Bloomberg Morning time: Asia 02/06/2024

This is DAYBREAK, Asia.We're counting down to Asia's major market opens Japan.South Korea opening in a few moments. And the focus today really coming downto the moves in the bond space overnight, Heidi, because we saw thatbig slide coming through. Stronger data tells us the Fed reallynot going to be cutting any time soon. Yes, some of that repricing and yetexpectations are still four or five cuts right down to the timing, I guess.But we're shifting from the Fed focus to the focus today, of course, with thatfirst meeting of the year. And as with just about everything else,it's really about that signaling rather.

Than the decision itself, isn't it?Bell? Yeah, and not to mention, of course,we're tracking Chinese markets, whether we can start to see any sort of reprievefrom the sell off. But let's get to the open here for Japantoday, because we had the wages data coming out about half an hour ago,pretty mixed signals coming through. But in aggregate here, we saw wagegrowth strengthening less than expected in December.It still did show some some signs of underlying momentum.If you take a look at data that avoided sampling problems, excluding bonuses andovernight overtime pay, actually we saw.

A bit better growth, but still it wasundershooting What economists had been expecting at the headline level andnominal cash earnings as well, rising less than expected.Not a great signal for the BOJ, of course, that wants to see sustained wagegrowth before shifting away from its easy policy settings.But today in the session, you're seeing those yields just moving a little bithigher. Japanese yen very flat and equities justfractionally under pressure here. Let's switch now to the outlook forKorea stocks today because here in the session, it's really, again, thatpicture of weakness coming through.

We saw U.S.stocks as well reflecting some of that pressure.So just a sort of carry across and equity futures still a little bit in thered that you can see. Korean one one to note here, because wedo see the currency trading band that's being expanded a little bit in thesession today to get more details on that.When I say trend trading band, I mean the trading hours, a trial is takingplace so the Korean one will be allowed to to trade until 2 a.m.today in a trial. As I said, it's all about trying toimprove the markets accessibility Heidi.

Yeah, of course, following on the backof China, doing something very similar, right?This is a feature on RBA decision day. Of course, what we're really waiting foris that 3:30 p.m. Sydney time press conference withGovernor Bullock expected to speak. We haven't heard from the RBA in acouple of months and this is the first decision under this revamped regime forcommunications from the central bank as well.We're seeing quite a bit of downside here when it comes to trading in thestock session. The ASX down by just about 1% thereahead of that RBA decision which we are.

Expected to be a decision to hold thekey rate. Lots of scrutiny over the signalling ofthe right path forward, as well as the updated forecast which today onwards weget immediately on the same day as the right decision, rather than have to waita few days, as was the previous structure, we are seeing miners and techstocks in particular leading some of those losses.It is a broadly negative session though, with the benchmark here declining forthat second day. Just a reminder, Kiwi stocks not tradingtoday. The market is closed for a nationalholiday.

The Aussie dollar is actually oddlyunchanged even as we see the dollar touching that 12 week high on the backof that yield surge as well. But broadly, we are looking like somedownside elements for the Aussie going forward, particularly in light ofweakness, continuing the Chinese economy.And finally, just taking a quick look at what we see across crude markets at themoment. We see new crude giving back some ofthose gains that we saw in the early part of the week, just under $73 abarrel there as we see a pretty steady trading session.These Middle East risks are kind of.

More or less being offset by the hawkishFed comments as well. We're also seeing more risks of strikesfrom the US, of course, and regional proxies against Iran and regionalproxies, I should say. So we're seeing that sort of modest movethere across oil. And a quick look at Bell mentioned themove that we saw in treasuries, a big two day losses.The Fed message kind of really begins to sink in there.That was really the biggest two day loss in months, is not just the Fedmessaging, but also the ICM data, the strong echo data, reinforcing themessage from Jay Powell that rate cuts.

Are unlikely to begin potentially beforeMay for that ten year, that two day increase for yields is the biggest sinceJune, June 2022. My next guest actually says that USTreasury yields are having backed up a bit, is offering more attractive entrypoints this spring. Isaac Paul is a global CEO and portfoliomanager at Oriana Financial Services. And as you actually see, moreopportunity within the bond space within sovereigns than equities anyway meanThat's right. And especially now that we've seen thatback up in yields, I think as we got to the end of 2023, that really big rally,particularly in Treasury.

He's perhaps just got a little bit ofahead of itself and and yields were looking a little less attractive atthose points. But now that we've seen that that beingretracement back, we we do see good opportunities there,particularly because although the Fed has pushed back pretty hard on a marchrate card or even a may rate cut, they have effectively said we're cuttingrates this year and so we know the direction for yields is lower.And as long as the yields back back up, there's a good opportunity to get set,participate in good income, but also some upside risk if the economy doesslow a bit faster than than what we're.

Seeing at the moment.I think that as within the sort of uncertaintyin trying to predict what the Fed or even what the RBA or any other centralbank does at the moment, what do you see that the risk lying, particularlyparticularly in a year where we're seeing already increased geopoliticalrisk and as we head into more elections, domestic political risk as well is notso strong? Yeah, I mean, there are a lot of broadrisks out there and geopolitics has been a big issue for the last couple ofyears. But right now, I think one of the majorrisks markets are facing is just.

Expectations that have increasinglybuilt up for a perfect soft landing. This sort of story of surgically preciserate cuts from the Fed, allowing not just the economy to have a soft landing,something where the economy moves back to around trend growth.Really what we're seeing is pricing for a reacceleration of growth.And that is not something that that looks likely in the data.Yet the data have stabilized, But but we're not really seeing that reallystart to pick up yet unless that happens.I think these these pricing for very strong equity returns could just beoffset a little over the next 12 months.

Or so.Yeah, because you are still thinking that a recession will come.So I'm interested how you're interpreting the recent data that hasbeen on the stronger side and as well, if we do see a contraction, themagnitude that you would be predicting? Yeah, I mean, absolutely the recent datahave pushed back on on a near-term recession and the three or the twoeconomic indicators that I think are really useful are the manufacturing PMIand the the change in the unemployment rate and that manufacturing PMI is backup towards 50. We really need to see that fall below 45to confirm a recession.

If we're back above 50, then then we'reseeing a little bit of improvement in growth.But at the moment it's pointing to some trend slowing growth.So it's it's a little bit both ways and same with the unemployment rate juststabilizing. It's not giving a flashing red signal,but the trend is amber. And so we're really watching thatcarefully at the moment. It suggests a recession would be in thesecond half of this year. And as far as the depth of that, a lotof that will be determined by the Fed, just how quickly they're willing to cut,how soon they're willing to cut and how.

Deeply they're willing to cut aseconomic data perhaps soften. And if they try and get ahead of thecurve or if they're forced to just cool their jets a little bit and just takethese 25 basis point rate cuts, that's really going to determine how deep arecession may be. What do you think about the lack ofmarket breath that we're seeing, particularly in the U.S.?Because it just seems like the rally is once again continuing to be led by theMagnificent Seven. How much does that concern you aboutpossibly any sort of risk around a bubble?Yeah, well, I mean, it's not even the.

Full Magnificent Seven any more.That is that is fully rallying. We are seeing real differences betweenbetween the so, I mean, I think that is a real difficulty that the market'sfacing. If you look out at what's being pricedin earnings over the next 12 months, the next 24 months, we need to see agenuine, strong reacceleration in earnings growth.At the moment that is absolutely not coming through from sales.It's only being supported by an expansion in margins or and that's beinghelped by a retrenchment of jobs. So this doesn't feel like a particularlypositive environment for equities or one.

Where we should expect to see breadthwidening out. So that leaves the market veryvulnerable at these valuations. I think it is stretched.It suggests that we might see leadership from two or three companies this year,but if those other four or five in the in the Magnificent Seven don't generatethe earnings that the market requires, then there could be some some punishmentdoled out by investors. On a different note, we've got the RBAdecision ahead in just the next few hours, not expecting any sort of changein policy, but a lot of focus on the tone that is struck in that pressconference.

What are you expecting and also what areyou expecting for the Aussie dollar reaction off the back?Yeah, I think the RBA will try and be firmly neutral and data dependent here.The idea of further rate rate hikes, which was the consensus view even amonth or so ago, I mean I think recent data have poured cold water on that.On the other hand, there's just no evidence that the Fed that the RBA couldpoint to to say that they need to cut rates just yet.So that means we're going to have, I think, a fairly neutral, data dependentRBA for some time and that will provide some challenges for the Aussie dollar.We've already seen it and again the real.

Whipsaw in consensus views around theAussie compared to last year, you know, a very weak start to the year so far.Yeah, from our perspective I think a 60 cent is more likely than $0.70 in thenear term and that that means you've got five or so percent that could that couldgive way if, if the RBA is at all more dovish and the market is preparing for.All right, that was Isaac Poole, global CIO and portfolio manager at OrientFinancial Services. And we're just bang on 10 minutes intothe session so far. So just taking a look at some of themovers that we're tracking in a session, these are some of the cosmetics stockshere that are listed in Japan and also.

In Korea.The reason we're tracking these is because we had Estee Lauder resultsyesterday. They came in better than expected.It's also cutting up to 5% of its workforce.So restructuring program going through. Investors really liked thatrestructuring program, in fact, because shares rose 12% in US trading.That's the most we've seen since August 2019.And then separately is what we had Blackstone considering a bid forLosartan International. That's another stock to track but whichis listed in Hong Kong actually off the.

Back.We are seeing some of these cosmetics stocks gaining here.Let's switch on take a look at some of the chip makers and supplies in thisregion here. We're seeing again some moves to theupside. And this is after we had onsemiconductor reporting fourth quarter results.That is well beat expectations. And they gave an outlook that was seenas better than had been feared. So quite a significant one because wehave seen some pretty mixed views coming through from the chip makers so far inthis earnings season.

But you can get a roundup of the storiesyou need to get your day going. In today's edition of DAYBREAK,Bloomberg subscribers go to be go on their terminals.It's also available on mobile in the Bloomberg Anywhere app.You can customize your settings so you only get news on the industries andassets that you care about. This is Bloomberg. China is taking further steps to stemthe market round that's hit small cap stocks especially hard.Sources say China is tightening trading restrictions on domestic institutionalinvestors, as well as some offshore.

Units.For more, let's bring in our chief North Asia correspondent, Stephen Engle.And Steve, I mean, just after the market rout that we've seen, perhaps thesesorts of steps, even if piecemeal, are still needed.Yes, I mean, there's two. There's a lot of factors at play.But the two main things that I'm looking at is obviously the national team, ifyou want to call it that, is probably coming in to help support.You've seen that through the some of the northbound data flows, some offshorefunds coming in through Hong Kong, northbound boosting the CSI 300 by theclose.

So we've seen that and that'sessentially what the data is showing. China equity benchmarks are rebounding,started coinciding more often with buying by offshore participants throughthe trading links with Hong Kong, saying eight out of the last ten sessions haveseen inflows into the mainland. Shares from the northbound program.One of those days, the CSI 300 index saw intraday rebounds just as northboundflows started turning around. So that's not just anecdotal evidencethat is pure data driven evidence right there that there is some sort ofnational team trying to prop up the A-share market in Shanghai and Shenzhen.But the other side of the story is much.

To the neglect, if you will, of thesmall caps. So the CSI 1000, a different story thanthe CSI 300. Bring up the chart here today.That's down about 27% for the small cap index right there.And that's also leading to a lot of the angst among retail, younger, if youwill, investors in Shanghai and Shenzhen who feel they've just been absolutelyobliterated on the markets and that it's a casino as we head into the national,you know, the lunar New Year holiday people as paper wealth has beendeteriorating. So that is something obviously thegovernment is worried about.

Let me talk about those piecemeal newefforts that we're hearing from. Sources are saying that the Chinesegovernment and regulators are trying to take are taking to essentially boostsentiment, put a floor on this fall in the market and perhaps lead to what alot of people have been saying eventually is going to likely happen isgoing to be sort of a stock stabilization fund.We just don't know how much that's going to be.One one academic at the Chinese Academy of Social Sciences yesterday essentiallysaid it needs to be upwards of 1.4 trillion USD, 10 billion, 10 trillion,trillion, ¥10 trillion.

All right.I keep on deflecting away from these measures.Basically, sources are saying authorities will impose caps on somebrokerages, cross-border total return swaps by clients essentially, and aboutlimiting a way for China based investors to short Hong Kong stocks.So that's going that direction. Hong Kong shares down 9% so far thisyear, the Hang Seng index. At the same time, some Chinesebrokerages that use the channel to buy mainland shares for their offshore unitshave been told not to reduce their positions.Okay, So that's going this way.

So again, that's trying to support theA-share market. Now, also, some quant hedge funds,meanwhile, have been banned from placing sell orders completely as of yesterday,Monday, while others were barred from cutting stock positions in theirleveraged market neutral funds. This is what's called a direct marketaccess strategy. It's believed to have essentiallyamplified what I talked about earlier, and that's the selling off of thesesmall cap stocks. Chief North Asia correspondent DavidAngle there. As we count down to the start of tradingin Chinese markets.

But here in Australia, the Reserve Bankwidely expected to hold rates at that 12 year high and maintain a hawkish stanceagainst still elevated inflation in the first decision under the newcommunications regime. Let's bring in our economics reporterSwati Pandya, for more. So what are we expecting?Certainly a little bit more scope for volatility.Yes. So we actually had a last week, fourthquarter inflation report, which came in weaker than expected, and that reallysparked a rally in bonds and drove market sentiment towards.But kind of like pricing in rate cuts.

Already.The RBA is not going to do that. They are they still have a tighteningbias until December when we last heard from them.So the big question is whether they retain that tightening bias or whetherthey soften that to make it more neutral.So that's what investors are going to be really looking out for.What about the expectations for rate cuts, though?Do you expect to see a government bullet taking a leaf out of the Fed's playbookand then pushing back against those those rate cut bets?So like I mentioned, with the inflation.

Report, we did see market pricing changetowards rate cuts. But again, Australia is expected to bethe last of the dollar bloc countries to begin cutting interest rates.And that is because at 4.3, 4.2% inflation is still well above the RBA is2 to 3% target. Australia was also lagging itscounterparts in the rate hike cycle. So the Fed, the gap between the Fed andthe RBA's rate cut is about rate hike is about one percentage points.So that's how slow the RBA went also. Australia's productivity is amongst theweakest in the developed world productivity growth now, and that isanother reason why inflation is expected.

To remain elevated in the country.So all that points to the fact that it might be too early for the RBA to starttalking about rate cuts, yet the RBA putting in place some of therecommendations that came from the independent review.We know the communications more of it as well as more you.The fact that we get the updated forecast immediately as opposed towaiting a few days, there's a lot of information to take in at once.Yes, it's going to be quite muddied. At 230.We are going to see a whole bunch of headlines right from the rate decisionto their forecasts for inflation, GDP,.

Employment, forward guidance.So, yes, there is definitely a lot. And and like I mentioned earlier, we'venot heard from the RBA in two months. So there is a lot of anticipation aroundhow their thinking has changed since the start of the year.And the statement is going to be signed off by the board and not by MichelleBullock. So there is also that probability thatthe statement will completely change, like they will rewrite it.So that is a possibility as well. So that that does add to the volatility,to exciting times. Our economics reporter, Swati Penny herein Sydney.

More to come.This is Bloomberg. Chicago Fed President Austan Goolsbeesays he'd like to see more favorable U.S.inflation data before interest rate reductions can begin.Speaking exclusively to Bloomberg, also said he wouldn't rule out a potentialcut in March that would affect what it feels like.The economy's been quite strong on the growth front.You've got big jobs numbers, you got big GDP numbers better than expected.But at the same time, we've had inflation better than expected, too.If you look over the last seven months,.

We've had seven months of really quitegood inflation reports right around or even below the Fed's target.So if we just keep getting more data like what we have gotten, we're well onthe I believe that we should well be on the path to normalization.Well, I understand you don't want to tie yourself down, but is there really muchof a chance of a march move? The markets think now 18% and somepeople think that's even high. Well, look, Michael, as I say, we're allall we need to do is keep getting information like what we've been gettingfor the last seven months, where inflation on a flow basis is absolutelyunder control and is is in the range of.

Of our Fed target.And if we keep getting strong quantity numbers, that is to say jobs numbers,GDP numbers, growth numbers, while inflation goes down, in the conventionalview, that's not really supposed to happen.So that would we'd have to be entertaining the possibility that we'reentering a period like the mid to late nineties where you had productivitygrowth faster than than expected, faster thantrend. And that opens up some newpossibilities. Scott Pelley of CBS last night said thatPowell suggested that rate cuts would.

Likely be a quarter, maybe a half of apercentage point at a time. That doesn't appear in the transcript.Was a half percentage point cut discussed at the meeting?As you know, we don't report on what's discussed at the meeting until thetranscript comes out. The our standard way to think of it fromthe FOMC is somewhat like what's in the summary of of economic projections theACP which comes out every quarter. And the last time that came out inDecember you saw that the median member of the FOMC thought there would be threerate cuts, i.e. 75 basis points for the year 2024.Is there a situation other than perhaps.

A recession or some sort of marketfailure where you would consider a 50 basis point cut?Well, I just think we you get the data and yourespond to the data in its totality.So it's I don't think it makes sense to speculate about hypotheticals of whatwould happen to make the rate cuts be different than what they have been inthe past. That was the Chicago Fed president,Austan Goolsbee, speaking exclusively to Bloomberg's Mike McCarthy.And let's turn to some political stories we're tracking today.Israel's foreign minister says time is.

Running out to find a diplomaticsolution to the presence of Hezbollah fighters along with border with Lebanon.Israeli forces have exchanged fire with a militant group almost every day sincethe Hamas attack of October seven. Israel has said it's prepared to openanother warfront of Hezbollah and doesn't retreat from the border underthe long under the terms of a long standing U.N.resolution. Donald Trump and House Republicanleaders have slammed a bipartisan Senate deal to impose new U.S.border restrictions and unlock billions of dollars in Ukraine aid.Trump used a social media post to call.

It a death wish for the RepublicanParty. Speaker Mike Johnson says the Senatecompromise is dead on arrival in the House.The deal to crack down on illegal border crossings also includes $60 billion forUkraine. We'll have plenty more ahead onDAYBREAK. Asia.This is Bloomberg. All right.Take a look at how offering as we just about half an hour into the start oftrading in Tokyo and in Seoul, it is broadly quite a tepid day across Asianmarkets.

And of course, it comes as we are headedinto that RBA decision as well. Before that, we are getting retail salesnumbers out of Australia, retail sales, excluding the impact of inflationquarter on quarter for the fourth quarter coming in at 3.0.3%, I should say. And that is a higher than expectationsof just a 10th of 1%. And also extending gains from 2/10 of apercent in the previous quarter. This as we see sort of a mixed picturewhen it comes to, of course, the broader economic outlook.But certainly a 3/10 of 1% gain considering the fourth quarter reallyheld that critical holiday and festive.

Period.Perhaps not too much of an impressive beat there.And of course heading into the RBA decision, not expecting any change whenit comes to rates to stay on hold. But all focus will be on GovernorBullock's press conference at 330. Those upgradedthe updated forecasts, which come immediately now rather than a few daysafter the decision. And of course, just any signallingaround whether there's a pivot, a potential sort of neutralising of thathawkish stance yet to be seen. But take a look at how all of this isfeeding through to how markets are.

Trading at the moment.And of course, the big story really has been the sell off in bonds that we sawin the US, which is carry through to the Asian session.The renewed pressure that we're seeing passing through from overnight and weare seeing quite a bit of downside across the board.The broad sell off with the Nikkei down by just about half a percent, but alsosome weakness when it comes to South Korean stocks as well.A lot of relief when it comes to Samsung.We'll get a bit more detail on that shortly.But also here in Australia, we're seeing.

A down side of about a 10th of apercent. Big tech miners, some of the biggestlaggards, but it is a pretty broad sell off.But Bell, even this good news when it comes toSouth Korea's biggest company, not lifting the broader market.Yeah, that's right. But let's get more on that becauseSamsung's billing it. Executive Chair Jae Y Lee will continueleading the company. That's after his acquittal on stockmanipulation charges. A Seoul court found insufficientevidence to prove that Lee misled.

Shareholders in a merger of two Samsungunits in 2015. It lifts a weight of the world's largestmaker of memory chips amid a global downturn and an increasingly challengingmarket. For more on the case, let's bring inSeoul National University Professor Park Sanguine, and I'm curious for yourviews. What was your initial reaction to thatverdict? Well, I was totally shocked because Ididn't expect to hear from the body, from the jury at all, because, you know,his case is very closely related to previous embezzlement and bribery casedelivered by Korea, the Supreme Court in.

2017.So the Supreme Court of South Korea actually found the KQ deal for briberyand for illegal succession using the mergerbetween Intel industries. Butyesterday, the duty of the press, the trial for this case actually denied thatkind of a precedent to a joint decision by the Supreme Court in the order ofshucking or decision making for me. But just to caveat the court as well,saying that it found insufficient evidence to to prove that he misledshareholders. What do you think, though, that it tellsus about the the influence of chaebols.

In in Korea, as you mentioned?Well, I mean, is still you know, the Kindle is broken in 2016,2015. I think we we're expecting somethingwill change in Korea. The people recognize this because ofcorruption ties between Korea and and politicians expressed in the past goodhair and the people f the change for a moon jae in administration took thepower after the Kimberly the but didn't do anything substantial and after thepresident used him to the power actually you know, he was the ex prosecutor incharge of all this bribery and the accounting fraud case against the EU.But he suddenly changed his editor and.

He became very involved globally.And then, you know, all the social momentum and political momentum createdall at the same time. I mean, they have had.Incredible recording in general efficient retail.And he is the key person for Korean economy right there.And their ideas certainly describe the body from the book.The trial of the accounting pro to price manipulation in the technical marketjust happened. So it is a big swing and the indicationsare increasing and substantial in Korea in general on legal system and politicsin every aspect of recording right in.

Front of society.Economics Professor, obviously the acquittal, theremoval of the threat of jail time comes as a huge relief for the company.Do you think it solves all of Samsung's problems?Well, not at all, actually. I mean, the problem by the electronicsis the issue of whether a game is in a choke condition or not.It is more likely the problem of the, you know, legacy.30 of the Samsung people development strategy from early days was theindustrialization of South Korea to be more exactly speaking.I mean, something is rooted in the.

Political integration and they believeit is a kind of very important the source ofcompetitiveness. But in the whole of the open innovation,I see no reason for, you know, it is not really strategic at all.So also the problem of the company electronics is due to the nature of thecompetition in the industry. So I mean, even moreso of course, schumpeterian innovation, of course in the industry.So incumbent is in a weak position or you know, asubstantial innovation may occur by the challenger companies and that would comewith their follow over situation.

So it's nothing to do with the whetheryou're doing it in jail or in a chairman table.You say that this may, I guess, in a way reflect or change the political mood orthe political environment. There has been some commentary that, youknow, is hard to avoid, that perhaps part of the consideration was economic,given the the economic heft of Samsung. Right.What what are your views on that? Well, this kind of bow to kind of thisconception. 0800 as a consequence of thecampaign by the comfortable and the politicians and the media as a wholebecause I mean, there is the evidence of.

Actually the existence of the economy,probably including for the Korean people, especially council became the defacto political power. So here in the end, they have so few theinfluence, legal legal politics in the media.So they try to form the public opinion in people or something.And you do. But as I mentioned, the problem.So please try to come to electronics and clearly kind of in general, you know,well, whether a person is in charge or not, it is more about a fundamentalchange. We need o from the old regime of thedevelopment of, you know, country.

Established in 19 1670s, and we have tobe adopted in the open innovation and the schumpeterian.So, you know, innovation. So we have to have a more flexibleeconomic system and we have to encourage more entry and exit in the industry.The current is the status quo actually has a huge barrier to the industry.So it goes against the idea of the Schumpeter doinginnovation that I Interesting.I wanted to move on what we're seeing with the support rate for the SouthKorean president. There's it's fallen to its lowest levelsince April.

There's continued questions and uproarover these questions over whether the first lady may have inappropriatelyreceived a Dior handbag. Do you see this impacting what we see inthe April election? Well, yes, In view of the campaignissue, I actually you know, I believe I mean, it's really inappropriate for thePost already to take that extent. And we had the bit from of course,she claimed that she's familiar with and or possible possibly a violation ofKorean law as well. So we need some kind of a policeinvestigation on the possibility as well.So.

Oh.I mean, it's so crazy to go on, and the first lady had to apologize.Oh, for the people of Korea. Oh, for the poster lady, You know,inappropriate behavior, so. Oh, there is no way they can avoid thethe Peacemaker campaign issue in upcoming general election. Professor, great to have you with us,boxing professor at Seoul National University.More to come here on DAYBREAK. Asia.This is Bloomberg. Yeah.

South Korean notes tied to Hong Kongstocks are facing a $7.7 billion maturity wall by the end of June, andthis could add to selling pressure on one of the worst performing stockmarkets in the world. Asia stocks reporter Zhong Cheng isjoining us now in Hong Kong today. He usually in Singapore.But tell us, how can this become a risk for the Hong Kong stock market?So we looking at 7.7 billion, that's quite a big number for Hong Kong stocksand that represents about two thirds of the total amount of Korea.You know, as this is maturing this year and they're all concentrated in thefirst half.

And the problem is when these securitiesmature, the issuers will have to unwind the hatches when they when they sold theproducts. And as in they will have to sell indexfutures. And that's going to, of course, create aselling pressure for the futures market. But that selling pressure can also, youknow, spread to the spot market as well. So, you know, that's just adding toanother win for the Hong Kong stock market.You know, it's already facing a host of issues, you know, China's economicslowdown, US-China tensions. And this is another risk that investorswill have to contend with.

Yes.Has become a huge issue in Korea. It is a city of massive potentiallosses. What do we know?So these are securities that are so with back in 2021 at the peak of the HongKong stock market. And we all know the story that follows.You know, the Hang Seng China Enterprise Index has since fallen more than 50%.And these these securities that are maturing this year, and that meansinvestors will be sitting at huge losses andthere could be potential misconduct when the Korean banks are selling thesesecurities because they're marketed as.

Some sort of fixed income sort ofproducts. And a lot of investors not knowing thehigh risk nature of these products, they bought into this and now they're sittingas huge losses. So, you know, some Korean regulators nowalready taking actions, you know, looking into potential misconduct bybanks. And some banks have announced that theyare stopping selling these products altogether.So it has become a huge issue in Korea. Indeed.And this also highlights how far reached the China stock route is.It's not just limited to China and Hong.

Kong only, but it's also spreading toother financial markets in the world. For Asia stocks, reporter John Chengthere with the latest. And we do have more to come here onDAYBREAK. Asia.This is Bloomberg. Toyota is releasing its third quarterearnings later Tuesday with steady containment and recovering supply chainsexpected to boost profit. For more, let's bring in transportreporter Nicholas Takahashi in Tokyo. And yeah, big earnings to watch forlater today. Just talk us through the headlines ofwhat we're expecting.

Sure.So analysts are expecting high profits during the third quarter last year,steady global demand for vehicles as well as record breaking sales andmanufacturing on Toyota's side are looking pretty optimistic for thecarmaker. The main question is whether it raisesthis fiscal forecast of 4.5 trillion to the 4.7 trillion that analysts expect.Manufacturing, like I said, has been at a record high over the last calendaryear. Toyota was able to beat Volkswagen AGfor the fourth consecutive year to become the world's top car maker.So things are looking pretty good for.

Toyota.The rest is whether they reflect that optimism in earnings later today.This even as there have been challenges, right, both when it comes to productionand also some some safety scandals. Yes.So the world's top carmaker is ensnared in a pair of scandals right now, as yousaid. The first one emerged in December withDaihatsu, which is a popular lightweight truck maker in Japan.The second one happened last month with Toyota Industries, which is a majorengine supplier for Toyota. They both concern certification testingstandards that are sort of notorious for.

Being strict in Japan.But these misdoings is traced back years, if not decades to some extent.So the big questions remain, how much is this going to cost Toyota?What will it do to reorganize its business empire and how does it get overthis and regain customer trust? Toyota is not the only Japaneseautomaker they're reporting over the coming days.What else are we expecting for the lineup?But we're expecting strong demand across the board.Japan sales have been pretty robust for most Japanese car makers, includingToyota, Honda and Nissan.

We're seeing aggressive competition inChina, of course, with the shift towards easy leaving a lot of company's brandsin the dust. It overtook Tesla last year and Toyotais falling further behind in that shift. For transport.Reporter Nicholas Takahashi there in Tokyo.Let's take a look at some of the other corporate stories that we're following.Shares in Palantir jumped in late trading as it reported a first annualprofit. The software and analysis company alsogave a better than expected outlook for 2024, citing strong demand linked toartificial intelligence, income and.

Revenue for 2023.Both beat expectations with management saying they are rebuilding the companyto meet demand. Bloomberg has learned that Reddit'srevenue for 2023 rose 20% as it prepares for one of the most anticipated IPOs inthe US. A source says it made a profit in thefourth quarter, but not across the full year.What about the social media platform is telling investors that revenue topped$800 million last year. Boeing has discovered a new problem withholes drilled into the fuselage of its 737 max jets.Its commercial chief, Stan Deal, says.

The problem originated with a supplierand will require work on about 50 undelivered.737. Deal did not identify the contractor,but fuselage supplier Spirit Aerosystems says it's aware of the issue and willconduct repairs. Blackstone is said to be considering abid for the skin care company Fluoxetine International.Sources say Blackstone is considering the possibility of teaming up with looksat Arm's billionaire chairman Bernard Chiesa on the buyout.The Hong Kong listed company has a market cap of just under $5 billion.Shares of On Semiconductor jumped in.

U.S.trading after the chip maker posted fourth quarter earnings at an outlookthat beat expectations. CEO Hasan Okorie spoke with us about theoutlook for chip demand from the automotive sector and why he's stillbracing for slowing global demand. What differentiates on semi for thelast, I would say, 4 to 6 quarters. We have been a taken taken action tomatch and become more in line with what we see from an end demand both inindustrial and automotive. If you recall in the third quarterearnings, I started talking about automotive softness, inventory,digestion that extended.

Therefore, it was not a surprise to whatwe announced today. It was more of a expectation and reallybetter than expected. But nevertheless it was a softness thatwe as a company have been very disciplined in addressing to get us toweather through it much better than a lot of our peers has.I'm one criticism from Truist Securities this morning was that there wasn'tanything said about the outlook. What happens next in those end markets?You just said we rebalance to make sure our output match demand on industrialand automotive. But going forward, what are you hearingfrom those and market.

Leaders and CEOs about what they thinkdemand for their industry will be in 24? I think for us, the way we're managing2024, we're not managing for a recovery, which if you take where we are today asa as a base, 2024 is going to be basically down in all end markets versus2023, which which was a good year in a lot of the markets or industrialautomotive. And then the other end markets willremain soft if the demand picks up in the second half.That's great. That's all tailwinds for us from, youknow, fab utilization that impacts margin profitability and revenue.We'd rather be in this spot rather than.

Prepare for a recovery.That doesn't happen. Now, we have a correction midyear.We're taking, again, a much more disciplined approach, which worked verywell with us for us in Q4 coming into Q1.We use the case study of Silicon Carbide in the EV context, and Caroline quiterightly points out that we think there will be growth in 2024.It will just be slower growth. That growth is decelerating in global EVdemand. Does your business reflect that?Yeah, I spoke about it earlier today where the industry still projects a highnumber for EV growth in the 30 to 40.

What I believe based on customerengagement are really based on some of the leading OEMs in the automotiveindustry, what they projected for their EV growth in 2024.We look at it more and 20 to 30 growth. That was the on semi CEO Hassan Okoriespeaking to us on Bloomberg Technology and a group of stocks we've actuallybeen tracking off the back of those earnings from on semiconductor, theAsian chip makers and suppliers here in Asia.It's a little bit mixed what we're seeing in this session so far.But as we said, that company reporting fourth quarter results that beatexpectations and give you an outlook as.

Well that was better than feared.So we saw on shares climbing significantly, as did the Philadelphia.Semiconductor index. But here a little bit makes up aboutwhat we're seeing. The other group of stocks that we'retracking in this session today are the cosmetics names in Asia.And these are actually moving again mostly to the upside here.So we had we had Estee Lauder putting out its earnings overnight and thoseactually, again, coming in better than expected.It's cutting its workforce slightly. Restructuring plan.Investors like all of these things.

What else we're tracking it for is astory you mentioned, Heidi, around lots of time because Blackstone is said to beconsidering a bid for the stock for the skin care company.And of course, we're watching the op ed, which is, what, about two and a halfhours away from the decision for it, half hours away from that pressconference under this new revamped comms regime from the RBA.We're seeing quite a bit of downside, although off session lows when it comesto trading across the stock session, we are seeing tech being the biggestlaggard there down by just about 2%. Real estate of miners and materials,names also suffering quite badly, over.

1% apiece there.Broadly, though, we do see a bit of a bounce back when it comes to Australianbonds, potentially signaling that there are some bond traders that expectpossibly even a pivot minded RBA. Right.That maybe that hawkish tone won't be maintained.We shall have to wait and see in the next few hours, but certainly a bit ofvulnerability there for the Aussie dollar as we head into that decision,particularly against the landscape of Fed Powell injecting a bit more momentuminto trading in the US dollar. That's to come.That is it for DAYBREAK.

Asia.Our markets coverage continues. This is Bloomberg.

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