Bloomberg Markets: China Launch 02/24/2024

It's 9 a.m.in Beijing and Hong Kong. Welcome to Bloomberg Markets China open.I'm out jewelers with a Yvonne Man. Our top stories this morning.Asian stocks rise fueled by a global equity rally as a craze sparked by avery bullish outlook. They're sweeping markets once again.China's securities regulator, though, denying restricting stock sales, sayingits recent measures were meant to curb abnormal trading.Plus, the Bloomberg scoop. The U.S.and China discussing new measures to prevent a wave of even sovereigndefaults, potentially their biggest.

Joint economic project in years.What's one stock in that scoop that we're tracking?Of course. But then again, you got to talk aboutthe it's all about the equity market at this point.You take a look at the US. It is the Nasdaq is the S&P, the Dowreaching records. It's Europe, it's Japan, all reachingthose all time highs. It really comes down to one stock andvideo lifting this market. And certainly we're seeing some momentumin the CSI 300 as well. I think you want to put it inperspective because let's just talk.

About in the video, I think for a momentitself. I mean, it was a 60% jump intraday, butyou're also talking about $277 billion in market cap being added in a singlesession directly. And it's it's been absolutelyit's just incredible numbers. And and some analysts are saying this isa company that's pretty much printing money at this point in time.And so yesterday we actually already saw those chipmakers rising in the session,given we had those earnings coming out after the bell.So this is the data reaction we've actually got for Asia today.And you continuing to see that climb.

Here coming through.These are the Taiwanese chip makers, Taiwan markets just coming online, butit is broad based. If you change out.Now, take a look at Japan's shot today for a public holiday.We should note as I was checking an MSA p ex-japan there at the bottom of thescreen. But again, chip makers, it's still thefocus. You've got the likes of HK Hynix, forinstance, gaining nearly 3% in the session and tech stocks generallySingapore to note because again has just come online a little bit of weaknesscoming through let's change on because.

It's not just Nvidia.We're also focusing on what Fed officials are saying this morning.And again, a lot of them speaking, Wally's the latest one, but there's justreally one key word coming out of it, and that's patience.They really, really saying you've got to be hold your horses.Wait, rate cuts, Yes, they're coming, but they're not coming.Perhaps as soon as what markets had been anticipating earlier this year.And again, the market reaction pretty subdued off the back of that.We've already seen a lot of repricing around expectations over the past fewweeks.

China stocks.Let's take a look at how futures are performing so far in the session.It has been that general climb over the course of this week.We are setting up for a little bit of weakness, though, today.And I think really, again, key words, Nvidia, you've got patience.And then I think Kwang Quake would be the one we're watching for China today.Yeah, this is something that continues to boil, I guess.And we're hearing more statements from the CCRC about what exactly that they'redoing across these markets to stabilize things.It's not quite sure, you know, stopping.

People from buying and selling stocksand limiting sales, according to our reporting.But that certainly is going to be a key discussion throughout the shows here.So that's what we're watching. Is this really likening to the 2007 quanquake that we saw back in the US? China, home prices coming up at thebottom of this hour, continuing on this whole AIG trend here.We had some auto passenger sales come out here, which were a bit gloomy interms of how, you know, durable goods, how car sales are doing here.So watching those auto stocks very closely, US-China ties, everything fromwhat we talked about, helping out to.

Prevent default defaults across theworld. That's good.There were some cybersecurity issues and then we have panda diplomacy that we gotto talk about. Stanchart earnings coming up later, alittle bit later on. But visitor arrivals to wrap up yourday. But certainly it is still this rally.We've seen eight days of the CSI 300, the longest winning streak since 2020.That certainly means there is still some buying going on here.And still the one game in town, it's Nvidia.It is still staying in overdrive.

As Bell had mentioned here, the amountof market cap out in one day is a record and it is basically what is drivingreally all these major U.S.benchmarks ready to go where the S&P and all that is looking at.But it's really there's I think, 50 something percent that has gained in twomonths. The stock alone is just incredible.So, you know, is this really the most important stock in the world?Well, let us get back to our top story first.No. And media are supposed to be discussingit later in the hour.

But yes, our top story, China'ssecurities regulator says it's put in place measures to regulate abnormaltrading, but they deny that they're interfering with normal markettransactions. Let's bring in Bloomberg's Asia stocksmanaging director Lanting to an eye. Bloomberg opinion columnist.Surely random. Yeah.Let's just kick off with what we heard again yesterday that that pushed back alittle bit from the regulator. They're saying that they're not reallyinterfering, but still they are sort of getting involved to some degree, itappears, alienating.

What was your take on it?Yeah, I think the regulator wants to make sure that the, you know, globalaudience or global investors will take it as is still sort of promoting.Market. Market friendly or free market approachto regulating the Chinese stock market. But in reality, because of the heavyhanded intervention in this quant market in the recent weeks, a lot ofquant funds actually are really afraid and more punishment or curbs will beimposed by the CSC. And then they they are really not, youknow, conducting their business as usual, which means they would typicallysell at the open, maybe wait for the.

National team to come in and buy backthat sort of trading strategy. So, yes, the rhetoric is out there thatthe CSC is only wanting to regulate normal trading.But in reality I think we at CSC stick sort of policy really discipline quite afew quants in in the mainland market. And actually, I think one of themanagers that we've been talking to is that this is seen as one of theindustry's biggest black swan events. Did you subscribe to that view?Not quite Black Swan, but it was a blow to the masters of the universe, so tospeak. What happens is that these funds lastyear did quite well and they did a lot.

Of the so-called index plus index, whichhas portfolios basically picking small stocks off of China's universe of 5000stocks. Right.And then this year, suddenly a lot of them are nursing like double digitlosses in just two weeks. And in that sense, they're comparingthat to the 2007, the summer of 2007 in the US, when a bunch of very highprofile successful funds, including from Goldman Sachs, nursed very, very biglosses. So that's the comparison right now.And landing, of course, I think the industry's fading.It really depends just exactly on how.

Regulators are going to continueresponding. We know that the next raft ofregulations are going to be sort of rolled out one by one.But is there any sort of context beyond that?Yeah, Right now, we don't know. Our reporters have been, you know,asking around whether what kind of policies are we expecting out of theregulators. But so far, I think the chatter is theregulator actually wants to follow through with this sort of, you know,rhetoric that they only wanted to regulate normal trading.And the chatter is they may actually.

Lift that ban fromwith the ban, which they put on mutual funds from selling at the open and theclose. So if that's really true, that means theregulator would probably just follow through with what they set out to do,which is just to discipline the the abnormal behaviour, not to reallyrestrict stock selling in the market. And Nancy, I mean, what do we make of ofwatching this news as our regulator now seems like his approach?These markets are quite different from what we've seen from from people in thatpost before. I mean, is this something that investorsare liking here right now?.

I mean, what's the overall take that youget? Yeah, so far, I think the reaction hasbeen positive or change, of course, had the reputation of being the butcher ofbrokers and you know, how he was a bit more heavy handed than the than hispredecessor. And we have reported that watching hasactually invited quite a few financial market experts and as and showed awillingness to really listen to their criticism and try to do something tocurb the market declines. And the latest, I think, is that hewants to really restrict IPO approvals, which is really a 180 degree sort ofturn from the predecessor who actually.

Wants to, you know, make the IPOapproval process more sort of just, you know, self led and registration based.But I think right now that because of the pessimism in the market, this kindof heavy handed deregulation is what investors actually wanted.But in the longer term, whether this is really healthy for the market is quitedebatable. Heavy handed regulation surely issomething as well that sort of kept international or US hedge funds out ofthe market. Is that something that you think is aswell exacerbated these issues? I absolutely think so.I mean, like whenever China has a stock.

Market rally, let's face it, they liketo play the content algorithmic trading. Right.Like we saw that in 2015, they actually raided the citadel and which the thatthat the hedge fund in the end that they paid almost 100 million USD in fines.But I think China has been talking about opening up those financial markets formany, many years. We have been covering this.But the pace is very, very slow. And as a result, it's all domestic assetmanagement. Industry is just very boring,inexperience, immature, kind of like it's a chip industry, let's face it.So I think this quant quick a lot of it.

Is just because the conflicts are reallybad. They don't know what they're doing.They don't really understand risk management.And if China, say, allowed Citadel or Millennium to come in to its domesticmarket, say, five or seven years ago, its domestic confidence probably willget a little bit better. Or if they're not good enough, they willhave exited already. So I think this is an issue that couldhave been avoided. But again, we don't know whether theChinese government is learning the right lesson.Spell out for us what this means then,.

Right.Are we expecting more waves of redemptions among these quant funds ordo you think, you know, they can actually change up their strides in away to adapt to this new environment and these new rules?I think more redemptions is inevitable. I mean, Chinese investors, they look atreturns and say, what happened the last year?You earned 7%. This year you're losing 15%.They're going to redeem. But even as even as they change theirstyle and try to be more adaptable, I think that this subsegment of theindustry is going to have a little bit.

Of a setback.All right, Julie, great stock actually run that.Our Bloomberg Opinion column is also our thanks to lending to our Asia stocks.Managing director joining us out of Singapore.We're going down to the open of trade in Shanghai, Shenzhen and Hong Kong.We'll see if we get that ninth straight day of gains when it comes that CSI 300,we are down in terms of futures, about half of 1%.This is where the market's trying to open.Happy Friday. What a sensational set of results fromfrom NVIDIA.

This is really the earnings heard aroundthe world. I'll do my best to sort of contain myenthusiasm. It seems each quarter they continue tosurprise. So there are going to be significantbenefits. The only result that was going to beacceptable was not only a beat but a substantial beat.This is a company that continues to execute and completely blow awayeverybody's most robust forecasts. You can't deny the impact that it'shaving across not just in the US market and in the US tech sector, but actuallyglobally.

And I think one of those reasons is thatpeople are really buying into this idea that it isn't a tipping point.There is great momentum, momentum there. People are beginning to wonder how manyconsecutive quarters can this company continue to run.The big question has been how long can this continue?There is sort of a consensus in the industry to put some competitivepressure back on and beat. The competition has never been morefierce than it is right now for Nvidia, but they have a huge head start, thistidal wave of spend, it's coming to the rest of tech and in our opinion, that'sgoing to continue to fuel this tech bull.

Market.The equity market sort of really nicely sort of set up from here as a party.It's just getting started. That was something I guess they'rereacting to Nvidia's blockbuster rally. And I mean, the market reaction to thosenumbers has been absolutely exceptional, up 16% in one day.You're adding about $277 billion in market cap.And that is the biggest single day surge we have seen for a company ever.And it's really putting Nvidia as well, getting a lot closer now to enteringthat $2 trillion club. The market reaction, of course, not justlimited to tech stocks.

We saw rallies in the S&P 500, theNASDAQ, now Dow Jones. European stocks are about the Japaneseindex. All of these are hitting all time highs.But let's get more on these numbers now. Bring in Gary Evans, chief strategistfor global Asset allocation at BCA Research.And Gary, I want you to just kick off by maybe bringing us down to earth a littlebit here, because how much longer can we see this sort of rally here?Is it really a really a stock you want to be buying at this point in time?Yeah, but I loved hearing all those gung ho fund managers that I mean, look,let's be honest, it was they were good.

Results.Nvidia has got a monopoly of chips that go to large language learning models.But a couple of problems are number one. You know, when I learned finance, I wasalways told that if there's a company making supernormal profits, unless it'sgot some competitive moats, people are going to come in and compete thosesupernormal profits away. And if you look at the numbers, Nvidiasells almost half of its chips to only three companies and you can guess whothose are, they are going to try and find other people to source those fromall priest in themselves. And what Nvidia does, it doesn't producethe chips.

That's TSMC who does that, they justdesign them and they're ahead of that. But how long is it before Samsung beforeothers catch up with that? The second problem I would say is, youknow, yes, A.I. is exciting.I like to think of myself as a sort of tech nerd, like I'd be using quite a lotof A.I. applications, but is it really changingthe world? We've yet found that killer app that'sgoing to change things. Now, even the Internet, if you thinkabout it, when that came in, that changed the way that he worked.But you can't see the impact of that in.

The productivity data at all.The last time we had a real big change with when PCs came in, you know, wesuddenly went for writing things by hand or typing them to having a computer onour desk. I don't think at the moment it's clearthat there's a killer app for artificial intelligence which justifies the sort ofvaluations that you've got out there. So how long do you think this globalequity rally can last? Right, Because the first two months ofthis year, I mean, equities have certainly been the the winner if youcompare what bonds have been doing, because bonds have basically caved to alot of that that Fed repricing already.

Yeah.So. Well, wouldn't you say that equitiesoutside of the Magnificent Seven or six or probably five these days actuallyhaven't done that? Well, I mean, we've seen a few attemptsby other parts of the stock market like small caps to rally and then a failed.You know, if you look at smaller tech companies, you know, Cathie Wood's ARKInnovation, for example, that ETF is down, I think something like close to10% this year. So it's limited to a very few number ofstocks. But your question is, how long can it goon the timing?.

That is really hard.The problem with bubbles is that they always last longer than you think.And I would deliberately use that word bubble.It's getting to me to look pretty similar to 1999.And what happens with a bubble is there is a genuine change.Now, that was when we first started using Google, for example, the Internetsearches. We saw the number of Internet usersdoubling every year, 98, 99, but that came down with a crash.But how long did it keep going for? It kept going probably for longer thancertainly people actually thought at the.

Time.So, yes, this can go a bit further. It's a genuine change.But, you know, I wouldn't buy Nvidia at these sort of valuations.So, Gary, what's the pinprick here? I mean, what makes the bubble burst?Yeah. So, you know, it can be the next quarterearnings. I mean, can Nvidia keep on blowing outthe lights every quarter? I mean, its guidance for Q1 is actuallyrelatively cautious. The amount of additional sales is quite,quite low. It could be equity issuance.You know, they decide they need to issue.

Some more shares.You know, it is one of the things that burst the bubble in February 2000.You know, it could be the Fed. I mean, at the moment we're all ignoringthe Fed with all these speakers today that you've been talking about, makingit very clear the Fed is going to be patient.They're not going to cut rates quickly. You know, maybe we start to get a hint,as we've seen, for example, from Australia and New Zealand.Well, maybe we might need to raise rates once more because if the next PCinflation data in the U.S. think it must be next week is a bit ofan upside surprise, which is likely.

And the economy keeps on goinggangbusters as it is. Well, maybe inflation risks are going tore-emerge so that that could be the thing that the buzz this bubble perhaps.And I'm just wondering in terms of the I mean, the U.S.data continues to be strong. We're not hearing a whole lot of peopletalking about recession concerns anymore.In fact, you have some fund managers saying, you know, I'm dumping myTreasuries holdings now because of just how resilient this economy is.Do you think that Goldilocks narrative is still intact?I know you're still kind of being.

Overweight on fixed income and whatform? Yeah, So that's clearly the consensus,this soft landing. But I mean, the pushback I would give towhat you just said is, yes, the U.S. looks fine, but look at the rest of theworld. And we had the PMIs out yesterday inEurope and Japan, particularly for manufacturing, still are really weak andweak. Last week we had GDP data in Japan, inGermany, in the U.K. you know, they're all in recession.So economists say it's really only the U.S.It's looking more resilient now.

It is holding up.But, you know, the key issue here is how long does type monetary policy take towork through to the economy? The Fed raised rates by 525 basis pointsin 18 months. So 15 months.And we're starting to see a few signs that that is going to hurt.It's hurting the housing market, it's clearly hurting commercial real estate,etc.. So, you know, ultimately that's what itcomes down to at the moment. But also, I think at some point the Fedstarts to worry about, well, if the economy really is looking lessresilient, doesn't that mean that wage.

Growth is going to stay strong?Doesn't that mean that inflation's going to pick up?And therefore, you know, market has completely shrugged off the repricing ofthe Fed's action in the last 6 to 8 weeks.I don't think it can continue to shrug that off forever.Given the high price tag that are on US stocks, for instance, other markets aswell as now the time to perhaps be considering cheaper markets like Chinainstead. As a trade?Yes, I think that's right. And there are quite a few clients Ispeak to for the last month have been.

Saying, well, China surely in the shortterm has got to have a rebound. You know, typically last year's loserhas a bit of a rebound in the first few months of the year.The Chinese authorities can't live with the stock market as weak as this, but itreally is only a trading rebound, I think.I mean, at the moment, the Chinese economy still looks very weak.You know, we'll get the housing numbers out any day, any minute now.I think the problem with those that don't really reflect reality, what I'mhearing from people in China is that actually transactions are being down 20,30% below the market price.

The government's very reluctant to cutshort term interest rates. The PBOC is because it knows that wouldweaken the currency. For the moment that's not a priority.So and we've also got an economy and a government that is very unfriendlytowards private sector, towards foreign investors in general.You know, and I think as a lot of clients I talked to, it generally wouldsay now that China is an investor boss doesn't mean it's not tradable.Look for a quick bounce. We'd have quite a 10% plus bouncealready. I think the A-shares in particular, theChinese government doesn't want.

Individuals in China to lose out.But I wouldn't wouldn't buy the shares that comes not going to focus on those.Gary. Great to have you.Thanks for joining us. Gary Evans, they're a chief strategistfor global Asset allocation at BCA Research.Just want to check when it comes to that can be fixed just crossing yourBloomberg here right now. So it's once again pretty solid at seven1064. So you're still seeing that policysupport. The offshore renminbi, though, has beenstrong of late.

I think we've gained for about sixsessions, but we are still, of course, trading near the weaker side of thattrading band here at seven 2029. Futures are still pointing a little bitnegative here. The de Hang Seng is lower by half of 1%in the pre-market. We'll see if we get another day in thisrally. C GBP is not going anywhere at 244 yourten year play. Moorhead.This is Bloomberg. And. All right.Your futures are looking like this here.

This morning.Looks like we could be. Well, see, I mean, it's been a good weekwhen it comes to Chinese equities. So is this really momentum that we'reseeing here? Is there actual signs of real moneycoming back? That's the key question.We're still lower in terms of futures this morning.We're seeing the Chinese ten year yield at just below that 240 level here.When you take a look at what this rally has looked like, though, right, we'retalking about an eight days of gains for onshore stocks, the CSI 300.We haven't seen a rally like that since.

2020.So it seems to be that there is maybe some support here.What CSR see certainly is one thing. You know, all these sort of new ruleswhen it comes to trading is certainly one thing that has been quite supportivefor this market. Analysts actions we're tracking for youtoday Lenovo cut to accumulate CLSA of the auto stocks very much in focus aswell. I motor shares raised an overweight Jpmorgan Garnaut on lithium. Those Asia's also been raised at Citihere they're talking about a 30 day catalyst watch here.Given the Asia's potential demand uptick.

And stabilizing sort of in prices.If I'm saying that right, the open is next.This is Bloomberg. You're watching Bloomberg Markets ChinaOpen and counting down to the start of trading in Hong Kong, mainland China,the start of the day here, pointing to a little bit of weakness across the board.We actually have seen that run up over the course of this week, but starting toperhaps dissipate so far that investor interest.What else we're tracking is those property prices.We've got that data due in just about 30 seconds.Yeah, if we're go ing to see any signs of.

This downward downturn in the marketturn in any way, I mean, we're certainly looking for those signs of that.We haven't seen that yet in the data. So certainly that is the one to watchuntil the data in the next couple seconds or so.Your market is looking like this year right now.So we are actually still capping the best winning run for the CSI 300 in fouryears. So certainly there is some buying takingplace here across this market. Futures and the free market in Hong Kongis looking like this year right now. But we'll see how this all plays outafter what we saw.

Right.The US, Europe, Japan, all hit stock records overnight.That is thanks of course in video it just take those on the back foot here aswe open the gates or about 7/10 of 1% to the downside here today.CSI 300 though. There you go.We are Shanghai, looking a little bit better than Hong Kong here this morning,Hang Seng. We're down about 4/10 of 1%.We're watching commodities in particular.You're seeing Shanghai crude as well as iron ore and Dalian up some 1% here thismorning.

So commodities are catching a bit.The small caps, the CSI 1000 also doing quite well here today at the get go.It's not a broad based rally, though. It's been a mixed picture.If you take a look at what's really driving this, Macao gaming is down about7/10 of 1%. Developers are flat.Financials, industrials are catching a slight bit here this morning, but we'rewatching and waiting. Of course, those property numbers, whichcould be happening any second now. You know, it certainly is one to watch,right, because the HCI is actually one of the best what is the best performingbenchmark month to date this month?.

Not a line we'll perhaps expecting tohear. Yeah, it's not in February, but weactually do just have those near home prices coming out and we've seen a dropof 0.3 points, 0.37% for new home prices on the month.That's for the period of January. So a little bit better than the monthprior because it was a contraction of nearly half a percent.Still, though, it is just pointing to further weakness.And we know the property market in China, it's not just facing very deepseated damage to buy confidence. There's also the structural challengesthat the industry needs to contend with.

In terms of demand and supply used homeprices as well. This is actually the first time webelieve this is being reported here. But used home prices were as well sayingthose drop nearly 7/10 of a percent on the month.That's a gain for the period of January, although actually it must have beenreported prior because the prior week prior rating was down 0.8 of a percent,but still in context, zero. Looking at that in aggregate, it's justfurther weakness we're seeing in China's property sector.I believe, when it comes to new home prices, that is the eighth straightmonth where we have seen prices actually.

In contractions.So that certainly continues to be that story, that trend there, as you say.Right. Used home prices.I mean, this is one where we are seeing existing home sales are actually pickingup more than we're seeing a new home prices.That was some of the new data that we got on the last couple of days or soduring that spring festival holiday. But certainly we're seeing a little bita little bit, of course, as property stocks, but not a whole lot here today.We're still tracking, of course, the tech space, air, autos, the like heretoday.

So in video, whether we see day two ofthis, we're certainly seeing that in some of these Taiwanese suppliers of theair stocks. There you go.Baidu rout 1%. Interesting note from Citron researcher.Overnight they were talking more about the 80 hours but they're saying by toremains the most underappreciated name in AI which is quite interesting they'resaying when it comes to the air as it could hit 200 bucks.We're watching some of these other air stocks I fly Tech, though, is slightlylower here today, so I'm pretty not too good.Car sales numbers coming through for.

February, down close to 60% year onyear. So we're watching the auto space veryclosely, BYD down some 1%. Let's bring in David Wong, seniorinvestment strategist for equities at AllianceBernstein.He joins us here in our Hong Kong studios.David, good to see you and happy New Year.It's time to turn bullish on China, you say?Why? Absolutely.We think that there's a lot to like about the China story today.I mean, for one thing, we actually have.

Been tracking sentiment indicators onChina and it's actually at an absolute extreme.It's so negative that it's really time to be bullish when we see sentiment thisbad. We've generally made money in the Chinamarket over past cycles. When we look at overseas positioning inChina, it's actually lower than it was before MSCI started, including China inits benchmarks. So this is the worst positioning we'veseen amongst foreign investors in ten years.And when we see all of these things and the fact that there's actually positiveyear over year earnings growth last year.

And this year.We actually think there's a lot of different ways to win.We can build a portfolio that is going to be, in our view, worth more at theend of the year than at the beginning. Firstly, what's going to be in theportfolio? And secondly,again, you mentioned earnings, you mentioned sentiment, but what else ismaking China so attractive to you? Well, we just think that when a market'sbeen down for three and a half years and there's just been widespreadcapitulation, there are a lot of opportunities for us to find ideas thathave literally become the babies thrown.

Out with the bathwater.We look at the industrial space, which you were citing earlier, and there aregreat companies making buses and trucks that export to the rest of the world,and they are actually seeing very robust revenue and earnings growth trends.And, you know, we understand why people are concerned about macro.It's definitely got its weak spots. You were talking about property salesearlier. But, you know, actually, when we look atexisting home sales volumes, just as an example, we're actually still seeingvery decent transaction volumes. And we just think what is happening isthat this trend of China kind of.

Overbuilding with new homes is comingback down to earth. But that doesn't mean that everything isfalling apart in China. We do think that theChinese New Year retail sales numbers that we've started to see on apreliminary basis look very encouraging. And there's a lot of parts of theChinese economy that are doing okay. We've been here before, David, andobviously we've looked at whether it's been the worst when it comes to investorpositioning. But, you know, what are you seeing interms of now, in terms of positioning? Is it really just momentum trainingtactical operators that people are doing.

Or is it really real money coming backto this market? We are seeing definite flows for thelast three or four weeks. There's actually been a bid for Chineseequities. And if you look across global ECM,actually China has been even more popular than India recently, justbecause there is starting to be contrarian money coming back to themarket. And we need to just remember when thingshave been this bad for this long, you have a very low bar to clear when youjust want to do less bad, which is what any first stage of a market rally is, isbased on.

I was reading your notes earlier and yousaid in Asia, follow the arrow. Why are you saying that for Asiaspecifically? Well, we do think thatAsian investors have always been a little bit gun shy of US equities,actually, because of valuation. And onechart I could just kind of talk you throughthat I show to them is if you put price to book on the Y axis and return onequity on the x axis, you can just draw a line straight up from the zero boundup that will reach us and us tech. And, you know, global markets areefficient and Asia has underperformed.

Because its ROIC has lagged the rest ofthe world. But what we are very encouraged by isthat markets from Japan to Korea and potentially other places in Asia arestarting to really focus on return on equity and on shareholder return.And, you know, when we see, you know, what the Korean government, forinstance, announces a week from now, we expect to see trends that are already inplace in terms of shareholder return policies being strengthened in Japan,for instance. And we do think that is actually a veryencouraging sign for the rest of Asia. We're really far away now from thatChina beta trade of two decades ago.

But what we can actually expect is thatif on a bottom up basis, companies improve their corporate governance andstart returning more to shareholders and getting rid of kind of long term passionprojects, yeah, that is going to be good for Asian markets.Is there any market you see in this region that could outperform the US thisyear, though? I mean, this is a market that continuesto be and I'm guessing with the NVIDIA earnings, I mean, we're continuing toedge through these all time highs here right now.Sure, the US should still have pride of place in any investor.Serious portfolio.

But we do think that, you know, there'sa difference between asset allocation and what you want to do tactically in2024. And when we look across markets today,the US will benefit from a broadening beyond the max seven story of last year.But, you know, when we look at Asia, there's so many companies that havedelivered earnings growth last year and will continue to this year and that areactually way cheaper than anything that you can buy in the US today.And so we just think having some mix of of Asian and US stocks is going to be ofbenefit to too many investors. Right.David, thanks for your time this.

Morning.That was David Wong there, senior investment strategist, equities atAllianceBernstein. And just recapping those China propertynumbers that came out a few minutes ago at a headline level.Yes, we're still sorting contraction territory for U.S.home prices, new home prices as well. But the other key is that the drop was alittle bit slower than the rating that we had coming through for December.And so the numbers, new home prices down around 4/10 of a cent on the month.The month prior was 4.5%. That contraction used home prices welldown around 0.78%.

And again, that drop a slower thanDecember, but still weakness coming through across the property space.So really that focus on the property sector, those support measures andactually we've seen that China property stocks one of the biggest gainers overthe course this week on that expectation that thoughts about further furthersupport. It's actually gained that gauge everyday except for Monday. So you know you continue to see propertystocks are certainly in focus here today.Let's talk a bit more about part of that property story is, of course, aconsumption space.

And what we're seeing with the slowdownin China is really taking down some of its rising consumer start up stars.And they have been hyped as the country's replacement for brands likeCoca-Cola and Haagen-Dazs. But now let's see what the outlook is.Let's bring in our global business reporter, Jinjiang Hong, and what you'reseeing across some of these start ups in China.Yeah, actually, I think a few years ago the narrative was still like Chineseconsumers are turning more and more premium products.They are also turning to their domestic brands because of the proud ing nationalcompanies.

But now the fortunes for these startupsfrom cheap forests to China, ice cream has really changed because of theinvestment pull out as well as the slowdown in consumer demand.So what we saw is aggregate capital raised in this field for consumer goodsin China has to shrink 93% from its peak of 2018.At that time was more than 70 billion a year raised in this sector, but now islike so small, so that a lot of these startups are facing both fundingproblems as well as consumer demand issues.So we are seeing shops closing down. We are seeing companies not meetingtheir sales target.

We're also seeing them pricing lower andlower in order to compete not only with their local rivals that outrightdowngrading their prices, but also with these foreign companies that arelaunching products that are similar to what's popular in their demand in China.So that shift in sentiment, that weakness that's coming through for thissector, do you really think that that's something that's permanent?Yeah. So what we saw from the Lunar New Yeartravel demand, we can see that people were out and about again.However, if you look at the per person spending, they are still much lower thanpre-COVID.

So we are seeing is it seems like thesector is becoming busier again. But in terms of getting people to toreally put money out of their pocket and be willing to buy the same product theywere willing to pay for a few years ago, that seems like a long way to go for thecompanies that were set up. And with the funding shrinking, it'sharder for us to see new brands coming up.In one time, it was so easy for us to capture a few companies like, That'svery exciting. But now that sector is just not astrending anymore. Yeah.What would it take for the venture.

Capital to come back then?Yeah, I think definitely like that was one idea when we were talking in thelast segment whether China is cheap enough for them to re-enter.However, now there's not only the demand issue, but also geopolitics with the US,with Australia, with Western Europe for the funding to come back to China.So that's definitely a question remaining to be asked.All right, gentlemen, that was our Bloomberg Global business reporter JinShen Hung there and we've just hitting it heading into the session here, 15minutes into trading. So far, we are seeing that move for theupside, but a bit of a talking point.

The Shanghai Composite hitting 3000 thatlevel for the first time since December. So it is that strength that's actuallycoming back into Chinese equities. So extending that rally really over thecourse of this week, that CSI 300, you can see that at the top of the screenand. All right.We are seeing continued optimism when it comes to, of course, in video.Is this really the Taylor Swift moment, as Dan says, when it comes to these techbulls out there? You're certainly seeing that, right?That is actually spilling over to the rest of Asia for a second day.Tell us that mix up.

We got behind us up close to 4% inSeoul, as am I see, also 2% higher. Nasdaq futures, though, are flat thismorning. Yes, I'm sorry.Let's talk more about that. Will officially open its Kumamotofabrication facility in Japan this Saturday with mass production to startlater this year. It's an early victory for Tokyo and itsrace to make more chips as governments around the world work to boost domesticsemiconductor capabilities. An exclusive interview is actually kindof, as I see it. Industry Division director of Japan'sMinistry of Economy, Trade and Industry,.

Tells us what's prompted Japan's move.Of course, you know, Kumamoto TSM is five is very significant for Japanbecause you know the five is kind of a to fill a gap between supply and demandin Japan. So without investment from TSMC,we only have over 40 nanometer technology node in Japan.But you know, recently the demand for less than 40 nano is getting traction inJapan, buying, you know, like Japanese carindustrial or other, you know, robotics industry, etc..So that's why the supply capacity from Kumamoto DFC.TSMC first Fab from 28 to 12 is kind of.

Essential to the Japanese industrialactivities. We've reported that the numbers could be20 to $30 billion. It could go as high as $67 billion interms of financial support from the chip industry.What would you say to the taxpayers of Japan who are going to help build thisindustry? Why is it worth it?I think, you know, Japanese public people already realize the importance ofthe support for semi industry. So what we what we are doing is to, youknow, tell the importance of each project to to the people, of course.So the kind of, you know, economic.

Security perspective is the one elementand the other is economic kind of a ripple effect perspective.As an example, you know, TSMC project is expected to have the, you know, largescale of the economic, you know, spillover effect.So actually, you know, we already have watched semi routed it.You know, companies, many semi related companies are moving into the Kumamotoprefecture. I'll be our TSMC is actuallyconstructing the first five. So which of course you know investmentyou know spillover effect as well as you know create job creation as well.And also considering the salary bill or.

Payment from TSMC, it is you know,higher than the you know, of course, you know, standard of living of Japanesecompanies. So which can make a very positive impactin terms of the raising solid level as well in Japan.It seems like Japan has jumped out to an early lead in this effort to build thedomestic chip industry. The United States is trying to dosimilar things. Europe is trying to do certain thingsalso. Mm hmm.What are the reasons that Japan was able to do this so quickly after, you know,considering the past?.

You knowwhat we have, you know, so it is, you know, everybody.So Japan is too small, too slow in terms of financial support.We sincerely regret that. Mm hmm.For the past. So that's why we realize the importanceof speed. I had served, you know, a couple ofministers of METI, so everybody told me that speed is very important to attractthe investment from our side. That was Kashani kind of Sashi, the ITindustry division director of Japan's Ministry of Economy, Trade and Industry,speaking exclusively with Bloomberg's.

Peter L'Estrange in Tokyo.And we're heading through the morning session so far and taking a look at howstocks are faring. And it is that broader move.We've got the upside really being supported overnight of course by thatstellar run and that rise and Nvidia continuing to climb, adding $277 billionin market cap. But broadly it's IT stocks that areleading the gains so far. Shanghai composite a note at the bottomof your screen because it earlier just crossed that 3000 mark. All right.Some big stories we're tracking for you.

Around the world today.Shares of Houston based startup Intuitive Machines are up after theirlander touched down on the moon. It's the first time a US made spacecrafthas made it there in one piece since 1972.It's also the first private spacecraft to land on the lunar surface intact.It's hoped the landing will provide an up close look at the moon's South Poleregion and offer us new information about the lunar planet.Now, the U.S. and China are said to be discussing newmeasures to prevent a wave of sovereign defaults.Our sources say steps being considered.

Include extending repayment times andincreasing financing from the World Bank and other multilateral lenders.The talks aimed to ease developing countries debt burden, amounting to morethan $400 billion, and is one of the biggest attempts at economic cooperationbetween the U.S. and China in years.Meanwhile, leaked documents from Shanghai based cybersecurity vendor AIsoon appear to outline the broad scope of China's state sponsored cyber attackson foreign governments. The files, seen as authentic by industryexperts, appear to show successful attacks in 2021 and 2022.Targets include the U.K.

Foreign Office, the Royal Thai Army, andNATO's Secretary general, Jens Stoltenberg.And continue on in geopolitics. China is going to renew its pandadiplomacy efforts with the U.S. and other nations after spending recentyears bringing the bear's IT loans to foreign zoos back home.China's wildlife agency recently reached an agreement with the San Diego Zoo andthe Madrid Zoo in Spain, and MOVE marks Beijing's latest efforts to improverelations with the West. So you could be seeing those cubs assoon as a summer, I believe in San Diego.They're working towards bringing them.

Back to Washington as well as Austria aswell. So.That's right. A few different places.You're going to want to see the pandas. At least the pandas are.All right. Quick check on how we're going withmarkets so far. Marion is one, two, and no, that's theentertainment giant. Absolutely.Pretty big search here. But the story is that they've reportedstrong preliminary profits. So a pretty good signal.I guess We did see better numbers coming.

Through for the box office in China overthe Lunar New Year break. Not the same story we're seeing in theAV space there, though, because we're seeing car sales slumping.Given that holiday holiday lull, rather, and drivers still awaiting rebates aswell. So we are seeing a bit of weaknesscoming through China property, too. No better numbers than the month priorin the latest results.

Sharing is caring!