Bloomberg Morning time: Asia 01/26/2024

This is DAYBREAK.Asia. We're counting down to Asia's majormarket opens just ahead of the start of trading for Japan and South Korea.But Paul, of course, just about 90 minutes away from the start of trade forChina as well. And the question for those markets todayis whether they're going to be facing any sort of reality check.Yeah, that's true. We have seen a pretty decent rally forboth the Hang Seng and the CSI 300 over the past couple of days off the back ofthe news of a 50 basis point cut coming. But yet questions remain around thedurability of that.

Let's see if reality does start to setin. BELLAnd then I think it's perhaps a reality as well for the BOJ and what they'rereally seeing signalled in the inflation numbers because we just had the servicesCPI coming out. But the Tokyo inflation numbers half anhour earlier telling a bit of a different story here.But the open for trading of the Nikkei and at the start of the day, we are justgoing to be tracking those moves that we had in the Wall Street session.So very strong six day of gains overnight that could translate across tothe session so far.

But as I said, that focus on thoseinflation metrics that came out in Tokyo, inflation really the one to trackbecause we saw it falling below 2% for the first time since spring of 2022.Tokyo inflation, a leading indicator for the nationwide level services paper.As I said, pretty much coming in line with estimates.We are seeing that tracking around a three decade high.So something that could help the BOJ will be one of the things that itfactors into its decision. Even though those BOJ meeting minutes wejust got at reflecting, of course it is intimating but telling us that officialsperhaps likely to wait until after the.

Spring wage negotiations are completebefore they start to shift away from negative rate settings.You can see here stocks coming online to the downside.Let's switch on. Take a look at what's happening in Koreaat the start of the day here. The focus is also coming down toearnings. And one of those to note is Intel, ofcourse, because we had the numbers after the bell today, just a verydisappointing forecast for the current period because they're saying that salesin the first quarter are going to be maximum $13.2 billion.That's about $1,000,000,000 short of.

What the Wall Street projection had beenprofit as well going to be falling. So it just really a signal to us thatcompany is still seeing a lot of weakness at chip names or it linksstocks, very heavy concentration, what we see in Korea markets and likewise,those are coming online to the downside. And we see that Korean one weaknesscontinuing to persist past its 200 day moving average for the market.Normally around this time I'd be updating you on what's happening inAustralia that the short answer is nothing and close for a public holiday.But we do have trading news debt underway in Japan.During the US session we saw yields.

Falling and that trend is continuinginto the Tokyo session. Yield on the ten year right now for1107, perhaps motivated by the big beats that we saw on GDP suggesting this softlanding narrative well and truly intact. Those GDP numbers, 3.3% on year for thefourth quarter for all of 2023, two and a half per cent personal spending in theUS really remaining strong and the economic strength in the US defying alot of the bears and a bell. Yeah.And Paul, let's bring in our next guest or our first guest of this hour, AlexWolff, head of Asia Investment Strategy at J.P.Morgan Private Bank.

And Alex.Yeah, really strong start to the year for the NIKKEI.And we've seen it gaining nearly 10% over this period, even though perhaps alittle bit of weakness coming through in the session so far.Uncertainties, of course, around what the BOJ does and what we see in terms ofany sort of normalization. But there's other factors that investorsare very positive about, even though the market lacks breadth as well ascontinuing to prefer it, we in the near term, we see it as both a near-term anda long term story. In the near term, we think there couldbe some consolidation.

It's run up a lot.You've seen very strong flows, particularly say outflows, even out ofout of the Hong Kong into into topics. And so it's also it's also run up alittle bit ahead of where we see fundamentals, both in terms of where wesee earnings upgrades somewhat disconnecting from where PMI's are.That said, over the long term, we do think that the corporate restructuringstory is is real. It will unlock additional value for forinvestors and we see many investors still underweight Japan.So we think that underweight could also graduate close even Japanese householdsare are relatively under owning.

Equities.So we think structurally we do like adding but adding more on pullbacks.Yeah, it's interesting when you talk about longer term because I think yeah,when structural growth and you think of India, you don't so much think of China.So when it comes to Chinese equities, what's your long term play there?We're still selective. We think it's something that investorsneed to own. It's the world's second largest economy,very deep liquid market. There's always going to beopportunities, but it's just about being more selective instead of just buying itat the index level and expecting that.

Growth to necessarily come through,Nominal growth has come down quite dramatically.Nominal growth is going to drive earnings and we're looking at a fairlyweak nominal growth outlook there, especially relative to India and manyother economies in the region. When it comes to the the the policies orpotential policies that have been announced over the course of this week,it's really clear that policymakers want to get ahead of this to some degree.What's been your reaction so far? Yeah, it does appear there's a newurgency both to arrest some of the sell off that you've seen in markets.But as well, the start of the year data.

Has been fairly has been fairly weak,fairly disappointing. So a newfound urgency, I think, to to tostem some of the slowdown. But it's still too early in that wehaven't seen any really comprehensive of the stimulus package or reallycomprehensive plan to address the property sector.So from our perspective, it hasn't been enough to really, in our opinion,rejuvenate confidence and and bring about either a new found bull market orreally reaccelerate growth. So maybe not newfound bull market, if wesort of look at it from the other end of the telescope of stocks found a flurryof in China.

That we do think they have.I think all the stimulus measures and policies that we've seen announced inaddition to just the fact that they are quite cheap, I think that likely limitsthe downside. And so we're looking at particularlyoffshore China as somewhat rangebound in the near term, we could see a pop basedon short covering, based on reaction and improvements in sentiment to some of themeasures that are announced. But see it largely, largely rangebound,particularly on the offshore side. But that said, do see do do see itcapped on the on the downside, limited downside.And if we see additional measures.

Announced then and could absolutely seeupside. So we do still see it somewhatasymmetric but more likely rangebound. Do you have any concerns about theamount of debt being carried by Chinese companies?Yes, but that's a that's a long term. I mean, that's been a concern, I think,when you look at the amount of overall debt.And second, only to Japan, most of that is held in local governments.A lot of that is held in so ease, I think when you actually look at privatecorporates, the amount of debt overall leverage has actually been coming downover the last couple of years.

So I think going private corporates,particularly massive corporates, not that much of a problem.The problem is is is fairly concentrated property, local governments, etc.That's how the overall macro level, yeah, it is absolutely a concern, butmore of a long term growth concern. What has been interesting overnight aswell, we got those US GDP numbers and it just tells you that US exceptionalismperhaps it can continue. It seems like markets or investors thatthe individual consumer is also withstanding high rates as well.Yeah, it's certainly been a surprise. I mean it's even surprised.Powell I think in this December press.

Conference in terms of saying theeconomy, saying by the supply side you've seen a real increase in laboursupply that has brought down wage growth and the consumer, contrary toexpectations, stayed say quite strong. So you really are looking at least bythe fourth quarter numbers at somewhat of a Goldilocks type scenario of stronggrowth, inflation continuing to cool. That is the big question though.Does inflation continue to cool to the target?As I say, somewhat stock, but the numbers are definitely encouraging forthe soft landing. The soft landing due for this year.It's when you take a look at the stock.

Market performance because that run upthat we've seen really from October stocks kind of thing priced toperfection at this point. What are you thinking in what we'reseeing from earnings so far? Because it does appear a little bit likea mixed bag. Yeah, we do think that earnings are goodbecause we did go through quite a trough last year.So you have good comps in terms of we saw across a number of sectors earnings,earnings turned quite negative. We do think across the board we shouldsee a positive return, return to earnings.We're more or less in line or slightly.

Below consensus.Nonetheless, we do think that that positive, positive earnings growth thatwe will likely to see, especially across the board, can continue to driveequities a bit higher. That said, we don't see that much roomrelative to our target from where they are now because they have run up a lot.But we do see equities going a bit higher, of course, of this year.All right, Alex, thanks for your time this morning.That was Alex Wolff, head of Asia investment strategy at Jp morgan PrivateBank. Still ahead, a closer look at Intel'sdisappointing forecasts as shares tumble.

In late trading.We'll have more analysis next. This is Bloomberg. You're watching DAYBREAK Asia.About 10 minutes so far in to trading for Tokyo this morning.And a big move just coming on line here. You can see that drop for a renaissancethere at the bottom, down more than 5%. Now, Renesas specializes in chips fororders and other industries. And the big news that came out yesterdayafter the bell is that Hitachi and NBC are seeking to raise a total of up to$2.1 billion by selling off their stakes in the company.So it's going to be Asia's largest.

Additional share sale so far this year.Of course, we're just in the first few weeks, but a very significant one totrack the two holders. They're offering 123 million shares atup to ¥2,528 apiece. So block deal that we saw the terms atBloomberg News, but the price representing a 6 to 8% discount to theThursday closing, you can see that drop in, Renay.So it's really reflecting the terms as well.But Japan's equity capital markets certainly active since last year becauseshareholders or companies looking to take advantage of climbing equityprices.

Also to note, if you change on now iswhat we're seeing in terms of chip related shares across the region.We had Intel putting out a disappointing forecast for the current period.It is the largest maker of computer processors, but it's tumbled, of course,in after hours trading. We've seen Intel dropping more than 10%during this period. Other chip linked names as well.We're seeing a bit of weakness coming through.But let's get more on that outlook now because we've got our big Bloombergintelligence analysts joining us here this this morning.Quanjian Sobhani.

So could you just talk us through whatreally stood out to you in the numbers? Yeah, I mean, the definitely the one.Q Miss was the biggest thing that stood out.You know, they had weakness in their non-core segments, which is PSG, FPGA isTelcos, Autos, Industrial and Enterprise, which was a growing concern.But beyond that, we had expected the PC and the server, which is their corebusiness, to sort of come to the rescue and offset some of that.And that didn't happen. Those were also guidance.Those are also going to come at the lower end of the seasonality.So that's a little bit of a concern.

But on the on the positive note, theydid guide for the total sales to resume its growth trajectory after one.Q But because they. Yeah.And also on a positive note, fourth quarter was a slight beat.So what were the drivers for that? Yeah, the primary driver there wasbetter client, which is their PC segment.You know, for Intel, the three Q most of its order inventory was drawn down.So for Q what we saw is customers growing down on the newer inventory fromIntel, which is the core and ultra core processors, and these are higher pricedwith higher ASP.

So it helped them get better revenuethan we anticipated in terms of what Intel can have into forfuture growth drivers here, We know they're developing their own processor.We don't have a lot of details on that. How concerned are you that that Intelhasn't gone public yet with any of the large customers possibly for itsproject? I mean, it is concerning, but at thesame time, nothing outstanding from what we expect.Look, they were they were behind in media and AMD.Right. But when you talk about the acceleratorsfor the datacenter and the two sort of 2.

Billion pipeline, it for a scale likeIntel, it's still pretty small for a similar pipeline for AMD is prettylarge. So there is concern that there is a lackof sort of big customer announcement or even more than that lack of a revenuetrajectory as to how much of that pipeline we will see converge in thisyear or next year. Yes.All right. Bloomberg Intelligence is seniorsemiconductor analyst at 270 there. And stay tuned for an interview comingup with Intel CEO Pat Gelsinger for more on the company and the industry outlookas well.

And that interview coming up later on.Bloomberg Technology. Just get your crossing alert on theBloomberg Channel at the moment. LG Energy, the South Korean batterymaker out with fourth quarter earnings, operating profit coming into Miss 338.2billion won. The market was looking for more like 465billion won LG Energy saying 2024 CapEx that's going to be similar to 2023levels and that's targeting a mid-single percentage revenue growth for 2024 aswell. So a bit of a miss there for LG Energy.Shares in South Korea right now trading pretty much flat.Well, optimism over A.I.

Is fueling a seemingly unstoppableadvance for Microsoft. The software giant closed the New Yorksession with a $3 trillion market cap for the first time.Bloomberg senior editor Chris Palmeri joins us now.US and Chris, a huge amount of optimism around what it means for the future ofMicrosoft. How much longer is this enthusiasm gotto run well up in the.Investors may be not in the media world, which is, you know, in a panic aboutthis. You know, there's a lot of believers inthis technology that it is going to.

Change every industry on the planet.And so whether that comes to be or whether this doesn't live up to the hyperemains to be seen. There's certainly a lot of questionsabout ethical issues. And we saw the Federal Trade Commissionin the U.S. start an investigation into thecompanies today. So it's obvious that there aredefinitely some speed bumps. Yeah.Talk us through more about how concerned you are by that FTC and could we seemore of these sorts of crackdown perhaps on monopoly power to come?Well, there have been lawsuits and.

They've had this six months betweenwatching regulators and the technology industry.But this is definitely something that's going to continue.We've seen news media organizations, sue, about artificial intelligence.We've seen them Hollywood writers wrestle with this issue.So, you know, the regulators investigating today have to be takenseriously. But we really don't know where this allwent because there's just so many question marks about how this technologywill impact our lives. This is only been three months sinceMicrosoft acquired Activision for $69.

Billion, and now there's a lot oflayoffs happening. Tell us more.Yeah, 1900 people announced today quite, quite a big chunk of that gamingoperation at Microsoft. You know, it's funny.This is something that they talked about during this long tortured acquisitionprocess. We're once again largely right throughregulators tried to prevent this acquisition from happening.It ultimately did. And now now we're seeing theconsequences. Not unusual for companies doing bigmergers to do layoffs.

Microsoft is implementing its strategy.We've seen some pretty senior people at Activision Blizzard leave today.We've seen games canceled, ones that have been worked on for six years.And we're seeing this throughout the video game industry as well as thesecompanies sort of refocus on their core brands and less on their sort ofexperimental projects. Yeah.And in terms of cancellations, one of the big ones is Odyssey, which was asurvival game six years in the making. It sounded like it was going to be quitegood and now the plug has been pulled. Why?There were a lot of issues with it.

It was a complicated game.And Microsoft or Activision Blizzard had problems with the technology.Our colleague Jason Shaw has really this story out today with the backstory of itall. But games can be complex things,especially when you're trying to break new ground.And in this case, it just didn't work. All right.That was Bloomberg's media and entertainment senior editor, rather,Chris Palmeri. And as Chris just mentioned, three ofthe biggest names in Tech Alphabet, Amazon, Microsoft have receivedinquiries from a US regulator about.

Their investments in partnerships in AI.Bloomberg Su Keenan joins us with more from New York.And Sue, what exactly is worrying the FTC about big Tech's alliances here?Well, they want to make sure that the competitive landscape stays competitiveand they want more information on what appears to be a close knit community andties between old guard, big tech and these very exciting new AI startups.The FTC making it clear that closely monitoring the industry in a publicworkshop with FTC chair Lina Khan saying these AI companies, quote, cannot useclaims of innovation as cover for lawbreaking.Now, the FTC said it sent subpoenas to.

Five companies to gather information.And what you're looking at here is bots from open AI, the maker of chat GPT,They're playing video games. It's part of what generated enormousexcitement in the market over the last 14 months.The probe is focusing on the more than 19 billion investments by Microsoft,Amazon and Alphabet's Google and the series of transactions that appear tohave cemented alliances between the world's cloud server giants and theleading developers of AI software. So the receivers of the subpoenas wereGoogle, Microsoft, Openai, Amazon and Anthropic.That is the fifth target.

This is an AI firm start up that wouldbegan in 2021 and was created by a lot of employees who left open A.I.and wanted to start their own firm. So again, there's concerns that some ofthe most promising AI startups are now depending heavily on a small group ofvery big tech firms for their financing and for their infrastructure needs.And the FTC wants details. So usually the Justice Departmentconducts antitrust investigations involving big tech.So what's changed here? What what's changed is perhaps a littlebit of politics and a little bit of procedural authority that allows this tohappen.

We know at least one Democratic memberof the Federal Trade Commission has criticized the tech giants forstructuring their transactions, their huge multibillion dollar funding intothe air in a way that avoids the U.S. merger law.So they're not required to notify antitrust enforcers.The agency is using its so-called six bit authority to do what they callmarket studies, to issue these subpoenas and gather information.And they also have the authority to then launch probes based on the informationor to aid in existing probes by other agencies.Microsoft is reportedly invested more.

Than 13 billion inches GPT maker.Obey. I.I. We know that Google back in Octobercommitted to back their entropic. Would you be an Amazon?Last year also agreed to an investment of as much as 4 billion.So you're talking multibillion dollar investments and the FTC wants to take avery close look. Back to you.All right, Bloomberg Su Keenan there. We have plenty more to come on DAYBREAK.Asia. This is bloomberg.

Blackstone shares gained after itreported distributable income of $1.11 per share, and that beat forecasts of$0.96. President and CEO Jonathan Gray told ushe expects IPO activity to pick up in the second half.What's happening in our business is we're benefiting from this regime shiftas we move from this rising cost and capital environment which we saw underthe Fed for the last couple of years into an environment here where asinflation comes down, the Fed's easing and that leads to a virtuous cycle forour business. Equity markets open up.Debt costs, The capital comes down.

IPOs occur.M&A activity picks up. And that's very positive for ourbusiness in terms of a reacceleration. A lot of your inflows really came in thecredit space. But at the same time, John, there are alot of investors out there who are worried that perhaps private credit isapproaching bubble territory. The question becomes, are there enoughopportunities out there to prudently put the money to work?Well, when you talk about things like a bubble in credit, what I like to look atis how much risk is there. And if you look at the loans wereoriginating in direct lending to private.

Equity sponsors, on average today,they're about 40% loan to value. That's almost half what they were backin the 0607 period when we had an actual bubble.Default rates in credit across are non-investment grade borrowers are lessthan 30 basis points. So we still see a very healthy marketout there. What we do expect is that transactionactivity will pick up and that folks like us in the private credit space arein a really great position to deliver for borrowers.If you think about what we do, we make loans to companies and hold them eitheron behalf of our pension fund clients.

It could be for individual investors inthe form of BDCs or in investment grade for our insurance companies, and we candeliver certainty to borrowers, and that is taking more share.And so I think what we're seeing is a structural shift towards private credit.It doesn't mean that we're seeing excesses build up in the system, as Isaid, because the fundamentals in terms of loan to value, credit quality stillremain strong. How do you feel about the opportunityhere for M&A to move forward? You mentioned deals coming back, but thereality is and we've only seen it in drips and drabs, how fast do you seeyourself putting hundreds of billions of.

Dry powder to work?Our expectation is we'll see a pickup. And if you looked in our fourth quarter,you see some early signs of that. Our our lending area saw more than adoubling in terms of new loans we were making.If you look in our private equity area, we've been working on some of thesetransactions a long time. But in the last six weeks of the year,we announced six deals across the US in Europe, many in sectors we like digitalmarketplaces, enterprise software, energy transition and in real estate.We also saw a pickup in activity, privatizations, a big distressed loanportfolio.

So we are seeing a pickup.It does often take a bit of time, but things are starting to loosen.So it does feel like for M&A, a bit of an inflection point.That was the Blackstone president CEO, Jonathan Gray speaking to BloombergSonali Basak. And we are half an hour to the sessionin just under for trading for Tokyo and Korea today.Australia is shot for a public holiday, but there is quite a bit of weaknesswe're seeing across sectors here with the exception of energy standing out,but certainly not tracking those gains we had for another day on Wall Street.

The consensus around the table of theGoverning Council was that it was premature to discuss rate cuts.And in addition to that, I typically stand by my comments.We had to continue to be data dependent. So rather than being fixated on any kindof particular calendar which would be being data dependent, we reaffirmed ourdata dependency. That was the ECB president, ChristineLagarde, speaking after policymakers left interest rates on hold for a thirdtime. A muted affirmation as well that camethrough from God that the ECB could start to cut rates from around mid 2024.But certainly taken by the markets as a.

Signal that earlier moves are very muchin play now. So we've seen traders really stepping uptheir bets that we could see a reduction in April.And more than 140 basis points of easing over the course of 2024.And so that's really been playing into that dynamic.Your stocks futures have just come online and you can see here pretty mutedso far, but perhaps looking to track some of the gains that came through inthe Wall Street session as well, higher for a sixth straight day.What's interesting, of course, the key market we're tracking this week is Chinaand these expectations around easing.

Bloomberg Economics says the PBOC isjust getting started when it comes to more stimulus on top of the latestreduction that was announced earlier this week in terms of bank reserverequirements. So our China economy editor JillDeSantis joins us now for more. And Jill, this is really what trade iswanting and banking on, but how much more aggressive do policymakers need tobe? So I think at this point, traders arecertainly expecting them to get a bit more aggressive this year, although Idon't really think that that's really the signal that we've gotten from thegovernment as a whole.

I mean, we just saw Ali Chang last weekin Davos say that they don't want to roll out massive stimulus to help theeconomy. Now, on the monetary policy side, I dothink what was really unusual about this press conference that we had from thePBOC governor this week was that he kind of front ran this announcement of thisreserve requirement ratio cut. Normally you'd see another state agencykind of announce that first and then there would be a bit more of achoreographed way of getting to that. The fact that he announces that in apress conference maybe symbolizes some urgency.I think what we'll probably see from the.

PBOC see this year, maybe you seeanother couple of cuts to that ratio throughout the year.I know that Goldman is forecasting another one in Q, Q2 and Q4.I think I know Bloomberg Economics is also maybe seeing a couple more trimsthere, but then they also have to take that with this desire to kind of balancethat with more structural tools that they may need to help the economy.The PBOC see over the past couple of years, especially during the pandemic,has been really focused on guiding credit into very specific targeted areasthat they're focused on green energy, that, you know, that kind of stuff.So it's really hitting that balance as.

We get in through the rest of the year.Jill, we're going to be hearing from another policy maker, Shai Yong Xi, thevice head of China's national finance regulator, a little bit later on today.What are we expecting to hear there? Well, I think at this point, when itcomes to finance in China, I mean, look, we are in the middle of this $6 trillionstock market rout. I think at this point, what peoplereally want to hear from China is any kind of additional pledges that canreally restore confidence in this economy, in the stock markets.That's really what we're looking for here, Right.So earlier this week, we also saw the.

Premier, Li Chung, you know, reallystressed to a lot of government agencies that they needed to do more to kind ofput a floor under the stock market rout. We've seen that in the form of not justwhat we saw from the PBOC, but also from some other regulators this week in termsof vowing to kind of, you know, protect things, stabilize things.I would think that we would want to see anything that really points to that ideaof a bit more stability, whether it's, you know, concrete measures, whetherit's pledges. I think that anything that can kind ofproject that idea of, you know, have confidence in this economy right now isreally what people are going to be.

Looking for.All right. China economy editor Jill Desus there.Let's bring in Andrew Collier, managing director at Orient Capital Research.And Andrew, we just heard Jill there talking about policymakers efforts toput a floor under these markets, restore confidence.We have seen the CSI and the Hang Seng both gaining over the past couple ofdays. Have they done enough?Is this really going to be durable? No, I don't think it will be durable.I mean, you've got a couple of things going on.You've got monetary easing through bond.

Issuance and interest rate cuts.You've got some regulatory changes in the gaming front.And then you have this very odd rumors of a ¥2 trillion stimulus injection intothe stock market by state owned entities, none of which has beenactually proven or officially uttered. So.And then you have, as you just pointed out, you have Li Chang standing up andmaking statements at a very high level about their intentions in the future.I'm seeing a lot of symbolic gestures. The monetary easing is significant.I would agree with that, because we've had three years of crackdown in theproperty sector.

And this is this is the earliest part ofthe larger stimulus that we're seeing. But so far, the government has been veryreluctant to open the floodgates because they're worried about more money goingto local governments and going to the property sector.So and the whole thing about the 2 trillion is just rumors at this point.And the idea of state buying of stocks is not necessarily the best way torejuvenate the economy. You need to make structural changes.But when you have a structural downturn, so this is steps that the market takeson board. But I don't think it changes thecalculus of a property market that's in.

A major downturn with massive amounts ofdebt and no easy way to get out of that. You mentioned the need for reform, butwhat needs to be done in your view, to really restore confidence to markets andto investors? Well, the property crackdown was a stepin the right direction because that's a bubble that's been propping up thegovernment and local government revenues for the last 20 years.So that was good, although it's difficult to see how they're going toget a get out of that. The reliance on the state sector forgrowth, industrial loans are going out. A lot of those are going to saycompanies that are not very efficient,.

The property developers, the only onesgetting money these days are state owned property developers and thecentralization of policy in the Central Financial Work Commission in thePolitburo means you've got a very sort of stiff regulatory environment.What you need to do is try to get money to the private sector, relinquish someof the crackdowns on the tech sector that happened a couple of years ago,starting with the financial and and Alibaba and some others, and and let thesmall businesses flourish because, frankly, they're much more efficient useof capital than the state owned sector. But that's not something that Xi Jinpingis really interested in doing.

It's also a lot easier said than done, Iguess, because I think, yeah, you can have a triple-A cut, but then at thesame time you've actually got to want to see loan pick up.And when you take a look at the credit numbers, I mean the numbers, the demandfor loans from households, from corporates, private corporates is soweak. So what is it going to be really thatspots any sort of meaningful sentiment shift?Well, you're right. It's pushing on a string.They're throwing the money out there and nobody's picking it up.It's difficult because semiconductors.

Has a future, but maybe ten years fromnow, electric vehicles and green energy is pretty small in terms of the overalleconomy. So you've got to find new growthdrivers. There's no easy solution.You've got to let the market sort of get money.The problem is when you have at least half the credit going through the statesector, they're not very good at giving money to the private sector becausethese are guys who have jobs. They don't want to lose them if theygive it out to somebody who's not backed by the state.So I'm hoping that there's going to be.

What I call forced reform, which isessentially local governments are sitting there, their tax revenue beingdown. They're watching massive defaults in theproperty sector, and they're going to push people out on the street and tellthem, look, we're going to give you 100 bucks, see if you can start a business.This is what happened 20 years ago when China entered the WTO and 6 millionpeople were unemployed. They had to go out there and try to findtheir way. And some of them did and some of themdidn't. And I guess just thinking about whatyou're saying there about finding new.

Growth drivers, because you think aboutsolar, you think about EV as well. These are all markets where there's agrowing concern from Western democracies that China has too much a monopoly.So how does that sort of work? When are we going to see some sort ofdiplomatic shift? Or is it that China continues to lookfor those other key markets, Africa, the Middle East, and try and tap futuredemand from there instead? No, they can't do that.I mean, that's a very good point. I mean, it has been a success story,although the province has wasted a lot of money getting to where they are now.But I do think that there's going to be.

A lessening of wolf warrior diplomacy.China desperately needs the US dollar trading environment because they can'tswitch to the ruble or the yuan. There aren't enough players out there,and they're going to have to try to figure out a way to play ball with theEU in order to maintain auto exports. At some level, that's going to keep someof these companies alive. So I'm expecting some softening of thetone going forward, although that's not in Xi Jinping DNA.But it may be forced upon him in the Politburo going forward.Andrew, I just want to get your thoughts on debts as well, particularly theamount of death being carried by a local.

Government financing vehicles, companiesas well. I mean, we've seen plenty of defaults inthe property sector by now. Are you concerned that we could seedefaults broadening out to other sectors as well?I do. And it's very funny because three yearsago if you'd said, gee, a lot of the property developers would default,everybody would have said, no, that's impossible in China.Recently, people said You can't have a trust.Defaulting trusts are kind of shadow banks.And yet we've had Jim wrong trust.

Default.Now the next thing to go is going to be these local government financingvehicles with about 9 trillion U.S. in debt.And people say they can't default because then there'll be a collapse ofthe system, they will start defaulting. And the government has been pretty goodabout containing these things because they don't have tradable products of theway we did in the United States, the mortgage crisis, and they can controlthe messaging. So I think we're going to start seeingthis kind of piecemeal default filtering through the system.And that's what's happening so far.

I'm curious for your views on on howmuch you think China actually cares. And China I mean, President Xi Jinpingactually cares about the moves in stocks because as stocks just account for sucha small amount of household wealth, when you compare it to what's happening inthe real estate sector. Sodo you really think that they are that bothered by by actually trying to propup equity markets? That's a great point.I totally agree with you. I don't think they are that I don'tthink Xi Jinping really cares, except it is a measurable optic that embarrasseshim in front of the global audience.

That's the issue.But that's why we're not seeing actual buying.We're seeing rumors of state entities buying, but we're not seeing actualhabits yet. So it's unclear to me if they're reallygoing to step in with the cash that the market is expecting.All right. Andrew Colley, a managing director atOrient Capital Research, thanks so much for joining us.Just want to check in on some of the oil stocks trading in the Asia Pacific atthe moment. A bit of a rare bright spot on themarkets that are up and running right.

Now.We got Inpex, its oil Corp, better by 1% at the moment.Energy is the only sector in positive territory in Japan at the moment and wehave seen crude prices rally as well. We've got oil up on China, stimulus, USstockpiles falling and of course that ongoing tension on the Red Sea helpingto support energy stocks in Asia at the moment.We do have plenty more to come on DAYBREAK.Asia, this is Bloomberg. Taking a look at some of the movies sofar with just under 45 minutes into the session for Japan and Korea trading,Australia's shot today for a public.

Holiday.But Renaissance one of the names we're tracking in particular.So this is a company that specializes in chips for autos and for other industriesand you can see it here off nearly 7% at this stage.What's happened is after the bell yesterday, Hitachi and NBC announcedplans that they were going to be seeking to raise a total of $2.1 billion.So they're selling off their stakes in renaissance to try and shore up somemore capital here. So the terms of the deal that was seenby Bloomberg was that they'd be selling them for up to around 20 ¥500 apiece.And that price represents a discount of.

About 6 to 8% to the Thursday closingprice. You can see here, unsurprisingly, we areseeing Renesas drop back down to that sort of level here.But Japanese equity markets certainly active since last year because companiesas shareholders are seeking to take advantage of climbing equity prices.It's all about trying to raise funds. But Renesas, one of the movers thismorning, let's change on take a look at Asian chip related shares because wealso had Intel issuing a very disappointing forecast after the belltoday. So the company saying that sales in thefirst quarter are going to be at 30.

$13.2 billion.You compare that to the average analyst estimate, it was about $1,000,000,000higher than what Intel is saying could be the peak for the first quarter.So certainly some concerns here because Intel is really struggling to defendwhat was once a dominant position in data center chips.So we are seeing chip makers, again under a little bit of pressure so farpoor. Well, let's have a look at some of theother corporate stories that we're following.LVMH sales rose at the end of last year in a sign of resilience at the world'slargest luxury conglomerate.

Revenue at its key fashion and leathergoods unit, which includes Louis Vuitton and Christian Dior, jumped 9% in thefourth quarter. Overall, organic sales rose 10% and thattopped estimates. The company's CFO sees the business nownormalizing after a post-pandemic boom. We've learned from Sheehan investors aretrying to sell shares in private market deals that value the online retailer atas low as $45 billion. The firm achieved roughly 66 billionduring last year's fund raising, but sources say sellers are struggling tofind buyers. Sheehan is battling intensifyingcompetition and regulatory scrutiny.

Ahead of its anticipated US debut.Jp morgan CEO Jamie Dimon is moving some of his top lieutenants into new seniorroles. The shuffle includes moving JanePiepszak to oversee the corporate and investment bank alongside Troy Romerpositions them for wider experience as Diamond prepares potential successors.Halfway through his five year retention package.A Brazilian judge has ordered BHP Ballet and their Samarco iron ore joint ventureto pay $9.7 billion in damages caused by a 2015 tailings dam disaster.A resolution over damages would help ease the legal uncertainty hanging overthe companies.

The dam collapse killed as many as 19people and contaminated waterways in two Brazilian states.Anabel Paul Porsche says its new vehicle provedso popular in the US that it won't be able to keep up with demand.It's just unveiled an electric version of its bestselling Macan SUV.We spoke exclusively to North America President and CEO Timo Resch about whathe expects from the new model. We are pretty sure that with the launchof the Macan Electric and we look pretty much not be able to cope with thedemand. And definitely in the first year, Ithink there's definitely a lot of.

Demand.A lot of people are waiting for products like this.And this comes at a stage where the Macan, as we have it in the market rightnow with the combustion of the combustion engine car, has its mostsuccessful year in the history as of last year.So there's high demand for the existing platform.And I think a lot of people are looking for this new latest edge technology thatdoes everything that the Macan already has going for it even to an higherdegree. So for that, for that reason, I feelpositive about it.

And then we can really see in the year2025 and upcoming what the real relationship between the ICE version andthe best version will be right in the foot the first year.I think it's just customer demand driven and what we can supply from our factoryin Germany. So.Well, exactly so so your supply constrained, right?Timo You know that demand for the electric Macan is going to outweigh yourability to supply when you are phoning your your counterparts in Germany.How much supply are they able to guarantee you for that first year?I can't go into details of numbers, but.

I think we are very much driven byproviding usually always just one car less than the mass market is asking for.So this is for our flexibility. Also in terms of our productionpipeline, having both of these cars come out of our factory in Leipzig, inGermany. That gives us this perfect possibilityto custom tailor our supply chain to the market demands.And for that reason, I'm sure we will hit the right spot supplying enoughMacan overall, and I assume in the first couple of months there will be moredemand than we can supply for them. Who you worried about there?Is it the Cybertruck?.

It's a highest spec expensive model inthe first instance that goes to the high net worth individual or the big spender?Or are you worried about the electric electrified offerings from some of yourGerman peers like Mercedes, for example? I think in terms of design, the peopleand technology really being cutting edge technology.We as Porsche can usually have a lot of people that stop being convinced andbeing excited about the Porsche brand. So we we see that there will be a lot ofopportunities to get the Porsche family growing, but at the same time also getexisting Porsches. Excited for Porsche fans, excited forthe Macan before.

So there is, I think, a lot ofopportunity in the still growing and best market where customers will comefrom and start joining the Porsche family and start experiencing what thefeeling of a Porsche the Porsche product is all about.T-Mo America, which was critically important to Porsche in 2023, in partbecause China's growth was decelerating. And I think Porsche has said 2024 isgoing to be difficult in China as well. What kind of.Pressure you under to keep the growth going here in the United States, NorthAmerica, more broadly when a key market like China is slowing downand being responsible for the North.

American market.I would like to focus on these topics. But if you see the overall balance ofdistribution of sales of Porsche, I think the Porsche brand is perfectlybalanced in terms of its international distribution of sales.So this is a really it's a great time to see that this is not such a hugedependency on the Chinese market as it might be for some other brands.And we see the brand being in a very good position.I think we have high desirability. You can see that in all different kindsof products. And for that reason, I also see goodpossibility to continue on.

This growth pattern of sustainablegrowth also hindered the United States on the North American market also, well,I think driven by customer demand, continue the success story.That's Porsche North America CEO Timo Resch with Bloomberg's Ed Ludlow.Coverage continues on DAYBREAK. Asia.This is Bloomberg. All right.We're just about over half an hour away now from the start of trade in HongKong, mainland China. Let's get more on the outlook.Bloomberg Markets going to David Ingles is joining us.And Dave, I mean, three days of gains,.

But maybe not setting up for a luckyfour. Even if we don't get a lucky, let's saywe get a lucky for you. Let's say we get a lucky four.It will still need 912 days on the Hang Seng China index to get backall the way to peak. Right now, there is some sense that thisnumber we're coming out with now. I'd also say that take it with a grainof salt. This is not an asset ask, you know,algorithm telemetry that, you know, this is a day we're going to land on the moonand this is the exact spot. Willard But so what we're using, themethodology we're using here is we're.

Looking at the individual price targetsfor each Hang Seng China index stock. You're getting that consensus.And then you were implying an index upside over 12 months, we're assuming.That's correct. We're taking that, which is 40 about 47%over the next 12 months. We're assuming that's another 47 on topof that. And then we just extrapolate how long dowe then get before we get back to north of 15,000.And the date currently is July 26, 2026. So we'll we'll we'll need to be patientfor what we did make it.David it is Friday.

What's caught your eye on what's been apretty eventful week. Yeah, well, caught my eye is not sleep.Certainly we do need a lot of that following what's really been a crackingweek for these markets. As Bill was pointing out, three days ofgains. You probably won't get a day four, butwho knows? We're looking at several perhaps eventstoday that could move the needle. You're looking at a market metric ofvolumes. For example, in turnover, you spikedyesterday trading activity at nearly ¥900 billion in the onshore market.I'd also point out there's a Ministry of.

Commerce briefing taking place latertoday where we could actually get something following the PBOC briefingthat we got all also in the afternoon session mid-week.Back to you guys. All right, David, all the action at thetop of next hour. That was David English, BloombergMarkets co-anchor, and that's it from DAYBREAK.Asia leaving you here with a look at the outlook for Chinese equities over thecourse of the session today. And as we said, lucky for it doesn'tseem to be appearing. Three days of gains.Setting up for a little bit of weakness.

Here across the board.

Sharing is caring!