This is DAYBREAK.Asia. We're counting down to Asia's majormarket opens. Well, of course, it is the day after theVijay the day before the Fed poll. And of course, we're still sort ofprocessing what the implications of that, what is widely seen as a verydovish move from the Bank of Japan and whether we'll see a much bigger movewhen it comes to Japanese assets, depending on the the narrative and thepositioning of the DOT plot from the Fed.Yeah, we might not see a lot of movement today because of course Japanese marketsclosed, but we will have futures.
Trading.But yeah, it's all down to the Fed and hours in it.What we see happen from here is some other central bank decisions as wellthat we're going to hear from the Bank of Indonesia.Also going to be staying on hold, though.So perhaps much less interesting. Yes, we did see look full steam aheadwhen it comes to the Japan equity rally. And take a look at whether that's goingto fade through for another adjacent market that is hoping for the same sortof narrative to take hold right with the belly up proposition in Korea.We are looking like a down day when it.
Comes to the start of trading, when itcomes to South Korean equities, of course, be continuing to extend thatdecline. We're down just about 1.1% there.We did see that weakness in the previous session as we saw a lotof the tech related and chip related stocks showing a little bit more of avulnerability to that in the Kazakh has caused stock, I should say, is down byabout 3/10 of 1%. We'll be watching the finance sector inparticular. We've seen financial institutionspledging to provide over $313 billion through to the end of the decade when itcomes to projects aimed at climate.
Related and green funds.So some of those adjacent stocks could move to the positive today.We're also watching some of these firms that may be impacted with thegovernment, the finance minister, I should say, saying that they'll beraising taxes for any firms that will be shown to be boosting shareholder returnsare really part of this enhancement of return to shareholders to try and closethat value gap hole for South Korean equities, really hoping to see similartypes of reforms that we've seen and drive the gains in Japan.We've been trading here in Australia for a little over an hour now.Kind of a mixed picture here.
We are seeing financials performingpretty well, materials getting up off the canvas at the moment.One of the best performing sectors in Australia right now, though, is energy.That's better. By 9/10 of 1%, we've got a Brent crudeopening a little bit softer though, 8712.We did hear earlier from the Carlyle Group, Steph Curry, He sees oil risingwell above that. If the Fed cuts in June as expected.And of course we're going to learn more about that a little bit later on.Take a look at Aussie ten year. Well, it's found a little bit of supportthere just above the 4% level.
And this was after we had the RBA, ofcourse, staying on hold as expected, keeping that cash rate at 4.35%yesterday. Let's take a look at how we're trackingin terms of Treasury futures as well. As we mentioned, there is no trade inJapan today. However, futures are trading and we'vegot Treasury futures looking like this just moving a little bit higher as wecount down to that Fed decision. Of course, we're not expecting anymovement today, but we will get a new dot plot and that's going to give us anidea of where we're heading, going ahead Heidi.And let's get a better idea of how the.
Markets are sort of figuring all thisout. Audrey goes ahead of asset allocation.It said it Chartered Wealth Management and she joins us now.And Audrey, did I guess the tenor of what we heard from Governor Awadayesterday, the Bank of Japan decision and the sort of repricing ofexpectations on what comes next, has that changed your view of Japanese riskassets or not?Really? I think it struck a rather balancedtone, right, in terms of having this wall height for the time being normalisepolicy, but at the same time of striving.
To keep both policies as obvious aspossible. But of course, keeping it open foranother potential rate hike is price pressure with a spike up, you know, morethan expected to the all of us monetary balance to fall one.And if you look at year end action, the reaction has been quite muted.I think you said of appreciation that a lot of people were expecting on thestreet. I think we can actually modestly offerhis announcements. So if we assume that sort of the lowhanging fruit with the rally that's taken us up to date has already beentaken up, what are the further cut of.
The next leg opportunities that you seein Japan? I think, for one, the ongoing corporatereforms that we are seeing in corporates in Japan is ongoing.And second of all, we are also continuing to see flaws, both from aforeign investor perspective, I suppose from perspective I can think of quiterobust. So that should continue to support themarket in the near term and longer term. Actually, we do have a constructiveview. Where comes the Japanese equitiesbecause the emergence from deflation of inflation will likely allow corporatesto have better pricing power and hence.
More higher revenue and potentiallyprofitability as well. And this is something that we are alsotracking quite closely in terms of the positive earnings revision that we'vebeen seeing in Japanese corporate so far.So we do expect to continue to support Japanese equities.I know that we may see some bleeding short term because the market has donequite well yet with the solutions. Some short term consolidation from tofour is entirely possible. And to me this may not be a bad thingfor the market long term. But in terms of Japanese equities,though, we do have the situation where.
The BOJ is now stepping away from ETFpurchases and through that it's holding about 7% of Japan's stock market rightnow. How do we how does this all get unwound?What are the risks here? So the build you havewill have to have a signal that they intend to take a pause in terms of theETF purchases. So the market support, for that matter,we will step away at least from a price sensitive buyer.But I think more importantly is how they intend to probably look at theseholdings. I think for now, I think is somethingthat the body will have to manage very,.
Very carefully.In terms of the messaging, I think Penelope has not mentioned anythingabout the ETF allocations for now. By the same time, I think even if theywere to do that subsequently a few forces, I think years down the road weshould expect receipt of domestic as well as foreign investors picking upsome of that slack for that matter, because domestically they've also madeit easier to provide a tax incentive for domestic investors who actually investin Japanese equities. And even with the ongoing recovery inconsumption as well happening in Japan. Hopefully that will feed into afostered, positive, virtuous cycle where.
Investors domestically, at the veryleast, will will feel greater confidence to invest locally in Japan because ofthe export actually creating their cashflows overseas to invest. I think from a foreign investorsperspective, I think that flows has been quite constructive because if you lookat developed markets yesterday, one of the cheapest out there compared to theUS for that matter, and fundamentals are also improvingaway from Japan. I want to take a look at Hong Kong if wecan. We have the Hang Seng sort of testingits 100 day moving average at the.
Moment.What's your outlook? Do we break higher or lower from here?I think we have seen a sort of a base forming for for the time being becauseof the policy that the Chinese authorities have introduced over thepast few months. But having said that, the overallbackdrop for Chinese equities remain quite lackluster, I would say.So from an economic perspective, I think the way to characterize it would be oneof stability in asset prices. I think we do need a bit more in termsof policy support from from the government to entice investors back tothe market, which has been seeing a lot.
Of selling pressure so far over the lastthree years. I mean, with the ongoing recovery thatwe're seeing elsewhere, maybe events in Japan, US and even Europe for thatmatter, I think Asia as a region for now us that lost the.But we'll see if the rally continues. I think then there will be more of arelative sort of valuation being position by investors.And if the Fed cuts, as we expect sometime in June and second half of theyear, then we may see more interest coming back to the emerging markets aswe Asia. Now, Andre, how enthusiastic are youabout Korean equities?.
This is a value out proposition.The effort to try and close the discount and the value gap.But are you convinced that this is going to take hold?I think it is all the right steps in the right direction as well.So I think we are quite constructive on it.And at the time they are also quite exposed to the ongoingmomentum that we've seen for Sweden as well.Exports have also been improving as well.So we'll see whether that translate more slowly into earnings positive upside andpositive earnings revision.
But it is one market that looks very,very interesting given exposure to tech as well as cheap valuations that what wethink of vis a vis the other Asian markets.Audrey, always great to chat with you. Audrey, go.Head of asset allocation at Standard Chartered Wealth Management.Let's take a look at some of the movers when it comes to the Korean andAustralia equity sessions. We're just about 10 minutes or so intothe start of trading in Korea. Of course, defense stocks are in focus.We have reports that Kim Jong un supervised a test of a hypersonicmissile engine.
That's according to reporting from CNA.This is a solid field engine for a new type of intermediate range hypersonicmissile. And that reporting suggests that thetest was successful. So we're watching some of those defensestocks that are trading at the moment. We're also watching the moves when itcomes to Aussie miners and some of those materials and energy names as well.On the oil front, Jeff Currie from Carlisle say that he sees rate cutssupporting commodities and that the upside here is significant.They are set to rise well above the current consensus view, which is between70 to $90 a barrel.
If if the Fed cuts interest rates in thecoming months, according to Jeff Carr, of course, formerly of Goldman Sachs, hesays he wants to be long oil and the rest of the commodity complex in thisenvironment. Speaking to Bloomberg TV, we're alsowatching iron ore as well. It has been quite a rollercoaster ride.We've seen iron ore extending that rebound to back above $100, but we areseeing a little bit more weakness potentially to come.It has been volatile trading over the past few days, but for the minute we areseeing the iron ore and more broadly mining plays in Australia seeing someupside.
Fortescue actually up by almost 2%though. All right.Still to come, we're going to talk a bit more about the Bank of Japan, what'scoming up next after Tuesday's historic Mike Rogers investment adviser sharestheir insights. That's coming up later this hour.First, though, we will hear exclusively from the Philippine president about hisambitious growth goals and why he thinks the country is still not ready for arate cut. This is Bloomberg. Philippine President Ferdinand MarcosJunior says he's not seeking.
Confrontation with China, even as Manilaworks harder to assert its territorial claims in disputed waters.He spoke exclusively to Bloomberg's Haslinda Amin, who joins us now fromManila and has it was a really elucidating conversation.Well, that's right. As you know, the South China Sea is oneof the biggest challenges for the Philippines of late.And that's because there's been increasing tensions in the South ChinaSea from China in particular. That aggressive nature that we haveseen. We've seen how Chinese ships have rammedinto Jap and into Philippine ships.
Causing damage as well as injuries tothe crew. And that is the reason, according toMarcos, that they've had to respond in a bigger way.It is about defending national sovereignty.It is not about provoking China. In fact, he says he wants relations togo back to an even keel. He does not want to, in his words, pokethe bear. So you get a sense that he wantstemperatures to be dialed down. He's keeping communications open, hesays, with China because he wants to do exactly that.He wants a peaceful way of dealing with.
The situation in the South China Seanow. I did ask him what it would take for himto perhaps get the U.S. involved in countering all the pressuresfrom China. And he says, you know what, It wouldtake an existential threat to the country.So it would take a lot. The bar is really high for thePhilippines to get the US involved in this.And you know what? He also said you can't always turn toBig Brother for help. So there you go.Pretty clear that he is more.
Responsible.Isn't wanting to get the US involved. Or has in terms of domestic policies.We've got an economy that's absolutely galloping at the in the Philippines.Looks like it's going to hit that seven and a half percent growth rate.Target is doing it with some of the highest interest rates in the region aswell. What's the rest of this year hold?Oh, well, that's great news, right? This is one of the strongest growingeconomies in Asia, and it is expected to continue to do so.You talked about that seven and a half percent growth that is likely for theyear and that is the higher end of the.
Target that they have for 2024.It is between six and a half to seven and a half percent, as you said.A lot of things going for the country, lots of investment coming in.A lot of growth drivers. Take a listen to what he had to say.Much of that much of the policies that we that we've taken on are agreed to doto spur growth. That's part of the most that's the mostimportant part, because it is only growth that will pull us out of this,the morass that was left after the pandemic.Even in terms of interest, even in terms of debt ratios, even in terms ofunemployment, in terms of inflation, it.
Really is growth.That seems to be the key. Is it sustainable if we continue downthis road, if we defend all of the things that we are doing?I believe it is. I believe it is.If we are also agile in terms of responding to the shocks that come up,come up from other, from and from the outside,to put it that way in shocks that we cannot control or can have very littleinfluence over, if any. So that's that will be the key.It's a six year term. Do you think you can get to 8% withinthe six years that you're in office?.
Sure.Why not? You know, there's no we plan we alwaysplan for the ideal. We don't plan for a mediocre result.We plan for a very good result. And as I said, we just have to adjustalong the way as we as we continue to to transform the economy.But, yes, I think it is I think it is doable.Central banks are currently in focus because of interest rates in thePhilippines. Rates are at, I think, 17 year highs.How much room is there for you to cut rates or under the BSP to cut rates?We're still battling inflation.
Inflation is still our biggest problem.And when you when you separate core inflation to inflation, that involvesagri product, for example, you can see that the core inflation,we're doing rather well in terms of controlling it.But again, these these shocks that keep coming in, that's still not quite thetime to cut rates because inflation is still stickingmore perhaps. We look at it almost every every week tosee if it's time to do to bring down the rates.We are not yet there and the peso at a three month high.Are you comfortable?.
I'm the person who at three monthsbecause it's an indication of the strength of the economy.There is a downside to it for the Philippines because of our overseasworkers where the dollar is worth a little less than it normally would be.But I see it as an affirmation that the economy has grown stronger.And that is that's one of those obvious tests.And the dollar, I mean, of course, because it's a relative, it's a relativemeasure, the dollar has not depreciated.So if we are if the value of the person isincreasing, then that is a good.
Indication that, again, the economy hasgained strength. So optimism in the Philippine economy.Worth noting as well that part of that growth drivers could be that transitionto clean energy. Remember that its sovereign fund,Maharlika Fund, has been getting a lot of investments for green energy into thecountry, projects which could span several years, and that could drivegrowth as well Heidi. All right, Thanks very much.Shares. And, you know, as has Linda was talkingabout there, the Philippines is also right in the thick of it when it comesto the disputes in the South China Sea.
And that's something that doubtless isgoing to come up when Penny Wong and Wang Yi, the Chinese foreign ministermeeting today in Canberra, going to discuss this is, I think, the sixth timethat they've met. Taking a look at the Ministry of Financeas translated statement, very positive for continuously increasing trust,dispelling doubts. But still a lot of those issues remain,don't they? The South China Sea problem hasn't goneanywhere. There's China's courtship of thosePacific island nations as well. So there's still plenty for these twohad thorny issues here for them to.
Remember.Yeah, and we kind of know some of the deliverables and the sort of lastremaining tariffs on Australian goods. Obviously, one will be one of them.And we know that Wang Yi, after he wraps up in Canberra, we are getting thatpress conference. He will not be partaking in that.He will be, however, partaking in a meeting with the former Prime ministerPaul Keating, much I assume, to the ire of the current government, because Iknow, as we know Paul Keating has been pretty critical of the way that theAlbanese Government and even previous governments have approached therelationship with Beijing, but also.
Questioningthe decisions around orcas. Right.And questioning, you know, where sort of I guess the best interests for Australiashould really lie. Yeah, it's going to be an interestingmeeting and we await the statement at the end of it as well.Some of the rhetoric in the channel that comes out of that.Just want to get you across what with something we're looking at on theterminal right now as the Japanese yen is continuing to weaken.One 5125 at the moment, if you take a look at it versus the euro one 6428.So that weakness really the yen falling.
To its lowest level there on future Bankof Japan policy bets. Of course, the normalization of rates inJapan came as no surprise. But some of these currency movements areperhaps a little bit surprising. Plenty more to come on DAYBREAK.Asia, this is Bloomberg. Bank of America's CEO, Brian Moynihan,says it'll take time for the banking industry to work through issues withcommercial real estate loans after a New York regional lender alarmed investorswith its exposure in the space. He told us exclusively how the travelsector is in a slow burn industry, is well capitalized, has goodliquidity.
Believe me, from last year to this year,people shored up their liquidity across industry.Commercial real estate is a slow burn. It's a classic burn.In other words, if you go back in the late eighties and early nineties, we hada rolling commercial real estate recession.And so there will be difficulties and we work in that.But, you know, the the trading attitude, which is these assets got to move at aprice tomorrow morning isn't the way the banking system works.And frankly that's the value of the banking system.We work with clients, we figure out what.
The you know, you take a building andfigure out what the ultimate end state rental rolls will provide.You refinanced it. Sometimes that wipes out the equity,sometimes it doesn't work. Careful in how we underwrite as anindustry. You know, the top 30 banks go throughthe stress test, which has a a in effect.It says, wait a second, if you're underwriting outs in a bad way, thatwill you have to put up the capital, prove it right before you even get thechance to prove your right. So in other words, your capitalrequirements reflect your underwriting.
Today, even though recession may nevercome and it reflects your underwriting commitments under scenario wherecommercial real estate dropped by 30 or 40% instantaneously, instantaneously.So there's a effect on that on the industry, which is much moreconservative building and much more middle of the road building, which isprobably slowed down the capital provision to some of these companies.But on the other hand, is not a bad thing when you get to this point.So we feel very good. Does that mean banks might fail?There's been thousands of banks have failed across the last 30, 40 years.That's what happens.
Business models change.But on the other hand, the the quality of the banking system is strong.That's Bank of America CEO Brian Moynihan speaking exclusively toBloomberg Surveillance. Blackstone Mortgage Trust has respondedto fresh concerns raised by its short seller Carson BLOCK.A trust spokesman says the Blackstone vehicle increased liquidity over thecourse of 2023 to near record levels and reduced leverage while maintainingstrong earnings blocks. Muddy Waters revealed a short positionin the Trust last year and says property market woes have since got worse.Yeah, actually we're more bearish on.
Blackstone Mortgage trust than we werewhen we announced the short in December of last year.And the reason for that is initially we were really only focused on office, butwe've come to the view that a lot of multifamily real estate is probablyquite troubled. All right.Here's some of the latest corporate stories that we're following.The New York Times says Saudi Arabia is planning a massive push into II.Sources say the kingdom is considering a fund of about $40 billion, which wouldmake it among the biggest players in the sector.Representatives of the Saudi public.
Investment funds have also reportedlydiscussed a potential partnership with Andreessen Horowitz and otherfinanciers. Shami says it wants its first electriccar, the issue seven, to become one of China's three best selling luxury EVmodels. President Lu waving a sign of theinternal target as the company prepares to begin sales of the issue seven acrossChina next week. Schamis move into EVs will test itstechnological capabilities amid a price war and sagging sales growth.Take a look at how futures in Europe opening up.Of course, it is a holiday kind of scene.
Session that we're getting any kind ofcarry through from here in Asia with Japan of today after the break.But we have seen European futures looking a little bit softer as we getinto the start of trading there. The previous session, we did see itadvance just ticking up and snapping that three session losing streak, butnot a great deal of conviction, of course, ahead of still quite significantevent risk with the Fed later on this week as well.We've also seen a lot of those bets compiling when it comes to the pound,rallying to the highest since 2007 ahead of the.This is what, the third consecutive week.
Of that positioning, according to CFTCdata for the pound. For the pound.So we could potentially see a bit of a risk of sterling pull back if the riskof cuts is really being flagged by the bureau.German DAX futures looking pretty flat at the moment, watching some of thosekey energy stocks in particular as we continue to see that climb in oil andalso some flattering commentary on oil and other commodities from Jeff Currie.This is Bloomberg. To look at the archive.Well, there are at today's meeting we took a thorough look at the recenteconomic, financial and price.
Developments, particularly in wages andprices. The board members determined that recentdata and information from hearings, including the current results of springwage negotiations, have confirmed the strengthening of the virtuous cyclebetween wages and prices. Therefore, the bank has decided toreview its large scale monetary easing programme this time.It was a break overnight because we're aware that speaking after raisinginterest rates for the first time since 2007 and of course, perhaps after allthat anticipation, a well deserved holiday, public holiday.When it comes to trading in Tokyo today,.
But we do have trading index futures aswell as, of course, continuing to watch the moves that we see in the yen.Futures are pointing to the upside pretty firmly, 1.4% that higher.And this, of course, as we continue to see just the extended moves in the yenfalling to the lowest since 2008 against the euro after we really saw signallingthat the BOJ path is being seen as gradual tightening such dovish atightening anticipation going into the end of the year.So that really saw what was really the reversal of the fears for the currency.Talking about the cost base as we're seeing that up by about 9/10 of 1%.So reversing some of the weakness that.
We saw earlier.And in fact, financials are doing very well in that session.We had a number of announcements from the government, including theannouncement that they would ease taxes for firms that are aimed at boostingshareholder returns. Following up on that pledge to improvevaluations and boost the local equity market.So the government set to reduce corporate taxes for a portion ofincreased shareholder returns. We're seeing some broad based reactionto that as well. Also watching the latest when it comesto the doctor's walk out as well, We're.
Expecting to see more of thoseallocations being announced today, as well as some pledges when it comes togreen stocks. We'll see them reacting today as well.The finance sector promising about $313 billion in green funding.We're also seeing a little bit of upside here when it comes to trading in Sydney.But Paul, of course, we're still very firmly focused on how that potentiallyreacts. We would need to get a super, superdovish note out of the Fed to see any kind of reversal.I think at these levels the the yen been losing ground all day and in fact isslumped to its lowest levels in 2024 so.
Far after the Bank of Japan ended theworld's last negative interest rate regime.Currency traders focusing on the gap that remains between Japanese and USinterest rates. And investors also expect further rateincreases to be gradual. Building the case for Japanese equitiesto continue their advance course. They're not advancing today.It's a holiday. But let's talk to Ed Rogers, CEO and CIOat Rogers Investment Advisors. So when you look at those yen movementsweaker again, does that suggest to you that the market thinks there's one anddone from the BOJ or is there more to.
Come and if so, when and how muchthe recall hit? Yes, clearly the market is telling uswhat they think with the with the yen moves a little bit surprising, frankly Isort of expected the yen would appreciate a bit.But I think this is also very much a reflection of what people areinterpreting as far as the Fed move at the end of this week.Yeah, that's definitely the next big macro event here.But but just in terms of Japan, the BOJ seems now pretty confident in Japan'srecovery that the fight against inflation is going well.How confident are you feeling about.
Those things?Right. Look, I think this is a very positivedevelopment for Japan. It is certainly a sign that the BOJ andI think many other actors here feel that we're getting a return to normalcy, ifyou will. So less need for the hand of thegovernment, by the way, BOJ be providing free capital and that's a very, verypositive sign. This is a very, very good sign, I think,overall for the Japanese equities market and the Japanese economy in general,that there now that the BOJ's comfortable will make this move.So you've got really that stand out.
Performance when it comes to wagenegotiations. But if you continue to have such a weaklocal currency, does that not negate some of the effect when it comes tohousehold confidence and domestic asset valuations?That's a good question. Again, I think we're all a little bitsurprised at the dollar and move today to 151.So in an overall sense, yes, I do agree with your comments, but but I'll standby what I started off saying, which is this is overall a positive indication asfar as where Japan is. And so, look, they've started the move.They now have much more flexibility in a.
Way to sort of put thekettle on the. Foot on the pedal, on the on the brakes,on the accelerator. Which one are you going to do?It's a good thing now that the market gets to wonder about that a little bitand wonder about how the Japanese interest rate policies will.Well, they'll be a little bit more volatility, and I think that's a goodthing, frankly. And that will well will play out overtime as we see the situation in United States.And I believe China is also very important to understand where a dollaryen in the overall Japanese economy is.
Going.China is a huge factor in all this. And that factor is not just economicside. You're talking about the geopoliticalrealities of the region. And obviously that may very well changeafter November this year, too.So in the short term, what you'd say is if we're getting back to a true cost ofcapital model for the Japanese economy, you'll have small and medium sizedenterprises and even some large companies that we'll see what what whatthe new interest rate environment looks like, how they perform.But in a very, very broad sense, the.
Overall Japanese economy.China is the largest trading partner since 2004, but the GOP politicalrealities of living in a kind of a we live in a tough neighborhood, you know,North Korea, China, the geopolitical realities of it since 2022 havingchanged indicate that certain parts of theJapanese economy will respond differently now than they didpreviously. When when China has ups and downs andwhen the United States has ups and downs with China.It's still a lot of work for the Bank of Japan.There is there are enormous balance.
Sheets.We've got a chart on the Bloomberg terminal that illustrates that.There's also the question of what it does with this great big pile of ETFs.I mean, how do you unwind both of these positions without destabilizing markets?Another fantastic question that we've all been pondering for the last tenyears. My, my, my basic view is bonds are alittle bit easier to deal with if you can just sort of hold bonds until theyexpiring, so be it. Unwinding the ETF positions which havebeen which are substantial and have provided significant market support toJapanese equities.
That's a little bit more challenging.My gut is at the end of the day they're going to find some form of governmentgiveaway. Maybe this becomes part of your pensionfund distributions. This becomes part of your social welfareprogram. And they could in fact have adistribution in kind at some point to all of Japanese citizens and say, you'reall part of the Japanese economy now you're all going to benefit.And that would be a more than likely the least disruptive way to solve theproblem. Yeah, and there's an interestingquestion around how Japanese citizens.
Respond to this as well, because therewas a huge pool of household savings and as Heidi mentioned earlier, a very, veryweak yen with the eponymous Mrs. Watanabe, very tempted to just keep someof that money at home and earn some interest at last,which is what she's been doing for the last ten years.The account programs have not done what we've what the government has wantedthem to do. It's not provided a similar to the 4001kvehicles in the United States where you provide tax free, frictionless tradingand also when people buy more equities. It simply hasn't happened in Japan.I think it's about $0.63 of every dollar.
Deposited in these accounts remains incash. So they're going to they're going tocontinue to experiment, I believe, find sort of hope.Ms.. Watanabe Find ways to help Ms..Watanabe in getting more market exposure.They have not found the right cocktail. They have not found the right partyjuice, as it were, to serve to make that an appealing drink for Mrs.Watson, albeit not yet anyway. Ed Rogers, CEO and CEO of RogersInvestment Advisors. Always great to have you with us.Coming up, though, we'll be talking.
About the biggest opportunities forinvestors in China's credit markets. And as international head of corporatefinance shares their insights next. This is Bloomberg. The US is running a 6% fiscal deficit.The largest deficit ever ran history in a peacetime non recessionaryenvironment. Think about this.If they do it in a recession, it's because of providing, let's say,unemployment insurance. They're doing it full employment, redhot economy, and they're turbocharging an environment that is already beingstressed.
That's why Bitcoin and commodities arethe two best performing asset classes out there.It's called Chief Strategy Officer of Energy Pathways, Jeff Curry, speakingexclusively with Bloomberg on the Commodity rally.And if we take a look at some of those commodities right now, we've got Brentthat's a little bit softer, but still holding its ground, really 87.19 abarrel. Jeff Currie says he sees oil rising wellabove the consensus of 70 to 90 a barrel if the Fed goes ahead and cuts in June,as the expectation seems to be. Europe rebuilding stockpiles, China'smove to support manufacturing.
That's what's behind that call.They love not extending to iron ore, though, continuing its slide that we'veseen so far in 2024, just above $105 a tonne at the moment.Notwithstanding that, though, we're seeing some of Australia's big iron orenames gaining today. We've got Fortescue Metals up by nearly2% Heidi. Yeah, some of the winners there has beena pretty volatile session there. Take a look at one sector that'sperforming quite well in the Korean section in Seoul.We are seeing financials really leading the gains there and in fact by as highas a 4% rally when it comes to the KB.
Financial and some of those associatednames, we have had really just a flurry of announcements when it comes to whatcould contribute to this value up program at South Korea.And in fact, the finance ministry telling investors and bankers in ameeting that the tax burden for companies that are taking steps toenhance returns for shareholders will be eased.This is part of the broader pledge to improve valuations and boost the localstock market to reduce the so-called Korea discount as being really a keypriority for financial and market regulators.In South Korea, the government set to.
Reduce corporate taxes for a portion ofincreased shareholder returns, according to the Finance Ministry.So a lot of these incentives and tax benefits are really coming through thecorporate value up program. We see some of that reaction in thesession in Seoul today. Well, China's property debt crisis hasentered a new stage as tensions increasingly shift to developers, courtbattles with creditors over debt restructuring plans and the onceunthinkable consequence of liquidation orders.Let's get some insight into what happens next.Bloomberg is hosting us and we'll go to.
China Credit Forum, which kicks off injust a few minutes time. Let's get over to Hong Kong.Annabel is standing by with our next guest, who is a speaker at the event,Bo. Thanks, Heidi.Yeah, really excited for this event kicking off in about 15 minutes, but nowgoing to be broadcast live on Bloomberg Television as well.So you can stay glued to your screens for that one.But let's bring in one of the speakers from today, and that's John Cochrane.He's head of Corporate Finance International at ANZ.And John, you're going to be speaking to.
Us today about the the opportunities andthe future landscape as well for what's happening in China's credit market.But your loans, man, and you know a lot about this market, so let's just kick itoff with the present day. What are we seeing and where are we atin the credit cycle? You know,it's been a relatively quiet couple of years in China, mostly because theinterest rates in US dollars have been much higher than in renminbi interestrates. So as a result of that, their focus hasbeen recently on renminbi loans. I think that's going to change a littlebit as interest rates start to come down.
In the second half of this year.And also one of the interesting developments I think that we're going tosee a lot of is the offshore renminbi market.It's still pretty small at the moment, but I think that's going to be somethingthat's going to take off later in the year.And a lot of Hong Kong borrowers are going to take access to to that renminbimarket, yet want to really get into the details of that one offshore yuanlending who who are the sort of issuers and who's also going to take out thoseloans. Yeah, at the moment there's about 240billion USD of issuance last year in the.
Loan market in China, of which justunder 40 billion of that was was offshore.Most of that offshore market was in US dollars I think 65% of that and aboutanother 25% in Hong Kong dollars. The renminbi offshore market, the cardmarket, as we call it, represented about one and a half percent of that market.So it has an awful lot of room to grow. And already this year, we've seen a veryinteresting deal come to the market in respect of a take private for a tissuemanufacturer called Vinda, listed here in Hong Kong, and that has a 15 billionrenminbi financing attached to it. The first time we've seen this sort offinancing use for offshore companies.
And even particularly more interestingthan that is the fact that this is a take private by an Indonesian company.So very interesting to see people. Or with no direct connection.Borrowing in the renminbi market offshore.Yeah, because I think that there's sort ofgeopolitical overhangs really here in the Hong Kong market.So would that be something that would sort of dent the appeal perhaps, or whatare you sort of expecting? Yeah, it's a bit of a it's a bit of amixed message, I think. The loan market in China is coming off afairly low base.
So of course geopolitical considerationsare always going to be relevant. But the market's been quiet largely as aresult of some of the restrictions during the COVID times.So that's going to rebound a bit. And I think a lot of borrowers have beendelaying accessing the market just because they do feel that interest rateswill come down in the third or fourth quarter.You know, business confidence is still a little bit shaky and I think many peoplefeel that it's a good idea to defer CapEx as long as they can.And the M&A market is still very quiet, if you look specifically at China.I think the M&A market was about 20%.
Down last year, which was coming from anextremely low base. And this year it's been extremely quietin the first couple of months. Yeah, I think that really points tocredit demand because we haven't seen it's been so weak amongst corporates andalso households alike. So when are you expecting that creditexpansion then to pick up? Yeah, I think it'll probably be third orfourth quarter, perhaps fourth quarter more likely because it takes a littlewhile for the interest rate reductions whenever they happen to flow through.But we are seeing some bright spots. I mean, there's a lot more activity fromChinese borrowers in South and Southeast.
Asia.We're seeing, of course, many Chinese borrowers very active in renewables andwind and solar. And we're seeing a lot of activity fromfrom the electric vehicle manufacturers and battery manufacturers.So those are definitely bright spots in the market.Yeah, that's the role here really, that the creditorscan play. I mean, how much is that going to be onthose more of those sort of new growth drivers in China?Yeah, I think pretty much every investor wants to get a bigger share of therenewables and sustainable finance.
Business.So I think that's a great opportunity for people at the moment.I think it's only about 10% of Chinese loans are either sustainable or green.That clearly has a huge way to grow and there's a massive opportunity there andevery investor in the bank world is looking for those opportunities.So I think that's going to be something which will only grow and continue togrow very strongly over the next couple of years.So much of China's credit crisis has been down to the woes in the propertysector, and we've just continued to chart the sheer number of builders orrelated companies.
I think there's more than 20 at thispoint that have received winding up petitions in Hong Kong.Does that tell you that we're entering a new phase in the property cycle?Yeah, I think mostly the if you if you take away the property sector, thecredit environment in China is reasonably benign.There haven't been too many defaults where borrowers have access to thepublic markets offshore. And a lot of that real estate hasalready sort of filtered through the system.Banks have provided for those loans where borrowers have got intodifficulty.
So I think perhaps we're going into anew a new phase. And many of the investors were notactually exposed in the loan market to to those loans.I mean, there's been a lot of caution for a number of years from many loaninvestors. So, you know, sometimes I think in theloan market, some of those real estate issues may be overexaggerated a littlebit, but it is something which clearly does impact upon confidence ofinvestors. All right, John, thanks for your time.That was John Carney, the head of corporate finance at ANZ.Really looking forward to your panel.
Coming up later today.Because, Paul, as we said, it is the first Bloomberg China credit forumtaking place in Hong Kong and also the first that we're going to bebroadcasting live on Bloomberg Television.All right, thanks very much, Bill. Anabelle, Jill is there, of course, inHong Kong. And we're going to be live in just a fewminutes at the inaugural China Credit Forum.It is hosted by Bloomberg News. And the focus is going to be the futureof Chinese of China's $13 trillion credit market.We've got more ahead on DAYBREAK.
Asia.This is Bloomberg. Hong Kong's fast track domestic securitylaw is prompting new warnings from the US and EU that it could muzzle opendiscussion in the global finance hub. From all this, bring our Asia governmentand economy correspondent Rebecca Chong Wilkins from Hong Kong.So Rebecca, what are the broader concerns about this are not necessarilyto do with this one article, but the broad sort of direction of travel thatwe've seen? Yes, that's right.So we have seen quite critical statements coming from the US, the UKand the EU.
The EU is pointing particularly to theharsher penalties, but also a sort of partial retroactive ability.But the US statement point to sort of this general potential that we could seefundamental freedoms eroded in the city too.And the UK has echoed similarly some of those worries.And as you say, though, comes part of a sort of broader criticism that the HongKong sort of openness, once this sort of free wheeling bastion of free speech andso on, is shifting and changing under way.It is worth saying that some of the local domestic business institutions inHong Kong, like the Hong Kong Chamber of.
Commerce, have come out saying this willultimately help improve the business environment.Okay. So, Rebecca, there's been criticisms onboth sides. As Heidi mentioned, there's been somecriticisms that this law is vague, the wording is vague, but then we hear thatit might improve the environment. Let's hear a little bit more about that,how it could improve things in Hong Kong.Well, in some ways, this perhaps does present both an opportunity and achallenge for chief executive John Lee. The sort of passing of this legislation,which is had to be was required and.
Mandated under the basic law after thehandover. And in fact, is actually sort of thelast piece of major national security legislation that has to be passed afterwe saw the government move to crack down on those pro-democracy protests back in2019. And I think there is this desire amongthe business community and the foreign business community to in Hong Kong forthe government to move beyond national security, to start focusing on HongKong's status as an international financial center, to focus more ontrying to boost the economy, particularly as we face the sort ofripple through effect of that slowdown.
In China's economy, too.So this is, I think, this desire, an opportunity to sort of move on with theagenda now remains to be seen precisely how we see that happen.All right. Bloomberg's Rebecca Wilkins welcomesthat. Let's take a look at some of the stocksthat we're going to be watching. We markets open in Hong Kong andmainland China. Keep an eye on Shami after it reported arevenue beat for the fourth quarter. The company also declared its ambitionfor its new RSU seven to become one of China's three bestselling luxury EVmodels.
Next, Fung also in focus in that spaceafter flagging a bumpy outlook despite better than expected quarterly earningsHeidi. And of course, we're taking a look at USfutures after what was a second day of pretty convincing gains in the US.Of course, quite a lot of caution now. A lot of investors stay on the sidelinesuntil we get perhaps that updated report from the Fed and any sort of commentaryaround the Fed's path forward. We are seeing futures up by just about a10th of 1%, looking cautiously optimistic when it comes to China,futures there as well. We are also getting some of these linesthrough from the foreign minister of.
China, Wang Yi, here in Australia,saying that China hopes to have a fair environment from Australia when it comesto firms. He'll be meeting with members of thebusiness community and going forward.
