Bloomberg Markets: China 02/01/2024

All right, here we go.Good morning. It's 9 a.m.in Hong Kong, in Beijing and in Shanghai.Welcome to Bloomberg Markets China open. I'm David Inglés with Yvonne Man.Our top stories this morning, a risk off mood in Asia after Wall Street's worstfed day in almost a year. Jay Powell now hosing down hopes ofinterest rate cuts beginning in March. I don't think it's likely that thecommittee will reach a level of confidence by the time of the Marchmeeting to identify March as the time to do that.But that's that's to be seen.

Also ahead, Chinese stocks set to extenda record losing streak. The mainland benchmark wiping out alllast week's gains on optimism over support measures.And the market rout also said to be triggering job cuts at UBS, axing about90 positions in Asia, private wealth and investment banking.So certainly there seems to be a lot of headwinds here across markets.But you got to talk about the Fed here. And I think the fact that you know that,you know, the Fed chair, Jay Powell explicitly talking and playing down theprospect of a march cut certainly did lead to this unwinding of some of thesedovish bets right now.

Yeah, we went from a base case prettymuch a few days ago to now. Obviously, that's a tail.It could still happen. There is still some pricing around apossible cut in March. But certainly what it's done is it'sconcentrated. Now.Those bets, if on into May, it even strengthened the case even for May andJune and maybe even maybe even July. We'll show you what that math looks likein a in a couple of minutes. A couple of seconds.In fact, I'll just briefly give you a status report of these markets.So we're flat on A50 futures.

We picked up, though, as you can see onUS futures. And that actually might be down to thisnews that broke about 20 minutes back and Moody's placing the New YorkCommunity Bank Corp on watch negative which could possibly mean that that getscut to junk over the next few months or so.Flip the boards. We have markets like Korea coming.Well, Korea's been up and running for about an hour or so, 7/10 of 1%.Exports just out about an hour back as well.A sign of momentum, if you will, as we start of this year.Bond markets.

Okay, Here's ground zero for you.You have well, your Chinese ten year yield.You have an auction in Japan and Tokyo today.We're still some distance away from a 2.3.That's the level you want to watch in a Chinese ten year.That's your 2002 low, thereabouts. But given the sort of pace that we'veseen them, KGB's coming down, that's perhaps weeks, maybe months away.We have a Bank of England rate decision later today.We have a lot of central bank decisions to get through, of course, the Fed andin between we had Chile, Colombia and.

Also Brazil, all cutting interest rates.I should note that commodity markets very, very quickly Here you go at thebottom of your screen, you'll see, of course, the Shanghai contract coming, aline about a 1% lower band, iron ore. Well, I guess pick your contract.We're stabilizing, though, after what was a two day drop as far as theSingapore contract was concerned, 3/10 of 1%.Okay. As promised here, more on the Fed.So before and after, right. This is the the the aggregate number ofcuts are easing in basis points before and after the meeting.So 76 between March, May, June and July,.

Forward meetings, that's now up to about85. So if you take out pretty mucheverything in March, that leaves you with about two and a half cuts for Mayand actually June. So what the market's done, it's pushedit back, but it's now in many ways, based on the current information we haveright now, cemented a cut in in May and again in June.In case you missed it, too. So we're coming up a little bit rightnow as we start off in Tokyo. But we actually ended the session nearlows after Jay Powell spoke so high, we dropped back in, we came back up andthen reversed all of that, even going.

Into the close.So, I don't know.Market interpretation may be dovish. We'll see.Yeah, dovish because I think the New York Community Bank stuff kind of, youknow, maybe change a little bit of the view.I'm against the bond market in some ways, but really it was what we heardfrom Jay Powell earlier then as the rates are now likely at their peak.But you know, really pushing back when it comes the possibility of March.Take a listen. I think it's likely that the committeewill reach a level of confidence by the.

Time of the March meeting to identifyMarch as the time to do that. But that's that's to be seen.So I wouldn't call you know, when you sit when you ask me about in the nearterm, I'm hearing that is March, I would sayI don't think that's probably not the most likely case or what we would callthe base case. There you go.The good governor himself joining us here on set to unpack what's well, whatI guess the key takeaways are from the Fed, what it means for markets.Aaron Brown, Multiasset strategy portfolio manager at PIMCO, normallybased in the US, has graced us with her.

Presence this week.Thank you so much and it's very nice to see you.You mentioned you were up at ungodly hours like like we were, of course,digesting the Fed. What was the most actionable bit, youthink, from the statement or from the from the governor's presser there?Sure. So I think there are three key, keytakeaways. The first is that the Fed explicitlypushed back on March, and we're now really looking at a midyear start to theFed cuts. The second, I think, is that the Fedreally needs to see more confidence in.

The inflation trajectory.Certainly there's been good progress, but wages in particular remain too hot.They're running at about 4%. It's probably about 1% over the Fed'scomfort level. So we need to see that come back downlower. And then third and interestingly, theFed did discuss that they haven't yet discussed quantitative tightening,tapering, though likely to do so and do a deep dive in the March meeting.And so that actually does mean that the time frame for tapering up is likelythis year in the latter part of this year.All of that said, as you mentioned, the.

Fed actually the forward pricing forinterest rates really didn't move that much.In fact, if you look from two days ago to today, there's more rate cuts pricedin between now and December year end than there was two days ago.I think a lot of that is on the back of what the bank action that we saw late inthe day, particularly around New York Bancorp.Yeah, but Community Bancorp. But I but I also think that with respectto the Fed, I think people right now are thinking that the timing is not going tobe as important as the pace once the Fed does get underway.And so I think that's really a lot of.

The price action that we saw today goingforward. I think that the yield curve is likelygoing to continue to steepen. What do you think is be the actualthresholds, though, to give the Fed confidence that's ready to cut rates?Because that doesn't seem like it's very straight forward right now.Does that just leave the market hanging on every data point up until March?I mean, the markets, the Fed is very data dependent, which means the marketis going to be data dependent, too. I think there's two key things.One, as I pointed to, is wages. We need to see consistent and persistentdeclines or disinflation in the wage.

Growth number.Second, right now, a lot of the decline that we've seen in inflation in the UShas been supply side driven inflation coming lower, yet demand is still reallyrobust. Demand is running now above potentialGDP. And so what we really need to see isthat as the supply shocks continue to ebb and continue to fall where it reallyis inflation on a clean read, a clean print, and do we see inflation startingto move a little bit higher on the back of what is still a very robust U.S.economy? So does it make sense to tilt one'sportfolio towards somewhat of a global.

Slowdown this year?How are you? I mean, do you timed this thing becausewe know it's coming, although it's not quite clear as far as the US isconcerned. It's quite clear with with Europe, forexample, and China, too. So it's very hard to time like the veryfront end of the fixing curve that's going to be highly volatile, verydependent on different data coming out. I think the number one trade to do is tobe long curve steeper in the 530 years point of the curve.Historically, we see when the Fed starts cutting rates, that's the time when theyield curve deepens.

I think from an investor perspective, itis now time to start terming out your duration, buying, going out of cash andinto sort of medium term duration. And I think the sweet spot of where youshould be buying right now is probably the fives and seven years part of thecurve. But I do think being overweight durationas the Fed starts cutting is going to make sense.I just wouldn't try to time the very front end part of the curve.Much of last year, I think if you had to choose between bonds and stocks, peoplewould choose the former. Do you think that trend continues forthis year?.

I do.I mean, if you think about historically, just given how cheap valuations aretoday, global AG is yielding close to 5% in a historical context.That's about the 90th percentile in terms of cheapness.Certainly there's going to be spots of equities that are going to do reallywell. Korea is a market in Asia right now thatI think is really primed to do quite well on the back of the semiconductorcycle bottoming. But by and large, you're going to have alot less volatility with really good returns, both on a carry perspective, ayield perspective, but also potential.

For capital appreciation in the fixedincome market right now. And for most investors, that's a coreportfolio holding that people should have.Right. And I think the last correct me if I'mwrong, the last two years on fixed income, you know, you're you're you knowthe profits in your book were mostly interest and not capital appreciation.Right? Yeah.With all that being said and perhaps in the rearview mirror, how do I then thinkabout how yield, for example, in the US and is 2424 the year that that thatfinally breaks or does that tighten even.

Further in your view?So high yield right now is incredibly expensive.I talked about how cheap sort of core fixed income is.High yield is about the 23rd percentile in terms of expansiveness based on theten year historical look back. It's really expensive right now.We saw significant spread tightening between October 31st and the end of theyear. Right now, I'd rather buy equities thanmy high yield. I don't think you're being compensatedfor the risk. You're buying a lower quality instrumentwith not much room for further.

Tightening in terms of the spread.And you're really exposed to the left tail in case we do enter a recession.I was going to ask you about New York Community Bank as well.You know, is this another sub sort of situation?Do you think investors are sort of overlooking the stress that could bere-emerging in the banking sector in the U.S.?So I think in some ways it's easy to say thatNew York Community Bancorp stands alone and that this is a problem that's reallyidiosyncratic to that bank. But I think that the problem arises thatas we go through and see more and more.

Of these idiosyncratic events pop upamongst the regional banks, that's a cause of concern.And I think, you know, if you extrapolate what was already a concern,which is the commercial real estate market, and you look at the other banksthat are exposed to commercial commercial real estate, particularly inlarge urban centers like New York City, that's one of the reasons why you sawsome of these other regional banks today trade down five or 6%.And so I do think that coming into a year where you're going to start to seerefinancing risks at a refinancing rates for a commercial property loan have nowdoubled since the lows two years ago.

That's a risk that you're going to seehigher. It's going to start to drain earnings.So maybe you don't see defaults, but I do think it is a real risk for themarket. And I do think that overall regionalbanks are going to be weak in the months ahead.On the back of this news, I got to ask you about China.This part of the world. I mean, you were you were in China thisweek, Mainland China, of course. What's your sense as a visitor?How are things? And of course, as a foreign investor,how should foreign investors be looking.

At this market?You talked about cheapness, right? That's right.Now that's right there, right? Yeah.So China certainly cheap on a valuation perspective, but I think that cheapnessis likely warranted. I mean, I was just in China.I was really surprised in downtown Shanghai how little foot traffic I sawin many of the luxury retail stores. And even just with the high streetretail stores in the city, particularly ahead of the Chinese New Year, certainlythat's very anecdotal. I wouldn't bet on that or investcertainly on that view.

But our view is that Chinese growth islikely going to remain constrained just because of the challenges that we'reseeing in the property sector. We're not expecting to see any type oflarge scale stimulus. We'll likely see incremental monetarycuts, but they're going to be small. And what we really need to see isstructural changes to really address the property market in China, and that'sunlikely to occur. We haven't had the third Plenumbe the the most recent meetings with the Politburo didn't address anything on theeconomy, not that people were expecting to, but it's a we're in a little bit ofa void or of information right now.

And I think that that's a concern forinvestors. We think that growth is likely to beabout the 5% range, but we think that that's likely a cap.And so that's our concern. It's that you're going to continue tosee this this lower economic growth environment.And there's just really not a lot of stimulus to excite investors and getcapital flows back into the market. Aaron, it's great to have you here inHong Kong. Aaron Brown there, Multiasset strategyportfolio manager at PIMCO. We're also take a look at we got throughthe Fed bill is actually coming up a.

Little bit later on here today as well.You're not seeing a whole lot of movement in the Asia session here whenit comes to effects. But, you know, how are they going tosignal when the Bank of England is going to cut rates?Obviously, you know, it seems like Andrew Bailey has suggested that theymight have to follow the Fed to follow the ECB.But you look at the economic outlook, you know, they're sharply you know, whenit comes to inflation, pressures are easing.You have the rest of the UK actually heading into a recession.David, you might have to see, you know,.

How early those rate cuts are going toplay out. Yeah, and particularly that's a bit of apickle because they've been extremely hawkish up until, I think, December.Right. And in fact inflation actually pickedup. Yeah, I think it was last or last weekor two weeks ago. Yeah.So we're not done, although we do seem exhausted at this point in time.It's fed day. Why not?All right. So we have the opening bell 15 minutesaway here in Hong Kong, in Shenzhen and.

In Shanghai.Welcome to Bloomberg Markets, China open.And good morning once again. All right.We're all talking about milestones here today.This certainly is one that doesn't bode well.Six month losing streak for the CSI 300 that was reached yesterday at the end ofthe month. That is a record, the longest losingstreak that we've seen in the history of this benchmark.So certainly we see, you know, all the gains that we saw last week on optimism,the support measures that's been wiped.

Out at this tech as well.We're still talking about six month steep declines there as well.So, you know, what's what's going to give what's happening here?Why are we seeing this renewed selling pressure?Let's bring in Lansing to our Asia stocks managing editor.Yeah, So we knew that, you know what we heard last week?You know, we're still waiting for confirmation of a stabilization fund.We still haven't got it. And investors are already giving up insome ways and saying, yeah, I think the the lack of freshcatalyst or stimulus is really weighing.

On sentiment and also economic data.The data was weak. PMI data, I should say, was weaker thanexpected this week. So overall, we're just not seeinganything positive at the moment. And adding to that sort of pessimism isthe news this morning that some companies are facing sort of the kind ofshare renewed sort of margin calls and then they have to top up their sharepledges because they've, you know, taken out loans by pledging their shares.And now the market has been slumping. And so we saw an analyst note sayingthat 30% of Chinese companies may be facing this kind of collateral callright now.

So that could add to sort of the viciouscircle that we're seeing right now. If they are forced to either, a, closetheir positions or or top up the shares, that's really not going to be sort ofpositive for the overall market as a whole.Do you see any visible, possible, possible visible catalyst, visiblepossible catalysts moving forward? Sorry, I'm just I'm a bit confused rightnow, but is there anything within the next four weeks outside of outside of, Iguess, in-your-face, blatant intervention in this market that couldsnap the cycle, at least provide a floor?Because we asked a question last week.

And we didn't get that floor.Yeah, I think it is. It's it's anyone's guess right now.Right. As your guest earlier said, the thelatest Politburo meeting didn't mention the the date or time for for the plan.And, you know, of course, the march to sessions is something that people arereally looking out for. And, you know, in the absence of anyfresh stimulus and people are looking at the kind of holiday spending that'scoming up. And anecdotally, maybe when you go toshopping malls, there's not a lot of people buying.But some analysts are expecting the kind.

Of experience based spending, the kindof domestic travel going by train or domestic flights that may pick up duringthe Chinese New Year period. And that potentially could giveconsumption or consumer stocks a little bit of a boost.But according to Morgan Stanley, I think they are saying that they expect or theyhope that the government will come out, too, with a big consumer supportpackage. That's something that a lot of othereconomists or analysts have been asking for as well to really boost consumption.Lending to our Asia stocks. Managing editor in Singapore for us.Futures are pointing to a lower open and.

That's probably what we're going to get.There we go, a quarter of 1% to the downside.A full preview of your trading day ahead.It's next. This is Bloomberg. From the world of politics to the worldof business. Every weekday, 5 p.m.Eastern Time hosts Joe Matthew and Kelly Lyons deliver news, insight and analysislive from Bloomberg's Washington headquarters.Get the latest from and about politics. Biggest power players at the end ofevery trading day.

Balance of power.I live around the world every weekday and 5 p.m.Eastern only on Bloomberg television. Context changes everything. I do think what we are going to find isthat outside of a very few industries and sectors, governments are not goingto be willing to subsidize indefinitely production that brings it home or bringsit to allies. And so the benefits of internationalsupply chains that we've seen over 40 years from economies of scale, fromspecialization, from innovation and the like, those aren't going to go away.And so if you don't have an.

International supply chain, you will bebeat out by competitors who do. So I think what we're looking to do isto maintain a trade policy, which is based on on openness,which is based on sustainability, which is assertive, where we need to beassertive and defend our rights, but certainly not one which is going to beclosing down unnecessarily. Our trade and investment relationshipswith the rest of the world globalization, that open supply chain,global supply chain is really important for the life science industry,particularly pharmaceutical supply chain.You think about the stress the.

Pharmaceutical supply chain has beenunder since Covid-19 the war in Ukraine, not to mention the geopoliticaltensions, if you will. You know, we don't have the luxury ofsaying we can temporarily stock up on our product because these products,these medicines keep people alive. Right.Big story. So we've learned that UBS is looking tocut about 19 jobs next month. That's across Asia.Private wealth and investment banking. That's image, of course, a stock marketrout in Greater China and a slump in dealmaking.Adam Haig, our finance editor, is with.

Us right now to talk us through thedetails of what we know so far. So, yeah, let's start with the cuts.Adam, What do we know about what's about to happen?Well, David, what's really important about these cuts is where they'rehappening. So as you said, about 90 jobs looking togo, but crucially in private wealth, but also in investment banking.So on the private wealth side, of course, that's a function ofthe general kind of malaise that we're seeing in investment markets in mainlandChina. And of course, that's been a strugglethat's been well televised.

And so there's clearly a little bit of apullback there. But also, of course, in investmentbanking where deal flow is struggling, not just in kind of, you know, the M&Aside, but equity issuance IPOs and in the secondary market for equities aswell. So you got these two kind of things atplay, which is and overall meaning that just less activity going on in those twoareas. Now, there are bonus discussions goingon at UBS this week. And so the numbers still could change ifyou get a number of people that will take more of a voluntary redundancypackage, post the bonus discussion.

And so there are still some kinks to beironed out in the next few days. But but certainly this kind of of anumber looks like it's it's going to play out.Now, of course, UBS a strong it has historically a strong position in thispart of the world. And with most of these cuts being in inChina and in Singapore, in China related roles, it really just shows you how muchof a tough time even the strong big players are having over in this side ofthe world at the moment, given everything that's going on there.Yeah. And as the chairman column has said, youknow, 2024 is where the challenging part.

Starts and there's integration as well,where some of the easier sort of job cuts that we saw last year, that'scertainly coming to the end. The hard stuff comes now.I don't think you out of hate there. Our finance editor joining us the latestwhen it comes to UBS in terms of the day ahead, here's what we're looking at.Of course. Looks like we're Hang Seng is edging tosome gains here at the pre market. So we're set to open higher, at least inHong Kong, potentially. Hopefully, that reverses some of theweakness that we've seen in the last couple of sessions where we basicallyhave seen the CSI 300 on that record.

Losing streak of six straight months ofdeclines for that market. It tech were up 8/10 of 1%.So yeah, potential what we've been seeing with the Fed now, obviously itwas a little bit less hawkish or more hawkish, so expect it.But I think the news of New York Community Bank certainly kind of reversesome of the moves that we saw on the bond market.Maybe that's a sign that that, you know, the banking stress that we're seeing inregional firms in the US could lead to the Fed to cut a little bit sooner thanlater. That's why maybe we're seeing tech catcha bit here this morning in terms of.

Analyst actions.We're watching the liquor makers as well and we're gauging distillery res to a bya Goldman China Shenhua the galaxy securities those in focus on top of thisit's busy on data so we're coming off the GDP print out of Hong Kong retailsales are coming out today we have some data points out of Macao.15, 20 minutes from now, the Taishan or the Taishan manufacturing numbers arecoming out. Can't talk today for some reason.And then most importantly, I'd argue, is this Finance Ministry briefing.Yes. At the top of the next hour, plenty moreahead.

This is Bloomberg and. Right.Good morning. Welcome back to shows.It's funny what seven days can do seven days is a week before you know it.It's Monday again. Before you know it, your hangover stillnot done. And before you know it, some of thegains that we've seen in this case, the CSI 300 from the time of news of thestate backed support came in. We've reversed all of those gains.As you can see, that's also taking place in the Hang Seng tech index.And we're watching out for it's probably.

Going to happen today on the Hang Sengindex, which is still some distance away from those lows.We're still about 1% and we are poised for a higher open today here.Yep. So at least there's that.This is after we saw the CSI 300 and the longest losing streak on record.And that's despite some record inflows that we're seeing as some of theseChinese ETFs on speculation that there is a bit of state buying here, which isactually a few times more than what we saw back in 2015.So you're certainly seeing signs of that that's trying to put a floor in thesemarkets.

But then again, we were just talking toLanting, too, about their team looking at more Chinese companies.Shareholders are adding collateral to their share pledges.There is this concern of margin calls. Now, does that actually exacerbate someof the selling once we do see more of that?So there you go. It just tech, though, is catching a bithere today. Obviously, we digest the Fed.So it was not March. That was what Jay Powell is is signalinghere. Unlikely when it comes to the first cutfrom the Fed here.

You're seeing more bets towards May now.But certainly in the last couple of hours, we have seen news of New YorkCommunity Bank and that Moody's move that we saw on that regional bank here.It does lead to these banks to watch what I say.The bond to rally U.S. futures are also perking up as well.So does that mean this rate cut cycle could be pushed forward in some ways?So that's maybe why it is tech is watching also.Very much so. The developers the was the first top 100developers. We saw January sales plunge more than34% year on year.

That was were where we saw that.So developers are on offer here this morning you're seeing consumers staplesthat's doing a little bit better but the rest of the market still seeing quite abit of pressure here this morning. Let's focus on the property names aswell. So we talked about that data print.We also the chasing PMI do as well. So after that was a pretty mixed bagwhen it came to the official numbers. I'm wondering if the chasing privategauge. So is any sort of clues.But those two have been diverging. I've laid to Dave right there you go.Property stocks still can't catch a.

Break long for down some 2%.So, you know, China also down 2.6% or so.We're watching the tech space is given what we've been seeing in tech,yesterday was a steep drop of 3%. All right.Amateur sports. This is according to our sources, set toguide the IPO pricing below range at 13 bucks a share.So that's sending add to sports down some 7% here today watching Ruchi ZCprofit increase of over 80% year on year for last year.Given just all the news for with Lucci we had to check that as well and Seattleso Tesla set to open according to our.

Sources a U.S.battery plant with equipment from China's Seattle.We saw a big pop in the shares yesterday, but certainly now coming offthat just a little bit there, Dave, there's so much corporate news and Iknow we know if we enter one of the two long and I sorry producers.No I think the which is very interesting too right because of all the gyrationsthat's taking place, we were not supposed to be talking aboutproperty but yeah, the sales came through as well.And you know, further for the downside therein terms of further downside.

So we've been tracking this rally andKGB's for many, many weeks now. And you know, at these levels we're nowflirting with 2.4%. We're not very far from that low.We hit back in 2002 of 2.3% thereabouts. And, you know, this is a completelydifferent economy than what it looked back in 2002.Yet here we are on the back of rate cut expectations and the slowing economy.When do things improve, I guess, is the question.Yeah, let's bring in Wang should do it. Ask him that very question.Chief economist at Global head of Asset Management at Haitong International.Do you see any signs of improvement in.

The next few weeks or months?Thanks for having me. Currently, definitely.We think that China is that the growth is below trend due to the deflationpressures on both CPI and the deflation. So that's why we think that they need tobe aggressive aggregate demand policy to support demand and to reverse the cycleof deflation, in particular the pressure on the pie, because that's matters forcorporate earnings forecast and everyone should lower their forecast guidance.So that's a pressure on the corporate earnings side and other on the corporatesales side. Yeah.So how long do we wait?.

You talked about pie earlier on.Do I look at 20 was it 2013 to 2016? That's a very long time, right?That in the previous episode of pie deflation, even last for 48 months from2012 to 2016. But at that time that is differentbecause that had China launched a so called supply side reform, it's becausethe pie deflation. In the previous episode was due toovercapacity because of the US water inventory and other factors.And so but this time is different. There's no obviously overcapacity issue.So that's why we believe they need to be an aggregate demand policy.For example, tax cuts, further rate.

Cuts, increased government spending andincreased subsidy even to the consumers to bring back the the demand cycle.Do you still get a sense that this is policymakers that are still prioritizinggrowth right now or is or what we've seen so far, just reactive measures toof urbanization? There are both cyclical and long termstructural factors for structural economic growth.China is slowing down with the lower growth trend that's due to thepopulation aging and other, you know, switch to a high quality growth model,which is natural but cyclically. The same worries me.It's more under on the short term side.

Of the pie deflation, as I mentioned,because so that's why we also need we need both cyclical demand policy toreverse this cycle because that's that's matters what people's expectations.We think the authorities need to acknowledge the pressure on deflationand and to bring on the table more convincingly or more decisively the thethe easing policies. Is the window closing from this becominga Japan in the nineties and I think that'sthat's partly where this might lead to as well.Right. You know we don't want to get caught in.It was very difficult for Japan to get.

Out of that.Yeah, but Japan also has a different case with China.Japan has no capital controls, basically Japanese corporates after the collapseof the housing market in the early nineties.They increased ODI to invest overseas and for Chinese firms this could be anopportunity to further difference, diversify their investment around theirsupply chains. For example, you know, Southeast Asia inthe Middle East, in the Belt and Road countries.So that's why they can bring more the the corporate revenue from overseas, andthat's what Japanese firms did.

So what does this mean for markets, forstocks? I mean, it seems like we've we're seeingmuch more of this renewed selling now. You know, how much more downside couldwe see for stocks? Last year when I was here, similar time.So when I discuss the 2023 outlook, I used the key word mediocre.Yeah, which happened because for Asia investors, on one hand, they gained U.S.equities and advanced market equities, but also they suffered a loss in greatChina equities. So that's why we emphasize theimportance of market assets, asset allocation.And in general, when the inflation is.

Trending up or nominal GDP growth ishigh, we should tilt to equities. But in the current environment, we justsee that the CCP bond yields keep falling, which I'm sure the China bondmarket is having a rally right now. So that's why we emphasize that the theasset allocation, instead of focusing too much on the equity market alone, thesame for the US market. So yeah, so talk to us about fixedincome then, in your view. I mean, particularly when it comes toKGB's and as a, you know, as a Chinese firm, for example, is it actually easyto sell exposure to KGB's $2 investors, forexample?.

Now they have both the southbound thebond connect on both southbound and northbound.And also they have the the interbank trading market for the for the bondinvestors. So I believe there's a there's a channeleven for foreign firms based in Hong Kong.We can we can do the investments through either a Q fee or bond connect.So you say 2034 is is is one word the year of promising, Right.I mean, lay it out for us If you think it's something that, you know, you'retold too much was bonds, I guess, over stocks.Why what's what's the assumption there?.

Yeah, What's the when the inflationlinked inflation is trending down. Yeah.In both US and China. So naturally you should overweight thatduration you should over because that yield curve is steepening.Right. Also last night at the FOMC minutes, theFed gave some disappointment to the market that there's there'll be a likelythere'll be a rate cut in March. But he didn't say middle of the year oror May or June. So our base case or many marketparticipants believe they're still the beginning of the rate cuts sometime thisyear, which the beginning of the new.

Monetary and policy cycle,it seems to me. China is more negatively affected by theinterest rate differential or the interest rate over here than any otherfactors, because for China or for Asian investor, basically the risk free therisk free return is too high and it curbs investment.That's interesting. I think you're the first person thatsaid that, that the Fed is more important to Chinese markets than thedomestic issues. Yeah, because you see, in the past fewdays with Trump winning two states in the GOP primary.Right.

The market even starts to bat a secondtrade war. But to me, China is more negativelyaffected by the interest rate overhead even than the trade war.Hmm. Okay.Well, where do things do things improve? Rates are going to fall like it is now.Is now the low point of the year for equity markets.I understand. But I also use the word of patience,because back to 2016, a similar time this year.In January 2016, China's stock market after China's stock market crash andthat there's two circuit breakers.

And also the CCRC chairman just steppeddown in January 2016. But after around three quarters in thesecond half of the year, China economy started to stabilize and inflation andinflation are coming back. Right.Which there's a reversal of the market sentiment.So it's take time for the demand side policy, for the easingpolicy to be effective. Chantal Huang, thank you so much.It's nice to see you. And maybe in 12 months time things arebetter. Okay.Chief economist, global head of Asset.

Management at Highton International.The breaking news in the last couple of minutes, we just heard from the U.S.House passing a $78 billion business and child tax break bill.That's going to provide a potential boost here for U.S.companies. And so these large capital, domesticresearch expenditures and and really hand Joe Biden election year politicalvictory. So that's certainly what we're watchingout here. That measure was approved by a vote of357 to 70. So that certainly was a big majoritythere.

And that now heads the Senate wherewe'll see how Republicans look at this sort of legislation.We are play more ahead. This is Bloomberg and. Okay.Welcome back. Now, sources are saying here that HammerSports has raised Getty's .3 billion in a US IPO priced actually below themarketed range in that second of course major IPO in a week to miss its target.For more on this deal and the implications, let's bring in FilippoPacheco our Bloomberg Quicktake Capital.

Markets reported to talk us to the maintakeaway from the final pricing which came in softer.That's correct, David. Well, a lot of things that we can takefrom this IPO that are quite interesting.One of them, of course, the price shares were sold at 3.They're the bottom of the range was 6, the top was 18.So you can have an idea that actually people were not willing to buy it at thelevel that the bankers and the company were selling them for.What? We know that this was delayed by oneday.

The pricing was delayed.There was some conversation in the market that there could be some sort ofpressure regarding valuation in the moment of the market, even though stocksin the U.S. are doing quite well, as we know.So this is a moment that it's a company that is somehow tied to China.It's backed by what the biggest shareholder was, the one on top of theconsortium that actually bought a big stake back in 2019.So there are a lot of elements there that people were basically asking, isthis going to open the doors for more U.S.IPOs and for Chinese names in in in New.

York?I think it's still very hard to say if this door will be open.Yeah, that's what we're seeing. And two shares down some 5% potentiallybecause of the story, because they are part of that consortium.But yeah, you know, this company, though, we have to talk about what theydo, but they make one. RTX Wilson Rackets.Solid boots. Yeah, nothing I used, but yeah, notrelevant, but. Well, for those that know Amber, they doall that. But I mean, just in terms of the backersof this IPO, what do we know right now?.

That's right.That's right. It's a very interesting company becauseit's it's actually a Finnish name. European traditional products.A lot of people in many different markets do recognize them withoutnecessarily knowing the name of the company.But at the same time, this Chinese consortium that led by Anta, which is abig name in the Chinese market that also includes Tencent and also defined by thebacker of Lululemon Athletica, these guys were all together backing this IPOand they actually were our reporters in New York showed in their reporting isthat they were actually buying more.

Shares than they were initiallyexpecting in the IPO, probably to support this deal to actually make it gothrough and not have to be pulled all the way through.So these are important names. These are big backers.This is the way it's related to China and to the Chinese market.And that reaction that you just mentioned in in the mainland today is aclear indication that, of course, nobody wants to price an IPO below the bottomof the range. That's not good news.Yeah. All right.Definitely a dip is a disappointment.

There.Philip, thank you so much for bringing that scoop there.Philippe Pacheco. He is our equity capital marketsreporter on the latest on Amor. I want to hear more from Ara Sports CEOJames Zheng later on from the New York Stock Exchange is going to be coming atyour times on your screen right there. Okay, Tyson manufacturing PMI forJanuary, our estimate was for 50.8 and back in line but estimates 50.8 as well.And that coming in and you don't typically get a lot of forecasts as muchas you get on on the official numbers. But this one coming in slightly on thehigher end of at least the median of.

These as far as the range is concerned.But consider that matching expectations. Yeah.And in some ways also, once again, very different from the official numbers,which was a fourth month of contraction. So I think Bloomberg offices told usthat, you know, kind of don't really care about this, the private gauge alittle bit. You know there's a bit of are notreally, you know, reflecting the true nature what we're seeing in themanufacturing floors. But certainly at least we're seeing a50.8% here today. We're watching some of these, well, chipstocks and focus a little bit more here.

Today.Obviously, we've been talking about AMD and what happened with their earnings.So it's a mixed bag. But TSMC is down some 1% in Taipei.Samsung on the flip is up 1% here today. And we're talking about AMD realclosely. What happened overnight?Yeah, we pared some of the losses going into the close and certainly there'soptimism about these new processors helping investors at least look past theat least the most immediate downbeat forecast for the first quarter.And the CEO, Lisa Su, also told us that the market is in the early stages of ahuge expansion.

Have a look.When I look at the potential of AI is really the single most important, youknow, sort of, you know, technology innovation over the last 50 years.So AI has so much potential to, you know, change the way our businesses workto change our. Sort of productivity to really changethe way we do research and a whole bunch of things.You know, from our standpoint, we see the A-Team growing to upwards of 400billion by 2027. I think from an AMD standpoint, youknow, you were at our launch, Ed, in December.It was a great coming out party for the.

AMD, you know, capabilities and it'sgone really well. I think our customer interactions, ourproduct qualifications, our ramp have gone really well.So we were able to update, you know, some of our numbers this this past week.I think a lot of folks focused on that ramp and how it went in the quarter.You know, you exceeded the 400 million that you told me about at that event.So it's $3.5 billion of sales this year for my 300.What's interesting here is kind of your ramp relative to what's happening on thesupply side. And I wondered how big a factor supplywill be in matching or beating that.

Number in 24?Yeah, absolutely. This is the fastest product ramp, youknow, in our history. So, you know, we exceeded our numbers inQ4, over 400 million. We're going to grow into Q1 and weupdate our full year forecast from 2 billion to 3 and a half billion.The way we think about that is that's a customer demand statement.So that is customers that we've engaged in who have made commitments to us, whohave placed orders with us. We're planning for a much larger numberas it relates to the supply chain. This is what we should do.We always plan for success.

So, you know, my view is it's stillvery, very early in the in the innings for accelerators and particularly for my300. But this is an opportunity for us tocontinue to build a major growth driver as we work with our top customers ontheir plans. AMD Chair and CEO Lisa Su, speaking toBloomberg Technology co-host Ed Ludlow. There are some other tech stories thatwe're following for you today. The leaders of top social mediaplatforms face a barrage of criticism from U.S.lawmakers over their online child safety failures.The CEOs of firms, including Meta and X,.

Testified before a Senate committee onWednesday and were pressed to support new legislations to impose controls onsocial media Companies, as they are currently designed and operate, aredangerous products. Mr.Zuckerberg, you and the companies before us, I know you don't mean it to be so,but you have blood on your hands. You have a product.You have a product that is killing people.These companies must be reined in or the worst is yet to come.The CEO of SingTel Digital Infraco Bill Chang, says demand for data centres inAsia is only in its early stages.

He was speaking to us after the companylaunched a new data centre brand, which includes a collaboration with an VEDERE.We believe, you know, given lot and various projections and you know, anumber of the report, this is a trend that is in the early cycle of the wholesort of adoption trend, and that's going to be growth that's coming.And at this stage we've just taken a very market demand driven kind of viewto stage as we expand and bring those IDC's in, you know, out to the market inphases andOkay. And we have a big one coming up, sufficeto say.

Jensen Huang joins us at those times andjoin us, of course, for that exclusive conversation.Yeah, I guess there's lots to talk about with them.Plenty more head versus Bloomberg. Okay, So massive drop in shares ofJapanese bank Azura were down by effectively what the stock is allowed tomove to the downside. So down by the daily limit on the backof some forecasts here as far as their exposure to U.S.commercial real estate is concerned. And this is really cutting through manyparts of this market today. This is really one part.And earlier on we had that headline,.

Massive headline out of Moody's and NewYork Community Bancorp. Yeah, it's interesting that this is allcoming back. Right.And if you take a look at what really led to that record drop in New York,community bank provision for credit losses was more than ten times whatanalysts were expecting here. So, I mean, it just goes to show thatthere's still a lot that we don't know about banks exposure to the real estateside of things. So certainly, you know, maybe that's whywe're seeing U.S. futures perk up.We're still up about use.

When you get bad news, that's good news.Maybe the Fed needs to start looking at this very closely.I think Ben was talking about his note, the fact, you know, in the statementthey took out that that line from the Fed, that the banking system is soundand resilient, but not even one question was asked or the presser about possiblestress on the banking sector. Well, markets are asking questions now,aren't they? There we go.We're headed into the next slide. Of course, the Bloomberg Markets marketslooking like this. And top of the next hour, we're lookingat a briefing out of the Chinese finance.

Ministry.Brace for that and others. This is Bloomberg.

Sharing is caring!