Bloomberg Markets: Asia 02/26/2024

Good Monday morning from the AsiaPacific. It's almost 10 a.m.in Hong Kong and in Singapore, 11 a.m. if you're watching, is out of Tokyo.Welcome to Bloomberg Markets Asia. I'm David Inglés with Yvonne Man.Our top stories this morning. Asian stocks swaying as traders bracefor a flood of economic data this week. Investors watching of the CSI 300 canmark its 10th day of gains in a surprise move And group outbid Citadel Securitiesfor Credit Suisse's investment bank venture in China.And China hits back at the U.S. over Washington's latest report onBeijing's WTO compliance, just as the.

Block prepares to meet in Abu Dhabi.Welcome to the show. Monday morning, the price action lookinglike this across region equity markets. Just keep in mind we're coming off fiveweeks of gains on the benchmark. On the benchmark itself, we're stillhigher for the day. That's down to really some names over inJapan, a lot in Australia. But as you can see, since the ChineseChinese markets opened up 4/10 of 1%. Case in point, vitamin four screens,we've come off highs of the day. In fact, just on that very note here,let's flip the boards, please. Shanghai COP, CSI 303,000 above that onFriday, a little bit below that bottom.

Of your screen test coming up.There we go to nine, nine, seven. We've also come off the highs on the ASX200, which at these levels is still within about 1% of all time highs.A lot to unpack as far as the value of program is concerned, which largelybased on price action and reaction from analysts has been generally negative ordisappointing. More on that in a bit.And S&P futures, as you can see on your screens there, a quarter of 1% to thedownside. Now we go.Yep. And there's a bit of I guess, pause, Iguess because we have a lot going on.

The Fed speakers that we talked about, Ithink there's several a whole list of it.They seem to be chiming, you know, the same tune, which is that, you know,we're pricing out the possibility of rate cuts too early.The market is certainly has been reprice enough especially you take a low at theshort end of the curve for Treasury markets.So will we continue to see that is one thing the week ahead is doing this here.Obviously we have CPI numbers out of the US, so it's the PC gauge which the Fedprefers. That's a key one.Japan inflation as well.

Core CPI could undershoot that 2% targetfor the first time in a few years. That might muddle the picture for theBOJ as well. Our BNZ decision, that may be a hikethere. Keep in mind we've got the budget thatcoming up on Wednesday here in Hong Kong, India, GDP numbers as well.And a wrap of the week. We've got that china PMI data too davevery important going into the weekend where we get the NPC there of course aglobal macro movers for you. So we talked about the equity marketsand certainly when you look at bonds, we're coming off a little bit as far asyields go.

We talked about Japan and you've talkedabout Japan and maybe the inflation print coming through.And it's not so much just the actual month.And as far as he's concerned, this applies there, too.You know, you look at the three month and the three year compares it to knowthree months before that, the six months before that as well.Just to get a sense of the trend and really what the Fed still needs to see.And certainly the conversation has been we've got to wait a little bit longerand certainly wait is a fairly flexible concept at this point in time.Mark Cranfield is with us right now to.

Talk us to the big market themes oftoday and the week. He's in Singapore for us.Mark, good morning. Top of mind for you, sir, this morning.Good morning. Yeah, it could be a difficult week forChina, actually, after the solid gains we've seen for a couple of weeks though,because of that NPC which is due next week.You might get a bit of a news blackout really, so you might not know the marketneeds the continuous momentum of the good news and the the reinforcement thatthere's more support coming and we might be a bit short of it this week justbecause they might be reluctant to say.

Anything ahead of that.NPC And as you say, we've got the the PMI at the end of the week, which isalmost certainly going to show that they're still in contraction besomething like the fifth successive month of being below 50 on the PMI.So the data is not going to help China very much.There might not be any particular added news flow to get the market going aswell. So and you've got a month in coming, asI say, could be a tricky week for pushing ahead with with China equities.Maybe next week will be a better week for them.So that will probably be an overhang a.

Bit.But then of course, on the flip side, you've got Japan, which only seems toknow one way to go, just like the Japan story seems to be, have a life of itsown. Everybody wants to be involved withthat. And we heard from Jonathan Garner, fromMorgan Stanley about this. Right.And why there's still reasons to be bearish on the Chinese equity market,because return on equity has been declining for the past decade.Opposite story. When you take a look at markets likeIndia, markets like Japan, we reached.

That record last week.When it comes to Japanese equities, what's next, that CPI print, is thatgoing to be a likely big catalyst? People might use it as a reason forthinking that the Bank of Japan is going to push back further and they won't beable to do a negative rate so soon that they might be jumping the gun a littlebit. But markets will jump if you're bullishanyway. People, of course, will jump on anyadditional piece of information that adds to the narrative in that direction.But the bottom line property is that the Bank of Japan probably wants to innegative rates but doesn't want to do an.

Aggressive tightening policy.So one one CPI data is not going to really change their mind on that.And you're likely to hear BOJ voices going that way.Don't forget we've got dollar yen still above 150.So we're still in the area where verbal intervention is possible, maybe evenforceful intervention if the yen weakens a little bit too quickly here as well.So the Bank of Japan is also aware they have a bit of a role to play.They don't like to talk about it, but they certainly have a role.The quicker they get on with some kind of tightening, it probably will help theyen stabilize as well.

So you've got all of that into the mixas well. This CPI data probably is not a hugemarket mover. But what's more significant for the forthe Japanese equity story is this this move towards I mean, the governmentstory is very good and then you get these really positive things like we'vegot Taiwan Semiconductor. It looks as though it's going to openits first big plant in Japan, way ahead of schedule quicker than the one beingbuilt in the United States. That's a huge positive for people,foreigners looking at Japan, what they can do and where they're going.That's a huge positive.

Yeah.And to your point, Mark, the earnings story in Japan, I mean, this market,even at 39 300, is actually cheaper than it was a few few weeks back.Just given, I guess, the earnings outlook there.Mark, just one last thing, since we're talking about inflation, PCE, that's onFriday, that sort of tops the list of just a lot of data coming out of the US.Don't get me started. A number of Fed speakers this week, butwhat's what's the risk to markets this week now?Yeah, it really is. It's all now about the the may thepotential for a rate cut in May.

I think we can forget about March.I think most of the market has given up on the idea there's going to be any ratecut in March but there's still 5050 on whether we we go in May or not.If this PCE comes into high the Fed because continue to push back, we mightremove all the pricing for the potential of a may rate cut as well.And as Jerome Powell said when he was on television recently, I he didn't see thefirst cut coming before the middle of the year, which implies June.So it looks like the market may well get on side with what the Fed is seeing bythe end of this week, which would again mean that Treasury yields need to go alittle bit higher and probably give some.

Support for the US dollar.All right, Mark, thank you. Mark Greenfield, there are manystrategies on what to expect this week still ahead of the markets.Asia 91 telling us why we all might get China wrong again this year.But I think reasons for upside and positivity.I think this is what the theme is for 20.4 according to him.Well, for. Joining us at a few minutes time.And. And. I just want to update you on thissituation that's happening in South.

Korea with this widespread walkout bythe country's doctors and trainee doctors in particular.We're getting some clarity here on just the number of which this widespreadWalker has reached. 10,000 trainee doctors have submittedtheir resignation. Around 9000 trainee doctors have walkedout. So this is what we're hearing here sofar. This is what we're seeing a second weekof this here with no sign from the government here right now.But they're basically their concerns is the country urgently needs to boost thenumber of physicians and they're saying.

Creating an additional 2000 slots formedical schools remains a necessity here today.So that walkout reaching now a second weekday.Now we go into numbers, as Yvonne is pointing out, too, as well, also inKorea, which we'll unpack this story a bit later on.You know, the market there is certainly on weaker footing as well, consistentwith, well, underperforming. I should mention that as well, on theback of the unveiling of details of this virus, because it's busy news wise overin South Korea. More on this later on in the show.Now to China, where in case you missed.

This, this junk bond rally on top of theequity market rally has also gained a lot of traction.In fact, on a weekly basis, our gauge here at Bloomberg is now up 11 straightweeks. These are the dollar bonds offshore highyield, most of which are issued by property developers.Certainly. I mean, the floor was in.You could even make that strong argument at this point in time.Wilfred Re is here to talk us through what's been driving this rally andperhaps is there another 11 weeks ahead. Portfolio manager at 91.Well, Fred, good morning and hope you.

Had a good weekend.Happy Monday morning. Thanks for your time, as always.Just your thoughts and what I guess, backward looking, what was behind therally and whether or not you think those factors will continue to play a partover the next few weeks. Hi.Good morning. Yeah, indeed.We have seen a very advance rally in global credit.Even in China, investment grade credit, as well as high yield, as you noticed,has had many weeks of outperformance. And I think in the China's case inparticular, we are seeing some changes.

In the data.You know, the data suggests perhaps, you know, I like to say that we could begetting China wrong again this year. And the reason for that is that if youlook at the numbers that have been coming out of China, if you look ataggregate financing, for instance, which typically leads property developers andlending medium to long term loans, we noted the corporate sector, butespecially to the household sector, has been robust and unusually seasonallyadjusted, very strong. You have also the Chinese New Year datasuggesting that the Chinese consumer is actually okay.You know, on the whole and more.

Recently, some of these policy signalsare supportive of growth of the April cut on actual activity.So you're getting a little, I think, changes in the data, which makes us kindof rethink perhaps not to be too up, too pessimistic on the China story.And I think credit spreads are pretty much reflecting that.As you note, you know, the is the how you sector is the spreads that aretightening and that is the composition of still performing non defaultercredits and spreads, you know. Yes you know they have come in quite alot at about 700 basis points versus US benchmarks but that's still way above ushigh yield at about 300 or 300 basis.

Points and spread.So I think the Chinese credit narrative clearly depends a lot on the macro.And so far we are getting some tailwinds on the macro side.So you mentioned how tight spreads have been.Do you think that there's room still for for those credit spreads to to compressfurther? And how are you positioning around therisk spectrum right now around trying to credit?So I think we really have to be very selective in how you space.You can just buy the index in the performing names.For instance, the favorite space, the.

Remains in casinos.Tourism, for instance, to Macao and even within China shows that the Chinesetourism is alive and well across Gaming revenues for the casinos are also betterthan what they were in 2019. So I think that space seems to be aneasy carry place to be in, and we expect some of the issuers perhaps to evenbuyback bonds and the performing names. You know, we are beginning to seeheadlines, right? I think today it was Paula Long thatcame out to say that these are engaging with the creditors with its plan.You know, they are four options for creditors jointly.And last week also had a court approval.

So we have to distinguish that, youknow, the market itself, especially in developer space, has already correctedand has priced in a lot of distressed and looking going forward.You know, the we are seeing some developments, especially on performingproperty developers. And in that sense, there is still someroom, I think, to to see how your spreads do well.But you know, we have to be cognizant, right, that an investment grade spaceand spreads are really tight and it's not just in China is in Asia, it's alsoin the US. And you know, you just have to I thinkperhaps in this environment shorten.

Duration a little bit, be very selectiveand if it is time to pare back some or wait for some you know, sell off due tosome unknown unknown, so be it. You know, so I would say take a littlebit more of a cautious stance as of maybe a little bit more topic.But yeah, perhaps short in duration and be very, very selective in how youspace. Okay, you do sound fairly cautious.The tone you just struck there as well. Maybe just a follow up oninvestment grade in China. What do you think about Chinese banks?The Chinese banks used to enjoy a lot of support from government ownership, andin that space they will need to issue in.

Tier two space, particularly for Baselrequirements. So I think we will see issuance in theonshore market and that's going to mean more paper available for people who wantto invest in that space. Of course, financing rates are anchored,so the availability of liquidity and funding still remains there for Chinesebanks. I think for creditors, you know, for usin the bond market, that remains still a fairly solid narrative for equityinvestors, of course. There is concern about NIMS compression.And in that sense, it's maybe a slightly different story for the equity guys, butfor fixed income guys, you know, I think.

So long as we see states continues to beproactive, pro-growth, you know, worrying about the left tails, I thinkin that space, you know, China banks are fairly sanguine.And even in asset management company space.Right. The hiring is still giving you about sixand a half, 7%. And compared to where it was a fewmonths ago, the a very explicit government and shareholder support aswell there. I think that space continues to be greattighter. Broadly speaking, though, I mean,markets are shifting again when it comes.

To when the Fed's going to cut.Right. It's more about whether it's going to beMay versus March now. Well, Fred, I'm just wondering, thestronger data that's fueling strength into the dollar here.Once again, what do you make of this U.S.exceptionalism story? Do you think it has more legs to go?And how big of a risk is that dollar strength for markets?Yeah, I think it's pretty amazing, right, that we started the year thinkingthat the Fed does six cuts and right now we're just pricing over three by the endof this year.

Clearly, the US labor market, theinflation narrative there suggests that monetary policy hasn't been thatconstructive on overall activity in the sense it gives us some comfort in Asiaif we get some of the export lift. I mean, it looks like the demand in theUS consumer continues to be fairly robust.So at least that I think tailwind helps us on the export side.But clearly it also means that, you know, monetary policy across Asia andespecially in China cannot be too loose. So in China's case, I think we've seen,of course, the official monetary policy rates have been pretty stable, you know,since I think it was August last year.

When we actually had a official LPRslash seven day repo type adjustments on the policy side.But the Dow, of course, other ways that, you know, interest rates in China canadjust lower. So we're seeing that through the bankloan prime rates side of it. And so we're seeing, I think, you know,the official stances off of central banks here trying to resist looseningtoo much. But at the margin, you know, stilltrying to be supportive of their economies.So it's more of like, you know, we're trying to buy time to get through thisperiod of adjustment.

What if the Fed doesn't cut this year?Is that the pain trade? If it's not, what's the pain trade?Yeah, I think it's beginning to factor into some conversations, you know,whether it was Bank Indonesia or the RBI in recent weeks.You know, this notion that the Fed cuts will be potentially later.And what does that mean? I think for our markets in particular,we again look at what's happening if in large, you know, domestically driveneconomies like China, like Japan. You know, they can still run their ownindependent monetary policy and focus on their own activities.But of course, for the smaller ones, you.

Know, like the Koreas, the Singapore'swe are going to have to look at what the Fed is doing.And of course, that means that a later Fed cut is going to delay any rate cutsin most of Southeast Asia. Well, great to have you.Thanks for kickstarting the week with us for we portfolio manager at 91 joiningus out of Singapore. I just want to give you more on thiswalkout here when it comes to these South Korean doctors.So we're hearing a bit more from the vice health minister of the country, saythe government is open to talks with doctors and they are warning strikingdoctors of the legal procedure from.

March.So as we talked about here, we talked about 10,000 trainee doctors haveoffered their resignation letters here in the midst of this walkout, which isnow marking its second week. We'll have plenty more ahead.This is Bloomberg. And. All right.We're on the Bloomberg scoop now. Bloomberg has learned that Jack Ma's andgroup has outbid Citadel for Credit Suisse's investment bank venture inChina. Let's get more now from Lulu Chen, wholeads her Asia investing team.

It's interesting, a surprise move, asyou talked about in the previous hour. But what what does that tell you aboutends ambitions now, of course, after this IPO derailed?True it's a testing for and to see if there are on the regulator's good side.People familiar have told Bloomberg that ant is bidding for that unit that JVinvestment banking JV of Credit Suisse's in China and they're offering to paymore than what Citadel Securities offered.That puts UBS, who is now the owner of that unit in a bit of dilemma becauseregulators prefer a foreign buyer for the business.The license was introduced as a way to.

Introduce more global players into themarket. How important is that factor that itneeds to be? Well, at least the person, the body thattakes over this license is a foreign player or they typically price.Ultimately, it's up to the regulator. And I think that given the currentenvironment where there is a lot of concern about China's openness towardsfinancial markets, global investors, the economy slowed down, it would be asignaling move as well. Citadel Securities takes over thisbusiness. That said, pricing here is another keybecause that unit was valued by Credit.

Suisse at ¥2.3 billion.However, the Citadel Securities that was only 1.5 to ¥2 billion, we were told.And just remind us what was the what was a bid from from.And we don't have those details yet, but they are offering more more thanCitadel, more than Citadel Securities, which is quite low anyway.Right. As you're point one.Right. Well, Securities was the only globalplayer going for that. Okay.Well, they got the the foreign buyer discount maybe.Lulu, thank you so much.

Our Asian investing team, of course,actually leads that unit. Okay.Some stories we're tracking at this point in time, be it on the weekends,out introducing its most expensive e supercar on Sunday.Shares are up 2%. As you can see, the U.Nine costing $233,000 and will be initially only for the Chinese markethere. And BYD says the supercar can hit 100kilometers per hour in about about 2 seconds here and reach a top speed ofthree or nine. Also, by that metric, the vehicle aimsto rival gas guzzling options offered by.

Ferrari and also Lamborghini.Now, the Japanese government will give an additional $4.8 billion in subsidiesfor TSMC to expand its plant in the country.TSMC plans to start shipping chips from its facility in Kumamoto by the end ofthis year. The new aid will go toward constructionof a new fabrication building next to the existing one.The Economy Minister, Ken Saito says the TSMC is the most important partner forJapan in realizing digital transformation.This just. Well,I believe.

Improving the resiliencyof chip supply.For the of open and for the world andrights. Also on the weekend, you might have readabout it. Berkshire Hathaway says its cash pilejumped to a record one at 67 billion that's U.S.dollars in the fourth quarter. In case you're wondering what the metricwas there, the firm struggles to find meaningful deals.Chairman and CEO Warren Buffett. Warren, An eye popping performance wasunlikely as a conglomerate tries to find.

Deals at attractive valuations.The firm's fourth quarter earnings came in at $8.4 billion versus 6.6 billionfor the same period a year before. Right.Plenty more ahead. This is Bloomberg.Oh, I was. So we have a minute left.Gotcha. All right.We're looking at financial stocks here right now in South Korea.Of course, this value up proposition that was brought up here, oh, that comesto the government on how to really kind of replicate some success that you'reseeing in terms of corporate governance.

And the like when it comes to Japan aswell. A bit of a disappointment there from thestreet there. So you're seeing some of these financialstocks lower, auto stocks very much in focus here today.We have the auto earnings. We talked about that new super car.Also the chairman proposing to double its share buyback to 400 millionrenminbi. The stock up for bid close to 2%.Toyota also up by 2%. This is Bloomberg. And.

Okay, it's.There we go. We're going into the lunch break inTokyo. Live shot there, which still should be abit chilly. I would imagine that certainly theopposite is true when you look at this market, which.And 40,000 is not actually in place. So we've got 200 points up today and alittle more of that. We could actually be there by the end ofthe quarter, if not next week, if not this week here.Dollar yen is still trading, albeit we're lower today.We're still trading at about that should.

Be one month highs there on the yen.Some key numbers coming through this week in the form of Japanese inflation.And of course that takes us into the BOJ in a couple of weeks and might theywould they should they move on interest rates taking them up from negative Ofcourse. I mean the bar is getting to be a bithigher right. For them to actually exit negativerates. You take a look at what the inflationprints have. So I mean they are in a technicalrecession as well. So certainly that's why you're seeingthe dollar yet still 150 here right now.

You take all your Asia dashboard.And what we're looking at in terms of markets here today, it's slow going.I mean, take a look at how we all the event result.We're talking everything from Fed speakers.You have China PMIs earnings. So that's one to watch here as well.But yeah and also China right whether we actually do see a 10th straight day ofgains for the onshore markets, is that a sign of maybe some sort of meaningfulturnaround now or is it still something about a tactical opportunity?Right. That right.This is still just a trader's market in.

Some ways.Yeah. And ahead of the NPC, certainly one partof the narrative this week is we might go into somewhat of a blackout period.Yeah, the policies that were meant to put in place to stabilize this marketare out 7/10 of 1% there, as you can see on the CSI 300.So may or may not get day ten. Now on the Chinese market.We've been talking to a lot of our guests this morning on their outlook forChinese markets. Have a look at the broader marketitself. Finally, get some footing as the Chinesegovernment continues to stimulate.

I was just looking at liquidityinjection. Many you see that continues to startramping up again. Right.So so their support for the market obviously that that's that's emphasis onthe on the short sale banner at the open and the close that's that's of coursethat's some pressure on the upward pressure on market too.And I notice that the short interest in ETF strategy in the US shows a key rampor the FSA ETF that's short interest is at the record high.So this fuel here for the Chinese markets you see some recovery.I do think the index has more to go up.

Both the CSI 300 MSCI China just belowour bearish target. The next thing, people will watch oneearnings. And then to the twin sessions coming inthe first week of March. Any sort of policy signs that people cantake away from? I do think in the past two quarters yousaw the free cash flow for Asia listed non-financial companies growing muchfaster than the CapEx is just a sort of negative fundamentals.So there is a reason why this bear market has been going on in China for solong. And until that's addressed, which wethink requires consumer to come to the.

Fore basically through fiscal stimulusthat targets the consumer, it's unlikely that the earnings profile for China willwill turn around. Okay, maybe markets.Listening to Mr. Gardner at this point in time, you lookat the benchmarks being down 7/10 of 1% on the Hang Seng tech index is down by asimilar margin amidst I guess the I wouldn't say lack of traction.There has been some momentum in this market.Certainly the defensive plays, high dividend income plays have beencertainly outperforming and keep giving. In fact, the MSCI China Banks index havea look at this.

Over the past month or so, while thatrally has taken place, has still outperformed the broader benchmark.Yeah. Let's bring in media head of GreaterChina Financials investment research at UBS, the perfect guest to talk a littlebit about this. Right.This momentum that we're seeing and the broader market and also in the lenders,can that continue? We are positive on the China banksfor for a couple of reasons. First, we do see the national governmentI so-called national team is buying into the ETF and also the previous they aretying the banks as well.

So the ETFs within that China banks hasa bigger is a bigger weighting so 14% or so.So that's indirectly supported the bank stocks too.And then secondly, I think a high dividend yield is what making the thebank stock attractive. So in the eight share banks it's about 8to 9% and in the Asia is about 5 to 6% in our marketing with the China onshoremutual fund clients that they are saying they will be willing to take as low as4% dividend yield for the a-share banks. So the bank's year to date have ralliedabout more than 10%. So 11% or so.Sure, we from this technical.

Perspective, we're positive, althoughthe fundamentals of we're also not so positive.Why not? Because we're forecasting net interestmargin to compress on the Chinese bank by about 15 to 20 basis point this year.And also we're expecting revenue decline by up to 5% for the major banks and alsopre-provision profit to decline. So what really helps the banks to reporta positive net profit growth is the cutting in the credit cost, so loweringof the credit cost. So they will try to maintain flat topositive net profit growth through thatshould I mean, I think some analysts.

Have said basically that makes thiswhole downtrend in deposit rates may almost irreversible because the need topreserve those margins. Do you agree with that view?Yeah, I do agree. I think we've seen losses last week.Some of the smaller regional banks, etc. follow the big banks to cut theirdeposit rates. I you know, our house view is weexpecting about maybe 10 to 20 basis point NPR cutrate cut this year. But potentially I think the regulator,the central bank, may cut deposit rate as well to give some room to the banksto maintain the profit, their net.

Interest margin, because that's verycritical for banks revenue and profitability.Okay. Well, as far as lending activity isconcerned and we're coming off, I think January is always a good month anywayfor credit expansion and credit lending in China.Yeah. Where do you see the most expansion atthis point in time? In other words, what parts of theeconomy are getting the bits of credit that they need?Yeah, Jan, to total social financing and loan growth was like record high.However, though we do see most of the.

Credit flow into,let's say corporate side, particularly mid to long term corporates, whichmeaning the infrastructures, the large state owned companies.So the underlying tools or corporate CapEx, the demand and also the consumerside too, we're seeing very little improvement.The within the retail side, there's some growth in so-called operating loans.So small business operating loans, inclusive finance loans that'sencouraged by the government. So the banks, the big banks are doingquite a lot of that, but at much lower rate than before.So that's also hurting their net.

Interest margin.You just came back from a trip to Beijing.I'm just wondering in terms of the feedback that you got from there, howare people still looking at the sector right now?You mentioned that, you know, even 4% of a deal is still okay among someinvestors. What about some of these kind of longterm investors? Right.A lot of the large funds, like the mutual funds, etc., we met with, I thinkthey are positioning in the China banks because they're sort of hiding there andthey wanted to have these high dividend.

To defensive play.It's defensive, yeah. But we're also seeing at the same timethe regional that. Are doing better even than the largebanks so far because we are expecting them to report net profit or revenuepositive growth. So that says some regions may do betterthan the other regions. So I think in the Asia, investors I'msure are being more selective. And we I think the regional banks thisyear will have a better performance than the larger state owned banks.If you're talking about offshore marketing, we also need to withinvestors outside China as well all the.

Time.I think people are still bearish fundamentally about, you know, long termbearish on China and also on the Chinese banks.So that's why the eight share banks dividend are much higher than the share.So they don't have to, you know, offshore, they don't have to be inChina. If they're bearish, they just leave.So there's no such I'll fly to safety in India each year.It's almost double right. I think it's 8 to 9%, 5 to 6% to fivesix. It's like a 50%, 50% higher.Yes, but my I guess my my next question.

There would be does does the overallmarket need to remain a bear market for banks to thrive and do well?That has been the case in the last 3 to 4 years.In the bear market, the bank seems to be a countercyclical word, the negativebeta, especially the large banks. So it depends, I think of at this point,you know, general view is still China market may be bearish.So they tend to outperform if you know we have three subsegments within theChina banks. So you banks are positioned asdefensive. And then the choice for banks like, youknow, quite a lot of them focusing on.

Retail, on the the capital market, etc.,they may outperform if the market truly turns to be more positive.And then the regional banks is also more, I guess, a sort of the theater inbetween. So I think if we watch the cycle to betruly turnaround, I think the joint style banks would be the ones that toplay. How concerned are you about the mortgageside of the business? We had DBS on last week saying that ifwe see property prices fall some 20% in terms of ACP, you know, there is a riskof underwater mortgages. Now, is that something you're lookingat?.

Our estimate for the overall LTV, longterm valuation for mortgage is probably around 50%.So theoretically, you need a very big drop for a price, you know, from thepeak to drop by about 50% for the market to be, you know, for the mortgage to bea negative equity. So far, probably the property price havegone down by maybe, you know, 20 to 30%, depending on the location, etc..So I think the mortgage is still positive equity,but the the pricing, the volume are all fact impacting, I think of the negativeside coming in from the developer's loan default, which is the biggest loss forthe banks Perpetual.

Is that a big part of the book of theloan book or -6% or so mortgages more than 20 25%.Okay. Yeah.So. Well, that's a trade off though, right?Which one does. Well, yeah.I mean, thank you so much. Man out of UBS, their head of GreaterChina Financials and investment bank research.And of course, at the bank, we think its earnings are certainly earnings arecoming out for Chinese banks. Earnings are also coming out for otherChinese companies.

Baidu, NetEase are due out, as you cansee. So this is our calendar for the weekacross the Asia Pacific. Speaking of banks, you have ocbc comingout on Monday. That's of course in Singapore.And of course the operator of the exchange here is also coming out plus Iguess in time for Thursday, Budweiser anyway,but more fodder for the whole trade right here.Anything from Baidu in particular as well.Coming up, the rally that pushed the Nikkei past a record high looks set forfurther advances as foreigners rush back.

In.We have more on that story coming up. This is Bloomberg. I guess we're there tells you what liesahead if you if you wait 35 years. Right.Patience is patience is a virtue. But I said certainly.I think one of the things that this reminds me of is, you know, don't losehope, I guess, in many ways. And certainly on total return, this hashas has has broken even long before last week.But but then again, I mean, it's it's it's also about timing this market.And certainly if somebody told you three.

Years ago that Japan would be up threetimes, they call you crazy, too, Right? In other words, we don't really knowwhere the market goes despite us trying to figure out on a daily basis.We just ask the question, let's get to it.And they do the wrong answers. Equities reporter joining us now when wetalk about that chart, right, that 1989 high that's been reached last week, whatare the things go from here? From here?Right. Definitely was a really big milestonefor us, but it's definitely also not the end of the story.So we're actually seeing more foreign.

Investors come into the market to jointhis rally, especially when they're also quite fear of losing out this this bigparty. I would say we saw foreign investorsbuying Japanese stocks for seven weeks straight already.And given that they are still pretty much under weighting Japanese equitiesamong their global portfolio, there seems to be more room to grow.And when you compare that boring investment buying during the Abenomics,which is about ¥15 trillion, where probably not even half of that levelsince the beginning of their rally, which is which was like early 2023.And also other drivers are still pretty.

Strong outside of just flows.When you look at some of the macro environment, we've got Japan potentiallyalready heading out of deflation and heading into inflation.It's got a pretty strong U.S. market and also China Chinese market isstill pretty weak in terms of the economy and also struggling with some ofthe property issues. So that would also help Japaneseequities to stay relatively attractive. And from the fundamentals perspective,we've seen pretty strong earnings growth and also the Tokyo Stock Exchange,corporate governance reform to encourage more buybacks, that that's alsosomething that investors continue to.

Look forward to.Yeah. In fact, South Korea, which we'll talkabout in a moment, is taking a page out of Japan as far as this corporategovernance is concerned there in the value program.But let's talk about Japan still. So, so fine.There's some momentum here, but you could look at it the other way to manyare the signs of overheating at this point.Right. So people say that after such a big run,there is some potential of a correction, but it just probably would be some priceconsolidation and is not really a big.

Concern.But a couple of other risks I think is worth flagging.We see that the Nikkei, yes, hit a record high, but the topics are stillabout 7 to 8% away from its record high, which also means that the rally so farhas been pretty narrow, focusing on some of the big, big caps like the TokyoElectron or fast retailing. Toyota are really driving the index up.So it would be nice if we can see how the rally could potentially broaden andto see all Japanese companies really, really riding this rally together.And also, you've got some of the because the flow is mainly driven by the foreigninvestors so far.

It would be also nice if we can seedomestic investors feeling more confident about Japanese equities aswell. And I would say one of the bigger risksthat people are saying is about the yen appreciation.So with the Fed potentially going to cut rates maybe in the summer and also theBank of Japan to tweak the monetary policy, the yen is likely to strengthen,which would weigh on Japanese equities. And now we're hearing some of theinvestors, especially global investors, recommending that it's a good time tostart hedging the Japanese currency when it comes to investing in Japanesestocks.

When you great stuff when he there inTokyo for us on largely the bull case there on Japanese equity markets nowSouth Korea is actually looking to take, as we were just pointing out there, totake a cue from its neighbor Japan there, Seoul just today, in fact, a fewhours back unveiling the details of this corporate refer reform plan.They call it calling that value up, the value up program that aims to pushKorean firms to improve things like governance and management.But markets don't seem to be very impressed, at least with the initialreaction. Today.You can see our Asia stocks reporter is.

In seoul for us to talk us through thekey points of this program. So what do we know about this pointabout the program right now? Sure.So, yeah, I can tell south Korean authorities and Korean stock marketinvestors feeling envious about this rally going on in Japan, whereas costtoday is falling more than 1% after South Korean authorities unveiled moredetails about this corporate value up program.So not much. So investors, not much of the detailsthat would force companies to come up with voluntary measures to improve theircorporate value.

Investors say one of the incentives theyunveiled today is about tax benefits. But the South Korean government hasfallen short of unveiling what kind of specific tax benefit it would offer,saying that those guidelines and details will be will be finalized during May.So that was a disappointment to investors looking forward to the statesannouncement for for final details of this program.Another measure that they say will come up with is that later this year theywill come up with Korean Premium index. That's very similar to Japan's premium150 index, composing a best practice in companies in trying to enhance theircorporate value.

But they also didn't say what kind ofcriteria they will look into for the companies to be included in thismeasures. What they said was that the index willbe used as a benchmark for the pension fund and other institutional investors.But what I heard from the markets so far is that they still like what kind ofdetails will be included in this Korea premium index.So so lots to see, a lot of details still to watch.So that's why we're seeing some of the disappointment, disappointment and thesell offs in the markets, especially among the stocks that have driven gainsahead of the announcement on expectation.

For the better corporate corporate valueand improved shareholder returns. Okay, So we have some quotes of whatpeople are saying. I think Samsung Asset Management issaying, look, you know, there was a lot of kind ofpent up sort of speculative money buying last week ahead of this announcement.And then I think, as you mentioned, there was, you know, far, you know, notreally quite meeting expectations there. You know, so what tell us more aboutthat disappointment. I mean, what it really what in 5 minutesreally want to hear from the FSC? Yeah, sure.That's a really good question.

So one of the key things that investorstold me they were looking for was some measures related to Treasuries, Treasuryshare cancellation in South Korea. A lot of companies especially buy oftenused Treasury shares in order to protect to protect controlling shareholders.At our founding families of this turbo conglomerates, where instead ofcancelling them for the benefit of the broader investor.So that measure was missing in today's announcement.All right. You think you can leave our asia stocks?Reporter joining us out of seoul. We got plenty more ahead.This is bloomberg.

Well, decades old global consensusthat's allowed e-commerce to grow without customs charges will be in thespotlight as the WTO gathers in Abu Dhabi this week.Bloomberg's Tom Mackenzie looks at what's at stake.Streaming a Netflix movie in South Africa.An international Zoom call with a doctor in India.Downloading an e-book. On a beach in Bali.They're just a few of the online transactions.That could face new taxes. That's if a 26 year old e-commerce dealfalls apart.

The agreement blocks tariffs on digitaltransactions wherever they occur in the world.It obviously benefits major US tech companies like Amazon Matter andNetflix. But it's also good news for smallerfirms that collect data and do business in international markets.And it's big money. The US exported more than $600 billionof digital services in 2022 alone, with the UK at over 300 billion.When the World Trade Organisation meets this week, it'll have a lot on itsagenda. But perhaps the most pressing isrenewing this deal, which expires on.

March 31st.They've re-upped it every two years since 1998 and some countries want tomake it permanent. But experts think Indonesia, India andSouth Africa could oppose it entirely, and it would only take one to scupperthe deal. The tariff revenues that governmentscould generate without the truce might not be massive.But the move would be hugely symbolic and could represent a big win for theglobal South. It may also be the biggest protectionistthreat the Internet has ever faced. Yeah, there we go.T-Mac in the house.

Tom Mackenzie We miss him every day.Yeah. Not Tracy McGrady, who was the only one.Anyway, there we go. Markets are on offer mostly for stillhigher in the benchmark, though. This is Bloomberg. It's almost 11 a.m.in Singapore, in Shanghai. Welcome to Bloomberg Markets Asia.I'm Haslinda Amin. Here are the top stories.Asian stocks swinging as traders brace for a flood of economic data this week.Chinese stocks edged no. As investors await signs of morestimulus.

In a surprise move, ant group outbidCitadel Securities for Credit Suisse's investment bank Venture in China.Plus, Disney and Reliance Industries set to sign a binding pact to merge themedia operations in India. Well, it seems that traders are sittingon the sidelines as we await the much anticipated data out of the U.S., thePC, the much preferred gauge of inflation for the Fed, that's comingout. And investors are keeping a very closewatch on that. Also, more Fed speak.We are expected to hear more Fed officials saying that, you know what,The Fed is in no hurry to cut rates to.

Clear where we are in terms of the CSI300 index consolidating after nine days of gains.Well, there's cautious optimism out there saying that perhaps the rally cancontinue if the right market policies remain in place at NPC meeting.Front and center the Nikkei to 25 in positive territory, extending the recordhighs up by half a percent right now. There is a sense that some say the rallyis just getting started because some more foreign investments are set to comein. Bear in mind the yen remains weak abovethat 150 level, and that's propping the Nikkei to 25, helping exporters inparticular.

In the ethnic space, we're seeingweakness pretty much across the board. Weakness for the Kiwi, the dollar, aswell as the Philippine passive. Take a look where we are in terms of thebond market at this point in time, of course, they are bracing for a barrageof aeco data that that's big yields across the curve just of their highsyear to date. Of course, we're talking abouttreasuries. The MSCI currently about a 10th of 1%higher. Flip the page.Take a look at what we are setting up in terms of India.Of course, we know that Nifty has had.

Five days of gains.It is off session highs currently. Futures pointing to a lower open, a tad,a 10th of 1%. And in as far as the emerging marketsindex is concerned, it is trading lower as well, in line with the rest of theregion, down 3/10 of 1% as we set a packed schedule for key economic datacoming this week, we'll be keeping an eye on the latest GDP and inflationreadings out of the US. Bloomberg Economics expects headline andcapacity numbers to come in hot for the fourth quarter.Japan also releasing CPI data with core inflation seen to undershoot the BOJ's2% target for the first time since March.

2022.How will we get fresh PMI readings out of China on Friday, which will probablyshow activity pulling back due to disruptions from the lunar New Yearholiday and the BNZ set to keep rates on hold as it waits for more evidence thatinflation is under control. And we've also been hearing fromstrategists this morning on the outlook for Chinese markets.Take a listen. The broader market itself finally getssome footing as the Chinese government continues to stimulate.I was just looking at liquidity injection and people see that continuesto start ramping up again.

That shows to their support for themarket. Obviously that that's that's emphasis onthe on the short sale banner at the open and to close that's that's of course setsome pressure on the upward pressure in the market too and I noted that theshort interest in ETF strategy and USOC K wrap or the FSA ETF to short interestis at the record high so this hefty fuel here for the changed markets you seesome recovery. I do think the index has more to go up.Both the CSI 300 MSCI China, it's just below our best target.The next thing, people will watch one earnings and then to the twin sessionscoming in the first week of March.

Any sort of policy signs that people cantake away from? I do think in the past two quarters yousaw the free cash flow for Asian listed non-financial companies growing muchfaster than the CapEx is just a sort of negative fundamentals.So there is a reason why this bear market has been going on in China for solong. And until that's addressed, which wethink requires consumer to come to the fore basically through fiscal stimulusthat targets the consumer, it's unlikely that the earnings profile for China willwill turn around. So is it time to buy China?Let's get more on markets.

And Stephanie holds a Jan Effect CIO atDeutsche Bank International Private Bank.Stephanie, good to have you with us. 10% gain in February alone for Chinaain't too shabby. I mean, it must spark a formal trade insome sense. Yes.So we are now at a point where year to date we have turned in the green formost of the Chinese equities. And so I think that is definitelyarguing for trading opportunity, even if, you know, we had initially looked atit for a second half, kind of sustained opportunity into Chinese equities.But I think right now we have already.

Seen that two things were number one, wehave seen the governments resolve in terms of, you know, putting inregulatory measures around the equities market toimprove sentiment. We have seen, you know, since thebeginning of the year so many actually government measures coming in.And now the Lunar New Year holiday has sparked a bit of optimism given.We had a lot of activity data that has even been, you know, better thanpre-pandemic. And I think these two things have beenstabilizing the market. And, you know, in terms of a tradingopportunity, of course, we need to see.

Whether there is a sustainable rally onthe back of it, because right now for me personally, three things need to happenat the same time. So one is the sentiment shifts, we get alittle bit of that. You can see how the coverage of somestrategist, you know, looking at it more positively, the narrative changesquickly when the market starts to rally ahead, of course.Right. But on top of sentiment, you need theflow is coming on the back of it. And then, of course, we need macroeconomic data to also, you know, give you more confidence in the longer termgrowth prospects.

And I think this year you've mentionedsome of the data this this week may not be the week to get a positive surpriseon this, but I could. So I can see why the market is kind ofconsolidating this morning. But overall, I think it's a tradingopportunity that at least starts in the short term.And, you know, hopefully, you know, we'll see more pronounced in the secondhalf. So where are the opportunities if it istime to buy China, What do you buy? Yes.So we actually feel most comfortable even in that short term possible tradingopportunity to go for the sectors that.

Will continue to see demand and andsupport. So demand on the one hand and supportfrom the government policies going forward.So one, you know, to start off as consumer discretionary, you know, ofcourse there is the, you know, one of element of the lunar New Year holidays.They only take place once a year, you know, first time in four years that youreally could celebrate without any restrictions.But, you know, if this is being continued, that is a green shoot.But in the consumer discretionary sector, there's more to it.We also like subsectors that are, for.

Instance, around, you know, sportsapparel, because there has been a shift towards a more healthier lifestyle.For instance, we also like the cars that are part of it.So but again, I think the narrative needs to be that there's also governmentstimulus. And given how important the consumer isfor the economy and to also stabilize the property sector sentiment, therewill be more government stimulus coming into the sector international more.Oh, okay. Go ahead, Democritus, just quickly.I think it is another one. And and then, of course, the greensector, where a lot of investments are.

Also going into solar, wind, etc..How about Chinese bonds have been rallying on expectations that we'll seemore rate cuts for China to fight deflation.Do we continue to buy Chinese bonds? They will most probably be more monetarystimulus coming from that. And but right now, I think we havealready gotten a bit of a glimpse that the government is navigating this verycarefully, because on the back of every rate cut, there's also the risk that youhave a currency reaction function. And I think we've seen this happeningwith the repricing of the US dollar on the back of a hotter CPI.And if you then would have added another.

Rate cut in the short term, you wouldhave risked to have renminbi also coming under pressure.So I think there will be a careful steering around this.And I wouldn't be I would actually, you know, consider more the equity side thanthe bond side right now. You talked about the US dollar strength.How are you assessing US exceptionalism? US Dollar Exceptionalism is has beenthere for a few reasons because of a very aggressive rate hike cycle andbecause of the safe haven element of the US dollar.Now this year will have one of those elements of falling away for us.This is in the second half because we.

See rate cuts kicking in.We only have three rate cuts to the tune of 75 basis points for the whole of theyear starting by mid of the year. So at that point the the exceptionalismfor the US dollar will stall. But having said that, because most ofthe central banks are actually will most probably go in tandem for the US dollar,it will be more of a sideways situation on.This will be also triggered by some short term volatility because whichcentral bankers first kind of leads the narrative on interest ratedifferentials. The US dollar, though, that's thatsecond element that will stay with us.

This year is still a safe haven.Go to currency when you have a lot of geopolitical risks happening on all ofthese elections that are coming our way this year.The thing is, what's the risk that U.S. exceptionalism might be a real risk forthe markets? We're seeing markets right now.A lot of markets are trending at record highs.Well, a risk for the market in terms of once it stops, the markets fall off thecliff. Yes.Yes, I, I think because I don't see US dollar exceptionalism to go awaycompletely.

I don't see the associated risks thatyou mentioned for it. It's more of a sideways when othersmaybe project a total turnaround and exceptionalism or a continuation.I think we just kind of stay where we are.And of course, all eyes on Japan. Traders are looking at that 40,000level. They say it's coming and it's comingsooner than you expect. More money, foreign money pumping intoJapan. Well, you know, now you mentioned firstyou mentioned the US equities markets being at highs.You have Japan being at highs.

Of course, it begs the question, howmuch further can you go? I think.But when you look at Japan, you have a very strong story, of course.And I know we are in uncharted territory, but we are also in unchartedterritory in terms of the structural reforms that we started last year.And they continue this year. We also on uncharted territory in termsof the cyclical element that is boosting, you know, the the returns ofChinese of Japanese companies because of the very big yen.And it looks like that this will not go away anytime soon because that dollaryen dynamic, which will be gradually.

Edging higher, will continue to be inplace. So I think, yes, Japan has more legs torun, but of course, you know, as much as you do not want to be in a broad indexwhen you, you know, an uncharted territory, you go for the sectors thatare the most likely to succeed. Stephanie, thank you so much for yourinsights today. Stephanie Hult again from Deutsche BankInternational Private Bank. Well, still ahead this hour, we'll hearfrom Tata Consultancy Services on how the firm has integrated AI engine intotheir business model. We speak exclusively with a CTO shortly.Keep it here with us.

This is Bloomberg. I'm. All right.Chinese market consolidating up to nine days of gains.The Hang Seng currently down by 7/10 of 1%.China's Shanghai come up by 6/10 of 1%. Into shabby, though, for the month.We have Chinese stocks up about 10%. The question really is where it goesfrom here. Investors looking for more policysupport. That NPC meeting will be front andcenter, looking for a bold policy to.

Help prop up not just the markets butalso the economy. Now, Bloomberg has learned that JackMa's and group has outbid Citadel for Credit Suisse's investment bank Venturein China. Let's get more from Lulu Chan, who leadsBloomberg's Asia investing team. Of course.Lulu, this was a big surprise. What do we know?Well has the key here is the pricing and also regulatory approval.Sources told Bloomberg that Ant Group has outbid Citadel Securities for thejob of Credit Suisse in China while they're offering to pay more forthat unit.

But regulators do prefer having aforeign buyer for the investment banking JV in China because that license wascreated to introduce more global players.UBS has some hard choices to make here. So in terms of getting that approval,you said that is going to be hard because China prefers a foreign player.What are the chances then and what can you do to counter that?Well, this will be a test to see whether ant is on the regulatory good side.Following that fine slap in July last year where regulators said that theyhave wrapped up all the regulatory clampdowns on China's Internet sectorfour and two outbid Citadel Securities.

Pricing is on their advantage.But that said, UBS will have a lot to consider a one, including whetherFounder Securities, which is their driving partner, would be happy withwhat Citadel Securities is offering. That unit was valued at ¥2.3 billion byCredit Suisse earlier, but now the offer only stands at 1.5 to ¥2 billion.And so they need to see whether more players are coming in to see if they canoffer more or if there is some more dynamic that they can push between thesetwo current bidders. Lulu, I'm wondering, might there beother bidders? And if so, who might they be?Well, it's a very challenging.

Environment right now in China.Foreign investors are really just staying on the sidelines looking atChina's economy and also the current concerns of the regulatory clampdowns,the stock market rout, and then more even more heavy handed measuresregulating the space is deterring more foreign investors from putting moreresources into the market. That's why Citadel Securities iscurrently the only bidder for the unit. And back in the headlines.Lulu Chen Good work as always. Lulu Chen leads Bloomberg's Asiainvesting team. Plenty more ahead.Keep it here with us.

This is Bloomberg. Welcome back.Let's talk crude. And we have oil kicking off the weekwith a drop. Traders are waiting cues on that marketbalance where Brent dipping towards 82 a barrel to losing more than 2% last week.And its U.S. counterpart, West Texas intermediateabove that $76 level. And we have your guess futures downabout 1%. Now, long standing warnings in the oiltanker industry that too few ships are being built are coming back to haunt themarket.

Just two new ship tankers are due tojoin the fleet in 2024, adding to that widespread divergence after Houthiattacks on commercial shipping in the Red Sea Asia oil trading report.Elizabeth LOE is with us. And Liz, the tanker market looking atthe lowest number of new deliveries in almost four decades this year.Why is that significant? So I think oil is a little bit softerthis week, so there isn't really any immediate panic.But given the context of what we've been going through with the Red Sea, themarket's been going through, that could be a pretty bullish factor for oil fleetin the coming months.

So as we know, shipping has been apretty large focus for oil since December because of the attacks onmerchant vessels by Houthi rebels and the Red Sea, which is forcing a lot ofthe tankers to reroute to a longer route around Africa.So crude and oil product markets have been pretty affected by the situation.It's a really important route for them. And the routing is already tighteningthe availability of tankers to ship them.So right now we're in the middle. We're just right off the Chinese NewYear, where I think oil markets tend to reassess.So I think this week will be pretty.

Revealing.So according to S&P global data, vessel utilization rates are already 5% up sofar. SoI guess the market's just factoring all this that the super low number oftankers coming into the market this year, which could make the situationworse if the Red Sea tensions stretch out.Liz, the question really is why? Why are there so few tanker deliveriesthis year? What?So these tank orders are typically meat deals in advance before delivery.And so these sales numbers would have.

Been meat on based on our assessments ofan oil market years ago or so. And if you just look back at 2019, eventhough freight was pretty good then there were also many predictions thatoil demand would begin to peak soon after COVID.And those estimates have changed drastically since then.So I guess my point is it's notoriously hard to predict oil markets, and itwould have been the same for anyone doing estimates for the oil tankermarkets as well, which is why we had the situation we are today.Liz thanks so much for that. Asia, all terrain reporter elizabeth lo.Now here are some top geopolitics.

Stories we're tracking.Ukrainian president Volodymyr Zelensky says the country has lost 31,000soldiers as its war against Russia grinds into a third year.He also reiterates calls for US funding and says 2024 will determine how the warwill end. President Biden and fellow G7 leadershave assured Ukraine of their support. In a video conference call, they saythey are stepping up security assistance and working with Kiev to meet itsfinancing needs. Michigan Governor Gretchen Whitmer haswarned President Biden risks losing support among the U.S.state's Arab and Muslim population of.

His support for Israel.Democrats worry Biden's pro-Israel stance will alienate voters in Michigan,which is home to a large Arab-American population.A January poll showed Biden trailing Republican frontrunner Donald Trump inthe state in a hypothetical 2024 rematch.And Australia is seeking an end to China's wine tariffs, which were imposedafter Canberra sought an investigation into the origins of COVID.Australian Trade Minister Don Farrell is expected to discuss the matter with hisChinese counterpart at the upcoming WTO meeting in Abu Dhabi.Blue Mix Paul Allen explains what's at.

Stake.It's been a challenging few years for Australian winemakers.When China slapped tariffs of up to 200% on Aussie wines in 2020, it left theindustry scrambling to find new markets. We lost everything overnight.We had built a business in China. When Australia called for aninternational investigation into the origins of COVID 19.China responded with a range of trade strikes against Australian products.The relationship has since thawed. Barriers against barley, coal and otherexports are now gone and wine is expected to be next.Australia suspended its appeal at the.

World Trade Organisation over the winetariffs when China announced a five month review.That review ends on March 31st. Australia's Trade Minister will meet hisChinese counterpart on the sidelines of the WTO meeting in Abu Dhabi.We want the tariffs on Australian wine removed and if we don't get that then wewill resume the WTO application a.s.a.p. Our agreement to suspend the WTO processwas based on the successful removal of all of the tariffs.Shares in Australia's largest listed winemaker Treasury Wine Estates haveslowly recovered since China imposed the tariffs in November 2020.In this month's earnings announcement,.

Treasury also signalled it is expectingsomething to celebrate soon. The review of tariffs on Australian wineremains ongoing, with the determination anticipated in late March.We are prepared and we are well placed to re-establish ourselves and ourAustralian portfolio in China should the review result in the removal of thesetariffs. But there's a question about whatAustralia's exporters have learned from the whole experience when it comes toreliance on China. Take barley for example.China went from buying almost all of Australia's barley to buying none at allduring the diplomatic deep freeze,.

Forcing exporters to diversify and findnew markets. Since tariffs were lifted, Australia'sbarley producers have gone straight back to their most lucrative buyer, withChina accounting for 90% of exports in December.And of course, when wine begins to flow, memories can become hazy.Paul Allen Bloomberg. And in the markets where we're keepingan eye on stocks in China as well as Korea, they're getting a lift after newsthat Jeff Bezos and video and other big technology names are investing in abusiness that's developing human like robotics.Take a look where they are trading at.

This point in time.We have Ningbo currently up by 2%, Miracle automation engineering up by amassive 10% as we speak. Of course, this startup, it's calledfigure. It's backed by Openai and Microsoftflipped the page. Take a look where we are in terms ofsome of those South Korean financial stocks.As South Korea plants a value of guidelines to ensure expansion of listedcompanies voluntary participation in the program while minimizing burden of thecompanies. That's on the back of the comments madeby Finance Minister Choi Sung Mok.

Take a look where they are at this pointin time. Under a lot of pressure, those financialstocks had a financial down almost 6%. Samsung life Insurance down about 5.9%in the broader market. Well, trepidation as we await that PCdata and fed speak. Plenty more ahead.This is Bloomberg. And. Welcome back.China markets just heading to lunch. It is a negative day after nine days ofgains. Still quite a turn around, up about 10%in the month of February alone, perhaps.

Igniting that FOMO trade.Some say that perhaps China provides greater value than markets, includingIndia taking the where we are in terms of the CSI 300 index down 7/10 of 1%.The Shenzhen calm, though, in positive territory, up by 7/10 of 1% and the yuantrading at seven 1981 versus the US. It's pretty flat and of course, it'sbeen well supported by the PBOC. Let's flip the page, take a look wherewe are in terms of Japan, which is coming back from lunch.It's been extending gains, hitting yet another record high set to post itssecond successive months of 8% gain. Some say the rally is just gettingstarted.

More foreign demand is expected.Of course, they're looking for the Nikkei to breach that 40,000 level.Not today. Maybe it will end at that level, maybein the coming days, but definitely looking for it to breach at 40,000level. No risk of overheating.If you take a look at the trading volumes at this point in time, andthat's according to some investors. Take a look where we are in terms of theyen one 5046 elevated, surpassing that 150 level, prompting perhapsexpectations of a verbal intervention that weekend has propelled that Nikki to25 higher.

The topics also in positive territory.Now for a closer look at the chips industry.Global technology supply chains are set to shift and diversify in response togeopolitical tensions as well as the pandemic.And that's according to the latest report from Bloomberg Intelligence.Let's bring in Asia technology analyst Charles Schwab.Charles, given the projected shift in leading edge chip, make it to the US andEurope, how do you foresee this transition impacting the globalcompetitive landscape? Hey, Good morning.Has been done?.

Yes, we have.I have done a very careful checking on the o the project and also the capacityexpansion by Intel, TSMC and Samsung. And then we publish a report today andthat be the conclusion of that report is that it's very likely by the end of2013, actually, US and Europe achieved the combined capacityof the leading edge that's five nanometer or smaller, could be actuallyin the same level as the tiers as to Taiwan.Right now, actually Taiwan is actually having about 61% of market share.But by the end of year two than 30, we see that if both region this, the freeregion can actually share the whole.

World, that leading edge capacity, USand Europe combined capacity can open in up to 43% and Taiwan down to 30 43%.That's one of our conclusion from the report today.Charles. That's a target.How will they get there? What are the challenges faced by theU.S. and Europe?All right. Actually, one of the big driver behindthis, a quicker capacity expansion in Europe and in the U.S.actually, we think is that because of the generous government subsidy?Actually,.

Because we already knew that actuallythe US has over around the 30 like that are a subsidy and you actually have a 36out of a billion. And actually we believe that every iffor all the new project, if there are 25% of our concession calls to that'sactually sponsored by the government, that that can cut back to the paybackperiod at least by one year's. So that's the one bit.But then also means one challenge, because if a government subsidy is notdelivered a schedule, that could be a big problem.And another problem we like to highlight here is that when we are talking aboutthe capacity expansion in these two.

Regions, if we are not okay about theyare building just the two of three new fabs that we are talking about, about 10to 15 new fabs. So each region they are actually forwhich the fact they need their 1500 engineers to operate.So that means at the end they need about 30,000 new engineers.And so it's really hard to imagine how they can get so many people on nine ifthat's the challenge. So we would like to say in the report.Also, Charles, we know that China has its own chipmaking ambitions along withJapan. Now, how might this play out in themarket?.

Yes, because they're facing a hiddengeopolitical tension also. Also, the U.S., where we're seeing thatChina is actually changing their charge, that they are not focusing on theadvance anymore. They're actually expanding quickly inthe data that we recorded at thematerial Oct 20, 18 meters, mostly a peaceprocess process used for the production of thepower chips and also for the the chips in the consumer electronics.So we think that actually by the end of 2032, China can still actually growtheir market presence from the currently.

About 27% to 35% by the end of the yearto land 22. Chelsea, thank you so much for yourinsights today. Let's stick with technology.Asia's earnings spotlight shifts to China's Internet giants this week.Baidu and NetEase will be reporting the latest results jolts as China tightensits grip on tech companies. For more, let's bring in our breakingnews earnings specialist Rachel Yeo in Hong Kong.And. Rachel china may be looking into ways tosteer its vast tech industry. It faces a strong run at this point intime.

How Baidu and NetEase earnings fareunder these circumstances. Yes, we are seeing more potential movesfrom Beijing to steer its tech industry so that could potentially mean moreresources are being diverted to a priority.Sectors like air and semiconductors amidst continued tensions with the US.So this also comes as Beijing is also trying to restore confidence amidst amajor stock route. But the move could be a double edgedsword because Chinese stocks are still struggling to gain valuation andinvestors may be concerned about tightening state control as well.So with Baidu and NetEase reporting.

Earnings under this backdrop by two isexpected to see its its air revenue being helped because thecompany had launched more air products recently including a program called onlybought last year which functions like a GP and in terms of its core businessesand revenue is it is also expected to remain strong as well.Over on net, we are expecting to see strong earnings for this quarter, buttheir growth may be moderated in the next few years depending on regulatoryoversight from China's videogame sector. So weakening demand in a global videogame console may also weigh in on overseas sales for NetEase as well.Right rachel how about li auto it's also.

Out with numbers.What are we expecting? Yes, Wally, although we may expect tosee better sales as the company had done some price cuts earlier to fight offcompetition from rivals. And in terms of quarterly operatingprofit, it is expected to remain sequentially stable, even though it didspend more on promotion for increasing competition as well.But in terms of its long term earnings growth, the auto may be threatened by itall, which is why we are in the long run.So we will see how that will go for its earnings in the next coming few years.We'll see, indeed.

Breaking news, earnings specialistRachel Yu in Hong Kong, Thank you. Up next, we'll be speaking exclusivelywith a CTO of Tata Consultancy Services on how organisations can effectivelyadopt AI systems. Keep it here with us.This is the. Welcome back to Bloomberg Markets Asia.You're watching India Focus. India starts trading in about 6 minutesfrom here. Futures pointing to a lower open butburied by Nifty at record highs. Try to say the overall trend remainspositive. They say continue to buy the dip.Well, today, pointing to a lower open.

Nifty futures down about 2/10 of 1%.Now, Disney and Reliance Industries are set to have signed a binding pact tomerge the media operations in India. Sources say the details could beannounced early this week. Bloomberg South asia editor Anto Anthonyis with us. Anto, what do we know so far?Yes, so relents. And Disney has signed a bindingagreement to most Air India operations and an announcement is expected as earlyas Wednesday. Once certain procedures are ticked off.So the Indian conglomerate that is reliance will hold at least 61% stake inthe most entity with the rest going to.

Disney.But the final figure is the exact breakup will be known or closer tocompletion of the merger, because it depends upon how certain assets ofDisney are treated in this merger. The key one of the case in point beingthe stake that Disney holds in a company called Tata Play.But Reliance will get that or not. So we will know the exact breakup closerto completion of the merger. And the announcement is being expectedby Wednesday. So how will the transaction impactIndia's media landscape? This is a binding agreement and it willtake at least a few months for the.

Transaction to complete.Once that happens, then the most entity will hold or will have at least or willcontrol more than one third of the media and entertainment market in India.So obviously a big threat or big challenge to other competitors likeother rivals like Zee, Netflix or Sony. So we are expecting a lot ofconsolidation to happen in the segment after this.And a lot of the competition will have to change their strategies to match upto the most entity. And before you go and tell, where doesthis leave Sony? What is Sony's game plan in the country?Yeah, that's that's an interesting.

Question.Sony has about less than a 10th of the market share in the media TV space inIndia. And they were in the process.They were in a two year long process to merge with an Indian TV network, one ofthe India's biggest Indian TV networks, C Entertainment Enterprises Limited.That would have given them a market share of about one fourth in the Indianmarket. But after two years of mergernegotiations, finally last month, they sent determination notice to sea, sayingsome of the conditions for the deal are not met.But we have to keep in mind that they.

Have sent a termination notice, but theyare yet to pull the merger cooperation agreement from the Indian authorities.So that's a space which we are very closely watching.Now, the second thing is that Sony also has to really bulk up or create morecontent that chain strategy and be nimble to take up to match up to thecompetition if the remains of Disney deal go through.So there are some local media reports today about how Sony might be looking atsome video streaming platforms for acquisition.Again, it's space which we are very closely watching.All right.

Details to come.Lomax and to Anthony. Thank you so much for that update.Now, staying with India software and eBay's automation looks set to growthrough this year and beyond. Many firms are now looking to get morefrom technology in every aspect of their operations.Harry Levin, CTO of Tata Consultancy Services, would know he oversees thedesign and implementation of AI and Jan Air for TCS as well as its clients.Good to have you with us. Give us a sense of the kind of demandyou're seeing, the the kind of interest you're seeing.Good morning, Linda.

Really nice to be here.We are seeing tremendous demand, actually, if you think about the year2023, it has been all about actually sort of a year of exuberance.Every enterprise trying and experimenting with jenn-air variouskinds of use cases. In fact, we are seeing two types of usecases, primarily for recall as augment use cases, which are basically whereJennie-O is use as a as a means to augment the abilities or augment thecontextual awareness of a worker. So, for example, when a call comes in toa contact center, making the contact center aware of who is the caller, whatare they calling about, what to do, what.

Kind of products they have bought in thepast, have they called before happy customersand things of that sort? All of that is essentially improvingcontextual awareness. These are sort of all going to use casesthat also assist the use cases, which are basically the ones where the machineis doing part of the work for you, such as generating the first version of arecord or generating first version of that same marketing collateral lot ofmarketing campaign. So those are the cases that are actuallydominating the market. We are going to see a substantial rollout and the production of these use.

Cases in 2024 and beyond.Right. In terms of TCAS, what kind of airpilots are you conducting right now? Three are more than 250 pilots that areactually going on in all sorts of industries.Essentially, we span all the verticals that are possible.A small percentage of these are actually starting to go into production as wespeak. And in terms of challenges when it comesto adoption, what are you seeing? What are the challenges facing all theclients that you have in adopting? Jenny, I.I think it's a great question.

I think there are sort of two differenttypes of challenges that I think we see. One challenge is how do you actuallyscale the implementation on an enterprise wide situation?Because today building and effectively solution is an art form.The Pre-trained ELA LMS, you can think of them as word wise.What is needed for an enterprise to truly derived value is to go from worldwise models to industry wise, enterprise wise and even activity wise modeling.That's actually a non-trivial exercise that one has to go to.The second big challenge that an enterprise is likely to see is thatdeploying these kinds of AI based.

Solutions actually requires changing theroles of people, right? And that is essentially a fairlysubstantial organizational change management challenge for everyenterprise. Harry, we talk a lot about how I willboost efficiency, productivity. The big question is really what it meansfor jobs and what kind of new jobs will be created, How many jobs will be lost.How are you assessing the situation and how are your clients adapting to all ofthat? Well, I think once again, a greatquestion. Actually, I was I just said I think theroles of people are going to change with.

This adoption of this technology and theroles of people are going to shift from doors of work.You can think of them as trainers of machines,essentially reviewers or information that comes back from a machine and orresolve critical thinking and creativity in a sense, right?So because of that, the jobs are likely to shift from their today's jobs to oneswhere a lot more critical thinking or design thinking or creativity isinvolved. So, for example, if you think about thedomain of software engineering instead of coding and writing a lot of scriptsand doing testing and so on and so.

Forth, the skills are going to have toshift towards deciding what to build y to build and actually designing andarchitecting systems essentially, once again, a lot more creativity andcritical thinking. So this is going to require asubstantial shift in how people are trained, not only on how to use JennyAI, but also the soft skills in a sentence of actually a lot of criticalthinking and creativity. And that's going to be a substantialchange. Running is around.Are you having difficulty in finding talent?Not really.

I think there is a lot of talent that isavailable and they are actually we have a fairly substantial programme toretrain people. So we have already trained about 150,000people on basic salary at Jennie-O and about 15,000 of them are ones at sort ofan expert level. But we are substantially pushing thisenvelope to see if we can actually train the entire organization of about 600,000people with the training and with the skills that are required for this newworld. But are you looking beyond India forthat talent? And if so, is there a number that thatthat you can share with us?.

No, we are actually looking at talentglobally. We have presence in all the countries.I mean, we have research and development organization also spread across theentire world. So I don't have a very specific numberin mind. But essentially we are looking at talentand recruiting them globally. The services industry is currentlytargeted to grow to $300 billion in a few years.Horwich And just wondering how much of that market are you targeting?I think a substantial portion. I would say if you think about themarket today and that is sort of two.

Different levels.One level is these large language models and so on, so forth, which are, as Iwould think of them, as the fundamental infrastructure for all of theseapplications. These are the Pre-trained plans.The real opportunity seems to be for every enterprise to look at these higherlevel, industry wise or enterprise wise oractivity wise models that have to be built in some sense building purposivesolutions for specific problems or specific opportunities within aparticular industry. And that's a humongous industry.In fact, every knowledge work as we know.

It will essentially get redefinedbecause of infusion of engineering into it.And that's really sort of the opportunity that we are really goingafter. Horwich I can only imagine that ACTU atyou do use Jen. I, I'm also wondering what applicationsyou're using, how you're using it. Can you share that with us?Personally, I think I find these a lot of the language models and thesesort of world wise nature of them to be incredibly useful for me to as almostlike my secondary research partner and a genius partner that helps me actuallyexplore and investigate new areas that.

I'm really interested in.So, for example, if I'm trying to understand the future of, let's say,environment or future of water or things of that sort.I actually spend a lot of time just going back and forth with these modelsto actually help narrow down my own thinking process.Or what's been very interesting actually, is that when I actually donethis, what I found is that there are fantastic sources of sort of secondaryresearch there that require sort of the critical thinking that we can do aspeople to actually guide that conversation.But you should be able to do so then in.

A matter of an hour or two, you canactually out I read incredibly deep, insightful information, and that'sreally what I use for. In fact, our own planning for what wedo, we invest in, how do we actually do a lot of things.Harry, thanks for sharing. Harry Evans, CTO of Tata ConsultancyServices. It has been trading for about 5 minutes.Let's do a check on where the markets are standing at this point in time.We know that traders are waiting for clues on the global rate outlook thatcould be report out of the US. A key report that the Fed focuses onSensex rally down by 3/10 of 1%.

Nifty index lower by 2/10 of 1%.Nifty 50, by the way, at a record high for the fifth.After that fifth constructive session that we saw the rupee at 8289.Plenty more ahead. This is the backand. And now a decades old global consensusthat's allowed e-commerce to grow without customs charges will be in thespotlight as the World Trade Organization gathers in Abu Dhabi thisweek. Bloomberg's Tom Mackenzie looks atwhat's at stake. Streaming a Netflix movie in SouthAfrica.

An international zoom call with a doctorin India. Downloading an e-book on a beach in Balithat just a few of the online transactions that could face new taxes.That's if a 26 year old e-commerce deal falls apart.The agreement blocks tariffs on digital transactions wherever they occur in theworld. It obviously benefits major US techcompanies like Amazon Matter and Netflix.But it's also good news for smaller firms that collect data and do businessin international markets. And it's big money.The US exported more than $600 billion.

Of digital services in 2022 alone, withthe UK at over 300 billion. When the World Trade Organisation meetsthis week, it'll have a lot on its agenda.But perhaps the most pressing is renewing this deal, which expires onMarch 31st. They've re-upped it every two yearssince 1998 and some countries want to make it permanent.But experts think Indonesia, India and South Africa could oppose it entirely,and it would only take one to scupper the deal.The tariff revenues that governments could generate without the truce mightnot be massive, but the move would be.

Hugely symbolic and could represent abig win for the global South. It may also be the biggest protectionistthreat the Internet has ever faced. Lomax Tom Mackenzie reporting there inthe markets. Let's take a look at where chip makersare performing right now on the back ofJapan, trying to boost its Chipmaking ambitions, providing additional $4.8billion in subsidies for TSMC to expand its plant in Japan.TSMC currently down by a 10th of 1%. But those plants in Japan in positiveterritory flipped the pace of where we are in terms of those stocks that we'retracking.

Among them by its chairman proposingdouble a share buybacks to ¥400 million. And we have the auto earnings in theU.S. today.Those stocks currently up right now. That is it from Bloomberg Markets, Asia.DAYBREAK, Middle East and Africa. It's next.This is bloomberg and.

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