Bloomberg Markets: China 02/26/2024

And good Monday morning.It's 9 a.m. in Hong Kong and Beijing.Welcome to Bloomberg Markets China open and David in Glass with Yvonne Man.Our top stories this morning. Asian stocks brace for a flood ofeconomic data this week, including China's PMI numbers, activity gauges andthe Fed's preferred measure of inflation.China's stocks, a stunning reversal from world's worst to best performers, isstoking optimism that the rally will continue if policies remain favorable.And BYD debuts its most expensive car, a high performance fully electric supercarpitted against gas guzzling Ferraris and.

Lamborghinis.You take a look at this market. I guess you do need a bit of a supercar.Yeah. And what we've been seeing here, as youtalk about. Right.How do we go from the worst to one of the best equity markets this month?It certainly is one we're watching out for.Is there something more to this or is it just sort of the short covering that weall been talking about for a long, long time now?That's a good point, because we've certainly seen, you know, a rally onprice of this sort.

Right.With that means that we haven't really seen a CSI 300 up to ten days.Yeah, now you get nine. Good to get day ten today.So we'll see what happens with that A50 futures coming online over in Singaporeand it's looking like we might get some weakness although that doesn't mean ofcourse we end the day this way Nikkei two to fives continuing that massiverally that we've seen certainly the last weeks of 40,000 perhaps now the currencythese next what, few days and weeks as far as Australia is concerned there,we're flat right now. We're within about half of 1% fromretaking that all time high that we hit.

Earlier this month.There flip the boards. One market that is also in focus isKorea were down after the unveiling of some of the details on this value upprogram. More on that in a moment.Three markets coming online, Netflix markets doing this.Finally, a dollar, the dollar weakened last week falling.I think it was seven, maybe eight weeks. Our BNZ index we could hike or theconsensus is they'll hold although you do get are you are getting a fewforecasters coming out and saying that they might actually move on rates thisweek up that has to be more specific.

Their bond markets doing this flurry ofFed speakers, plenty of economic data coming out.We're slightly just below the year to date highs and treasury curve right nowto 40 and China ten year yield and commodity markets doing this.Bottom of your screen is coming up. US crude Brent and all things in betweenwere mostly weaker across the commodities right today go we'll see ifwe re round those numbers right a 10th straight gains day of gains for the CSI300 was certainly a mark, something we're already in the longest winningstreak since 2018. We're past about 10% from the lows thatwe saw back in February.

In terms of this agenda here today, thatcertainly is the equity market very much in focus.Let's not forget that junk bond rally to 11 straight weeks, Dave, that we've seengains there. There's an anti-graft body work report.Of course, we're going to look into in terms of details there.The auto earnings coming up. Hong Kong tourism stocks are, of course,a big countdown to that budget. What sort of measures we could see tokind of bring back more tourists to the city.There has been some reports from SCMP that there could be some meeting in HongKong with business groups, with Mr.

Shah himself.So certainly that could be one to watch because as we count down to that budget.So certainly a lot hanging on the investors minds this week.Yeah, you know, there's the meeting actually today between Asia about longof course, and the business groups including I think I look at the reportsincluding the AmCham might actually give you an indication maybe it's embracingmaybe a private sector. We'll see what happens with that aswell. Now on the on the on the China rallystory and certainly more on the earnings front.About 60 minutes back, we had Morgan.

Stanley on the show as we talked toJonathan Gardner, chief Asia strategist at Morgan Stanley, and he actually toldus why the bank is still not bullish on this Chinese equity market, tellingthem. It's just a sort of negativefundamentals. So there is a reason why this bearmarket has been going on in China for so long.And until that's addressed, which we think requires the consumer to come tothe fore basically through fiscal stimulus that targets the consumer, it'sunlikely that the earnings profile for China will will turn around.Let's get a preview now on what to.

Expect of this open.Let's bring in our Asia equities reporter, Charlotte yang.Charlotte, you've been talking to money managers out there.What do they make of this rally? Is this something that's meaningful intheir eyes or, you know, we just talking about a bear market bounce or whatever?Yeah, I think to start with, sentiment has really recovered for the Chineseequity market. If you remember last month, we're stilltalking about so many pressure points, you know, from below in structureproducts to, you know, margin calls. I think after, you know, Beijing,Chinese authorities almost daily policy.

Major to support the market right now.Investors do feel like a bit more confident about this market.But what we've been hearing from managers in Europe as well as in the US,is that they feel like the rebound we saw last week is not a widelyanticipated one, meaning that still a lot of among the long term, you know,fund managers are still standing on the sideline.But with that said, given the valuation that was so attractive and also thelight positioning as well as the expectation that we're continuing to seemore support from the authorities, they feel like we could see some tacticalupside from current levels for the.

Market.But, you know, a meaningful turn around definitely will need more improvement onthe economy side, not just market wise. Yeah, And, you know, we get someindicators on the economy this week. And how important will those metrics beto this to this rally? Yeah, I think the activity data, youknow, manufacturing activity data we get on Friday will be very important for theassessment on the economy side. And also the a lot of earnings investorsare playing close attention to whether that's electric vehicle maker autos,earnings up to market today or you know by doing that use that will come up alsoduring this week.

I think the, you know, specific resultswill give a lot of sense of how, for example, competition concerns areplaying out for the specific sectors and how profitability are looking for thosecompanies. And also, I think the key thing towatch, everybody knows it's next week for the National People's Congress forthe policy. How big of a catalyst is that going tobe that some people are saying that's more of like a make or break moment forsome because you know you know, on the say, support side for market wise, youdo have national team some people believe up continuing buying.But the biggest thing still is going to.

Be property and also economic growthtarget. So I think if we see a positive signaldisappoint on that front, a lot of people might turn back to be morecautious again. Charlotte, thank you so much.Or asia equities reporter looking ahead to the open here, shanghai composite,we've taken 3000. We could get a day ten on the csi 300.You can read all about this, by the way, the quant quick and today's big take.Did it mean that on purpose there we go you can find that on your terminal andalso on Bloomberg dot com. All right.Still ahead, we heard from Morgan.

Stanley what I hear from Jp morgan.Now, what do you say Investors should start leaning more towards risk ontrades when it comes to this equity market in China.She's gonna be joining us at the bottom of this hour.We're also going now the open of trade in Shanghai, Shenzhen and Hong Kong.Certainly watching to see if Monday can lead to more extension of gains here.Asia futures, though, slightly on the negative side here.We're down by 4/10 of 1% on a gloomy morning here in Hong Kong.Happy Monday. I'm.

It's a busy week when it comes to eco,when it comes to central banks. Obviously, the Fed and the commentswe're going to get this week are certainly quite a lot.And of course, you've got to talk about the activity data out of China.Certainly one to watch in terms of the PMI numbers.That's the key one. Japan CPI expected to see core inflationundershooting the 2% target for the first time since March 2020.Does that complicate the equation for the Bank of Japan, necessarily one towatch here as well? We have also retail sales of Japan fromIndia, GDP, Aussie retail sales, our BNZ.

Decision.There are some out there that say they could actually hike as well.That Hong Kong budget, a key one here for any sort of policies when it comesto property and how to bring back tourism to the city as well Dave Andthen of course, a whole list of speakers from the Fed.Oh, a ton, yes. So those those conversations aresprinkled over all It's a quite a busy week as far as economic data isconcerned. And certainly what will.Is there still room to push back, I guess, as far as market pricing aroundFed easing is concerned?.

Current pricing, in case you curious,we're looking at at least two cuts by September.Is that still too much or is that Goldilocks?Pretty much at this point in time. Dollar, as you can see, flat after,what, seven weeks of gains we did, clocking a weekly decline on theBloomberg dollar index. There we go.All right. Bring in Ben Emmons, senior portfoliomanager and head of macro strategy at New Age Wealth.That is always great to talk to you. I mean, obviously all the focus lastweek was on the equity market, just.

Given what we saw with NVIDIA.And it's really ignoring what the bond market seems to be, you know, pricing inright now. When it comes to the Fed, I just thoughtwhat are you still encouraged by this rally that you can continue to chasethese gains or is there reason to be a bit more worried now?Avon Davis Yeah, great to be back. It is momentum market because whathappened with the NVIDIA earnings was just showing there is so much more thanjust that company in itself, right? I mean, it really looks like that isright more and more widely adopted in United States and lots of activityhappening.

So the market caught a bit on that.And these are not just because of Nvidia, but because it shows this canimpact the broader economy. So the momentum now showing up in stockslike Walmart or Home Depot or even financials like like American Express atall are sort of linked to this, you know, shift like in fact from from a onon the economy. So we're in a position here to say likelet's go with this momentum a bit because it's not anymore about that.Nvidia looks really overstretched and if then rates were to go up again and we'regetting a some sort of a major correction, it seems that actually themarket is in a sort of a cyclical.

Recovery, as we say.So I think we should stay with this momentum.I don't think there will be much derailment of it, no matter what the Fedsays this week or what the numbers say this week as well.Hmm. Yet, Ben, I guess just to follow up onthat, how long do you think at least the U.S.equity market, to be more specific, can remain somewhat divorced due to the Fedspeak? In other words, can the market rallyback whatever the Fed says over the short term?I think in the short term it can, David.

But you're right, it won't be as longthe forces as she was saying because I don't is opinion due to the Fed verymuch matters. But you know because last week clearlythere was a roll back of expectations of these rate cuts as well.Our for example, we strongly came out and said like, you know, is we probablycan hold off for some time before we actually, you know, it has to doanything. But yet the market is so enamored withthis fact. I've never really an eye on what's goingon the US economy that you have to temporarily divorce.But let's keep you keep an eye on the.

Fed.And there's a lot this week in terms of speakers clarity economy has somemomentum. So if you're getting to the point wherethe Fed sounds more hawkish than what they are currently, then I think it willimpact all the markets. Right.And you know, Ben, but pricing on the Fed has gone from 6 to 3.That's half in, what, six weeks? And I'm just looking at the Taylor Riggscare. Should we should we be surprised if theFed does not cut rates this year? Yeah, I'm of the view, David, that thatmay be the case.

You know, because if it really is aneconomy that can hold up in a way it does I guess in I you know I looked atdata is over the weekend right that was in I know that you know manufacturing isreally expanding and I think the ascent later this week will probably show thatthat there's more strength. So there's always productivityunderneath. Then the Fed is actually in an economywhere probably inflation sort of staying where it is, but the strong servicesside of the economy against production picking up.So you actually don't have to cut rates. If anything, it probably is an economywhere inflationary pressures may.

Resurface to some extent, but it keepssuccessful rate just just down enough rate.So I think the Fed is in a position not to do anything at least well into thesummer. So.You talk about this, the stall and disinflation that we're seeing in theU.S., do you think this is more just a pause or is it something morethreatening? That is something to watch, obviously,because I think that we got so enthusiastic about a disinflation,particularly in the fall of last year when it started to show it wasn't justthe good side of the economy was also.

Rents that started finally soft.And unfortunately this is reversing back up spread.And I think it's an issue that we're dealing with in the U.S.economy in terms of the shortage of housing and that rents are still verysticky. And it's not so simple for the Fed justto get that also cooled off. In other words, you need to keep rateshigher here for longer, Right. Rather than cutting them.So it is it is it is a risk that the stalling of disinflation, if thatbecomes more pronounced, that you're getting in a different view in a marketdeveloping off more may get some more.

More higher inflationary pressure.So it's a warning sign. I would say it's one numbers the Fedsays we have to watch the next numbers. The OPEC data on Friday will be key.I think that data will show that there's probably stickiness of rents in the U.S.does that. Let's say we get a nasty number in thePC print. How much upside do you see short term,if any, on the treasury curve where I think we're slightly below year to datehighs across the curve at this point. So it was interesting to see, David lastweek that the ten year broke just above 200 day moving average at 4.35.Now, why does this matter?.

We have a lot of like very specificpositioning in U.S. central bank, short positioning in theshort end of the curve and and a lot of long positioning in the lower end of thecurve and a lot of things all over the place.And so if you get a break of it, of the ten year and the technical level and itsort of opens up the door for, you know, say, four and a half or 4.6, yeah,that's that the PC can be really a trigger for that.Now we have gotten hotter CPI, MPI data that feeds directly into PCE.So the estimates are really dead as could be hotter.I think that and a long chief economist.

At Bloomberg, I think she estimatedpoint seven on the month, one of the highest estimates out there.You know, that that could indeed put pressure on the Treasury market.So it's not a you know, it's not something we can can ignore in terms ofthe risk of the ECB being a bit stronger than expected.Ben, just on China here, so we're up 15% depending on which index you look atfrom the bottom here. But certainly this equity market's beenthe best performer globally over the last several weeks or so.So, you know, the conversations in certainly near Beijing and here in HongKong might be different from what you.

Guys are having over there stateside inthe US. Just give us a sense of foreign flavorfor this equity market. Are you guys buying into this or is itstill largely a sort of local story, this part of the world?So we're definitely looking at China, David, because know, like Alibaba isactually a really good company and there's a lot of good fundamentals.Is it now really undervalued? As an example,the broader market itself finally gets some footing as the Chinese governmentcontinues to stimulate. I was just looking at liquidityinjection and you see that continues to.

Start ramping up again, Right.So so their support for the market, obviously that that's that's emphasis onthe on the short sale banner at the open and close.That's that's of course that's some pressure on the upward pressure in themarket too. And I notice that the short interest inETFs traded here in the US or C K Webb or the FSA ETF, its short interest is atthe record high. So there's deftly fuel here for theChinese market to see some recovery. Again all about the pandemic and howultimately with most stimulus finally also China comes online so it is I thinkan opportunity given but it has really.

Lacked other markets.I think it's got no to show I think I think it's an opportunity, David, to toto engage Chinese stocks. Mr.Emmons, have a good week ahead. Thank you for your time, as always.Ben Edmonds there, senior PM. Ahead of I macro strategy at New Edgewealth. Right.The midpoint of the days out 3 minutes in seven 1080 estimates near 720.The approach to the open 7/10 of 1%. We're looking at weakness as you cansee. 11 minutes to the opening bell.Happy Monday.

Hope you're all well rested.This is Bloomberg. All right, Hasan free market is up andwe are at a slightly to the downside, about a fifth of 1% here this morning.Of course, we have the talk about whether we will see a 10th lucky tenmaybe when it comes to CSI 300 Shanghai Composite.We talk about that 3000 psychological level as well.C.G. these are not going anywhere, despitewhat we've been seeing in this equity market.724 your offshore right here this morning as well, a Bloomberg scoop thatwe have to tell you about that just.

Happened the last couple of minutes orso. We've learned that Jack Ma's and grouphas outbid Citadel for Credit Suisse's investment bank Venture in China.Let's get more now from Lulu Chen, who leads our Asia investing team here atBloomberg. Lulu, what more do we know?How a surprise move is this? Pretty surprising.People familiar have told Bloomberg News that saw Ant Group outbid CitadelSecurities for the JV that Credit Suisse was previously running the investmentbanking JV. It puts UBS in a bit of a dilemmabecause Citadel Securities was the only.

Global player that bid for the unit.But Ant is offering a higher price as possible.That Founder Securities, which is the JV partner, will reject Citadel's CitadelSecurities offer and delay the process even further.So right now I think they have to choose.Yeah, and just in case that bank that you heard was Ken Griffin, I'd get it inthe background. Give us a timeline of this.This transaction need to close anytime soon, for example.And to your point, right, UBS is in a sort of pickle because there is a quitea wide gap between the bid from Ant and.

The likely bid that might actually comethrough regulatory wise if it's Citadel. Yeah.One of the key tensions here is regulatory scrutiny.We've been told that regulators are preferring to have a foreign buyer forthis unit because when the licence was awarded to Credit Suisse, it wasintended to attract more global companies to China's financial markets.Hence, the the scale is leaning towards Citadel Securities and also hadambitions to build a securities business.But that was halted when the regulatory clampdowns happened.The pricing on the unit.

Previously, Credit Suisse wanted to buyout its local partner and a value at $2.3 billion ¥2.3 billion.But right now, Citadel Securities is only offering a bid of 1.5 to ¥2billion, we've been told. All right, there we go.Well, we'll keep on top of this story. Bloomberg scoop, check it out on yourterminals and also on the website. Lulu Chen, who leads our Asia investingteam, wrote some other corporate stories that we're tracking this Monday.Ferrari, Look out BYD out with its bet unveiling its most expensive anysupercar on Sunday. The fully electric young Wang Yu nineactually costs over $233,000 and will.

Initially be for the China market.Now Bhiwadi says the supercar can hit 100 kilometers per hour in about 2seconds and reach a top speed of three or nine.The vehicle aims to rival gas guzzling, gas guzzling options offered by, as wementioned, Ferrari and also Lamborghini. Okay, Berkshire.Berkshire Hathaway says its cash jumped to a record $167 billion.That's in the fourth quarter as the firm struggles to find meaningful deals.At this point, Chairman and CEO Warren Buffett Warren's an eye poppingperformance was unlikely as the conglomerate tries to find deals atattractive valuations.

The firm's fourth quarter earnings camein $8.4 billion versus 6.6 from a period before, and certainly still a big pop,but perhaps not to.Chances are it happened again, perhaps for not likely at this point in time.All right. So we're looking at a couple ofmilestones in this market, Right? So we crossed 3000 Shanghai Corp.We could get day ten of some mainland benchmarks.It doesn't look like we'll get there at the open today, although it is earlydays. As you can see, 2.4%.We did have a cash injection, in fact,.

Out of the PBOC.Let me bring up my terminal to make headlines at this point.Whether you look at the fix net injection, 192 billion renminbi, openmarket operation, same rate on a seven day, 1.8%.So yeah, there we got nothing as far as the fix is concerned news wise.Okay, Steph. Yeah, we're watching very closely someof these analyst actions to tell you about.Lenovo. There was a call there from Fubon with aprice target of $10 now. So that's been raised to a buy for thatstock.

Goldman's taking a look at some of thesecar services sort of companies in China raised to a buy for to who car asimplies a 52% increase from its last price and if I'm far more read a new buyat CITIC Securities. Okay.A couple of other things we're tracking here.So what will you be waiting? We talked about this and of course, themunveiling that fairly expensive bet there in that market, 270,000.If in case you missed a few seconds back here not news and play Xpeng 4.3%.We're also looking at other other stocks here Alibaba of.Cause on the back of that story that we.

Just talked about with with Lulu on atoutbidding reportedly outbidding Citadel SEC here for the investment banking unitCredit Suisse in China. We're down about 0.3% apart from otherstocks are retracting Cathay Pacific obviously also very much in focus on theback of two things we have seen to our reporting that Hong Kong will be rollingout measures to support tourism and also that Air China is said to be soundingout its advisers on raising its stake in Cathay Pacific.The open 3 minutes away. This is Bloomberg. Good Monday morning.40 seconds to the opening bell.

This world beating rally and Chineseequity markets were up 15% from the bottom.And certainly the question at this point is whether or not this market is goingto reverse as quickly as that sit in, Stan, that people do at buffets wherethey pretend to sit down at the table and then hadis it going to be that quick or are they going to be in place for much longerthan expected? Yeah, certainly we're watching that dayten possibly when it comes to the onshore market, when it comes to CSI300, we're seeing a little bit on the back foot to kick off your Mondaymorning when it comes to the Hang Seng.

As well.But keep in mind, we do have those images throughout of the week here.So that could be some key data, at least for this week.Take a look at what the markets are doing here right now.So, you know, China's at 720. It was once again a stronger affects ofthe PBOC. The futures are slightly to the downsidehere. But yes, nine days on this is I think itwas is already the longest winning streak since 2018.So that's one to watch very closely. Right now, we're still seeing some redacross the board.

MSCI China is down about a third of 1%.HS tech seems to be slightly on offer here this morning.You're seeing a bit of downside when it comes to commodity markets as well asShanghai crude, as well as iron ore that is slightly lower here.Smallcaps are doing okay, though. The CSI 2000 is up about half of 1%.So GBS to 44 year Chinese ten year yield.Let's continue our sector by sector. It looks a bit mixed at the get go here.It looks like industrials, manufacturing stocks are gaining a slight bit here.Developers are slightly on the back foot.Financials are also down about 4/10 of.

1%.Let's take a look when it comes to some movers as well.We talked about the auto space. So there was some talk from CCTV thatthere's this consumer push. So maybe we're looking at some of theseappliance stocks, auto stocks here today besides up some 3%.The chairman proposing a double. It's a share buyback.Certainly the buyback story is one a key theme for a lot of Chinese stockinvestors out there here. Li auto earnings coming out a little bitlater on as well as i believe clp. And we're watching of course higher endthe day.

These are some of the consumer stocksall up here this morning and we're watching of course Cathay as well as AirChina. There's a scoop from our Danny Lee andhis team of Air China potentially looking at maybe rejigging that stakeand raising it. When it comes to Cathay Pacific, Thestock's up some close to 2% for Cathay here right now, Dave.Yeah, okay. So let's get a sense now on the sort ofoutlook, near-term outlook for this market.So in about a week's time stamp, CE, that's about a week of runway.Beyond that, who knows how far this.

Market can go, assuming of course, itdoes move higher over the next week or so.Joining us here in set, Wendy Leo, chief Asia China equity strategist at Jpmorgan. Happy Monday.Nice to see you. Happy Monday to you, too.I chase this rally selectively.Yeah, I do think the index has more to go on both the CSI 300 MSCI China.It's just below our best target. The next thing people will watch oneearnings and then to the twin sessions coming in the first week of March.Any sort of policy signs that people can.

Take away from?I do think in the past two quarters you saw the free cash flow for Asian listednon-financial companies growing much faster than the CapEx.So the free cash flow that the X grows, but cash flow improvement that iscommensurate with the value profile is coming together.Yeah. Who's buying this rally, you think?I mean, if if it's still you're not seeing the real money, the long terminvestors come back, is that going to be something that can you know, can marketsstill stabilize without those long term investors?That's a key question.

We took a lot of time to look into theflows pre lunar New year.We saw 392 billion into 730 ETFs, but then 94% of that went into the biggercap indices. So CSI 300, a 50 501,000 and China X,right. And then after that, the pre post lunarNew Year flow top billion. But now to a little bit more to thesmaller caps and smaller caps. I think on February 5th you also sawsome flows. Now most interesting is when we look atthe EPF, our data, the outflow out of China since three Q23 that was pretty big.

It was 18 billion for funds domiciledoffshore, right? But that has moderated.So around that outflow we saw 11 billion inflows into Japan and 4 billion intoIndia. But since December there are four weekswhere we see net inflows into China. So I think there's been an outflow, butit's not moderating. So among the investors we speak to, thevalue people are. Most interested because they see on asingle stock basis, some parties are becoming quite reasonable in a globalcontext. And is it possible to distinguish whatpart of those inflows are somewhat state.

Intervention, if you will, across thestock connect? Because there's been talk obviouslythink I'm sure you've heard about it right, that state support measures goingthrough the stock market and wondering what you know, what is coming from statesort of funds and what are the sort of long only foreign funds coming back intothis market convinced that there is a flaw?I think people are trying to dig up the numbers.We don't have all complete numbers. But I think the foreign domiciled fundis a good indicator. Okay.So that outflow has moderated and in.

Some weeks, you know, since Decemberthere for weeks that you've seen that net inflows.I think onshore money, a good part of that is the state and then peopleparticipating accordingly. Yeah.What do you make of watching this new CCRC regulator?He's he's been working quite swiftly, a bit differently in his approach.He's he's cracking down on quants, short selling the like.I mean, do you think that he's doing enough to restore confidence now?I think, you know, when we look at China, we've got five cycles, thebusiness cycle, the earnings cycle, even.

If analysts forall you only, and then the property cycle, the NPLcycle and the regulatory rebalancing cycles, I call as part of the regulatoryrebalancing cycle, trying to protect the minority investor a little bit better,build public confidence and people come back to the market.So I think that's all good and it's consistent with what we saw was marketslike Japan and Korea. Once you improve minority shareholderprotection, you know, people come back. But I think it's a process.And I think within that aggregate approach, there's one element that'squite interesting.

There are domestic media reporting thatrisk directing fund flows for overcapacity sectors.If that's going to happen, then I think it's goodbecause for a lot of the high growth sectors, once they're high growing, youget a lot of investment in, you know, ASP comes down and then, you know,stocks have problems on the earnings side.Right. So I think that would be something I'llpay some attention to. Yeah.Back to you. Well,we were talking to Morgan Stanley.

Jonathan Gardiner, 90 minutes back.And so, so far, essentially the message from them is they're not convinced thatthis to go overweight in China. Precisely.To your point, you talked about India and Japan, because the alternative asfar as return on equity earnings growth is they can't find a case to be made inChina. And I'm wondering what your thoughts areon that. I think last time when we discussedthis, we compared China was topics, right?MSCI was topics and you get into a period, whereas there's trading andthere's also thematic investing.

So we identify three or four basketswhere people could find good outperformerslike the exporters, the niche leaders and the domestic incumbents and thenGreater China. I place to that very concerned.I do think two of the five cycles are still driving the property cycle and theNPL cycle. But then on property, I think you need aphase of price decline. So there's clearance and I do think theupgrade demand is there. So by the end of this year you'll seesigns of stabilisation in the secondary home prices and that would be theleading indicator on the NPL cycle.

It depends on how people look at it.There are some investor who say on the Aflac side that the beginning of the NPLcycle is something that they will take as a positive sign.But we haven't seen much of that yet. And I think in Japan's case, when theNPL started to kick in and then recaps start to kick in, that's when the marketstarted to rally in a very big time. Hmm.So you switched your strategy, right, from from the barbell approach to nowsomething more slightly risk on. What does that mean?How do you express that? Yeah, I think was the MSCI being belowour bearish target?.

There's a recalibration.We're starting to see that coming through because positioning have gottento extreme valuation, to extreme geopolitical risk, probably stabilizing.And then we're going into earnings. And then when we look at the businesscycle, it's been recovering, but it's just very weak because pricing isagainst the volume recovery. And secondarily, when we look at thesector recovery on the third quarter numbers, 39% of the 31 MSCI Subsectorswe tracked during recovery. It's just that pricing is against them.So there's any consumer focused policy that can give us a little bit moreinflation rather than the deflationary.

Risk and then net positive real interestrate, then it will also be good. So those are the things we're lookingout to. And I think there is support from theearnings series supported from the policy outlook at this point in time.Yeah. So if you're correct that this marketdoes rally even further and, you know, some of the cyclical parts of thiseconomy and market rally even for what happens through the defensive place likebanks, for example, you know, the high dividend protection that investors sortof went into amidst a bear market. I think there's a divergence in thebanks.

There are some banks will have muchgreater NPL risks than the others. So we prefer the leading joint stockbank and then the as so you bank now for this space suit are natural buyers likethe insurance companies, they like the high yields.But I think it's also critical to watch how the NPL cycle will kick in and thatwill have more impact on the lower quality tier within this bankingecosystem. Yeah.All right. When do you think you you loo there arechief Asia and well, what was your day to work as chief Asia in China equity issometimes hours.

Now I like to think what is part of ourteam. All right.Take a look at the market there. It's pretty slow going here on thisMonday morning. CSI 300 Shanghai comp flat right now.But keep in mind, if we get a 10th day of gains, the CSI 300, that would be thelongest winning rally we've seen since 2014.Right now, plenty more ahead. This is Bloomberg. Okay.Welcome back to shows we're looking in at looking into some of the big technames across the region, hardware,.

Semiconductors, to be more specific, asyou might see, TSMC, there you go, a 10th of 1%.And Samsung Samsung's nothing much as far as you missed out last week.Really, that was really the only game in town.Nvidia. Oh, yeah.These folks were just going nuts. Yeah, I was trapped in the jungle yet Istill had one eye on video. Suffice to say it's a yeah, it's acircus out there. You got to ask about chips though,right? If you take all of these global techsupply chains are set to shift and.

Diversify in response to geopoliticaltensions in the pandemic. That is according to our latest report,our very own bloomberg intelligence. Let's bring in our Asia tech analyst,Charles Shum. Charles, I mean, you're seeing thisprojected shift, right, that you think that you know where you're starting tosee chip making and leading edge chip making heading towards the U.S.and Europe. How do you think that's going to changethe competitive landscape globally? Yeah, thank you, everyone.Actually, we just do a report this morning in the report, actually, we havea study, the whole project pipeline that.

Been released so far.And our conclusion is that actually it's very likely that for the leading edgeand that's the five nanometer looks smaller actually is the very likely thatright now the towards the market share is a 61 percentage.But by the end of that to around 32, we think that is a very good chance thatthe U.S. and Europe, their combined market share,they can actually go to 43%. That's actually equivalent to Taiwan,some market share. So that's one of the conclusion we haveheard from that report. Yes.What are the so what are the things that.

Stand in the way challenges that the USand Europe might have to get to was at 43%?Yes. And actually, when we looked into theseprojects, we think that most of them actually is being actuallypushed by the government incentive. Actually, for example, economicincentives are quite important because we believe that actually even just aboutthe construction costs, 25% of that is sponsored by the government.Actually, that can cut back to the payback period at least by one year.So, you know, that's the one factor. And that's so if a government subsidycannot be.

Disbursed on time, actually that couldcause some problem.But on the other hand, actually, you have to understand that we are not andnow we are not talking about just building a two or three for FAFSA inEurope and U.S. We are talking about about at least 10to 15 fabs in each region by the next ten years.So that means that just let's let's do a calculation here.Actually, each the should require about 1500 skilled workers.So that means at least a 33,000 engineer they need.So that's actually a big problem that.

Could be for them, for them if they wantto put them in a full capacity operation.The palace that. Yeah.What about when it comes to China? I mean, you're saying potentially Chinacommands a significant portion of the world's chipmaking based on maturetechnology nodes. Right.What implications would that have for the chip market?All right. Yes, that's a very good question,actually. Although China is under a very strictU.S.

Sanctions right now, we've seen thatactually they are changing their strategy, not focusing on the leadingedge. They are focusing on a mature notethat's mostly for the production of the those power chips, you know,and also for the our home appliances and also Iot stuff.Actually, they actually have, for example, that smic.They actually they are going to expand very aggressively.They actually are adding a one here. So that's they actually give them apresence in the still a strong presence in the the whole supply chain.Also, you have to consider that right.

Now, the U.S.and Europe, they are focusing on the leading edge and the mature potentiallyis going to be dominated by the China, actually, that they actually will havethe capacity more than 35% by the end of this year.So that's, I think, fairly fairly comprehensive for ourclients. Of course, you know where to find theresearch there out of Charles Trump and the team Bloomberg intelligence analystthere. Okay.Let's talk us through well, let's talk about trade, talk about wine.Why not?.

It's it's 9:47 a.m.on a monday morning. Someone's out there having it for sure.Australia is seeking to end tariffs. I think China wine tariffs that it'smade more specific here, which were imposed actually after Canberra soughtan investigation into origins of COVID. Australian Trade Minister Don Farrell isexpected to discuss the matter with his Chinese counterpart at the upcoming WTOmeeting in Abu Dhabi. Paul Allen explains what's at stake.It's been a challenging few years for Australian winemakers.When China slapped tariffs of up to 200% on Aussie wines in 2020, it left theindustry scrambling to find new markets.

We lost everything overnight.We had built a business in China. When Australia called for aninternational investigation into the origins of COVID 19.China responded with a range of trade strikes against Australian products.The relationship has since soared. Barriers against barley, coal and otherexports are now gone and wine is expected to be next.Australia suspended its appeal at the World Trade Organisation over the winetariffs when China announced a five month review.That review ends on March 31st. Australia's Trade Minister will meet hisChinese counterpart on the sidelines of.

The WTO meeting in Abu Dhabi.We want the tariffs on Australian wine removed and if we don't get that then wewill resume the WTO application a.s.a.p. Our agreement to suspend the WTO processwas based on the successful removal of all of the tariffs.Shares in Australia's largest listed winemaker Treasury wine Estates haveslowly recovered since China imposed the tariffs in November 2020.In this month's earnings announcement, Treasury also signalled it is expectingsomething to celebrate soon. The review of tariffs on Australian wineremains ongoing, with the determination anticipated in late March.We are prepared and we are well placed.

To re-establish ourselves and ourAustralian portfolio in China. Should the review result in the removalof these tariffs? But there's a question about whatAustralia's exporters have learned from the whole experience when it comes toreliance on China. Take barley for example.China went from buying almost all of Australia's barley to buying none at allduring the diplomatic deep freeze, forcing exporters to diversify and findnew markets. Since tariffs were lifted, Australia'sbarley producers have gone straight back to their most lucrative buyer, withChina accounting for 90% of exports in.

December.And of course, when wine begins to flow, memories can become hazy.Paul Allen Bloomberg. All right, that was Paul Allen there, ofcourse, as you take a sip of that wine, take a look at these markets here.Not saying hold on a juice right now, CSI 300.We are down about a 10th of 1%, just below that 3500 level there.This is Bloomberg. You're watching Bloomberg Markets tryingto open a look at some of the stories making headlines when it comes to localmedia in China. Here today in the China SecuritiesJournal is reporting on the impact of.

The CSR CS tighten rules when it comesto IPO approvals. It says 44 companies have withdrawntheir applications as of Sunday and that the pace of issuance and the amount offunds raised have declined. Also on the front page of the paper, anupbeat note when it comes to earnings, 40% of nearly 3000 a-share companies aredisclose annual results, providing some positive guidance out there.And the report does say that auto manufacturer biomedicine companies sawbig improvements in their numbers. Although via Morgan Stanley, theyprobably take, I guess, some consideration as far as that'sconcerned.

So far, I believe almost 3000.You could make that argument for the Shanghai Corp., though we're almost atthat level. If not, they're just below maybe now allthis is on social media and Weibo here. China's space ambitions are a hot topicof late here. Lots of excited posts here about thespace agency unveiling. Now, we now have the names of the newmanned space ship and a moon lander. So the spaceship is actually calledMunjal, which means dream Vessel. And of course, the moon lander isLander, meaning embracing the moon. There we go.I guess a better way to describe it.

Okay.Also taking place and certainly some sad news over the weekend, Sunday morninglocal time taunting of the Wahaha group. News came in that he passed away.He died at the age of 79. He became China's richest man bywresting control of the country's top beverage brand from Danone.This was about 15 or plus years ago. Years back, Chinese netizens are callingthe self-made billionaire an outstanding and patriotic businessman who certainlyworked hard with passion. He was certainly very old school.He was from, I think, Jonjo, which is the cradle of private enterprise, humblebeginnings, humble beginnings.

And he lived a very frugal life.Father said he always, you know, flew economy class, second class on trains.He says he only spends like less than 50,000 renminbi a year, doesn't travelwith assistant. And really, you know, so a guy thatpeople say was a guy from the past that really encapsulated theentrepreneurship animal spirits of China at that time.The real thing I mean, this this is the O.G.consumer plane. Yeah, right.The first one of the first generation, One of the first generation of privatebusinessmen, of course, there after the.

Economy reopened there.And certainly the win with Danone certainly put him certainly into focus.Anyway, there we go, dancing Ho was was 79.Okay. Just very, very briefly, a couple ofother stocks that we're tracking here at the open.24 minutes into the open here, we're looking at, well, Internet of consumerstocks on the back of this push into consumers.As you can see, a rally still for many of these names.We're looking Cathay Pacific up 3.3% on perhaps reports a news here that AirChina might be mulling increasing its.

Stake in the airline.

Sharing is caring!