Bloomberg Markets: China Open 02/05/2024

Good morning from the Asia Pacific.It's 9 a.m. in Beijing, in Hong Kong, where justmoving to 10 a.m. here in Seoul.Welcome to Bloomberg Markets Asia. I'm David Inglis.No, I'm Rishaad Salamat. Let's have a look at our top 50 becausestocks and bonds slipping. The Fed chair pushing back on hopes forimminent policy easing. Jay Powell repeating that a march cut isunlikely warning against the danger of moving too soon.China is pledging to stabilize its markets after shares to sink to a fiveyear low, but officials offering no.

Specifics on ending the sell off.Plus, the key Middle East tensions as they hit new highs after a wave of USled strikes in Iraq, Syria and Yemen, with Washington really warning of moreto come. All right.Those comments, Dave, coming out of the reverberating across mountain markets.Yeah, Rich, we're just gonna go straight to breaking news right now out of theKorean Air Force as it really talking about, I guess in many ways goes intothe conversation to this repricing that's taking place in global marketswith the dollar stronger probably March not in the cards according to JayPowell.

We're seeing weakness across thecurrency markets, across the Asia Pacific, including here in South Korea.We're getting some lines coming out of the regulator talking about how they'revowing to end illegal shorts. These probes going into the global bankshere. They're looking at stern steps againstmis selling of some of these China tide equity linked securities.It's certainly a conversation that's really made the headlinesthe last, I would even say the last few months here, here, here in South Korea,certainly the exposure of retail investors to just a rout in equitymarkets in China.

There's also really to the point of themacro story of higher rates as well, project financing and the risksassociated in the exposure of the banks there.So we're getting a lot more lines coming through that they will not be toleratingthe mismanagement of these risks. Rish So I guess we'll get more on thestory in a moment, but certainly it's a stronger dollar story that investorshave to contend with at this point in time.Well, that's absolutely right that David, we are looking here at theprospects here for the futures is telling us we're going to have more painput on markets once more.

Looking at those futures down about ahalf of 1%, looking at the S&P futures as well after Friday's stellar gainsafter that. Well, unbelievable jobs report andshowing such strength of the U.S. economy.That's all been played out on the session down Friday.On the U.S. side, we've got futures adding a bit ofpressure. Nikkei do 25 off the highs of themorning so far at least. And we've got in prospect, of course,that interest rate hold by the Reserve Bank there in Australia and it's comingoff record high so that market and there.

We go.And where you are, David, got a cost PPI, which is a 1.6% to the downside andopens elsewhere indicating well movement again lower looking.Let's just have a look at tell us a bit here we've got to playing out of themoment that pledged by the Chinese authorities to stabilize their marketscould give the indices a boost. But it's not seemingly it's not likelyto. But the problem is here that some aresaying is just basically too little, too late, even though we have a lack ofspecifics, going to be looking at that and that fix as well, that because theyuan seven at 21.

Quick just check with what's going on asfar as the Treasury and other markets go.Bonds at the moment. There we go, ten year with a full handleagain. So those are Treasury futures dippingand reversing back at one stage and then going back down again is this headlinefrom Jerome Powell TV interview. And the headline from that landed onscreens across this part of the world. And well, is it an algo driven reaction?Well, we'll have to see how it all plays out for the time being.But employment, as we know, is as robust as it has been indicated by that nonfarmpayrolls report, because, Becky, the.

Favorite measure of inflation that forthe Fed that's slowing down and productivity remaining strong, it'sessentially still that message to markets still repeated from the Decembermantra, 75 basis points of cuts. So there we go.David, let's have a bit more on what else is going on.Yeah, certainly the context going into this Chinese this new trading week inChina, certainly we'll talk about this in a moment.Certainly these promises for more measures.You know, what happened on Friday was quite wacky, right?We had a massive drawdown in the CSI 300.

Down over 3%.At one point it recovered. But, you know, on a whole, you know, wesaw the worst week in on trade. China going back to October of 2020 tothat was when we were in Covid zero on the Chinese mainland.Interesting today is you're getting this ten year GBS.You were just showing the Irish now with a 2.3% handle that takes us all the wayback 24 years. And the fix coming out in a few minutesshould be interesting to see. And whether or not with a dollarstrength coming through with the falling yields that we're seeing in China,whether or not the PBOC steps in more.

Firmly today to anchor the currency,it's busy and it's quite early, but we'll see what happens here.All right. Well, indeed, let's get over to chiefNorth Asia correspondent Stephen Engle, who's with us now in Chinese talks.Well, how are they looking overall? Because, I mean, we've had promisesbefore, promises, promises here. The regulators want to stabilize themarket. Again, we don't have quite the specificshere. What to do?Yeah, I think investors are looking for specifics on what kind of steps they'regoing to be taking place.

The CCRC, the securities regulator,Sunday night or Sunday, essentially put out a statement saying that they willpledging to stabilize the market. But what in what form, really?I mean, I think there's been a lot of scuttlebutt over the last month or soabout a stock stabilization fund, but talk about how large that will be andwhere it will come from in the like. We had the Chinese Academy of SocialSciences also kind of call for a very large stimulus of a stock stabilizationfund to the tune of $1.4 trillion. I can talk about that in a little bit.But again, the signals coming from Beijing is they're obviously worriedabout the stock rout on Friday, down.

3.4% for the CSI 300.The frustration is palpable in China with investors.A lot of mom and pop investors in the mainland just ahead of the Lunar NewYear holiday. So it's not good sentiment going intothere. The statement from the CSR sayingbasically they're vowing to prevent abnormal fluctuations in the market,like what? We saw that chaotic trading on Friday,saying it would give more medium to long term funds into the market.Again, we don't know the size or how that would be taken out taking place.Crackdown as well on illegal activities,.

Including what they call malicious shortselling and insider trading. But again, the backdrop of all of thisis a weak Chinese economy, not enough, according to a number of investors,concrete measures to put a floor on the troubles in the property market.And then that the backdrop is the simmering US-China difficulties,geopolitical stress. That does not bode well necessarily forexporters and the Chinese economy. Yeah.Steve. In fact, you know, the latest iterationof that is an arguably a new factor to consider.Here are these comments coming out of.

Coming out of Donald Trump.Well, what more can authorities do apart from jawboning and obviously theproblems of the economy will take time to will take time to sort in the shortterm to buy themselves time and stabilize this market amidst all ofthat. Yeah, what Trump's doing a lot ofjawboning, talking about upwards of 60% tariffs on Chinese goods if he's electedin November, that is souring the mood of the investors already hitting with hitwith all these losses in Shanghai and Shenzhen.And again, we talked about that stock stabilization fund that is in theoryright now.

Whether it will come out and how largethat would be. Sources saying it could tap into theoffshore accounts, essentially of state owned enterprises to inject funds.And again, I mentioned the Chinese Academy of Social Sciences, one of thetop academics there, telling 21st Century Business Herald essentially thatthe national team in China, again, the CEOs and the like, are what's proppingup and stabilizing the market right now and as little confidence on theindividual investors and of course, institutional investors are cautiousright now. But again, the return of Trump is a topconcern, according to Goldman Sachs, on.

A survey of its clients and investors inthe mainland that the return of Trump is a is a top concern and the stresses thathe might bring to the market. I mean, he's the alpha and he's gettingmore and more. So as you know, the election comes well,as it comes closer, it becomes a greater reality or potential reality.Yeah. Okay.But going into the Chinese New Year as well, it is going to be something tobehold. The amount of travel as usual is goingto be key for the economy, I suppose in many ways.Well, sure.

I mean, see if the consumer comes backin full force. Obviously the Ministry of Commerce,Ofcom has talked about 2024 as being the year to promote consumption.And during these big weeklong holidays, consumption usually picks up.It's probably not going to pick up in property.But again, as they travel around the nation, will they be spending enough toboost confidence? Thanks, Steve Stephen Engle there, ofcourse, our chief North Asia correspondent.Of course, all of this with the mood music also being set by the Fed Reservechair, Jerome Powell saying the.

Policymakers will likely wait beyondMarch, reiterating that before they move on interest rates.Speaking with CBS's 60 Minutes, saying that the central bank needs moreassurance that inflation is on a sustainable, sustainable path to that 2%goal. And I wonder, to what degree doespolitics determine your type? We do not consider politics in ourdecisions. We never do and we never will.It's not easy to get the economics of this right in the first place.These are complicated, you know, risk balancing decisions.If we if we tried to incorporate a whole.

Nother set of factors in politics intothose decisions, it could only lead to two worst economic outcomes.So we simply don't do that and we're not going to do it.We haven't done it in the past and we're not going to do it now.There are people watching this interview who are skeptical about that.You know, I would just say this integrity is priceless.And at the end, that's all you have. And we we we plan on keeping ours.Well, that's Jay Powell. Let's get to Joanne to she's the chiefAsia-Pacific Economic at Citigroup Global Markets.I mean, this is a reiteration of what he.

Said before, I should say.I mean, what's your take away? Look, our takeaway is the data and theeconomy of the US has actually been still fairly resilient.I mean, we had look at that jobs report. Unbelievable.So we had a very good non-farm payroll numbers.I really think March is too soon. I mean, obviously the market gets tooexcited. Clearly, we've had a very nice kind ofdecline and disinflation from poor PCI. But our house view is the Fed's probablynot going to ease until June. I think the fact that you still haveaverage hourly earnings running at 2.6%.

Month on month annualized growth rate inearnings is still too high relative to the 2% target needs that they should becareful and wait a little bit longer. So that's why we have it at June.And then maybe when they start going in June, they will start cutting steadily.So this year we still have 125 basis points cut for the year.Okay. Very quickly, Jay, what does this thenplay? How does this play out for Asian CentralBank? That's what your remit is, essentially.Sure. Sure.Look, I think most of Asian central.

Banks, again, a lot of central banks inAsia didn't hike a lot. So I guess we're not really going to cuta lot. And most central banks, especially somecentral banks that are still quite sensitive to the balance of payment,will probably wait until the Fed cuts before they ease.Now, having said that, there are exceptions.I mean, in China we've had like nine consecutive months of like zero toslightly negative deflation. We're probably going to have anotherdeflationary print this this week. So obviously, China, we're still callingfor a cut.

In fact, they should cut earlier.They've disappointed so that the central bank can cut ahead of the Fed.But the fact that the Fed may have to wait longer in the end, to the extentthat PBOC cares about renminbi stability, it is complicating the timingof the policy space for easing the other central bank that we think can deviate alittle bit and cut ahead of the Fed is Thailand.So we just change our call. We've got a central bank meeting in Bankof Thailand this Wednesday. We don't think they're quite there yetand cutting this Wednesday. But we do think, given the data,disappointment that they've been coming.

Out of Thailand since November untilJanuary, data and the fact that the fiscal policy seems to be gettingdelayed, we think Bank of Talent is another central bank that can cut aheada bit ahead of the Fed. Yeah.Johanna you highlight two important landmarks this week for Asia.You have China inflation and of course, that rate decision out of Bangkok.Just more on the inflation story, if you could.I know we've talked about this, whether China now was Japan a few decades ago.When do you think price pressures will emerge in mainland China?And I guess connected to that, do you.

Think the yuan remains a fundingcurrency? Right.So the challenge right now is, for example, this print, we still havenegative .54 CPI, still -2.8. The challenge is, even though we areexpecting inflation to pick up on the back of, you know, mainly because ofpork prices correcting. And the reality is pork prices are stillflat month on month. I mean, normally seasonally ahead ofChinese New Year, there should be a lot of demand for pork, but actually pricesare still quite soft. I think the challenge is even though weget some kind of volatile components.

That could hopefully drive CPI topositive territory, what is important is the underlying inflation momentum.And core inflation is still very subdued.And my worry is as long as the real estate continues to struggle, as long aswe have a lot of heightened uncertainty, including now heightened uncertainty onthe back of Trump policy, for example, that will obviously create a drag toprivate sector aggregate demand. I think the pressure on deflationarypressures is going to persist. And I think the fact that central bankPBOC has kind of too many policy objectives, he's like PBOC is alsolooking at preserving net interest.

Margin of the banks to safeguardfinancial stability so the banks can replenish capital using net interestmargins and the fact that deposit rate cuts are not transmitting as effectivelyand the fact that they also care about renminbi stability.So these multiple policy objectives is kind of contradicting kind of the kindof policy stance to support reflation. And so I actually think in a nominalpolicy rate is just too high and real rates expected, real rates are too high.So I think that I think raises the risk of a more persistent underlyingdeflationary pressures. And never mind the fact that you mighthave volatile components of CPI driving.

Headline to positive territoryeventually this year. And might a global easing cycle help ifwhen that comes this year? That's number one.And you know, last year, arguably, China was still dealing with the aftereffectsof COVID on its finances. So if we do get a global easing cycle,one easy monitory policy cycle in China,number two and fiscal policy in China to support that.What's the best case scenario when you have all those three arrows?So certainly a global easing cycle, if that's really being driven by acalibration of policy because we're.

Getting this nice disinflation path.So they're you know, they're cutting rates to kind of accommodate thedisinflation that would help at least provide a better outlook, a betterprospect for a soft landing. That would be good.Of course, if we're going to a global easing cycle because of hard landingconcerns and a recession, fear that would be bad.So I think that's something that we need to watch out for.And then, of course, into China, I think a lot of the heavy lifting of policy isgoing to going to be relying a lot more on fiscal policy rather than monetarypolicy, because, as I said, there's a.

Lot of these conflicting objectives interms of financial stability, preserving net interest margins effects.So they're going to have to lean on fiscal, quasi fiscal.So that's all eyes are going to be on the MPC meeting on March 5th.And we are expecting the central government budget deficit to be expandedby another extra trillion, so 3% to 3.8%.We're expecting carryover funding from last year from the amended budget beingbeing transferred over to 2024. That should add a little bit of aaugment that fiscal stimulus of about 1.3 percentage point.We were hoping, you know, the salvage.

Could carried over this year willprovide a bit of support. Now the challenges that will help at themargin, but, you know, we're still kind of concerned about real estate.You know, our house view is physical. Real estate market in 2024 is going tobe no better than it is in 2023. And you have to add that drag on realestate with all the other fiscal quasi fiscal and push on advancedmanufacturing. To what extent that can offset eachother? You know, right now, obviously for 2024,we have a forecast of 4.6% growth, which will probably be below what the growthtarget they're going to set at 5%.

And I'm not sure this growth is reallygoing to be significant enough to kind of, you know, address some of thedeflationary risks that we're still facing.And in reality, you know, for equity markets, it's nominal growth thatmatters less than real GDP growth, which is what the policymakers are trying tofix, is quite something. It's the strongest one that we've hadagainst estimates since, what, November or thereabouts at 7.10, as opposed to7.2, A thousand people that. Tell me something, what is the policyregarding the currency and how does it play into the overall structure, thecontours of what they're trying to do?.

Look, I think right now, especiallygiven there's risk of heightened policy uncertainty with trade tensionspotentially be emerging in the US with Trump potentially re-emerging in Europebecause obviously Europe's very concerned about autos.I do think PBOC is going to want to want to manage renminbi within a rangeof CNY range, maybe between seven and 5 to 730 that range.I don't think PBOC really needs to push renminbi weaker in order to reflate theeconomy. I don't really see that as the policybecause the reality is in real effective exchange rate, because China's inflationor should I say deflation is actually.

Lower than everyone is trading partners.It's still very competitive. So I think they're going to want tomanage renminbi within a range to kind of create less risk of heat in terms ofpolitical kind of in terms of protectionism.But having said that, you know, if the dollar does weakened, there is anopportunity to drive the stuff that's a lower basically renminbi to weakenrelative to the basket. But as you earlier pointed out,obviously, the dollar, you know, given the resilient data that's been taking alittle bit longer to adjust. Joanna All right.Yeah.

John A quick one here.Since I'm curious, I need to ask you about the chip cycle.We've started to see that bottom here, and I'm wondering whether the bottomthat we're seeing across the trade story here, would that be reflective ofsomething region wide or is that something that's more specific to Koreaand maybe even Taiwan only? So here's the thing.Historically, we always think semiconductors are like a leadingbarometer for the overall electronics cycle, which, as you know, is a veryimportant source of exports for the region.But the interesting thing is when you.

Look at electronic export and the data,it's really just Korea and Taiwan that's really doing relatively well thaneveryone else. So there's this bifurcation of theelectronics cycle. Like if you look at Southeast Asia, someof the data coming out of Malaysia and Thailand has actually been disappointingrelative to the higher end, the chip cycle, which is benefiting Korea andTaiwan. And I think part of that bifurcation isthe fact that China still has excess supply relative to demand and Chinaproduces a lot of electronic products. And I think that is kind of convoluted,the broadness of the manufacturing base,.

Because price pressures are moving inthe opposite side for some of the broader metrics.And that I think, is a piece of risk on the strength of the manufacturingsector. We can talk all day.Thank you so much, Joy. The chief Asia Pacific economist,Citigroup Global Markets. And of course, we're counting down tothe start of the trading day in Shanghai, Shenzhen, and right here inHong Kong. Andwe are back now. We'll look at the Biden administrationsays it will carry out more attacks on.

Iran's forces as well as its proxies inthe Middle East coming three days after air strikes in Yemen, Syria and Iraq.Bruce Einhorn is with us, getting us up to speed with all this.And quite a lot of the raising of tensions over the weekend, to say theleast. Yes, Richard.Right. There's a lot of military activity.There's also a lot of diplomatic activity going on right now.So on the military side, as you mentioned, more U.S.and U.K. attacks on who rebels in Yemen.This is follows the first the first.

Attacks by the U.S.and the U.K. forces, which began in January, earlyJanuary. So the latest ones, according to thePentagon, attacked 36 different sites in Yemen.They were going after missile systems, weapons storage facilities, launchers,air defense systems, radars. The Iranian foreign ministry issued astatement criticizing this, saying that's further escalation and sayingthat the U.S. and the U.K.are, in the words of Iran, fueling chaos, disorder, insecurity andinstability in the region.

And the Houthis said that this is openwar. The U.K.defense secretary did issue a statement saying that this is not an escalation,that this is just part of the additional attacks on this.And then finally, we got to talk about Anthony Blinken on his way to theregion. Now there's going to be talks about apossible cease fire, humanitarian assistance for Gaza.I was about to give diverse views. I know like a C or something of theprice of oil there. Like a lot more coming up, including thestart of the trading week across greater.

China.This is impacting. Good morning and welcome back to show isminutes away from the opening bell and we're looking at the clients acrossthese markets in Hong Kong with a 1.3% give or take here on the regionalbenchmark. We're also seeing yields continuing topush lower and we're down about three basis points on your ten year.That now takes us back several decades. In fact, that's something to watch veryclosely on the CSI 300. Our starting point for the week is nowwithin 10% of a new nine year low. When you look at that level and you lookat two key levels to watch moving.

Forward, the 2019 trough is a red lineon your screens, and the yellow line is actually the other one, which I think isa 2017 or even 2016 low. Below that, we're back to levels in 2014on this index. So that's about 10%.It's about a bad one or two weeks away from that.So we're looking at that and perhaps going into that story, potentialmeasures to further stabilize this market.Certainly when you look at this bond rally, which has beenongoing for nine, eight or nine or even ten weeks, depending on which metricyou're looking at, certainly.

Expectations are for lower rates ahead.Some data coming through in about 20 minutes from now.And of course, stocks to watch, Rick. We're looking at these big tech plays aswell as well as Mucci. Yeah, we certainly are.Yeah. And again, we need that to go inpre-market down by one half of 1%. We're looking at Alibaba coming out withearnings later this week, three in fact, Wednesday there and perhaps looking foranything in terms of a sale of of freshippo our our team this is a Reutersstory originally and there you go looking at that as we count you down tothose earnings, I'm looking at buy we've.

Got, of course, geopolitical tensionsplaying out with the U.S. There you go. And.All right, a good Monday morning from the Asia Pacific.Welcome to the program. Hope you're all well and rested as wehead into a new trading week ahead on China.Two things here. We're waiting for more policy supportsto stabilize these markets and certainly whether pricing you're seeing on yourscreens, this market does need further action to provide a floor.We're pushing.

We're seeing yields pushing lower.A weakening currency that's really on the back of these comments kind ofcoming out of Jay Powell. And certainly when you look at pricingfor a march cut out of the Fed, that's certainly almost been priced outcompletely. And you look at May, that's certainly nolonger a base case. Yeah.And we are, of course, looking forward to the open up for the week.And we are just seconds away. Of course, free market seeing alsofutures moved to the downside here. We had that Taiwan fix as well quitesomething here that reference 8000 pips.

Actually above of below the estimate ifyou will hear the strongest figures that we've had since November.There you go. This is a sector breakdown already.I got tech in the mix here. On the way down.We're looking perhaps at Alibaba, responsible for the decline there,largely speaking as where we go. Financials also weaker.We got that selloff continuing as far as these Chinese equities do go.Let's have a look at some of the individual kind of sectors, if you will,tech stocks. That story at the moment really beingdominated by Alibaba was down pre-market.

Over 2%.We've recovered somewhat. We got ten said just coming back aftersome of the gains that it did see after the approval of one of its key games,along with, of course, next on various others, which we did see, of course, seethat big move to the upside last week before they did pass some of the gainsgot Ruchi biologics at the moment purchasing the they do not pose anational security risk to the US. Here we go And well this is a surprisehere really in some senses given that these EV makers this is the momentlooking at to this purchase tax of the moment the ministry of Industry andInformation issuing this a new vehicle.

Models that will be exempt from thevehicle purchase tax. And that, of course, should perhaps begiving them that. But we don't see that.It seems like this sinking tide is sinking all boats right now, Dave.Yeah and I'm certainly that against also I would even say I wouldn't say toxic,but certainly a counterproductive macro environment that's not that well that'sthat's keeping Chinese assets really from finding a floor.And the stronger dollar is certainly something that we need to talk moreabout going into this week, where the dollar's up against everything as well.I'm here in South Korea.

The exchange rate yesterday is muchdifferent from where it was this morning as I came out of the airport.Let's start on the macro themes and move to China.And Wang joins us right now, chief in China, strategist at Alpine Macro.Yeah one good morning from the Asia Pacific.I was hoping to start off with just the outlook here on macro in the Fed.It's certainly a reminder that, you know, this easing cycle is not going tostart as soon as markets wanted it to start.What are your thoughts and the hopes right now getting priced into thismarket?.

Well, I think as far as China isconcerned, I don't think the Fed really matters that much.I think, you know, the problem in China today is the economies are weak.And so if they can actually push strong stimulus measures to make the economystronger, I think that the R&D will not be on the downward pressure.So I think the problem is not is pretty much kind of China related, not reallyabout the Fed. Okay.Understood. So we'll talk more about the China thenthe China story then. We were we were bantering just duringthe break, the ad break going into this.

Their chat today that for the betterpart of last year, policymakers were trying and putting in place policymeasures to address the economy. And arguably, we're 12 months into thatstory. Should we be concerned over the not somuch the intention, but the toolbox that they have to deal with the currentissue? Right.Yeah. So I think if the economy just continuesto remain at this below below par deflationary environments, then I thinkthe policymakers who were pretty much kind of exhausted their policy toolsbecause for now you have deflation,.

Then, you know, interest rate cutsitself probably doesn't really matter that much.So, yes, I think they do need to take aggressive and preemptive measures toreally backstop the growth problem for now.So, yes, I think, you know, they have been saying thatthey are trying to to conserve, to be conservative, to to try to keep somepolicy tools in the toolbox. But the problem is, you know, if theeconomy continues to deteriorate, I don't think, you know, that option willbe there for for much longer. And the pressure's on, isn't it?I mean, if they continue to let the.

Economyperform suboptimal, this can actually expose all sorts of other perhapsfissures and fractures within it. Right.Absolutely. Yeah.So that's why, you know, they have been policy makers in the past couple ofdays, you know, probably two weeks have been really trying to to pump up thestock market. But so far, all of these measures havefailed is precisely because all of these measures don't really address the keyproblems in the economy, which is very weak economy.And then you have this structurally, you.

Have this confidence crisis.So I think policymakers really have to address those two issues so that themarket can find a bottom. But for now, policymakers are still kindof dragging their feet. And yes, I don't think the heart of thestock market will have we'll find a kind of sustainable floor without furtherpolicy easing or aggressive measures to really revive business confidence.Yeah. Yeah.And, you know, a lot of that is the wealth effect that we see that play out.And that's kind of the property side of things.But, you know, what would you be doing.

Here?Okay, You can pass with a floor under the property market, but you've got torevive the rest of the the economic environment, i.e.engender those animal spirits which whenever they reappear, they seem to bewashed down. Right.So I think a couple of things that we will probably need to monitor.So, so far now, we are still cautious. We believe the market obviously willhave extremely deeply depressed sentiments if the market is cheap.But on the other hand, there is no clear catalyst.So for for some time, the economists a.

Couple of things that we should we canmonitor. One is what kind of growth targets theChinese government actually tries to achieve for the year.Right. So if they they if they kind of publisha relatively ambitious growth target for the year, and then that means that theywould have to use a lot more aggressive policy easing to achieve that kind ofgrowth target. So I think that would be actually apositive sign. Another one is the housing markets.You know, in the past couple of weeks, I think what really changed is ifsomething that really matters, I think,.

Is the housing policy.Now, they allow the Beijing allows local governments to use specific measures tostimulate the domestic property market. So I think that may actuallychange the the housing market dynamics. So I think if the home sales begin tostabilize, begin to improve, and I think that may add a bit more kind of impetusfor the economy. And then the third one would be whetherthe party will have the third plenum, you know, what key policy measures thatthey announced in the plenum. Ten years ago, there was a lot of hopethe party leadership will advance with continue to advance reformagenda, but that has been delayed,.

Obviously.So we need to see whether they can continue on that kind of reform agenda.I think those will be important to revive business confidence.Yeah. Yeah.I was just having a glance at the date today.Fab five, where we're exactly a month away almost to the start of the NPC.And you know, certainly the policy address there and the work report andthe economic objectives, the, the rout in the equity market seems to becornering the large part of the attention of markets.What I want to ask you what with what's.

Happening with the bond markets, becausethat actually is one part of the market that's started to respond to policystimulus, right? GBS have been down eight or nine weeks.High yield bonds have been the outperforming group in Hong Kong.Is that the way to continue if you want any exposure to China, Is it is itthrough fixed income? Well, the fixed income,you know, the bond yield is pretty low already.Right. So, you know, if if our path if if ourpath is in, ultimately the government will have to meet to to stimulate more,then I don't really see bond yields to.

Have much more downside.Yeah. So I think I think stock market will bemore interesting to watch. But for now, it's just too, too early toabout a drop in. Yeah.Ryan, thank you so much for joining us. Have a great week.Achievement China strategist at Alpine Macro joining us out of Montreal.And indeed we're going to keep the fixed income theme going in some sense isgoing to have a look at what's going on with China's state of local credit riskhedging as a hedging tool, I should say. And this has been soaring.Companies have continued to struggle in.

This.Credit markets continue with the impact of these slumping real estate side ofthings. Conditions are ripe for that trend tocontinue, but alone because of the changes with now what's the creditrisk hedging tool that they are using and what does it tell us about privatefirms ability to raise cash? Yeah, we observe a huge pickup inpopularity of these so-called credit risk mitigation warrants.So they're kind of work like the CDS, the credit default swaps in China.So investors have the option to buy them in order to mitigate their credit riskexposure.

And we're seeing the private companiesover the past two years have been largely using these credit tools inorder to sell bonds. So on the on the other hand, privatefirms are selling less bonds in the public bond market so far.And even with those credit and mitigation tools, we're still seeing adrop. So it's it's very obvious that tells youthat investor appetite is not in that sector right now.It's really hard for these firms to get financing.Yeah, So there's some news about some projects have major Chinese developersbeing listed for financing support, but.

That is the credit crunch that they'refacing. Yeah.So Country Garden is the first firm to announce that news because they have somany projects across the country. And we're seeing that seems to be alocal government led drive. So in certain provinces such as Hubei,Canaan, Shandong, these provinces have told certain developers, includingCountry Garden, that they have projects that have been whitelisted to getprioritized financing. So it's good news for the companies forsure, because they don't have to scramble funds from elsewhere to fillthat gap.

But it also makes sense becauseoriginally, you know, these firms have to put down funds with the localgovernment in order to build that project.So the money is indeed with the local government.So it does seem that it makes sense that they are the one to step in to help.And then on the company financing. So, you know, those money are not goingto go to the company to pay their other liabilities.So, so limited help, I would say, for the companies themselves.But yeah, good news for the home buyers. Yes.Well, if there are any, I think.

Thank you very much indeed, Loretta.It's been a bond and a reporter. Right.I've got a lot more coming ahead, including, of course, a look at that toearnings this week out of China and beyond.This is the. And.All right. We were barely a few hours into thetrading week and already rates and effects are hitting us in the face asyour top macro themes today. As you can see, yields are pushinghigher. This repricing that's taking placeacross the Fed fund futures forward.

March is almost completely off the tablenow. May is no longer base case, 80%probability. You're seeing this also play out acrossthe fixed market. The dollar is making a strong comebackearly this Monday. You're getting a weaker Korean one, forexample. I'm not saying that just because I'mhere, but certainly that it's more pronounced than usual.The one is weakening the most in about two months against the US dollar, withthe exception, though. And as you can see, perhaps a little bitlater on, the Chinese currency's.

Actually catching a bit of an anchor maybe on the back of that PBOC effect. Some data is coming out in a few minutesout of the Asian PMI numbers. In the meantime, though, what is causingthis? It's the Fed and the rethinking of wherethey go and when they can go. Jay Powell has signaled that a march cutis now unlikely. Speaking with CBS 60 Minutes, he saysthe central bank needs to see more and needs more assurance that inflation ison a sustainable downward path. Have a look.I think it's not likely that this committee will reach that level ofconfidence in time for the March.

Meeting, which is in seven weeks.Right. Well, you know all of that.And we got this background of some of these tech giants in Asia out withearnings. They include Alibaba.It does also follow hot on the heels of choppy results coming out of US techcompanies. Alibaba's results, of course, as ever,closely watched the company dealing with internal turmoil and a stock stockmarket rout. Let's get to our breaking news editorFelix. Time is with us now.And Alibaba, of course, is going to be.

Absolutely key.Yeah, of course. And we may see the earnings call fromAlibaba to continue because of the strong revenue in Kabul and team ofbusinesses. And he is offsetting some of theweaknesses in the international commerce side.So for the policy side with such high number bring up measures to support thehousehold consumption and you can, Ben, for Alibaba and for the company itself,as you have mentioned, is we suffering the top management and also isorganization by selling some of the stake in the units So we can see thatthe focus of the business for the.

Business will be back to e-commerce andin cow side. Okay.So Alibaba, that's one sim. I see.That's two. Tell us about that.Yeah, we just mentioned a lot of optimism for Alibaba, but this is notthe case for the semiconductor industry. So as am I see, we may see operatingincome to slump about 80% because of the sluggish demand in the smartphone andthe PC markets and us a few days ago adding more firms to the list that theycan see to helping the Chinese military. So this is an election year.We may expect to see these kind of back.

And forth between China and us on themacro side for as must be. So we really have to focus on thecapital expenditures and also the price of energy.All right. Well, what about the wider tech side ofthings? I mean, look at I think Nintendo lookingat SoftBank as well. Yes.So I think overall, the recovery in Asia is pretty uneven before, but it'srebounding, as you can see for the SoftBank earnings estimate, we'reexpecting to see a profit after losses for four quarters because of theinvestment value of the vision fund.

And Tendo is benefiting from the weakeryen to support the sales despite intensifying competition from Ps5.So we may need to wait a few earnings like Pence, then later this month ornext month to see why the scope of the Asia debt.Felix Thank you so much, Felix. Time there, our breaking news editorjust getting through the earnings which are going to keep him very busy in thenext few days. Yeah, exactly.Thanks a lot, Felix. All right.Well, we were talking to Felix. We go to thoseservices figures, composite services, I.

Figure coming through here just a shadebelow estimates, 52 and a half, as opposed to 52.6.These services, PMI, 52.7, just down from the estimate of 52.9.In fact, that was the actual figure of 52.9.So there we go. That is that PMI number coming through.And just quickly, just checking in a little more detail on all that.The estimate actually for the PMI itself was 53.We've got to get rid of 52.7, down from 52.9, of course, the previous month,which was, of course, December. These January numbers actually here verygo.

Right.That's what's going on. This is the dollar.And you can see here as it sees a little movement there against the yuan afterthat, much stronger than anticipated. Six This is a sector breakdown for thetech anyway, 1.3% down, dragging things lower Hang Seng 8/10 of 1% to thedownside. And overall we are in the red.We got much more on the way. This is the backand. Yeah.What a weekend. And certainly when you look at theweather in Hong Kong, I guess in many.

Ways there's a interesting juxtapositionwith what was supposed to be a weekend of, you know, celebrating who I think isthe best footballer on the planet, bar none.Across all time Lionel Messi. But we could see a messy fall out, nopun intended, because he just didn't he he didn't play, of course, in that muchhyped up match that took place over the weekend there.He basically sat on the bench for for the better.Well, for the entire for the entire match.Yeah. I mean this was the into Miami coachsaid that I think there goes Geraldo.

Martino he did acknowledge that isbecause it's a huge this but also from the government they said that he didn'twant Messi or indeed the Uruguayan star Luis Suarez from playing because of therisk of further injuring them. Well, we had of course, the event didreceive something like 1.9 million USD in funding from the government in thegovernment saying I'm going up and saying it was extremely disappointed andmight deduct that sponsorship because of his failure to play here.Of course. And we had of course the crowd wasshouting by the end of it for a refund. You can see the thumbs down by some ofthose supporters who came in and holding.

Up Messi shirts.So you can see that. And much to the chagrin, he did not comeout. We had this really against thisbackground of now Hong Kong trying to re-establish and restore its reputationas a world class centre. Right That of course, after the strictpandemic curbs and of course the crackdown on protest as well to get to.Yeah, I was about to say I was about to say to I mean the well, you know, whennews broke that the club was coming to Hong Kong and, you know, Messi andcompany were about to play I think a few days after that, back in December, youknow, that the ticket prices came out.

Expensive, obviously.And, you know, people were wondering what was the risk of him not playing.And I remember back then a reason why fingers are not pointed are pointing atthe present tense of the organizer Tattler was because what what are thechances of him not playing. And I think Tatler back then in fact, asrecently as Jan 11 posted on their social media that rest assured, theysaid that he was going to play. So interesting that they came out and,you know, after this and also saying that they did not expect that to happen,I guess if they were trying to preserve his health, that's, of course, on theteam.

That's a prerogative of the team.But certainly the the optics and they should have just Ithink they should have come out and said he was not healthy, just so to, I guess,manage expectations and keep the crowd from doing what it did at the end of thematch. Right.And just not kept the crowd waiting to the end of the match to figure out thathe wasn't in fact going to play after all anyway.Yeah, I mean, I mean it's what, 4,880 HKD at 624 U.S.dollars for a ticket that, you know, they sold out within an hour when theywent on sale in December, as you alluded.

To.I mean, quite something here. No wonder there's the disappointment washeightened. All right.Well, we can, of course, have a look at what's going on now as far as ourmarkets go. It's not a great day.We had a 20% drop by four for she on Friday.This is down, of course, to these geopolitical concerns about curbs beingput on the company. And what they saying, though, is thatoperations do remain normal uptake, though, down 5.3%.We got, of course, as ever develop is in.

The mix, too.And let's have a look at what's going on with some of these property companiesand just seeing how real estate is behaving itself.There we go. Country got it on the way up against abackdrop of overall Chinese markets. Well, really, I suppose you could usethe word languishing. You know, we've got them on the way downagain. And adding to the rout that we witnessedlast week, this comes against the backdrop of the latest pledge bypolicymakers to try and stabilize what is a market that's really not goneanywhere down.

It had indeed, the CSI had actually theworst week since 2022 as well. And we've got those the Hang Seng ChinaEnterprises Index. In other words, the shares that billionsof those really trailing most major equity benchmarks of right around theworld. And that stability pledge not really atthe moment playing out and resonating, as it were.So there we go. And overall markets here.What are you seeing, Dave? Oh, but I'm good, actually, not to havea look at the Philippines. We got through theeye that up half of 1%.

Just a bit of green out there, seeingsome green also for the Nikkei 225. But it is about Chinese stocks which arereally at the moment continuing that descent.So what is likely to happen? We've got a lot to come and we've gotthen the markets, Asia coming your way next. Why do the biggest names in businesschoose Bloomberg? It was a great question.Great question. Great, great question.The question I get all night bird top experts, Great questions.

Welcome to the world of decentralizedfinance. You can see the massive gains for the OGcrypto coin breakout. We have all perhaps long awaited finallyrealized. We'll see if it sticks.Bloomberg's covering all things crypto for people.There's no question this industry is composed of some bad actors and somegood actors, but transactions volumes have surpassed $24 billion per day.And the technology. Stop talking about the technology.Start demonstrating the utility. Bloomberg Crypto Tuesdays.

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