Bloomberg Markets: China Commence 02/21/2024

It's 9 a.m.in Beijing and Hong Kong. Welcome to Bloomberg Markets China open.I'm out of rulers with a Yvonne Man. Our top stories this morning.Asian stocks fall following declines on Wall Street as traders weigh prospectsfor big tech ahead of it. Video's earnings.China's Huang Funds Drawing scrutiny. Stock exchanges freeze one moneymanagers accounts after it dumped $360 million of shares within a minute.And HSBC is set to report results with analysts focusing on the impact ofChina's economic slowdown and potential for new share buybacks.There's definitely those earnings.

You have the video, as we talked abouthere. And then again, there's still plenty ofevent. Where is the Fed minutes when we'restill trying to determine whether the next move in the Fed's going to be ahike or actually a cut here? We're still going to talk about theshadow markets still struggling to gain a bit of traction despite that biggerthan expected move from the LPR yesterday.Yeah, that's right. You take a look at the Golden Dragonindex overnight. It tells you that rally that we hadleading up to Chinese New Year perhaps.

Is starting to dissipate and investorsnot really convinced that we're seeing any sort of recovery in the consumptionstory in China. But you mentioned of course Nvidia andthat is really the big focus in the session so far.When you take a look at the market action and it tells you just how muchinvestors are really anticipating these numbers.I mean, as we were just saying in the break, that every time we have an NVIDIAreport over the past year or so, we're saying really, can they live up to thehype? And that's the big question ahead ofthese numbers.

But given that that focus on it, we areseeing tech really leaving the drop and you can see that reflected in SoftBank.We just had Taiwan coming online and you can see as well TSMC is 1% down.So outpacing that drop that we're seeing for the Taiwan benchmark there.But let's change on because earnings, not just the focus with NVIDIA,Australia's earnings season very much underway in the session.Rio Tinto, one of the big ones, we're going to be watching those numbersactually a do after hours in the session today ahead of the London market open.But we did see Rio Tinto inking a very big pact for the supply of renewableenergy.

So that was announced ahead of thoseresults. Other markets coming online and you canjust see that broad pressure really coming through in the session so far.Moving on to what we're seeing in the Treasury space and we're just not reallyseeing too much action. But we do have treasuries one hour intotrading so far. The Japanese yen, of course, one tonote, given that yen weakness that we're continuing to see and jawboning fromJapanese officials has been just pretty much a hallmark of what we get there inthe currency markets. A quick check on what we're seeing aheadof the Chinese market open in terms of.

Futures.So far, we have been setting up for, again, more weakness coming through inthe session. A question marks over, as we said, thehealth of the Chinese economic story and really whether whether investors areplaying into that. Yeah, certainly we've seen some moveshere. Of course, obviously with that surprise,they were they expect a record cut when it comes to the LPR, not enough know.We saw what happened during the session. It was initial lift.So these property shares that was trimmed off a bit.The latest was these quant funds, one of.

Them which was froze frozen, just giventhe fact that they were selling stocks on Monday quite heavily here.So maybe some more signs of policymakers really trying to stop.I guess, this the selling pressure that we're seeing across these markets.We're focusing a bit more on some of these lows and these white listdevelopers that's been played out according to CCTV.So we're still focusing on the developers here today.Earnings of HSBC, Trip.com northbound. So certainly one to watch out for.And of course, this rally that we've seen, the auto remember that's beenhappening for, I think four or five days.

Now.We'll see how that all plays out. Nomura had a pretty interesting callstill staying long on the renminbi against the basket here.We also have some calls on whether, you know, what the next steps for policymakers are going to be after that. LPR Is that does it mean that they havemore firepower in the back half? Nomura seems to think so.Bell Yeah, that was really one of the questions that came out of it.If we are seeing any sort of recovery in the Chinese consumer, does that removethe need to then have any sort of rate reduction?But that's certainly something to be.

Tracking.And as we said, that weakness that we're really setting up for and we gotGoldman's consumer research co-head joining us as well.Talk a little bit more about that holiday data as well.Let's bring in our first guests of the morning, Stephen Roach, senior fellow atYale Law School and former chairman of Morgan Stanley Asia.I also want to bring in our chief North Asia correspondent, even Angel StephenRoach. Thank you so much for joining us.Obviously, I want to get to that op ed piece that's stirring quite a debate inhere in Hong Kong.

But first and foremost, I have to talkto you about what we've been seeing across these Chinese markets, wherewe've seen policymakers try to throw everything from rescuing this market.Support measures the private market deeper than expected cuts and is notreally doing enough. Have we seen the worst in this equitymarket in China or are more declines in store?Well, fortunately, as an economist, I am notgoing to venture out into making an equity market call the Chinese marketin the Hong Kong market. They have been in avicious bear market for a number of.

Years.And, you know, it's very much tied to theconcerns that investors have about the medium to long term prospects of theChinese economy. I thinkthere's a general belief that the short term cyclical pressures can beeffectively addressed by the same types of policies that Beijing has usedin addressing cyclical problems in the past,both proactive fiscal policy and, you know, prudentmonetary policy, as they like to say. SoI don't think it's a question of.

Following.Well, short of, you know, the growth target is likely to be releasednext month at the National People's Congress.But it's this medium to longer term outlook where the economy's in the gripsof really powerful structural pressures.There's now a significant whiff of deflation.And, you know, the property market sees no easy bottom.The local government financing vehicles are under pressure.And the actions the government has taken to address theseserious issues are de minimis.

Thus far.So I think those are the big issues that investors are looking at right now.Hi, Stephen Stephen Engle here. Always good to see you.You know, again, Ivan alluded to the op ed piece that you're going to we'regoing to talk about Hong Kong in just a minute.But in that op ed you did mention about the China factor and you talked aboutdebt deflation, demographics. And that leads to the next questionabout the policy path going forward for Chinese leaders.We had, of course, yesterday or the day before, Claudio Peron of Bank of Americacome on and say, look, China is facing a.

Crisis of confidence, no doubt,especially in the private sector, but also policy credibility.Would you agree with that? Or is the tackling of of de-risking anddeleveraging a prudent course right now? Well, Steve.Yeah? It's always great to see you.You don't look a day younger than when I first met you.Maybe 25 years ago. A day older.I'm sorry, butyou get the general drift of it. But I think the.The confidence issue is a very serious.

One, especially insofar as it bears onthe private sector, which remains under very intense pressure from Beijing.They're on again, off again in terms of the tech sector and now back on again.And I think entrepreneurs arenow facing a much more challengingenvironment in terms of starting of new companies and inmaximising the type of return on a risk adjusted basis that has been such apowerful force in driving the Chinese economy over the last 15years. And Beijing has not done a lot to reallyinject.

Confidence back intoprivate sector entrepreneurs and the new businesses they are attemptingto start up in terms of, you know, credibility.And I don't think it's that that there's a lot of doubt that the actions that arebeing taken are legitimate and serious. I just think that there's a generalconsensus that I would agree with, that they're not enough in this climate.Stephen, hold that thought. We have plenty more with Stephen Roach,a senior fellow at Yale Law School. Of course, we're going to talk and dig alittle deeper into his op ed piece about why it pains him to say that Hong Kongis overbuilt.

Yeah, well, on just about 10 minutesinto the session so far for Singapore markets and one big move it that we'retracking so far is Singapore Airlines. You can see that drop there.Actually, the airline had some pretty good numbers because they saw net netincome rising 5% from a year earlier and also revenue rising to an all timequarterly high. But the focus and the reason we'reseeing that drop today is because investors are really looking atpassenger yields. That's an indicator of revenue, butthey're continuing to come under pressure.So there's increased competition, a.

Geopolitical economic uncertainties, andthat is really the focus there. But we'll have more ahead, as everyonewas saying. Stephen Roach joining us in the nextblock and of course, counting down to the open of markets in Shanghai,Shenzhen, Hong Kong. And we are setting up for a bit ofweakness ahead of that. All right.Checking out of futures here today, still in a bit of red this morning, downabout one third of 1%. We'll see how the open plays out here.We're seeing a flat renminbi holding on to the strength that we've seen of late241 yet bond market not really going.

Anywhere here this morning.Let's bring by Stephen Roach, senior fellow at Yale Law School and formerchairman of Morgan Stanley Asia, recently wrote an op ed piece for theF.T. that did stir quite a bit of debate.At least we can say that here in Hong Kong.It pains me to say it says timid it, but Hong Kong is now over, has gained a lotof traction online. He joins us again, Stephen Roach.We later on the introduction, Stephen Roach used to be the chairman of MorganStanley Asia. You were Hong Kong was your home formany years.

And for you to say this is quite boldand I have to ask you kind of what's changed in your mind to say, to reallysay that Hong Kong is over? Well, first of all, Yvonne, I want tosay that I know I've always loved the city of Hong Kong in terms of itsspirit, the sense oftradition mixed with a very modern approach to life.The people I have great friends, or at least I did.And yet, you know, when I look atthe circumstances over the last several yearsthat were freshened up, when I.

Came back to Hong Kong early last yearand had three, three visits in 2023, which is pretty much at odds with theimpression that some of your politicians have been trying to convey who theyclaim. I haven't been therein years. TheyI think the wheels start to come off with the the demonstrations in 2019.The COVID related lockdownswere increasingly serious problem for the mainland as well as Hong Kong.And the the exodus of of talentand now of some companies.

Was increasingly disconcerting.And as I spoke with my former colleagues and business associates repeatedly in2023, they were, I think, stretchingfor an answer from somebody like me whoknows Hong Kong quite well to tell them everything was okay.And the more they pushed me on it, the greater the sense of an ease I detectedfrom them. And you know.Stephen Yeah. Stephen What are the consequences then,of a city if you know it comes true that you predict it's over?What are the consequences of a of a city.

Like Hong Kong, which plays that bridgerole between East and West as a capital raising centre for Hong Kong for fundsto flow freely. But in your op ed, you mentioned thebifurcated world geopolitically supply chains.Trade is a massive part of this economy. What are the going to be theconsequences of Hong Kong being over, as you say, property market slump, stockmarket slump? What are those consequences?Well, I think still the dynamism of Hong Kong, which impressed me so much, youknow, when I first visited the city in the 1980s,a city driven.

By risk taking entrepreneurs, by the thethe role as a gateway capital raising gateway to to China.You know, those are characteristics of Hong Kong that wereunique at the time. But now I think they'reall. Very muchat risk going forward, in part because Chinais is in trouble and Hong Kong has been for a long time a levered play on China.And also, as you alluded to and as I wrote in the piece, Hong Kong is trappedin the crossfire between the U.S.and China as the conflict intensifies.

And many of Hong Kong'sclosest trading partners are being forced to choose sides in this tradewar, tech war, Cold war between the U.S. and China.And they're opting to to go the route of the U.S.and that leaves China, Hong Kong, in trouble.So. So Stephen, what would you suggest thatBeijing can do to fix Hong Kong's problems and to retain that sort ofuniqueness that you that you just reiterated it, you know, whether it's,you know, maintaining a common law, independent judicial system, lowtariffs, free flow of carbon.

What do you think is essential for HongKong to actually maintain its financial status?Look, I think the most important thing that Beijing can dois, number one, to fix its own system, to get its economy back on track, toaddress the structural problems we alluded toearlier in this interview. And I think that,you know, Beijing also needs to be, I think, more aggressive and transparentin underscoring its commitment to,you know, the one country, two systems model that has given Hong Kongsuch a long runway to exhibit the type.

Of dynamism that it has become,such a powerful force in shaping the whole essence of of the the Hong Kongsystem. His Stephen King of Hong Kong.Do you also allude in that op ed that Hong Kong basically can't do muchwithout the approval of Beijing? You mentioned that sort of social mediabattle you're having with Regina. If she is obviously very stridentpro-China and says that essentially the Fed policy has caused a lot of HongKong's problems. But is there anything that Hong Kongspecifically can do? Or is it helpless?You said in that article you said.

Hong Kong is to be remain mired in atrap made in China. But I'll play the devil's advocate here,Steve. I'm asking multiple questions here.I know, but it was the protesters who turned violent that really forced thenational security law and this and the subsequent actions that it was sort of aproblem. Also born in Hong Kong.Is there anything the Hong Kong can do to change its course?Well, I agree with your characterization of what happened in 2019 that forcedBeijing's hand. But, you know, that's, you know, prettymuch.

History at this point.Stephen and I in Beijing is not, I think, going to relaxthe imposition of the national security law that it imposed shortly thereafter.Hong Kong has got to, I think, address its owndomestic stability issues. It appears to be doing that through thecourt system. ButI think the heavy hand of Beijing is much more apparent today.You know, in the years after the demonstrations and then it was beforethere was a long transition period that was still ahead for Hong Kong betweenthe handover and the.

The finalassimilation of Hong Kong into the PRC. And that's been shortened, I think,dramatically. There's still someautonomy that Hong Kong has, but it's more limited as a result of thepolitical developments that have occurred.Stephen, are your views, do you think are they shared by others here in HongKong? I'm just wondering, are you getting asense of of growing frustration among the people that you talk to?Well, I've had a lot of feedback from my friends and former colleagues, and Iwould say.

The feedback goes something like thefollowing. I agree with most of you, but most ofthe most of what you've said. But I still hold out hope that Hong Kongwill once again demonstrate the resilience, the capacity to reinventitself as it has repeatedly in the past. And I had onegood friend, very well-known figure in Hong Kong, saying, Look, I'veheard this before, you're like a broken record.You know, I'm sad to see it coming from you.And it just as some of these views were wrong at the time of the handover,you're going to be wrong again.

And,you know, I think it's more complex than that.This is not a situation that is any way reminiscentof what it was in the late nineties. It's a very different set ofcircumstances. Sure.Then how can Hong Kong re-imagine itself?You alluded to the fact, Stephen, that you and I have known each other forseveral decades. We've lived through crises here in HongKong, whether it was the Asian financial crisis and the subsequent collapse ofthe property market here.

We had scars.We had numerous protests before 2019 as well.The umbrella movement as well as 2013 Article 23 protests.There have been shocks to the system. But if it is fundamentally changedbecause of Beijing's heavy hand, as you call it, how can and will a city of just7 million people reimagine itself? It's going to be tough.I mean, the the the options that Hong Kong have rightnow are more limited than they have been at any point, I would say,in the last 30 or 40 years. I mean, there certainly is theopportunity for Hong Kong to play a.

Critical rolein the Greater Bay Area. But again, that isa PRC centric concept that allows for Hong Kong to play one rolewhen, you know, other cities like Shenzhen and Gwangju playpossibly, you know, equally important, if not greater role.So, you know, Hong Kong is, I think, at risk of getting marginalized.It still has the talent, the institutional heritage, the rule of law.And you hope that that all of that remainsenduring features of Hong Kong in the years ahead.But there are there are many who are.

Asking questions about those veryattributes. Stephen, thank you so much for joiningus, of course, with your views. Stephen Roach there, senior fellow atYale Law School as well. Thanks, Stephen Engle.Our chief North Asia correspondent. Take a look.When it comes to your futures board and why respecting a cross as open heretoday looks likely that we could be seeing things down about half 1% for 80futures. Your reference rate just crossing lastcouple of minutes or so. Seven 1030 the estimate there was for a718 sort of handle.

So it is once again a stronger fix fromthe PBOC. Those of analyst actions are leaning.That's one to watch out for. That was a call from Michelle Cheng fromGoldman. She's joining us in just the next fouror 5 minutes or so to talk us through what her take from this holiday spendingdata is going to look like. But cut to neutral when it comes to thesports makers likely in a new world. Developments ECB coming out withinteresting note about the Hong Kong developers.A bit of a mixed picture in terms of what you're seeing but really rate a newunderperform when it comes to new.

Developments.You get acid rain in new outperform when it comes to that firm as well.Well, yeah. And as you mentioned that that report aswell that we had, that China developers are going to be given more funds to tohelp finish the unfinished project. So that is making the developers one ofthe groups of stocks to watch ahead of the open here.But we're just a couple of minutes out from the start of trading for Hong Kongand also mainland China. You're watching Bloomberg Markets Chinaopen in just a couple of seconds out from the start of trading here.And really the setup today isn't looking.

Too great.We didn't have a great session overnight with the Golden Dragon index on WallStreet. And you also had a run that surprisedpretty much underwhelming investors yesterday.I mean, yeah, I mean, we thought it was just going to be, you know, five, tenbasis point cut, 25 basis points. Still doesn't quite cut it.To really turn around those markets. So it seems like now it's just yearningfor more sort of stimulus when it comes to the property market, the like here.So certainly you have very different takes from Nomura and more which we'llget to about, you know, just what the.

Next steps are going to be.Does this mean that they're going to ease more aggressively, given thissurprise move, or does it mean that they actually don't have too much room?Because there's a lot of uncertainty about the Fed and clarity around that aswell. So certainly there is a lot of factorsat play here. We're also going out to those Fedminutes video earnings on terms of the macro front, as well as tech is doingthis right now. We're seeing another down day aboutthree quarters of 1%. The Hang Seng as well as onshore, we'reseeing some declines here, 7/10 of 1%.

The downside when it comes to theShanghai gauges is certainly it's another day where I guess there's stilla bit of disappointment. We did adjust some gains yesterday, butreally it's not as the robust sort of return that really, really everyone'sthought of, said UBS. I've been pretty much stuck in a rangeas well. Right to 41 for your Chinese ten yearyield mistake. There you go.You were down more than 1% here right now.I had of course, and video sync leading up to those results.Maybe there's a bit of vulnerability.

When it comes to the tech space overallhere today. Crude's down.There you go. Iron ore down for a second day here,we're down 3.6% in terms of what we're all what else we're watching out for.Seems like it's all sectors in the red here in particular, it's the Macaogaming. So some of the stocks that really kindof gained quite a bit here last week after the reopened.We are seeing a bit of profit taking out, it seems here today in terms ofindividual moves. We talked about what we heard frompolicy makers here, CCTV talking about.

Banks approving a 123 billion renminbiof loans for property projects. So potentially more help on its way, notdoing too much when it comes of these property names.It was basically trimming gains yesterday on what some of thesedevelopers here today. Country Garden, though, is still lowerby about 3%. We're also watching earnings, earnings,earnings. So not just NVIDIA, but HSBC, it's ANZBank, it's Trip.com. So more in the consumer space as well.HSBC, it's all about really what loan charges look like, what exposure theproperty market in China's going to look.

Like maybe a dividend.You know, news as well. That stock's up about 7/10 of 1% leadingup to that result. Trip.com There you go, down 1%.Heidi Lao came out with some prelim numbers, I think met expectations,though, that full year net income at least 4.4 billion renminbi.Well, yeah. And I think what we're going to bereally watching for as well out of those trip.com numbers in particular is justsort of any indications we got in terms of the pick up in recovery orconsumption in mainland China after the Lunar New Year holiday.Do we get any signals from that in the.

Earnings call, for instance, this ofcourse, just looking at some of those numbers in it, as we discussed over thecourse of this week, at a headline level, consumption looked like it wasrecovering a little bit. But when we dug into the details,actually, perhaps it was a little bit more patchy, the numbers instead.But let's discuss with Michelle Cheng. She's co-head of Asia consumer researchat Goldman Sachs. Michelle joining us this morning in HongKong. And it just kicks off what was what wasyour takeaway from these numbers that came out?Yeah, I think initial targets and we.

Think the number is solid because beforethe holiday, I think market has been really bearish given our pulse now goldand weak in fourth quarter last year, consumption has been seeing asignificant slowdown. So before the holiday given a high baselast year, I think our market has have a pretty low patience.So look at the data. Definitely travel service led growth.Travel is increased, visitation increased by like 38% and 19% higherthan 2019 level. And looking at the travel, touristrevenue is also 9% higher than pre-COVID level.It is also one of the biggest level in.

The past few holidays.And even on the goes consumption where we see a lot of concerns, looking at alot of different CDs properties, they have points on the ground it's aroundlike me to things levels growth. It's definitely much better than whilewe have been seeing the past few months, only three or 4% kegger.So I will say that data points are it's better than fear and driven by surveys.Having say that, I think there's definitely a lot of debate.I think one is still the spending power. Yeah.So if you are really arguing that the per capita spending is still 9% belowthe 2019 level and looking at the ticket.

Price in box office and high nice ticketspending, you can still argue that spending power is not there yet.But I think relatively by certain sector, like if you look at apparel,sports or wholesale price in spirits, it's relatively resilient.So I think it's not. Like a 100% good, but I think at leastwe still see some encouraging thing out point among that among holidays,does it lead to a more broader recovery in consumption?Yeah, great question, I think. I think one of the reason the past fewdays, you see Starbucks has been pretty challenging.On the one side, I think some of the.

Patient has been building on last week.But on the other side, I think aside from the spending question, are thesustainability of the recovery. I think that's still a question mark.And looking at the past few holidays in fourth quarter last year and also in oursecond quarter pulse, the Labor Day holiday, we do see a big trend pullsColvin is are consumers tend to concentrate their spending during theholidays but post holiday will see weakness.So so findings that we still need to monitor but in 2020 for while we have amore like a cautious view on the overall consumption but we believe our travelservice will still lead the growth given.

It's not really fully recovered to whatwe call billable. But for good spending, it's already backto pre-COVID levels. So the bigger growth rate, it may stilltake time to two to being accelerating. I'm wondering, because you mentionedthat apparel and sports have been resilient and we know that this sort ofan emerging trend of how people are using their time over the lunar New Yearholiday as well, preferring to perhaps go on a trip rather than spendingtraditional time with family. How permanent as some of these changes,post-COVID, do you think? Yeah.So this year at least, we see that the.

Service driven category will still begood. Yeah, because on the one side, peoplehave been locking down at home for many years and even some of the friends, andthat's the very first time they go back home this time.So surveys in different category, including travel, catering or even likea box office, I think they are still relatively decent.But for go spending, I think it's a it's a mix between the volun and ASP.So in the past when China is something is going through a premiumisation trend,you are seeing a very good balance on balance and pricing growth.But now some category you might still.

See volume growth because penetration isnot there yet, but pricing trajectory might be capped.So that's why the overall growth will be still small, where we've been talkingabout this economy that's still in deflation.I mean, how entrenched is it across the consumer space here right now?Are we likely to see prices trend even lower?And what impact is that going to have on earnings?It actually depends on sectors. We still see some encouraging datahappening on the Premiumisation trend in southern category.For example, looking at spirits, the.

Super high end, still doing much better,still have a good market share again in beer because the overall ASP versus automarket, if you consider the disposable income, are in China still pretty cheapand so they are still seeing a decent premiumization trend.But for some sectors like restaurants, this is these aresector very interesting, just in between stable and discretionary.So it's more sensitive to the pricing. And starting from like early last 23, wehear quite a few companies, no matter. You are like Yancy, we talked to Joey.What was a 50 bucks for pizza? Renminbi.Yeah, Yeah, 20 $20 for a bucket of.

Chicken.I mean, it just seems like this price she didn't want to call it a price war,but it seems like it is a price war in some ways, Yes or no.I think on the one side, if they are many big companies, they want topenetrate below what he said. So actually, they have more channels toto to offer these value for money products, still decent up productquality, but not sacrificing margin, but can fulfill that.He made the law what he said so. So I think overall volume definitely wesee some price competition but also it's a combination of the the the big brandsbig chance they have a better.

Opportunities in the why he Lord he hasit is a lot of the investors that we speak toare really waiting on some sort of sustained pickup in Chinese consumptionto to tempt them back into the market. And we know a lot of that really hingeson the health of the property sector. So far, the measures that have comethrough haven't really been that effective.What else do you think is needed to try and reinvigorate this this consumption?Yeah, this indeed is one of the biggest questions we always hear from investors.On the one side, consumption is always a late or cycle sector.You need to see the property sector or.

Order like a physical or economicactivity is improving and then people will show confidence to spend.And I think more for China consumption. The challenging right now is probablynot the wealth itself. Actually, if you look at the savingrate, has been moving up significantly in the past 1520 years.Yeah, So in the past I think people spent save more for property, but nowyou see a lot of a property market housing burden that is lowering, butpeople still not spend because they are they don't have confidence yet.So I think initially we still need to see.Auto industry activity is picking up for.

Us and so that consumers will restorethe confidence and then they will be more willing to spend.Real quickly, how do I position around the space right now?It seems like you're still quite bullish when it comes to liquors.I think it's more balance. So so when we talk about our 2024console Cosmos, I'll look, we have five key categories in the space.So value for money is still the focus and property market sentiment and marginprofile. Also the podcast cycle and also goingglobal to figure out some white space. Sofor the subsector wise, we like beer.

Will active rebel leading to rebel valueretail and also the exporters. Yeah so basically for those company wehave which has a more balanced growth opportunities in this year.Want to get your reaction because you had a call out Goldman Sachs on leaningand actually we're seeing the market reaction coming through today becausethe stock's down as much as 2%. So now that you're here, you're movingthe market. Yeah, exactly.Boston moving the markets. And you here on the China Open show.Tell us what was behind that call. I think maybe we can move it more topdown perspective.

Today, we also published a big report onthe margins analysis. I think the thing is, we do see everyoneknows that the consumption growth has been slowing down.But one big debate this year we think will be margin because a lot of Chinesecompany, they have a pretty decent margin.And also even compared with the global market, China for even for globalcompanies, their business in China, the margin is much higher than the globalmarkets. So in this environment, everyone isstill keen to gain shares. So this means that they will havebullets to spend and these might impact.

The margin profile.So that's why we see multiple companies they make spend more on AMC or thepromotion activities will be will be higher and in some cases there will besome channel shift now will impact the margin.So none that I think these the two of you that for selective company they maysee higher margin we saw this year. Michelle great to have you Michelleshowing their co-head of the Asia consumer research at Goldman Sachs.Fantastic work. And of course as we talk leading sharesback up again, we're down 1%. But, you know, watch that space here.CSI 300 is doing this.

We're still seeing negative territoryfor Shanghai. But offshore, we've actually seen a bitof a turnaround here. Just about 11 minutes into the session,Hang Seng up 6/10 of 1%. This is Bloomberg.And. I'm all right.So big earnings day. HSBC is set to report earnings later onand analysts are expected to focus on the potential for a new share buybackprogram and, of course, the bank's outlook.When it comes to China's economic growth more, let's bring in our banking andfintech senior analyst uber intelligence.

Francis Chan.But he is here on set. What are you expecting, Francis?Well, I think the market may focus on the asset quality issue in mainlandChina, in particular for commercial real estate, which is also a big problem inthe United States recently. And the bank has been making quite a bitof provisions on that item. We want to see the outlook,unfortunately for Hong Kong as well as the commercial real estate exposure.Mortgages are some other pockets of stress, maybe in terms of wealth.And we are looking for for management's comments on the potential marginperformance this year against the.

Backdrop of a potential pivot of fundraise in the United States and China in the fall.So those would be the key operating items.And share buyback and dividends obviously are something investors arelooking very closely on. What about any sort of guidance we getin terms of business disposals or acquisitions, the outlook for Hong Kongor these other things you're going to watching closely?I think the lowest in Hong Kong could be something the we we want to watch outfor. In fact, the bank has formed a committeeto oversee the research for the housing.

Buying unit.It was announced a few days ago. Obviously, that's another item about thecost control new bonus system for the junior staff in the bank.It was released also a few days ago. How do you think in terms of what elseyou're watching? Because you mentioned that that thatrace between Singapore and Hong Kong, you do have a big report out today onthat. Just talk us through what you found atthe headline level. In the headline level, a Singapore walkout of the pandemic period earlier than Hong Kong.They reopen but one year earlier and.

Then they do gain a lot of well flows,business flows for multinational companies.And the ProQuest is a pretty, you know, obvious that has been becomingthe international city in Asia. Hong Kong, obviously it has beenstrengthened a little bit by a later reopening from from the COVID control inChina. But we see it catching up in terms ofwealth management flows. And we are really looking forward to arevival of perhaps IPO volumes in Hong Kong in response to increasing corporatefinancing needs from the mainland China. Interesting line that came out about howmuch bankers get paid here in Hong Kong.

Versus Singapore.Now, you've been crunching the numbers and actually, you know, you can actuallysee a pretty decent bump up if you if you stay in Hong Kong versus borderlinestate. What's that?I would say, though, as a set of numbers, are they the bank may be tryingto find the free office, the different news rolls coming in in terms of, youknow, some bankers lay off or something. But investment bankers in Hong Kong,they they may still be making more than their Singaporean counterparts justbecause of the deal flows from mainland China.That deal size.

Such as?Okay. Yeah.Up to maybe 46% more potentially here, 36% more of your associate in Hong Kong.Certainly some interesting numbers there for us.Chan, Thank you. Thank you, Lawrence.Banking and fintech senior analyst. Be sure to check out his team's deepdive into that race between Singapore and Hong Kong.I think we only just kind of scraped the surface really of what he says.Basically, there are a lot of segments here where there's really no contest.There's a win in different ways.

Bell Yeah, that's right.And I guess one of the questions that perhaps is answered in that report isjust the permanency of the shift as well that people can be really focused on.But we're going to have more, as we're discussing with friends and say thoseHSBC results because the CEO, Noel Quinn, is joining us later.That interview is happening at 1:30 p.m. Hong Kong time.That's 5:30 a.m. if you're watching from London.But it's not just the focus on HSBC. Is earnings also big earning that is dueout Wednesday after the bell in the US is Nvidia Yvonne and this chipmakerwe've just discussed so many times over.

The past year, given that huge run up wehave seen in the stock price. Yesterday though in the session weactually saw a bit of a drop ahead of it.We do see, at least in options telling us we could see quite a lot ofvolatility here. But that was the biggest decline thatwe've seen in about four months for the company.So just a lot of focus on the stock, whether all of this promise around AI,the hype of the technology, whether that's actually going to be able to tobe realized in those numbers. You look at the options market and whatthey're saying, right.

Look at this size and scope of theirimplying, a ten and a half percent move. It could either be either way, postearnings. That is the biggest one day move afterthose results came in since what we saw back in May of last year when theyposted those first quarter earnings and the stock moved 24% up.Right. So it's going to be pretty volatile, tosay the least. But as we talk about, you know, everysingle time we look at this print is that it's a great company, but the stockhas just gone price for perfection in many ways.So, yeah, like a lot of a lot of US.

Equities it.But Nvidia is really the poster child for that still though that focus ofcourse Nvidia is one of the names that is sort of caught between the chiptensions between the US and China. It does take about a third of itsrevenue from mainland China and that's something that we really watch quiteclosely in this region as well. Given that there are major chip makers,major chip supplies, materials, supplies and and Japan is really at the center ofthat as well. Now they're trying to be thatalternative market. Right.And the country is embarking on its most.

Ambitious chip development program todate, is looking to leverage U.S. concerns over supply chain security andreturn to a game it once dominated. Chitose, Hokkaido.The foundations are being laid for the revival of an industry Japan oncedominated in three years time. It's intended there will be an advancedchip making foundry on the site, producing cutting edge two nanometerchips. Currently advanced chip manufacturersconcentrated in a handful of countries. Iron ore to not take.There are geopolitical economic security factors involved.To survive as a nation, Japan needs to.

Be a global main player with technology.We can clearly demonstrate that with semiconductors as electric vehicles, AIand advanced weapons development spur demand.The US is in. Charging its allies to shore up supplychains and limit the risk of overreliance on China.Because of the geopolitical risk between China and Taiwan.We are not expanding in mainland China. We are building a large factory inThailand. Also, our presence in Germany and Japanis increasing. Taiwanese circuit board maker ErnieMicron has been operating here for some.

Time and now with government backedrapid is setting up. The longer term vision is to buildHokkaido, his version of Silicon Valley. Further south in Kumamoto, the world'slargest chip maker, TSMC, has a $7 billion factory gearing up forproduction and another one in the pipeline.The Japanese government is pouring a $28 billion into US chip revival strategy,with the city of Chitose experiencing a property boom as a result.I'm asking young companies and manufacturers have beenmoving overseas and now we are beginning to see a trend towards a return toJapan.

I believe Rupert is exactly the kind ofbusiness development that will give young people the opportunity to makedifferent choices in their hometowns. At the moment, Japan has a shortage ofskilled chip industry workers to move in once the construction crews move out.The hope is build it and they will come. Paul Allen. Just take a quick look, rather, atmainland markets as we get 20 minutes into the session.So far, pretty different fortunes we're really seeing here.You've got the CSI 300 a little bit under pressure.We've seen the other index now very much.

Into positive territory.We'll have more ahead. This is Bloomberg. All right.I'll tell you, the markets here today, so it looks like we have some bigearnings to come up here when it comes to HSBC, Hang Seng Bank, TRIP.COM.Those are the next three. But we are seeing the lenders at leastup one about 1% for the Hang Seng Bank here leading up to that leaning.That's up now 2%. That was interesting call from theGoldman Sachs that we just talked to michelle chang about, worried about whatthis means from comes to margins and the.

Like.Here they're downgrading that stock to neutral.And in terms of what we're looking at, well, it's really about one big earningsreport and video that could really shake up the tech space here today with the HStech, though, really reversing some of the initial losses that we saw at theopen. We're now actually back up.And you're going to look at when it comes to chip stocks, the like here, I'mreally how a video is going to dictate what the next few sessions are going tolook like. Here.You take a little tax base.

There you go.Lenovo's up 24%. JD is up close to 2%.BELL Yeah, it's been a pretty interesting session so far, but it isthat focus you said on NVIDIA earnings, which is why it's making it sointeresting that we're actually seeing that Hang Seng tech.You can see they're trading up 1.4% so far.What else we're tracking in the session today is that continued market reactionto the open move from yesterday disappointed investors and you arecontinuing to see the season 300 just a little bit under pressure so far.But we're going to have more ahead in.

The next hour.We're live from the Singapore Air Show with interviews including Cebu Pacificis CEO.

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