we have not seen for that benchmark infive years. And everything is really just pointingto a very battered, battered market there.You've got nearly half of the members on that trading at a 52 week low.Now, it's not just the season 300 or mainland equities.Sometimes it can be more indicative of.
What's happening in the Hong Kong marketas well. And we actually see the RSI falling backbelow 15,000. That is a level we haven't seen sincethe 1997 handover happened in the city. So we're at 17,000 at the beginning ofthe year. We're now below 15,000 a touch.So it's a 12% sell off in less than a month.Really, really incredible moves. Let's get a preview now of the Chinesemarket open today, see if we can see any sort of sentiment shift.But our Asia stocks reporter Gina Yu is joining us.So, Jenny, we were just discussing there.
Really, you're saying a lot of that selloff yesterday that didn't seem to exacerbate is coming more down to asnowball derivatives talk us. Why do you think that is?And also just a bit of context on what those derivatives are, those structureproducts. Yeah, sure.So in general, as you mentioned, we do those concerns about the problems inChina have been persisting. But yesterday, the reason why we seesuch a drastic sell off suddenly I guess it's more like on the technical front inparticular for Asia, is there were I think there were about like ¥200 billionof us know what you were motives and a.
Lot of those snowboard derivatives weretied to a knocking level, which is around to the level we've seenyesterday. So that means like once the indexdropped below that level, like many issuers of those derivatives, they haveto sell their holdings around that level in term to to maintain a doubt deltahedging in their portfolio. So that's why like yesterday we see adrastic sell off of a lot of, for example, like CSI 500 small cap indexderivatives and also CSI 1000, which is a broader gauging the Asia.And also this is on the Asian market. Then for Hong Kong, we are also at avery critical technical level, which, as.
I mentioned, is the is the is the lowestsince. There hand over.And also we're about to wipe out the the gains since the opening last October.So I think a lot of structure products in China have been tied to this level aswell. So when the index approached this level,there was there was a lot of unwinding of some of those products happening inthe markets. So I guess like, you know, those factorsin both China and Hong Kong have, you know, accelerated the selling yesterdayand it's not the end yet. So we're not sure like how far this cango.
So, yeah, so let's see.So I guess for the market to turn around, we need very decisive easingpackage. We need backstop from Beijing to reallytry to solve the problem in the property market slump, credit, credit risk, andalso give confidence to investors in the stock markets.Those stuff doesn't really come easy. So.But what about though? I'm interested because.Because I think besides what investors are really looking for, which is somesort of stimulus from China. What about also just the generalattractiveness of of other Asian markets.
Because we're seeing those inflows intointo India, into Japan, into Korea. What can it be about China or Hong Kongthat actually brings investors back in, especially when you still have centralbanks like the Fed saying higher for longer?Yeah, Yeah, you made a very good point. So for a lot of like Asian managers whenthey're looking at this region. So I guess most of the market as most ofthe investors there, they're kind of really on the way to China.And also you feel compare the market cap between Hong Kong and India.India is about to surpass Hong Kong to become, you know, a larger equity marketby market value.
So in that sense, I don't think, youknow, investors there are coming back to China unless like a we've seen a strong,very strong easing signal, like a very clear clue of also rebound for theeconomy. So I guess before those happens, thingswould have really come back to this market just because of valuation.I guess like for Japan and India markets, when we talk to investors,they're still really bullish. You know, for Japan, they have reallygood corporate governance reform. They have a lot of things going on topush out the market for India, like they have strong earnings growth and a lotof, you know, stocks, they're enjoying.
The valuation for for high growthcompanies. So, yeah, those things at the momentcan't be found in the China market. So, okay, so only one to be watchingwhat we see in the trading activity today, about 40 minutes away from theopen now. That was our Asia stocks.Reporter Gina, you joining us. But up next, our exclusive interviewwith the singapore exchange ceo lo boon chai on the outlook for trading in asia.This is bloomberg. The CEO of the Singapore Exchange sayshe's expecting more robust trading activity once global rates normalize.Logan Chai also told us that Southeast.
Asia's unicorns should consider comingto the market as conditions improve in Southeast Asia.Ten years ago, we hardly had a few unicorns.Part of the ideal stories is of supply. Today, the Southeast Asia boasts ofeight 100 unicorns, and with market conditions, more conducive companieswill come to the market. Coupled with the fact that we do have avery effective single point of access into Asia, that is country leadingglobal growth, that allows participants to obviously trade the whole of Asia tothe next group. So who do you think right now is yourbiggest rival?.
I know you're trying to get businessfrom at the Hong Kong Stock Exchange. What about the LSC here in London?Has Brexit changed the appetite, I guess, for for listing in the UK?And can you take advantage of this call to do this as an exchange forSingapore exchange group? We probably have more collaborationswith many other exchanges, as many other marketplaces than any other group in theworld. Our deposit receipt with Thailand mobilecome in with the other markets. Connectivity with China, and I thinkexchanges are probably better by collaborating to create a biggermarketplace.
You must be in a rivalry, though, right?I mean, if you look at London, you think do you think Brexit has changed Londonlistings? Well, London has historicalsignificance, obviously, strategic geographical location, coupled with anenduring resilience. I'm sure over time you will have a newmodel of economic growth and London remains a very modern capital markets.Treasury income actually gave a big boost to your 2023 fiscal year earnings,thanks to higher interest rates. What are you expecting for this year asinterest rates go down? We are very devastated.Business model.
So as rates normalize over the next 1224months trading activity, I think in particular the stock market willprobably increase, coupled with the fact that Asia continues to lead the growth.There will be flows of financial flows into Asia.Singapore Exchange CEO Lee Boon Chai there speaking with Bloomberg's FrancineLacqua. Now you can watch it live and you cansee our past interviews on our interactive TV function.TV go. And there you can also dive into any ofthe securities or Bloomberg functions that we talk about.And you can become part of the.
Conversation by sending us instantmessages during our shows. This is for Bloomberg subscribers only.Check it out of TV. Go.This is Bloomberg. You're watching DAYBREAK.We're just going to look crossing the Bloomberg terminal now coming from theissuer of the largest onshore ETF tracking the Japanese market in mainlandChina. So this is the China AMC, Nomura Nikkei,2 to 5 ETF. You can see here we have seen thatpremium absolutely surging on this share price there.And we have actually seen it really.
Trading at a substantial premium in thesecondary market, significantly higher than the reference net value of fundshares. It really just tells you it's anothersignal really of just the level of pessimism in mainland equities thatinvestors are really clambering for alternative options.And we have seen Japan really being a preferred stock market.But investors, of course, are they invest blindly, this sort of thing.They could suffer serious consequences for that.And that's what's really prompting perhaps that warning of the risks inthis Japan ETF, given that premium, as I.
Said, to the underlying net assets, sothat Nomura Nikkei 2 to 5 ETF is now in a trading halt.It's been suspended from trading until 10:30 a.m.local time. Of course, that's one hour after thestart of trade. But certainly something we're watchingthat given, Paul, just the level of pessimism coming through in mainlineequities. Again, this is just another signal ofthat. You know, most definitely.And it's quite staggering what we're seeing in China and Hong Kong, theextent of the sell off there, just so.
Many superlatives, the CSI 300 taking afive year low on Monday. And we hear from the Premier Li Chang,saying, well, forceful measures are going to be needed.It almost feels like the stage might be set again for the national team, but theHang Seng really getting beaten up as well, falling below 15,000 points onMonday. We're back at levels that we haven'tseen from way back in 1997 and the handover bell and a new a new thing toconsider today as well. Snowball derivatives.Yes, certainly those structure products, one of the key things is beingattributed to to the market rout and.
That extended selling in this sessionyesterday. Of course, there's Hong Kong.We can track that because we're back below the 1500 mark or 15,000, rather.We haven't seen that since 1997 at the time of the handover.We're at 17,000 at the beginning of the year.So you're talking about a more than 10% drop in Hong Kong equities just thisyear alone. A lot of investors really not seeing anysort of reason to get back into the market either at this point, given we'vestill seen Beijing very reluctant to push through any sort of large scalestimulus.
So Hong Kong markets opening in abouthalf an hour's time from now. Yeah, that's right.It will be an interesting one to watch for.Of 12% so far in less than a month. Have we reached the bottom?Well, I guess we're going to find out in about 34 minutes.And that is it from DAYBREAK. Asia markets coverage continues as welook ahead to the start of trade in Hong Kong, Shanghai and Shenzhen.
