It is almost 11 a.m.in Singapore, in Shanghai. Welcome to Bloomberg Markets asia.I'm Haslinda Amin. Here are the top stories.Stock investors playing it safe while Treasury yields fall from highs of theyear. Traders awaiting the key US inflationreport for clues on the Fed's rate cut timetable.New Zealand's Reserve Bank delivers a hawkish hold watching upside inflationrisks. The Bank of Thailand is up next undergovernment pressure to ease. Also ahead, President Biden set to hostthe Japanese and Philippine leaders in.
Washington, sending a clear message toChina. We talk about that with the USambassador to Japan, Rahm Emanuel. Plus, a check on India's venture debtmarkets with strike ventures. And speaking of markets, littleconviction in the markets ahead of the US CPI report.It is a key number this week as straight as pare back expectations of Fed ratecuts in 2024. Of course, CPI has come in hotter thananticipated for three straight months. The Fed says it can remain patient.MSCI Asia Pick index up 3/10 of 1%. We know that Treasuries droppedovernight ten year use easing from the.
Highest levels this year.Now China down yuan supported by the PBOC.Strong folks in Hong Kong. What a performance HSBC and OUTPERFORMERtoday above that 17,000 level. All sectors in the green and we'rekeeping a watch on the Kiwi finding support is the RBNZ at push back onexpectations for rate cuts despite lingering concerns about growthinflation still above that 1 to 3% targets.Markets currently pricing in nearly three rate cuts for the year.We're keeping an eye on the Nikkei as well under pressure Governor Causeway toavoiding sounding dovish on monetary.
Policy and yen traders on guard forpossible currency intervention yen just below that 34 year lows versus the USDone 5176 unchanged versus the USD right now.And investors are waiting that key US inflation reading in the coming hours.Bloomberg opinion columnist Mohamed El-Erian weighing in on how the Fed mayreact. Inflation will be sticky.Inflation will be absolutely sticky. We're going to get stuck at around twoand a half to 3%. And I do think that that actuallywarrants, over the long term, the Fed rethinking its inflation target.And here's how bond traders are.
Positioning ahead of the release of thelatest US CPI data. The CFTC says funds that use borrowedmoney to amplify returns have increased short positions in the Treasury futuresmarket for the first time in two months. We also saw a record size block trade inshort term interest rate futures, which appeared consistent with an outrightbuyer. For more.Let's bring in Gavin Reynolds who heads our Markets Live Asia coverage.Golf. I mean, what prompted that recordfutures bat? Well, Housetraders are seeing that there's the.
Potential for a serious shift.We've had this drawback from three rate cuts priced in, which came after we hadat one stage had six rate cuts priced in for the year earlier on.So now the question is, do we go a two or do we go to three?Do we end up with one? The way that both which was flaggingmight be possible. So amid all that, about the only thingthat is certain is there's a lot of money to be made and to be lost on this.That record trade could have been somebody taking out a bet that the CPIis not going to come in strong enough to justify a reduction in the number ofrate cut bits.
Or it could have been somebody who's gota big short position on treasuries and they're using that know Fed futuresblock of futures that are linked to the Fed, right.That block trade as a hedge in case they get squeezed out of those bearishpositions by a slightly, you know, modest CPI report.And interesting to note as well, Straight Street coming in to say thatperhaps you could see a 50 basis point cut from the Fed in June.Yeah, that was a very interesting call. And it's, it's noticeable that ah, tosome extent they were using a political justification for it.I mean their base case is that the US.
Economy is worse off than it seems, butthey're also saying the Fed is going to be rushed into moving more rapidly sothat they're not carrying out major policy moves right at the time when theelection is taking place. So that's a very bold call.It's hard to see the CPI release justifying anything like that,especially seeing as we've had previous CPI and jobless releases come in sostrong. And despite some sectors of weakness,the US economy continues to show the sort of level of resistance that makesit very hard to understand how you've got people betting on, you know, lots ofrate cuts.
Well, outside of the fact that the Feditself is saying that, yes, rate cuts are coming, it's just that we're goingto be patient about it. So there's a lot of moving parts outthere. It's the Fed has always said it wants toachieve a soft landing, but that that's a very narrow and difficult target tohit. It still thinks it's on target for that.But there's a lot of nervousness about both sides of that equation.For the markets point of view, if the Fed gets it wrong and there's a hardlanding, then we get those big rate cuts.And so if you've been shorting.
Treasuries, you're in trouble.If the if there ends up being a no landing, which means quite possiblyinflation does stay a little bit higher but doesn't get out of control, thenyou're in trouble if you re betting on bond gains.And also if you've been thinking that, hey, the stock market's bull run is overbecause in a no landing scenario, people are going to be saying, let's get out ofbonds, Let's get into stocks. Several scenarios just highlighting howconfused and how divided markets air. Garfield Reynolds, who leads the M lifecoverage. Thank you so much for that.Let's bring in Jim Levers, public fixed.
Income CEO of M.G.Investments. Jim, let's get your thoughts on it.I mean, you know, there is a contradiction you can say.I mean, we have the Fed saying it can remain patient.Yet it insists it will do three this year.What's going on? I think that the markets have gotthemselves completely nervous that we're going to see an aboutturn from the Fed this year. And the Fed needs to be quite clear thatactually rate cuts will be coming through.They may not be as optimistic about the.
Degree of those rate cuts as the bondmarket was. As we heard, the bond markets werepricing in six rate cuts in December is now more like two and a half rate cuts.But I think the Fed will be very nervous if bond markets start pricing in hikesor take away all of the rate cuts from the market.So the Fed's got a very balanced game to play.I think the Chairman Powell, has been more dovish.Some of the voices we've heard over the past week or so, whether that's Bosticor Waller, have been a bit more hawkish on the outlook for rates.I think they will go they will go two or.
Three cuts later this year as theeconomy starts to slow down and remember that the inflation measure the Fed looksat, which is the PC deflator on a on a kind of short term annualized measure,is already back at the Fed's target level or pretty near there.So they'll be okay about this. They'll think that they've got enoughroom to move from restrictive policy towards a less restrictive policy, butthey're still a long way above neutral levels of rate.So some sort of mid-cycle adjustment cuts can be justified even in the faceof what you describe rightly as a very strong US economy and particularly thejobs outlook.
Jim, the debate is two or three for you.Is it two or three? I think it's three.And the reason for that is just how quickly PC is coming down.I think there are some weaknesses in the employment data, underlying employmentdata, even though those headline job creation numbers are incredibly strong.Remember, a lot of that strength in employment number is due to immigration,keeping the number of people entering the workforce really high and creatingthis buoyant economy going into the election.But we've had this high level of interest rates for a long time now.The bond market has been living in a bit.
Of disbelief, to be honest, that withthe inverted yield curve we've seen for a long time with 5% worth of rate hikes,that hasn't yet fed through into either some, I don't know, some systemic creditshocks or a slowdown in a more significant slowdown in the housingmarket or corporate activity. But eventually you do run out of roadand these high interest rates that we're experiencing at the moment can't besimply outweighed by the animal spirits coming through the stock market.So I say three this year, perhaps even moreyields easing from the highs of the year.But do you see yields trending higher.
Pretty much from here?Now, I think yields will come down in the US.I think having a longer duration stance at the moment is the right thing to do.There's a lot of value in government bonds if you expect inflation to headback towards two as it appears to be doing.Obviously the CPI that will come in later today will be above three still,but it's going in the right direction generally.And that means as a bond investor, if you're getting paid four and a halfpercent ten year bond yield, that's a decent real return historically.So that value in bonds, valuing.
Government bonds and the entry pointsnow look attractive. I think the thing that bond marketparticipants are worrying about perhaps more than the inflation outlook is thesupply outlook. And that's the thing that's that's keptbond markets on the back foot as much as anything.It's worries about the long term debt to GDP outlook of the US, the budgetdeficits that the US is running and what that means for supply, who's going toturn up and keep buying these bonds. So I think that's the major concern forbond markets, if anything, as much as the inflation outlook.I think most of us believe that the.
Inflation outlook is trending in theright direction, even on a month by month basis, we may be getting 0.3instead of the 0.2, that I think the market would be more relaxed about it.And of course we had James Bullard saying that there's enough data tosuggest that three will be it for the. Jim, I'm just wondering, when you take alook at correlation between stocks and bonds, there were.Related. Then they diverge and now they're backbeing correlated. What's going on?And where do you see that correlation going?Well, it's one of those difficult things.
For investors, because so many peoplehave a blend of stocks and bonds in their portfolio, a balanced portfolio.And when correlations go towards one where everything goes up or everythinggoes down, that makes life really tricky for investors to get some risk out oftheir portfolios. The thing that's going on really,though, is that bad news becomes good news and good news becomes bad news.So when we get weak data, it makes people think the bond marketscan come down in yield and that gives them support for long term equityvaluations. And so I don't see the value, thecorrelations changing dramatically.
Unless we get some risk events inequities. So individual company earnings startingto deteriorate in a big way. Or in credit world, some more accidentsin the corporate bond world. And to be honest, we're not seeingeither of those things in any big way at the moment.Things seem to be going along nicely and credit credit spreads are near their alltime lows and equity markets are obviously extremely buoyant.And so I don't see the correlations changing dramatically in the short term.And still we until we start seeing some of those accidents in global marketsthat I think everyone's been expecting,.
Given the high level of interest ratesin the global economy. And we saw a few incidents last yearwith the regional banks in the United States, with Credit Suisse, with some ofthe CRB property bonds around the world as well.But really we haven't seen the big risk of episodes or the significant rise inoverall defaults in corporate bond markets that we'd need.And Jim, very quickly, your credit strategy in Asia, how does it looklike credit in Asia? Actually, I think it's one of the brightspots in corporate bond world. I mean, if you look at the US, as Isaid, where we're trading, it's almost.
Post GFC types and credit spreads.Lots more opportunities in Asia are both in local currency markets and in dollarbond. So our credit team in Singapore andelsewhere in the region are really actually quite positive.We're not seeing the levels of distress outside of China property and even thoseareas in Asian credit, the badly to the Chinese property crisis offer some valuenow. So our of our people over here in Asiaare bullish on Asian credit and think prefer it overEuropean or US credit at the moment. Great insights Jim.Thank you.
Jim Levers, public fixed income CEO ofFMG Investment. Still to come.We speak to Streit Ventures about their outlook for India's venture debtlandscape. They're managing partner Apu by Sharmawill be joining us later in the hour. Plus, defense issues expected to top theagenda during President Biden's meeting with Japanese Prime Minister FumioKishida. We have a preview next.Keep it here with us. This is Bloomberg. And.Welcome back.
Japanese Prime Minister Flavio Kishidais set for one on one talks with President Biden as he continues hislandmark visit to the US. Tokyo bureau chief Isabel Reynolds joinsus now for more. Isabel, put this in context for us.What can we expect from Kishi that's meeting with Biden as well as thattrilateral meeting with Biden and Philippine President Ferdinand MarcosJunior. Right.Well, for that for the foremost summit with Biden, they've actually alreadymet. I have to mention that they were havingdinner together informally in a.
Restaurant earlier, just a few hoursago. But for the formal summit, what we'reexpecting is for the main results to be around this stepping up the defensealliance, the security arrangements between the two countries, as they bothshare these concerns about the increasing threat from China.So what we're expecting is things about the 50,000 U.S.troops in Japan, how they can work more closely with the Japanese military,setting up what's called a defense council, where both countries will lookinto defense procurement and how it can be done more efficiently and perhapscooperate in that area.
And also, have you Japanese shipyardworkers work on U.S. naval vessels, which would be a new stepin bringing those two militaries closer together and really increasing thedeterrence value of the alliance. We know that Kishida is pitching formore tech investments from US firms into Japan.It does seem like he is getting some traction there.Yes. Well, he's had one very great victoryalready. He's had Microsoft have announced this$2.9 billion investment in Japan, which is great news for him on this visit.He's also appealed for more.
Investment in that particular sector.I think Japan's sort of a little bit concerned about being left behind andthings like I really want the sort of US contribution on that front.But of course, the elephant in the room on this occasion is the whole deal overNippon Steel and US Steel, which has been opposed by President Biden and ofcourse by former President Trump. So I think one of the messages thatKissinger wants to send in a more subtle way without necessarily raising itdirectly with Biden is to say, hey, look, investment between our twocountries is very normal, it's healthy, it's beneficial for both sides.So there's no need to fear it.
Isabel, thank you for that update.And Tokyo bureau chief Isabel Reynolds in Tokyo.Earlier, we spoke to U.S. Ambassador to Japan Rahm Emanuel fromthe White House lawn. He told us why he has high expectationsfor prime minister because she does visit.This comes at a historic moment for both countries as they change dramaticallytheir kind of deterrence, posture and position.Japan's changed in the last two years, five separate policies that have beenbasically on the books for 70 years from the size of the defense budget, thecurrent strike capability in the defense.
Area normalizing and level, bringing thelevel of relationship with the ARC, the Republic of Korea to a new, more solidstrategic level. The United States also has made somefundamental changes going from a hub and spoke system to a lattice multinationaltype of strategic architecture. And I kind of see this state visit thefourth from a head of state in the region out of five that the president'sdone. It's kind of putting a period at the endof one era that's defined as alliance protection and beginning to write thefirst chapter of the new era of alliance projection with Japan.And that's not just for the.
Indo-Pacific, but also as a keystrategic partner in a global set of issues.The second thing it's kind of bookend the week started with Australia, theUnited States, Japan and the Philippines doing naval and air exercises togetherin a new multinational effort and have the end of the week with a historicfirst ever trilateral between the United States, Japan and the Philippines headof state. That reflects and symbolizes the changein the United States approach. It also symbolizes the kind of role thatJapan is going to play as a constant in our era, in our relationships in thearea.
But it also symbolizes China's wholestrategy is to isolate the Philippines, isolate Australia with their economiccoercion, isolate Japan by not accepting their fish to be exported.Our strategy is to flip that script and make the isolated party China.They're the ones that are isolated in the South China Sea as it relates to thePhilippines. They're the ones that are isolated whenit comes to trying to use economic coercion to coerce Australia to changetheir posture, and they become the isolated party, which is why they throwin the towel of that effort. So that's how this state visit.It's been a long it's been nine years.
Since the last Japanese Prime Ministerhas had a visit. But it comes at a critical juncturewhere the relationship will pivot into a new kind of posture and a new position.I wanted to hone in, Ambassador, you've mentioned, of course, the first trial atsummit with the Philippines. How far do you expect Japan to involveitself when it comes to these confrontations in the South China Sea,where, of course, these encounters tend to be more aggressive than what we seein the East China Sea? Well, the whole goal is not to have aconflict. That's what credible deterrence is.And understanding that this is not China.
Versus the Philippines.This is China trying to coerce the Philippines into changing their policy,which the international court in 2016 ruled was in favor of the Philippines,not China. And understanding that China needs tounderstand that the Philippines has some very, very important friends in theneighbourhood the United States, Japan and Australia in this situation.And that was US ambassador to Japan, Rahm Emanuel.Plenty more ahead. Keep it here with us.This is Bloomberg. Well, here are some top corporatestories we're following.
Intel will roll out a new version of itsAI chip in the third quarter in a bit to compete with in video.The gaudy three processor focuses on helping to train AI systems and runningthe finished software. CEO Pat Gelsinger says the chip willcost less than in various current and future processors, better downgradingthe threat of AI disinformation in a big election year.At an event on Tuesday. Its top leaders say they haven't seenthat happen yet on their services. Last week, Metro announced plans tolabel all air generated content on Facebook and its other properties.Experts fear such media could mislead.
Voters or spread disinformation onlinein the markets where keeping an eye on Kiwi assets on the back of our BNZstanding pat. But of course stood by its restrictivepolicy, pushing back on expectations for rate cuts.Despite lingering concerns about growth, inflation still above that 1 to 3%target. Take a look where we are in terms of theKiwi dollar up 3/10 of 1%. That restrictive policy stance remainingnecessary market currently pricing in nearly three rate cuts by year end,while also keeping an eye on Hong Kong going pretty gangbusters outperformingtoday.
It just up about one and a half percent.It is up 20% since those lows we saw at the end of January HCR.Year to date, currently up by four and a half percent.Same story for China, by the way. It is in the opposite direction, downabout 4/10 of 1%. Lingering concerns about the economy inthe broader market. Take a look where we are in terms ofgames. Well, lack of conviction as we head tothat CPI print out of the US. Remember that we've seen hot an expectedCPI data. Investors now reconsidering what's beenfactored in in terms of the number rate.
Cuts for the year.Plenty more ahead. Keep it here with us.This is Bloomberg. And. Welcome back.Shannon, Mark is just heading to lunch. It is under pressure as we speak.The CSI 300 index down about 4/10 of 1%. No conviction in the market.Of course, we've seen some optimism of late when it comes to the data, but notenough to reverse that sentiment. CSI 300 under Pressure.Take a look where we are in terms of the Chinese yuan currently at 723 12unchanged versus the USD.
The PBOC continues to support thecurrency under pressure from that like lost economy, the Shanghai compcurrently down 3/10 of 1%, Shenzhen comp currently down by the most in terms ofall the benchmarks trading in China down about one and a half percent.We're keeping an eye on Japan as it comes back from that lunch break.The Nikkei to 25 under pressure down 3/10 of 1%.Governor Kazuo way to avoided sounding clearly dovish when discussing monetaryeasing the yen front and center of course traders on guard against apotential currency intervention yen trading just below that 34 year lowversus the USD currently the yen at one.
5175.The Nikkei 225 down 2/10 of 1%. Topics also in negative territory.Now the Bank of Japan said to be considering raising its inflationforecast at a policy meeting later this month after surprisingly strong resultsfrom annual wage negotiations. Meanwhile, government because data hasweighed in on the impact of a weak yen. This is a cartel.Monetary policy isn't conducted for the purposes of controlling exchange rates.Exchange rates may have an impact that can't be ignored on economic and pricetrends. In such a situation, there's apossibility of considering a monetary.
Policy response.This is a general statement, though. Them all.Let's bring in our Japan economy and government editor Paul Jackson.Paul, how would high inflation affect the view on meeting the inflation targetas well as the outlook for policy? Well, if you've got higher inflationthat seems clearly linked to demand, I think that paves the way for the Bank ofJapan to be able to raise interest rates further and move towards a normalizingpolicy. More the question is, is the pace atwhich that will take place? I don't think anyone at this stage isexpecting the Bank of Japan to do back.
To back rate hikes.Having waited this long to do its its first raising of interest rates since2007, but these forecasts will be among the main points of interest at the Aprilmeeting. And if the BOJ is forecasting inflationto be around the two 2% mark in fiscal 26, which is what we're hearing frompeople familiar with the matter, then that suggests that they are on track tokeep moving forward with policy normalization.We we know where has said the BOJ would reduce monetary stimulus further if thebasic inflation rate nears 2%. Aren't we there yet?Well, you know, again, there's lots of.
Different ways to slice and dice thesefigures. We've had inflation at 2% or or more foralmost two years now. So what exactly are they waiting for?Well, I think it's the measures of underlying inflation and also this ideathat they really want to avoid moving too soon when it's all about input costsand the impact of the of the weekend. They want to see this inflation beingdriven by consumer spending that's fuelled by higher wages.And we're still yet to see clearer evidence of this taking place.And I think that's what they're going to be waiting for.So put this in context for us, right?.
I mean, how do it's costs compared withthe private sector? Well, generally speaking, I think we dosometimes see the private sector getting in a different spot to the Bank ofJapan. I think one of the things that's reallykind of moved the dial in the last couple of weeks is the decision by thegovernment to phase out its energy subsidies sooner than maybe someeconomists had expected. And that's led to quite a fewprivate banks raising their forecasts for what they expect inflation to be,some as high as 3% for this for this year as a result of that subsidy impactbeing phased out.
Remember that when Crescita brought inthe subsidies for utility bills that shaved a percentage point off inflation.So obviously, it's going to have quite the impact when it goes in the otherdirection. Paul Jackson.Thank you. Bloomberg's Japan economy and governmentEd now and that is central bank in focus, the botched Thai prime ministerset out. Harvison has been calling for the Bankof Thailand to cut its key policy rate later Wednesday.But most analysts of it by Bloomberg, expect the bot to keep its benchmarksteady for a third straight meeting.
Let's get more from Bloomberg's puppychat. Kennicott simplified in Bangkok.Puppy Cha. We know said that have been pushing fora rate cut and there's reason for that. I mean, we've seen inflation easing fourconsecutive months. Yes, yes, hassle.And so Satur has made a lot of big promises to boost Thailand's economywith a key target to lift growth to an annual to an average of 5% annually overthe next four years. Now, that's a tall order, given thatThailand has grown at an average of below 2% for the last decades.So by now, he's used up most of his.
Fiscal firepower and now needs a lendinghand from the bot to help cut costs of funds for businesses and households,which is one of the key strategies that he's set out to achieve in the shortterm. So he's been exerting relentlesspressure on the budget to cut rates from 2.5%, which he says is way too high foran economy that he thinks is in a crisis with sluggish growth and weak demand.Credit to the vote for resisting that pressure.But what might change its stance? The U.S.has been resisting so far because it doesn't think that the economy isactually in a crisis as to parameters,.
As the prime minister describes.So the member, the Monetary Policy Committee members would be looking outfor us clear signs that from high frequency data that the sluggish growthtrend is here to stay and that external and domestic headwinds facing the Thaieconomy are not going to recede any time soon.That said, even if the MPC doesn't cut rates today,all eyes will be on Thailand's release of the GDP data for the first quarter ofthis year, and that's going to come up in May.So if there's more proof that the economy is not growing at a pace that itshould be, then that could strengthen.
Stats calls for rate cuts or it couldbecome a bigger point of consideration for the NPC when it meets again in Junefor the next rate decision. You got to wonder.But I mean, what the implications might be yet again overlooks the PM's demandto cut rates. Yeah, that would be the clearest signsyet of the boat asserting its independence and prioritizing stability,which contrast very much with US growth by any means approach.But there is not much that the government can do to sway the rate panelbecause of the way that it is structured.It includes three boat nominees and four.
External members.So it's very hard for Satie to dictate his way through this.That said, there's a very high chance that we couldcontinue to see that are continuing to make calls for rate cuts and to becontinuing to resist and wait until it that it things that the financial andeconomic conditions warrant such a move. So likely status quo.Blomberg pitcher Tanaka simplified in Bangkok.Thank you so much for that. Well, coming up, a deep dive intoIndia's venture debt markets, which topped $1 billion in deployments lastyear.
Stride Ventures tells us what themilestone means for startups. Keep it here with us.This is Bloomberg and. Welcome back to Bloomberg Markets Asia.You're watching India. Focus.India starts trading in just under 5 minutes.Futures pointing to a higher open sensex up 4/10 of 1%.Now some individual investors in India are exploring a new and growing segmentof the nation's credit market in pursuit of higher returns.Asia credit reporter Divya Patel joins.
Us now.Divya, why, why, why? Yes, some of the individuals areexploring this nascent stage, you know, the needs and market, the needs andcredit market of India. And it's primarily because of the higheryields these kind of products are offering now.For instance, they are delving into a market where the debt is backed by thecash flow of bonds, which have been issued by the nation's missilecompanies. Now, these kind of products arepromising a return of around an annualized return of around 11 to 12% ina period of two years.
And when you compare it with the fixeddeposit of a similar maturity from the nation's largest lender, State Bank ofIndia, that's offering 7%. So clearly the yield is a major driverof why these individuals are exploring the exotic corporate debt.The other reason is also because it's believed it's believed that thesesmaller companies of India are going to gain the most out of the robust economicgrowth that India is promising as compared to the larger peers.So this buying of these kind of debt products gives individual investorsexposure to that smaller midsized firms. Debbie, We're talking about exoticcorporate debt by virtue that we're.
Talking the word exotic.It sounds like there are risks involved. Yes, of course, a credit does come withits own set of risks and overhead, although the risk is a little dispersed,given the fact that an individual is not investing in one single high yieldcorporate bond, but in a basket of corporate bonds.But still, these are credit products. What could be even riskier is that ifthe small savers of the country who do not fully understand the illiquidity andthe credit risk involved in such products, go back and invest in here.And we should also not forget that India has had its own share of credit crises.Just in 2018, when a triple A-rated, a.
Top notch rated infrastructure financiercollapsed and that resulted in roiling the broader markets.Dev Patel, asia credit reporter thank you so much for joining us.Now we have some breaking headlines to tell you about.Fitch revising its outlook on china to negative affirming its A-plus rating.The outlook revision reflects increasing risks to China's public finance outlook,as the country contends with more uncertain economic prospects thattransition away from property rely on growth to what the government views as amore sustainable growth model. Again, Fitch Revising that outlook inChina to negative and firming.
It's a plus rating on the market.Now turning to India's venture debt landscape, let's get some analysis andinvestment insights with Apu Sharma, managing partner at Stride Ventures, afund supporting startups and innovative businesses across sector.Good to have you with us. Give us a sense of what you're seeing inthe sector right now. Thank you so much for having me on.Bloomberg. So, yes, Indian venture debt landscapehas evolved a lot in the last five years.And now this year, I mean, the last calendar year, 2000 to 23, the totaldeployments cost $1.2 billion, which was.
A 50% uptick over the calendar Euro2020.So it's been the acceleration over the last five years has been a combinationof multiple factors. One is, of course, the education of thisasset class, because this was a, you know, not a very well known asset class.It has been in existence in the U.S., for example, for three decades now.But in India, it's just about eight years old.So over the last five years, there has been a lot of education amongst the VCecosystem, amongst the founders. On what quantum of Debt should you addon your balance sheet as part of your capital structure, such as not tooverleveraged yourself as well?.
The other thing is founders with BritishCAC series D have realized that if they don't add some bit of debt in theircapital structure, they're unnecessarily diluting themselves, which results in asub optimal outcome for the founders as well as the existing investors when itcomes to for fundraise. So those are a couple of factors whythis asset class has really accelerated in the last five years.And people are using I mean, founders are using it for use cases likefinancing, working capital, capital expenditure acquisition, financing,etc.. So where did you see the most demandlast year and what are you anticipating.
For for the coming year?So since I always say that venture capital and nature that are verycorrelated asset classes, most VCs, this happened in Pre-seed stage and hencemost videos, 79% of the deals by volume happened in the same stage, but theyconsumed about 53% of volume. So I'd say in terms of the number ofdeals, maximum number of deals are happening in the early stage in terms ofthe amount, the quantum of cost, later stage deals like CDs, CDs are absorbingmost of venture debt when it comes to sectors of financial services or fintechis the primary sector which absorbed 55% of the venture.That requirement in India last year.
And this is because of multiple reasonsfor onward lending, for financing, for DG, for acquisition, financing, for newareas of business. So financial services was the number onesector followed by consumer, which has inherent working capital requirementbecause of inventory, build up receivables and general trade partners,modern trade partner portals. So these two sectors were the most andthe third upcoming sector, which we felt, you know, will be a very primarysector even in this calendar year, is clean tech or EV specific.And this is across the value chain, whether it's a recycling batteryrecycling player or an OEM or a ride.
Hailing operator or a batterymanufacturer or a swap operator, all of that.As you said, there's been a lot of interest.Can you quantify that for us? Because we know that venture debt hitabout 1 billion last year. Are we likely to see the same kind ofgrowth in the years to come? So since 2017, India has seen a 34%growth in venture debt, and this year it was close to 1.2 $1.3 billion.We feel that this can continue only if the venture capital ecosystem also picksup. Generally, the venture debt as apercentage of venture capital fell,.
Whereas around, say 10 to 20%.That is what we have seen even in the US, which is the oldest market forventure debt. So the venture capital ecosystem alsohas to come back, as you know, 2022 and 2023 having been extremely good years interms of VC deployment. The sentiments have been muted.So if the VC deployment, which we hope will pick up this year, I mentioned itwill also continue growing at the same pace.But, you know, if the VC ecosystem does not pick up at the same space, then thecargo growth of venture debt will also reduce.So is there a correlation, for instance,.
Between a fall in equity for venturefunds and a rise from venture debt? It is definitely.You know, I'd say that a lot of groundwork had already been done withrespect to people, understanding the asset class with a lot more nuance andnot getting scared because of debt. Right?If you use that for the right reasons and in the right one, then it'll alwaysfill up your business. But of course, given that venturecapital was expensive, you know, people had in 2021 had thought that, you know,global equity is very cheap. People were raising back to back roundswithin six months.
The valuation multiples were at acompletely different level. So given that in the last 18 to 24months, the valuation multiples have sobered, equity is, you know, evidentlymore expensive. People have understood the value ofventure debt for specific use cases, and it has definitely nudged people to thinkof alternative sources of financing in a tough funding environment.I'm just wondering whether there are systemic reasons for for it as well.So, you know, as I said, multiple reasons.One, that the education has been important to a lot of VCs and founders.They have understood equity is more.
Expensive than debt, which was, youknow, not like how they understand in 2021.And the third thing also, I'd say, as I mentioned today in India, has largelybeen driven by domestic capital pools. And that is why it has not gottenaffected too much by what is happening internationally.So if you look at U.S. major debt, it reduced from $40 billionin 2020 to $30 billion in 2023. So there was a dip which was coincidingwith a dip in venture capital ecosystem. But in India, venture net still grewdespite venture capital going down. And one reason, as for me, is alsobecause it was insulated from what is.
Happening globally, because it wassupported by the domestic pools of capital, it has shorter, you know, muchmore liquid asset class in that sense with returns similar to what a topquartile venture capital investor would it would give you.So I think because of those reasons, venture debt has held its base in India.But those are the systemic reasons. But venture capital in India has to growthis year for venture debt to keep up the pace.Otherwise, I think it'll be more flattish.Over the last year or so. There are lots of reasons, lots ofreasons for the uptake and the.
Challenges for venture as well as growthmanager at this stage. I think one good thing that has happenedis, you know, people have just gone into the mindset of profitability andsustainable unit economics and the growth at all cost mindset, you know, isnot to be seen anyway. So it's generally a positive developmentfor the ecosystem because people are only chasing growth which is meaningfuland sustainable positive unit economics. And as long as that is happening, wefeel that India has a lot of, you know, very high quality startups that willcontinue to grow despite the funding environment.So having said that, above what sectors.
May come under stress then?So obviously, you know, the most obvious ones are EdTech, which took a deep divein 2022 and followed in 2023. And tech, hence tech are the two sectorswhich are which have been the most impacted, post-COVID, because, you know,during 2021, they just short showed a massive fillip and once the markets wereopen, offline was back into play, a lot of those companies had to pivot intomore offline presence or omnichannel presence, as they call it.But the companies which were not able to pivot, you know, in that pace have lostthe funding appetite and hence EdTech and Healthtech have been the mostimpacted sectors.
And now we feel, you know, even SaaScompanies, B2B companies have to make sure that the cash conversion cyclesthey have, the B2B e-commerce companies is up to the mark because this year B2Bcompanies haven't been able to amass a lot of capital.Above all. Thank you so much for joining us today.Apu Sharma, managing partner at Stride Ventures and has been trading for about7 minutes now. Let's do a check on how they're doing.Muted gains pretty much across the board as we await that crucial CPI data out ofthe US. The SENSEX index certainly up about 2/10of 1%.
We're also keeping an eye, of course, onthat rupee. In terms of the other benchmarks, wehave the nifty index up 21%, nifty 100, up 3/10 of 1%.Some say you want to keep an eye out on Indian banks, shadow lenders inparticular, out of favor at this point in time, but they may extend theirrebound. There's now renewed optimism Alice willsee a return of more than 14%. Plenty more ahead.Keep it here with us. This is Bloomberg. All right.Headlines to tell you about in China,.
Tesla, or rather in India.Tesla in talks with Reliance for India's EV plan.And that's according to the Hindu business line.Tesla may be scouting for a local partner to set up its operations inIndia. Highly placed sources say the US evenmajor is in talks with Reliance Industries for a possible joint ventureto build that manufacturing facility in the country.Reliance currently trading up by 1.2%, of course, amid that headline talks somesay are at initial stages and have been ongoing for over a month, according tosome people familiar with the matter.
The source is also saying that the moveshouldn't be construed as reliance's entry into the auto mobile space.We're also keeping an eye on markets, in particular on the back of that, a CPIprint out of the US, which is crucial, and also some headlines which came outearlier. Fitch revising its outlook on China tonegative affirming that eight plus outlook.The outlook revision reflects increasing risks to China's public finance outlook.That is it from Bloomberg Markets, Asia, DAYBREAK, Middle East and Africa isnext. Keep it here with us.This is Bloomberg.
It is almost 12 a.m.here in siguen, Shanghai. Welcome to Bloomberg Markets asia.I'm Haslinda Amin. Here are the top stories.Stock investors playing it safe while treasury yields fall from highs of theyear ahead of the US inflation print. The RBA, ANZ delivering a hawkish holdwith the Bank of Thailand under political pressure to cut.Also ahead, President Biden set to host the Japanese and Philippine leaders inWashington, sending a clear message to China And Boeing shares extend the slideas the whistleblower makes new allegations of shortcuts in productionof the 787 Dreamliner.
And we have reaction.The mystery of finance in China after Fitch downgrade its outlook to negativebut maintaining that A-plus coal. Fitch.On that move, China is more vowing to resolve that local government debt,saying that it is disappointed about Fitch's outlook revision.Of course, we are getting reaction from the Ministry of Finance of Chinaresponding to Fitch's outlook revision to negative affirming that A-plus coal.China now vowing to resolve that local government debt risk, which has beentroubling the markets in a big way. Again.Fitch A-plus outlook negative.
Moody's A1 outlook also negative.But in terms of the S&P, the outlook is stable.Let's do a checking on how markets are faring with Annabel Julius on top of allthe market action bell. Thanks, Hans.Yeah, of course. The market reaction that we'remonitoring to that actually the session so far for Chinese equities has beenlooking fairly rangebound so far. Hong Kong is really standing out here.We get can get to Y in just a moment. But you do want to track that move.They're going into the lunch break up 1.8%.Otherwise, some of the key things are.
Watching today.The moves that are coming through in qe bond yields and also that strengthcoming back into the Kiwi dollar. We did earlier have the RBA NZ comingout with a decision to hold the key rate of 5.5% that was predicted by everysingle economist that we surveyed. That was what was interesting was thatsurprisingly hawkish tone that came out from officials there.Of course the RBA NZ now one mandate in place and it really is focused onbringing down inflation as that's some of the things we're tracking.Again, as we said, China markets going into their lunch break here broadly gotequities trading fairly flat.
But let's take a look at Hong Kongstocks in particular and it is that real watch for the HCI.So the China facing index, you can see here, this is going into the lunch breakhere. We were up more than 20% from the 2024lows. That means if we hold that going intothe close today, we'll be eyeing technical bull market territory.So something that's really been driven by by EV sales.We've seen a lot of buy backs coming through.Among the different factors, investors perhaps turning a little bit moreoptimistic on mainland equities.
But let's also just take a look finallyat what perhaps tells us just how much investors are also choosing to sit onthe sidelines today. If you take a look at trading volumesfor the broader gauge here today, actually, we're looking at tradingvolumes at a more than 20% off their 20 day moving averages here.As you can see here, that's the typical line that we see that one in blue on a20 day moving average basis. And that's the projection through thecourse of the day. So as I said, that there is about a 20%gap and where we would typically be has at this point in the session.Well, let's try a different story for.
China, of course, under pressure today.Just recapping some of those lines from China's Ministry of Finance, respondingto that Fitch's downgrade for China's outlook to negative while affirmingstill the rating of A-plus. It's now saying that it is disappointedwhen it comes to that downgrade. China continues to strengthen itsmanagement of the local government debt. It says that Fitch fixes decision hasn'treflected fiscal policy impacts again. China saying that the scale of local hitand debt has reduced gradually. It is disappointed with China's Fitch'sdowngrading of China's outlook to negative affirming that A-plus rating.Let's bring in, I guess, get response to.
That.Andrew Ferraris, CEO of ECONO, says Advisory Andrew.First off, your reaction to what Fitch has done and the response from theMinistry of Finance. Surprise, surprise.You know, China has been on the negative side for several months now.And remember, also when the last downgrade came, also that included HongKong and that upset of China. The issue with this is this.On one hand, rating companies have to look at sizes of debt.The second part is, is in the case of China, all the debt is domestic.In other words, China owns money to.
Itself.It's not going to affect either the interest rate or the external capacityof China to fund whatever it is doing outside.So in a way, it's a little bit silly what China is going to default on itsown domestic debt. This is not going to happen.So on one hand, having a large amount of debt, which goes based primarily onmortgages and primarily on land, that is I'm talking about there the municipal,that it's not a very good idea. On the other hand, putting it down tonegative, I'm not quite sure what means what.What do you make of China's response?.
How much sway does it have when it saysthat it has strengthened the management of its local debt?The answer is, is yes, because we have been observing what has been happeningin terms of, let's say, verbal encouragement on on their on their localmarkets. And at the same time, certain strangethings as we happened in China just issued about a month ago, if I remember,were 1.2 trillion of domestic debt to come out as part of its fiscalincentive. Well, now this is central governmentspending the money, which apparently is okay.So one is looking at the fiscal position.
Of China, which is modestlyexpansionary. The fiscal that used to be somethinglike 3.2 or 3.3% of GDP and it's likely to go up to 3.4, even had 3.7, which ispeanuts. If you think that Japan at one stage was12% plus of GDP. So China is modestly expanding itsfiscal deficit in its fiscal initiative and at the same time saying, well, we'renot particularly, let's say, worried about the debt of their localadministration, which is altogether different, because ultimately it is thecenter which is standing behind the, let's say, their worthiness of of thelocals.
In other words, bottom line is this thecentral government may very, very well need to take the tab, although they arenot saying this. So so so it has made improvement.The question is really whether it can resolve those risks.China thinks it can. Do you think it can?Again, I'll take a deep breath and I can tell you any country which is a hugenet, a huge net, a huge net lender to the world.China is a huge net. A lender, not a borrower to the world.Okay. Has no externalimpositions on what's happening.
I could take the other extreme ofArgentina that owes money both domestically and externally, so theirhands are completely tied. In the case of China, the only thingthey need to concern, only thing they need to concern is their domesticsituation. And that is much more easily doablebecause one third of the banking system belongs to the government.So it is unlikely that they are going to be put and the market pressure, if theyare not resolving very quickly their domestic issue of debt and they aresaying they are doing it. And I do believe that of course they arevery concerned.
Everybody else is concerned.They never said either domestic that it really doesn't matter.Okay. Particularly as it is still connectedwith property. Remember, you can't remove the twothings. All right.So they are right. And perhaps the external creditors,okay, are clearly in their throats. But again, we're missing the point.This is domestic, not external. Andrew, all things considered, is ittime to perhaps increase your exposure in China?Only selectively.
Good God, I sound like an economist.I. This.In other words, I will I will tell you that macro economically, I will tell youthere are still couple of things that I would like to see.But then when we turn back to the domestic side, it is clear that theemphasis on what is going to drive the economy forward is has now been slightlyshifted to just infrastructural investment.And of course, what's happening to consumers is very important, and hencetheir obsessive attention, rightly, that the Chinese authorities are spending onwhat's happening to the stock market,.
Because that's the first thing that itis reflected in the headlines and perhaps possibly hit the pockets of afew million of the domestic investors. So the answer is, is I will be lookingvery carefully at some of the domestic companies as opposed to of giving ablank, let's say, macro economically plus.And let's not forget that are great little sideline of that is of courseHong Kong and poor Hong Kong. One cannot give them hey, go ahead fullfull on without American interest rates falling and American interest rates arenot falling. So I can't possibly tell you that when Ilook at Hong Kong and I look at the.
Interest rates in Hong Kong, I have abig smile on my face because I don't believe the Fed is not going to cutinterest rates anytime soon. Hence Hong Kong is not going to receiveany good news and a great deal of China has been traded also in Hong Kong.Let let let us let us talk about the Fed.I mean, the CPI print front and center, Andrew.I mean, you know, the question is really whether it's two or three and how strongthe U.S. economy really is.The thing is, if the US economy is resilient, it's very strong and data issupporting that, why does the Fed.
Actually have to cut?Look, there are two reasons for that. One is, is that they said we are havingto control inflation. And once inflation is near our target,there is no reason for us to have historically high interest rates.Point number one. Point number two is, of course, is oneis asking whether the level and size of interest rates in the United States isat a level that somehow justifies leaving them there because of theimportance of their better performance of the economy.Sounds it sounds a little bit of both of these, but the Fed has got itself arather awkward piece of of of.
Policymaking.Okay. Also, and that's hugely important,actually, I'm afraid I have to set a question to myself and then proceed toanswer that. The target is 2% rate of inflation rightnow is 3.1, 3.2%. It is 3% higher than their target.Well, then I can't possibly look at them and say, well, you're meeting yourtarget, so let's cut interest rates. No, they are not.Every single CPI number in the last 18 months has got the number three in frontof it. Then for something, blah blah after thatand blah, blah, blah has been going up.
And down.It is not something that it started with.3.9. 8.8, 3.8.No, it does not. It is went up to 3.1.Then it went up to 3.5. And if somebody would say it is notreally on a determined move downwards. So if the Fed is to be believed, we want2%. Look at my fingers.2% inflation and inflation is 3%. We haven't finished.You know, I'm a simple guy. I simply do what I'm told.You know, I'm not going to say what the.
Fed really doesn't believe on on the 2%inflation. They are really, I believe, in only 3%.Well, they haven't told us. That's why, you know, I've stoppedlooking at the three eyes, despite the fact that you're stilllooking at the Fed. All eyes still in the Fed, yet when itcomes to conviction calls. You think the best way to play it all inthe market is defense stocks. What's going on is has it got to do withgeopolitics? It has to do with two things.First, defense companies, okay, sell to one client that doesn't care aboutinterest rates.
Hello, The defense client.You know, it's the American government. The American government is not going tosay we're not going to buy guns because interest rates are high.The defense sector is uniquely isolated. And I'm talking about not just UnitedStates, I'm talking about the defense sector in European Union and also inAsia. And also, I'm sorry, this soundsunbelievably immoral and a little bit hard.There are lots of juicy wars going on as far as the defense sector is concerned,and they are not seem to be going away. I'm sorry.It's a very crude thing to say, but.
There is an enormous wave of defensespending both in the European Union and also in Asia.And we keep forgetting Asia as if the only thing that matters is a Ukraine.Well, it isn't. Japan, South Korea and Australia arespending as it is no tomorrow and they are not being threatened by Russia.Okay. Also Singapore spending a lot more.Andrew Ferris Absolutely. We thank you so much.We thank you so much for your insights. Some breaking news here.Apple doubling its India iPhone output to $14 billion last fiscal year.That's a line that we're getting right.
Now, doubling its India iPhone output to14 billion. Of course, this is a pivot from China.The US tech giant now makes as much as 14% or about one in six of its marqueedevices from India. And that's according to people familiarwith the matter declining to be named. Of course, the ramp up suggests Apple isaccelerating efforts to cut its long standing reliance on China because ofthose geopolitical tensions that we have been talking about.Well, still ahead, a Boeing whistleblower accuses the planemaker ofcutting corners in building hundreds of its seven, eight, seven Dreamliners.We have details just ahead.
Plus, defense issues set to top theagenda during President Biden's meeting with Japanese Prime Minister RomeoKishida. A preview is up next.This is. Japanese Prime Minister Fabio Chito isset for one on one talks with President Biden as he continues his landmark visitto the US. Tokyo bureau chief Isabel Reynolds joinsus for more. Isabel, talk to us about thesignificance, what can be expected from this XI, this meeting with Biden.Right. Well, this is the first such visit inalmost ten years.
So this is a pretty big deal for Japanto be doing this. It's an official visit with a statedinner and a big speech to Congress. But from the bilateral summit itself,which is coming overnight Asian time, we do expect the focus to be largely onconcerns about China and what the two countries are going to do to worktogether more closely to sort of deter that threat.So it's going to be things like the two militaries working together moreclosely. It's going to be things like setting upa defense council to work on defense procurement together and also havingJapanese shipyard workers work on U.S.
Naval vessels.We have a bilat. We also have a tri lat.Talk to us about the trilateral with Biden, as well as the Philippinepresident, Ferdinand Marcos Junior. Right.Well, this is, in fact, the first trilateral summit of its type.So what we're expecting again, is this kind of shared concern about China.And that should lead, we think, to more cooperation on coastguard training, forexample, because a lot of these territorial disputes that thePhilippines and Japan share with China basically come don't boil down to theCoast Guard activities.
So how far they can work together toraise their game and work better to combat those threats from China.Isabel. Thank you.Tokyo bureau chief Isabel Reynolds with that significant Kishida meeting there.Now, earlier we spoke to U.S. Ambassador to Japan, Rahm Emanuel fromthe from the White House lawn. He told us why he has high expectationsfor prime minister because she does visit.This comes at a historic moment for both countries as they change dramaticallytheir kind of deterrence, posture and position.Japan's change in the last two years,.
Five separate policies that have beenbasically on the books for 70 years from the size of the defense budget, thecounter strike capability in the defense area, normalizing and level, reallybringing the level of relationship with the eryk, the Republic of Korea to anew, more solid strategic level. The United States also has made somefundamental changes going from a hub and spoke system to a lattice multinationaltype of strategic architecture. And I kind of see this state visit thefourth from a head of state in the region out of five that the president'sdone. It's kind of putting a period at the endof one era that's defined as alliance.
Protection and beginning to write thefirst chapter of the new era of alliance projection with Japan.And that's not just for the Indo-Pacific, but also as a keystrategic partner in a global set of issues.The second thing it's kind of bookend the week started with Australia, theUnited States, Japan and the Philippines doing naval and air exercises togetherin a new multinational effort and have the end of the week with a historicfirst ever trilateral between the United States, Japan and the Philippines headof state. That reflects and symbolizes the changein the United States approach.
It also symbolizes the kind of role thatJapan is going to play as a constant in our era, in our relationships in thearea. But it also symbolizes China's wholestrategy is to isolate the Philippines, isolate Australia with their economiccoercion, isolate Japan by not accepting their fish to be exported.Our strategy is to flip that script and make the isolated party China.They're the ones that are isolated in the South China Sea as it relates to thePhilippines. They're the ones that are isolated whenit comes to trying to use economic coercion to coerce Australia to changetheir posture, and they become the.
Isolated party, which is why they throwin the towel of that effort. So that's how this state visit.It's been a long it's been nine years since the last Japanese Prime Ministerhas had a visit. But it comes at a critical juncturewhere the relationship will pivot into a new kind of posture and a new position.I wanted to hone in, Ambassador, you've mentioned, of course, the first child,that summit with the Philippines. How far do you expect Japan to involveitself when it comes to these confrontations in the South China Sea,where, of course, these encounters tend to be more aggressive than what we seein the East China Sea?.
Well, the whole goal is not to have aconflict. That's what credible deterrence is.And understanding that this is not China versus the Philippines.This is China trying to coerce the Philippines into changing their policy,which the international court in 2016 ruled was in favor of the Philippines,not China. And understanding that China needs tounderstand that the Philippines has some very, very important friends in theneighbourhood the United States, Japan and Australia in this situation.U.S. ambassador to Japan, Rahm Emanuel.Plenty more ahead.
Keep it here with us.This is me. I'm. Inflation will be sticky.Inflation will be absolutely sticky. We're going to get stuck at around twoand a half to 3%. And I do think that that actuallywarrants, over the long term, the Fed rethinking its inflation target.Bloomberg opinion columnist Mohamed El-Erian weighing in on how the Fed mayreact to the upcoming inflation data. Of course, we do have reaction in termsof the markets to that upcoming CPI print, which some are concerned that itwould be hotter than expected.
We have seen hotter an expected CPIprint for several months. Right now, the question that they'reasking is how might that impact the trajectory of Fed rate cuts?Treasuries dropped overnight. Ten year yields eased from the highestlevels this year, putting Asian bonds in a pretty precarious position, two yearyields. The question right now is will we see 5%forward, two year yields inching ever closer to that for 73, 63?It's what we're looking at. And in terms of ten year yields, four3536, will it get to four and a half percent?Taking a look where we are in terms of.
U.S.futures, how they're trading ahead of that key CPI print.Pretty flat right now as a B, futures up about a 10th of 1%.Dow Jones NASDAQ also flat as we await that crucial data.It is expected to come in pretty hot in line with what we've seen for severalmonths. Right now, pretty much the same picturein Asia. Trepidation, lack of direction, somemarkets on holiday, but investors struggling to find that direction aheadof a key number this week, traders paring back expectationsof Fed rate cuts in 2024.
The Fed has been saying it can't affordto be patient HCI and outperformer up as much as 2% earlier today.Plenty more ahead. Keep it here with us.This is Mumbai and. Welcome back.You're watching Bloomberg Markets Asia. Let's do a check on how markets arefaring ahead of the CPI print. I will.Julius is on top of it. BellBanks has. Yeah, exactly.CPI print that is certainly front and.
Center for traders as we head throughthe afternoon session here. Trading volumes really to note they'rebelow their 20 day moving averages. So a lot of anticipation building aroundthat. But overall, we actually have started tosee more positivity coming into the session.So sort of mirroring actually what came through on Wall Street overnight.We saw that late day rebound for the S&P 500.Other things to note and you can see that strap on BNZ very much the watchpoint today for central banks ahead of Bank of Thailand.Of course, that decision coming out in a.
Couple of hours.But today we are watching that retreat for the Kiwi bond yields, rather.That strength coming back into the Kiwi dollar as well.After the RBA, ANZ elected to keep its key rate on hold at 5.5%.Certainly not a surprise to anyone who was an economist that we surveyed any ofthe traders as well. That was very much the marketexpectation. What has surprised though, is sort ofthe hawkish sentiment that came out of policymakers there.What else we're tracking. You've got the CSI 300 in a lunch breakright now.
We did actually just have some changesto its debt ratings coming through from Fitch.And we've got Jill sitting here ready to go through those details.But certainly with something that is the most read story on the terminal so farthis hour. What is the second most read, though,has and certainly worth pointing out is the reporting we have around Ali Babatoday, because you can see that jump there for the Hang Seng up 1.9%.But Alibaba again in the lunch break, but moving more than 5% to the upsidetoday. We've actually heard from Jack Ma again.He's taken to an internal forum.
So I did that about four months ago.Four months ago, he was pretty pessimistic on the outlook for thecompany. You could say he had some criticismscoming through, some praise coming through 4.2 A as well.Today, though, actually has he's a lot more optimistic and says that Alibabashould stay the course and he's urging employees to get behind the leaders whoare, again, of course, trying to turn around and lift the sentiment at thatmajor Chinese tech giant. What a jump.5%, but still a long way to go to recover all those losses.Annabelle Douglas, thank you so much for.
That.Let's stay with China. Fitch Ratings has revised its outlookand China's long term foreign debt to negative from stable, citing increasingrisks to the country's public finance prospects.For more on this, let's bring in news desk editor Jill de CES.Jill, we have Fitch saying that, you know, it's because of the new growthmodel, rising economic uncertainties. I mean, these are not new issues.Some sounds pretty similar to me as what we heard from Moody's when it cut itscredit outlook for China back in December.I'll just run you through a couple of.
These things that Fitch is citing here,saying, yes, there are increasing risks to China's public finance outlook,citing the fact that China is contending with more uncertain economic prospectsas it sort of runs through this transition model.As we know, the property sector is deep in crisis, not contributing nearly asmuch to gross domestic product as it used to.China is really trying to, you know, sort of pivot toward these newproductive forces. It's been citing for quite a while nowon tech, EVs, renewables, all that kind of stuff.It's also really citing those wide.
Fiscal deficits and rising governmentdebt in recent years. Again, as we know, China has beencontending with significant issues related to local government debt.We're seeing a lot of those balance sheets really struggle under the weightof that as trying to try to pivot and, you know, figure out a lot of thesethings. So, again, in light of the Moody'sdecision just a few months ago, maybe not the biggest surprise here.China's already, you know, sort of hit back at Fitch over this a bit here.But, yes, we're still kind of getting more information on, you know, sort ofthe calculus behind this decision.
But it does come in light of thatMoody's decision just a few months ago, as you said, China crying foul.How is it defending itself? So ultimately, I think what, you know,China has said during previous rounds of not just, you know, that Moody'sdecision, but also, you know, other hits to its you know, its economic model isthat it's, you know, frequently said that, you know, it's it's sort of sortof taken ways to, you know, protect its economy.It's done all of these its kind of economic outlook is probably stable.It's also pointed to the fact in the past that it's hitting growth targetsyear on year.
I mean, look, you know, China's economygrew around 5% in 2023. It was pretty bang on with what thosegrowth targets were. It's targeting similar growth this yearof around 5%. We'll see if it ultimately hits that.But yes, ultimately, China has long said that its economic outlook is broadlystable. It cited, you know, certain recoveriesin different sectors and most recently in the industrial sector.So we'll see what else they have to say about this downgrade later today.Jill, what are the chances that the local government debt defaulting?Some say it's almost zero.
Yeah, So I think at this point, look,China has actually taken a lot of measures recently to try to shore upsome issues related to local government debt.I think one of the biggest things that we've seen in terms of it's a sort of asea change in strategy toward protecting its finances is that it's actuallystarting to ship some of the burden more toward the central government.We're seeing that in the form, for example, of it issuing a bit moresovereign debt this year to try to, you know, help support fiscal policy.We saw the announcement just about a month and a half ago at China's NationalPeople's Congress that it would be.
Issuing ultra long sovereign debt.Still waiting to see some of the, you know, resolution of that as that gets,you know, tipped out over the course of this year.But, yes, it does seem like, look, I mean, China has long known that it's gotissues with central and with local governments draining their coffersbecause as we know, they can't sell land anymore a key source of revenue becauseof the real estate crisis. So it has shifted some of that burdenagain toward the central governments in Beijing to try to help alleviate some ofthose issues. And it's also just taken a lot ofefforts to, you know, sort of stress to.
Local governments that they do need tomitigate risks from local debt. They do need to pay down those, youknow, that that debt on their balance sheets.And they do need to ultimately find alternative sources of revenue to, youknow, help support fiscal funding in the years to come.Hmm. Jill, thank you.Jill this is new says editor putting perspective on china's debt.Now let's get you to japan. The bank of japan said to be consideringraising its inflation forecast at a policy meeting later this month aftersurprisingly strong results from annual.
Wage negotiations.Meanwhile, Governor Kazuo Awada has weighed in on the impact of a week incase his accounl monetary policy isn't conducted for the purposes ofcontrolling exchange rates. Exchange rates may have an impact thatcan't be ignored on economic and price trends.In such a situation, there's a possibility of considering a monetarypolicy response. This is a general statement that.All right. Let's bring in Bloomberg's Paul Jackson.Paul. I mean, how would high inflation affectthe view on meeting the inflation target.
As well as the outlook for policy?Well, if the BOJ can see stronger inflation coming through, especially ifit's driven by demand, then it can move forward with raising interest rates now.It just rose its stride for the first time since 2007 last month.So no one is expecting them to do back to back hikes after such a long break.But we will be looking at these forecasts at the April meeting.And of course, the higher those forecasts are, the more likely that theBOJ will be moving forward with its next rate hike sooner rather than later.Now, what's the current thinking on when those hikes might take place?Well, we did survey economists after the.
Rate hike in March, and each of them arethinking that the DOJ will move by October.So it's kind of shaping up to be well to the move in October, although they go abit earlier in July. And if we see the inflation building upand, you know, the wage gains feeding into faster inflation, then I think thebets on July move will naturally strengthen.Oh, Paul, we know the governor has said the BOJ would reduce monetary stimulusfurther if the basic inflation rate nears 2%.You got to think that we're already there.Yeah, obviously we've been at 2% there.
Or higher for almost two years now.So a lot of people have been wondering what are the have been waiting for allthis time. But I think the key point here is thatrather than seeing inflation is as a negative thing, that must be squashedand wiped out as soon as possible. Japan's been on this this long runningexperiment to try and generate a positive form of inflation in a countrythat has had weak prices and weak wages for decades.So it's a kind of way of looking at inflation as a way of transforming youreconomy. So they're trying to focus on somepositive inflation that is driven by.
Demand and not by input prices.And when they've got more evidence of that, then they can raise rates further.Compare the forecast of the BOJ versus the private sector.How is that looking? Well, if you look at the private sectorforecast that we've got on the Bloomberg terminal, it'll show you that they'reforecasting 2.3% this year. I think that the movement in forecastsin the last couple of weeks, we probably nudged that up.Why? It's because the government has isplanning to phase out utilities subsidies earlier than expected.And that's got a lot of economists.
Revising their forecasts for this year,some to as high as 3%. Paul.Thank you. Paul Jackson, Blumberg.Japan economy and government editor. And from Japan to South Korea, wherevoting is underway for a new parliament in what's effectively a referendum onpresident youth performance. The results will determine how muchpower U.N. has during his remaining three years inoffice. Is Asia.Government editor Jon Herskovitz joins us from Seoul.Jon.
What is at stake for President Yoon inthis election? This election's going to determine justwhat the remainder of his presidency is going to be like.Right now, he's in a parliament where the opposition progressive bloc has themajority. If Jung's conservative bloc can getcontrol, it can push forward its agenda of pro-business reforms, tax cuts.And if it doesn't? Yoon is looking at a weakened presidencyfor the remainder of his single five year term, and that's another threeyears in office. So it's really defines what's going tobe going forward for the president.
And this is the only national electionthat takes place during his single five year term.So, John, what are some of the key numbers that we should be watching for?Yeah, the election is for all 300 seats in a unicameral parliament.So the big one is 150. Who gets the majority?Right now, the the opposition Democratic Party has the majority.U.S. party needs about 31 seats or so.His conservative block needs about 31 seats to take control.The other big number is 180. If a party reaches this level, it canblock filibusters, really takes control.
Of the legislative process.The biggest number is 200. If the Democratic Party bloc gets thisnumber, it can veto. It can override any veto.And it also has the power to impose or pass impeachment measures.So it could hobble the government and perhaps even end it.What is on the mind of the voters, what will sway their votes?It's mostly pocketbook issues. People are worried about inflation.They're seeing the price of vegetables, fruit go up ahead of the election.Rents in big cities have been on the rise for years, and a lot of the thebattlegrounds are in big cities trying.
To win over urban voters.So we have rents, we have inflation. And the the overriding thing is how toadd strength to this export driven economy.It's been slowing down a little bit. People want to see it stronger.They want they want prices of fruits and vegetables be a little bit cheaper andto afford housing. So those things are really driving it.The big picture issues security with North Korea, alliances with the U.S.Those are not likely to change after the election regardless of how the votingbreaks. So it's what people are.People are worried about their finances.
And that will likely shape the way thatthey vote. So what might we see?If you were to look into the crystal ball, what might we expect?I think we may see the the we the polling and surveys indicate now is thatwe're going to see the Democratic Party bloc keep its majority, perhaps withsome movement on the margins. But the status quo staying in placewill get better. We'll get a better idea.Polls close in a little bit more than 4 hours.We'll get some exit polling and forecast pretty soon after that just to tell uswhere the bands may be.
But it was last election, four years agowas at the start of the COVID crisis. And South Korea had a at the time we gotwhat was regarded as a pretty good public health response.And that really helped the Democratic Party, which was in power, then take onwin a lot of seats. So that Covid factor is not in therethis time. And that also is a bit of a wildcard tosee how the voting is going to go. Our with Asia government editor JohnCovid in Seoul. Thank you.Plenty more ahead. Keep it here with us.This is bloomberg.
And. And. And the markets traders in wait and seemode as we await that crucial CPI print out of the US.Might it be hotter than anticipated like what we've seen in the past severalmonths? Of course, that would dictate the pathof the Fed rate cuts. Investors are already pushing back onexpectations, perhaps not three, but perhaps it is to the Nikkei to 25 underpressure, down 3/10 of 1%. The ASX to an index up by 3/10 of 1%.Stocks in New Zealand currently higher.
By a marginal 2/10 of 1%.It is the Kiwi dollar that we're tracking as well.It is higher than anticipated. The dollar, the US dollar is flat that'son the back of the RBNZ not staying pat, saying that aggressive stance will haveto persist despite the fact the economy is under pressure.In terms of the yen. This is how it's looking flat versus theUSD one in 5174. Investors are pretty much waiting forintervention. Might we see that coming through?And in terms of what we're seeing in India, it is green pretty much acrossthe board.
Sensex index up 3/10 of 1% gains too forthe rest of the benchmarks scheme. It eye on Indian banks.Shadow lenders as well are perhaps more upside given what we have seen so farout of favour right now, but could be in favor not too far from here.They'll stay with India as long that Apple assembled $14 billion of iPhonesin India last fiscal year, doubling production in a sign it's accelerating apush to diversify beyond China. For more on this group, let's bring inIndia technology correspondent Suncorp. PATEL Suncorp, put this in perspectivefor us. What do we know?I hope so.
What we reported today is that Apple ismaking about $14 billion worth of iPhones in India, which is double whatit did the previous year. So in this fiscal year end in March.So this March, March 20, 24, Apple made $14 billion worth of iPhones.Last year they did $7 billion. And it's a great sign of India'semergence as a manufacturing hub. And obviously, good news for Apple.It's also a message to China. No.Yes, of course. I mean, they still make a bulk of theiriPhones in China. But with this now, in volume terms,Apple's making about 15% of their global.
Output of iPhones in India.Again, that means that they get to diversify away from China as a trade warbrews between Washington and Beijing. So Apple is taking these steps veryquietly but steadily. Some of it is a win for India.It's also a win for Mr. Modi, who's been pushing for this.And this comes ahead of the elections. Yes, of course.I mean, this making the drive is the flagship program of Prime MinisterNarendra modi. It was his bid to get more manufacturingcompanies to India. They are going to use Apple as a posterchild to get other companies like Tesla.
To India.And obviously, this is good for employment.Apple itself has created about 150,000 direct jobs in India.So this is definitely a good election plank for Modi as well.We know that Apple has opened to Apple at two stores in India.How are they doing? Is it expected to invest more in thecountry? What do we know?We've previously reported that Apple is planning another three stores in India,which would take the total number to five in a few years time.But this is a very important sales.
Market for Apple as well.We know that in China, the company is under intense pressure.Sales are dropping there. But this market, the Indian market, isgrowing very fast. Last year was a record salesyear for Apple in India, and even this year they continue to make new salesrecords in India. iPhone purchases are becoming verypopular. Apple's current market share in India isabout 6% because this is still a market dominated by Chinese brands.But Apple is doing incredibly well in India.Some can't.
Thank you.And your technology correspondent. Some partial with some line to tell youabout out of Thailand. Thailand will fund its $14 billion cashhandout via its budget. It is scrapping that debt.And of course, there's been a lot of speculation how Thailand will do this.It is part of plans to boost growth in the country.Thailand now to fund its $14 billion cash handout via its budget.It is scrapping plans of that debt plan, which waswhich it was considering much earlier before.Now, meantime, here are some top.
Corporate stories we are following.Intel will roll out a new version of its AI chip in the third quarter in a bid tocompete with in video. The gaudy three processor focus onhelping to train AI systems and running the Finnish software CEO Pat Gelsingersays the chip will cost less than invidious current and future processes.Boeing shares fell to the lowest in five months after employees said theplaymaker took shortcuts to ease production bottlenecks for its 77Dreamliner. The engineer who worked on the planesays the alleged issues could dramatically reduce the life of morethan 1000 of the jets in service.
Meanwhile, Boeing handed over 83 jetsfor the first quarter, logging its lowest deliveries for the period sincemid 2021. The majority of those planes were 737max jets. Plenty more ahead.This is the man and. Let's get you to markets.Do a check on Apple supplies on the breaking news about India doubling downin terms of its Apple production. Apple doubling down as Indian iPhoneoutput hitting $14 billion in what is obviously a pivot away from China.This is the US tech giant making as much.
As 14% or about one in seven of itsmarquee devices from India, according to people familiar with the matter.Take a look where we are in terms of those players.Pretty mixed bag, but mainly in negative territory.TSMC down a 10th of 1% Hon Hai down one and almost 2% right now.Standing is declined Pegatron though in positive territory up about 1% on theback of Apple doubling its India iPhone output to $14 billion.Just how it's looking in terms of U.S. assets as we count down the CPI printout of the US, it is a key figure that may dictate how the Fed goes from herein terms of its Fed rate cuts.
Futures pointing to a flat open and asthat futures about a 10th of 1% higher in terms of Asia, Hong Kong andoutperformer up 20% from those lows that we saw in January.That is it from Bloomberg Markets Asia, as Hong Kong and China are about to comeback from lunch. This is Bloomberg.
