China Extends Toughen For Currency | Bloomberg: The China Cloak 3/26/2024

It's just Tuesday, but it's a mega weekfor financial events here in the States. And certainly a lot to talk about here.Our top story this morning, caution in these markets after the US stock rallyhits the pause with the Fed's preferred inflation gauge staying elevated.The yen is close to prior intervention levels and is approaching that 17 monthlow. China's renminbi in focus as well,advancing after Monday's signals of central bank's two for one to be livealso at the Boao Forum watching for any signs of new policy initiatives.Well, speaking of you, coming out with the Milk Global Symposium, as you talkto leading market players about their.

Top investment themes. Thriving together.Building Bridging global markets is the theme for the first ever GlobalInvestment Symposium Milken Institute, of course, here in Hong Kong.So we've just begun. Of course, people have just started toflock in Yvonne into the main hallway here in terms of where we are going toget started. In fact, just now.Right before we came on air and just in case, of course, some of our viewerscaught a little bit of backstage commotion Right now, Paul Chan, thefinancial secretary, in fact, just just.

Actually walked by and came over to sayhello and ask him. There's an empty seat for you here justin case We'll keep that one in any case. Of course, lots of other goodconversations coming up here. We've curated really I was I was talkingto Bell and Heidi near earlier show. We curated the conversations we'll behaving here on the ground for our viewers right now.So a couple of things, right? Where is the Chinese consumer, Jane Sun,who's standing by a couple of meters from where I am right now, really whatforward bookings look like. And their business actually didexceptionally well in 2023.

So both the business and really what itmeans for the industry, two good conversations coming up in privatemarkets are private credit and private equity.Private equity, of course, the focus in real estate with with Golf Capital andHillhouse, of course, joins us later on in the show to talk through all thingsprivate credit. Is it getting too crowded?Are we going to see downward pressure on fees?And of course, we'll be talking allocations to China.Where does that stand as far as things like pension funds are concerned?So stay tuned for all of those things if.

On.Yeah, go ahead. Yeah, it's a busy week as we talkedabout. Right.Who needs Taylor Swift when you have all these financial leaders coming to thecity, you have Milken your wealth for good.Coming up this week, the One Earth Summit.Then to wrap it all up, you want a bit of culture.We also have our basil a little bit later on as well.So certainly there's a lot in focus. Christopher Hoy from the government atthe Treasury when it comes to financial.

Services, the like, It will be joiningus in the ten hour as well. All right.Here's a market slump, though. It's a slow day.So we got to talk about Milken here, obviously.But we are really seeing when it comes to this U.S.equity rally, we've taken a bit of a breather here as well.So we're not seeing a whole lot of appetite, although we're catching aslight bit across equities here today. Japan's slow, though, but you are seeingthe cost be up some 1%. Taiwan's coming online and see a bit ofa gauge here, really seeing some.

Appetite coming through back intoTaiwan. It's interesting, right when it comes tothe side of things that see effects yesterday.Plus one of the first salvos that we heard from Japanese officials on the yenseems to have at least brought effects a little bit lower here, at least puttinga floor. So that's why you are seeing not a wholelot moving a dollar. Yeah, we're still trading around 151Bank of America got an interesting note saying, look, you got to watch 152 to155 range. That could be the zone where we could beseeing some sort of intervention here.

And we're watching very closely some ofthe proxies of the renminbi. Just given the rebound we've clawed backfrom some of the losses from Friday, the Aussie dollar.So it clearly has been a beneficiary of that.Yields are slightly lower here this morning.But obviously, just given what we heard from Rafael Bostic, the Atlanta Fedhead, they're talking about, look, one cut for 2024 only.Certainly we did see yields pick up overnight, stabilizing a little bit heretoday. We were flat on the gold Dragon indexovernight as well.

So in terms of what the setup is lookinglike, you're not a whole lot direction. But futures are pointing to this yearright now. Obviously, we've been talking about therenminbi moves. We're pretty much a slow going when itcomes to futures. 231 for Chinese, ten year yield and 724we're just below 725 That fix is we're very, very important here today becausewe are still trading around the weaker end of the band when it comes to DollarChina. David.Yeah. Which is why the anchoring for today, dowe get anchoring to get a little bit.

More give out of the P, B or C And weextremely close of course, as everyone is pointing out to the weekend, it'strading bad. It's been it's been several weeks sincewe've actually seen the onshore rate move towards 2%, of course, up thatmidpoint as well. We talked about how we're big onconferences day. I'm here, of course, at the GlobalInvestment Symposium, the Boao Forum. We're awaiting, of course, on theChinese Vice President, Hang Seng, of course, to be speaking here today interms of economic data, trade numbers coming out of Hong Kong and later that'stowards the end of the day.

And give or take, I would say in aboutan hour or so, the latest thinking from private economists on really what growthlooks like, inflation and all other key economic metrics should be coming outeven in the next hours. On top, of course, of other thing, Ithink earnings are also very much in focus.Oh, yes. You take a look at that board rightthere. And some of the biggest heavyweightsthat we see are going to be reporting results today.BYD certainly is one. Nongfu spring and sports chain down veryso some of the consumption plays,.

Obviously, and also the brokerages aswell as CITIC Securities are going to be counting down to a lot of bank earningsfor the rest of the week as well, with China merchants coming out with thatsurprise dividend as well. So certainly could be so that could movethe stock here today. But yes, we're talking a lot more aboutdiplomacy, what we're seeing with these big events, not just here in Hong Kong,but also in China, where the mainland is talking up the economy this week as ahost. Several events where foreign visitors,including company executives, one of them is the Boao Forum for Asia thatstarts today.

Let's bring in Stephen Engle, our chiefNorth Asia correspondent, joining us now live from Hainan.Steve, you've covered this event for many, many years now.What one feels different this time around?It's a little slower this year, obviously.Yes. I have covered the Boao Forum here onHainan Island for actually before this year, 17 consecutive years, then wentdark for about four years. Actually, five years.We have not been back since 2019. And, you know, they really do want toinstill some confidence in the foreign.

Visitors who come here simply becausemany of them, like me, had not been here for many years.And also from the National People's Congress, which I covered a couple ofweeks ago in Beijing, we didn't get a lot of explanation of any policy moves,no big bang stimulus. And really the press conferences fromall the ministers and heads of state agencies really read from scripts intheir answers. And we didn't get a press conferencefrom Premier Li Chung. And on top of that, Li Chung and XiJinping are not coming to bow out of this year.Usually the premier and the president.

Alternate coming and giving the keynotespeech. This year, it's the number three man onthe Politburo Standing Committee. Dong li Jr.He is is simply the the the chairman of the Standing Committee of the NationalPeople's Congress. So I'm not necessarily expectinganything extemporaneous from the number three man.He will probably be mimicking many of the common words coming from Xi Jinpingat the NPC, and that is new productive forces and high quality development.We're going to hear that a lot because we're on Hainan Island and it's really apilot zone for new energy vehicles and.

Batteries.Every vehicle here at Boao is powered by a electric battery.So again, this is a test zone and a really a place where China will signalthat they are going to be the leader in new energy vehicles.And we've seen a lot of, I guess, behind the scenes meetings that are beingongoing with corporate executives around the world, with Chinese officials.What we heard so far, Steve. Well, so far we've heard from Lee Chang,the premier at the China Development Forum up in Beijing on Sunday,essentially saying there is strength in the Chinese economy, there is strengthfor over the long term in the property.

Sector.He downplayed the concerns in the property sector and the debt as well asthe debt at the local government level, which is a very big problem at theprovincial level. So again, they want to instillconfidence. And one thing that Boao has always beenor regularly has been used by top leadership is to unveil some sort ofsignature policy initiative. We've heard it in the past from the pastpremiers as well as Xi Jinping. We're not necessarily expecting thatthis year. This is a confidence building exerciseover the next three or four days to.

Reassure foreign investors who come herethat China is open for business and that because the central government has notunleashed a tons of stimulus yet, that doesn't mean they don't have the toolsto do so. Later today, we are going to be hearingon a panel from the PBOC Governor Pangong Chang, as well as a number ofother Chinese former and current leaders, including state ownedenterprises in the energy sector and also geopolitically.Former commerce secretary under the Bush administration.Carlos Gutierrez will be here. He will be on a panel with, among otherpeople, some of those state energy.

Champions talking about geopoliticalissues, no doubt. Steve, great to have you Stephen Englethere, our chief north asia correspondent in bow out for us for thenext few days or so. And as we, of course, watch what thoseconversations will look like, we're certainly looking at the renminbi wherethere's whipsaw that we've saw from the fixings is certainly leaving a lot ofinvestors thinking about what is next for this.Is there still further pressure? We're getting closer to that upper limitof the Pboc's ban. So we're still dealing with someweakness here.

Despite that stronger effects on Monday,traders are still on edge. Whether you know the PBOC, are theyactually loosening its grip? Will they tolerate further yuandeclines? I think just out in just a few minutestime. This is Bloomberg. Who's just taking you live now to theMilken Institute Global Investor Symposium, where the financialsecretary, Paul Chan, is opening up, of course, this conference and with hisopening remarks. And certainly the key question is reallywhat's going to be the pitch is that.

Hong Kong is going to make for all thesefinancial leaders out there about where Hong Kong is as a financial center.Certainly, this will be very busy. We got milk in first.You got well for a good coming up, among other events this week as well.So, David, it's about to be very busy where you are.Yeah. Yeah.In fact, it was just a couple of minutes back.It was extremely busy. We're actually right outside the door ofthe main hall. In fact, just anecdotally, in casesomeone from yours, Mr.

Paul Chan, actually walked up thestairs, came over right at the show before the show was started.So I told him, Your late man is great inside anecdotal and jokes aside, ofcourse here and said, we're joined of course by first guest here to talk usthrough the health of the Chinese consumer travel demand, what they'veseen and where they go. Of course, the biggest platform inChina, Jane Sun found a fantasy, of course, of Trip.com joins us.Nice to see you and good morning. Thank you.Good morning. I think you have a panel today, revivalof the consumer, correct?.

We're about a year and a half from thereopening with COVID, the revival of travel, outbound travel in particular,hasn't quite gone all the way back to what remained.A two sticking points in your view? Sure.Yeah. When we look at album travel, we look atboth demand side and a supply side. On the demand side, we already farexceeded 2019 level based on the search volume.On the supply side, we still have two major hurdles.The first one is the visa application. For some regions, it's still take monthsto get the visa approved.

The second thing is SARS out.The flight capacity was only 50 to 60% compared to 2019.However, during the Chinese New Year, I think we saw a huge pickup.So Australia, New Zealand and even South Africa, which is so far away from China,got lots of customers. So we are very much looking forward tothe recovery. Right.And suffice to say, if if they remove visa requirements, forexample, do you think travel immediately jumps?For example, give me examples of and you mentioned South Africa, for example,what are examples of places that have.

Lifted visa restrictions and have seen aflood of tourists come? Sure.A couple of regions are doing very well. The first to reaching is the GCCcountries in the Middle East Dubai, Abu Dhabi, Doha.We saw huge pickup in this region and Saudi Arabia is also doing very well.They offer free visa or visa upon arrival, they double the flightcapacity. So we're bringing thousands of customersover there. The second the region that's doing verywell is Singapore, Malaysia, Thailand. The prime minister in Thailand even wentto the airport to welcome customers from.

China.So all of these major measures take place, a very important role for therecovery of the of our customers from China.Right. And visibility around visa restrictionsperhaps isn't as clear as perhaps flight capacity.Do you think flight capacity comes back? Where do you think flight capacity comesback in a big way this year? Visa needs to be clear to first, but I'moptimistic. We saw a good influence from all theembassies because three years is a long time.They have lost of bottleneck.

But once it's approved, it's approvedforever. So we're very positive.Hopefully this year we'll see for recovery in the outbound travel.Okay, How about visitors from mainland China to the US, for example?People talk about geopolitics. They draw a direct line between thetensions between the two and two perceptions of travel between the twoplaces. What do you see an influence in futurebookings? Yeah, customers.China is very big customers. Interest is all in all over the world.So we still see very strong interest in.

Different countries for differentreason. But obviously people will take intoconsideration of how welcome they are in these specific countries.For example, Switzerland used to be not in the top five destination, but thisyear the visa application for Switzerland is shortened to seven days.So we saw a surge of travelers into Switzerland because of the policy isright. Right.And your what? What is your platform seeing as far asfuture bookings, You know the next long holiday for me, La Chine is coming up inMay.

Yeah.What do you say. Look where where people looking to go.Yeah. So we have three long holidays ChineseNew Year October for us to go the week holiday and the summer holiday.During these long weekend people tend to go to a far away Australia, New Zealand,Africa. Holloway And then we also have threeshort holiday. The first will use the spring breakthat. It's coming next week.And the second away is the May Labor Day weekend.And the third away is the Dragon Boat.

Festival.During those holidays, people tend to travel within China or nearby in Asia.What and what do you see? Are you seeing a pick up in bookings?Yes. Spring break is coming up.And on that spring, spring holiday and ultimate holiday is coming up.Yes. Yes.So we have see ramp up for our business already.Okay. Well, what about what about grouptravel, for example, because that's also a part of your business group.Travel is also recovering nicely.

The new trend is rather than travelwithin 50 strangers on a big bus, now, people prefer to travel with privatetours. So a typical group travel is twofamilies, three family. They hire car hire van.They have their own family tour guide, a driver.So smaller tour tailor made a tour is very popular.Right. And are you tailoring part of theplatform, of course, to those changing needs, for example?Yes. Yes, absolutely.We have seen new trends.

For example, young people are focusing alot on entertainment, wellness. So happiness and joyfulness is thatscene. So we saw a huge pickup when there was aTaylor Swift concerts, when there is a sports competition.And we saw a huge amount of the people travel into the location.The second way is for older generation. That's the first generation who havemoney or have time. So the cruise industry is also boomingfor these customers. Now, the third to pass is the high networth. So luxury hotels, guests, healthbusiness as well.

I'm curious because the like youmentioned, China's a big place, right? Overall, the economy doesn't seem to bedoing as well as it should be. Yet travel, to your point, seems to bewell and good. What's what's.Help me understand the disconnect between between the U.S.China is very big, so it really depends on the line of the business we'retalking about where certain business might have some pressure.But if you look at travel, it's doing very well.Entertainment, concerts, music, cinema, restaurants, those are doing very well,wellness are doing very well.

So it's really depends on what segmentyou're looking. Okay.But what what's what's the most expensive thing I can get on yourplatform? How much is it going to cost?The flagship tool we sail costs about 200,000 to USTA per person.100,000 USD, correct? Correct.Yes, Love get. We got we charter flight from SingaporeAirlines. We bring customers to differentfestivals. So, for example, Carnival in Brazil,concerts in certain area, we try to time.

It so that the customers get the bestout of this tour. We also bring customers to the landmarkhotels where they have wonderful views, wonderful festivals during their visit,200,000. It's not for me.Maybe Yvonne can afford that, but she'll she'll comment in a moment.Just in the business this year, I think revenues doubled last year.Was a good year for you guys. 44 billion, remember, if I'm notmistaken. Analyst See 51 billion this year andmaybe 60 billion in 2025. Do you think that runway is achievable?Yeah, we believe in the long range model.

Is evergreen industry.So we look at the GDP growth rate for about 4 to 5%, for example.And travel normally can double with that because the population who can't affordto travel normally makes more money and we will be able to outpace the travelindustry. So somewhere between 15 to 20% quickeris achievable. Okay.So it looks like it's it's business as usual for you guys.Jane, it was a pleasure to speak with you.Have a great panel. Of course, you're coming up next yearright behind us in the hall.

Yvonne, I'll send it back to you.A conversation there, of course, with Jason of Trip.com.And of course, also coming up here, plenty of guests, other guests coming uphere on show to be. So that was the consumer part of ourcurated guest lineup. Today.We'll be talking all things private markets, private equity, private privatedebt and direct lending, of course, coming up.And also allocations from pension fund. Are they are people reallocating back toChinese equities in a very big way? A lot of that, I guess, depends on wherethe time ago is.

And I know you have on your looking atthe Chinese currency at this point. Yeah.I mean, given what we've been seeing so far, I mean, maybe we can afford thatcharter flight of 200 grand. Yeah, I was going to say, you owe me abirthday present, maybe day. But look, okay, stronger facts on theBBC once again, that's really helping. And we're extending the rise that we'reseeing in the renminbi here right now. 720 403709 43 Why is that referenceright? And you're seeing some of the proxieslike the Aussie dollar right now ticking higher after that second day ofmessaging from the renminbi, the PBOC.

Sending a message.Yeah. They're not quite ready to let thiscurrency go play ahead. This is one birth. You're back with us.And we're live, of course, of the Global Investment Symposium, Milken Institute.First one, first edition here in the region in Hong Kong.So we're looking at markets just approaching the open here.So futures are actually pointing pointing up, really, when you look atHong Kong specifically, I'm just waiting for initial indications of mainlandequities to come online.

And if I was to fancy a guess, would beflat in the mainland. Right now, we are outpacing, though, thegains we're seeing across the region. Eight shares index is up 9/10 of 1%.While I'll be generous, 1%, we're also seeing even some strength coming throughin a Chinese currency, which really in many ways underpins risk appetite almoston a daily basis. Anyway, I'll leave it there for now.FUND Yeah, at least that stronger sectorshelping the renminbi, at least today in terms of support analyst actions heretoday we're focusing on the energy space.I believe it's Shenhua energy, the light.

That we're tracking here today.Cut to neutral at Goldman, China coal also cut to neutral at the firm andgreen town. The property space China already knew byfounder securities laws. Talk about when it comes to earnings.We're seeing a lot of price action already in the premarket here.Petro China, they're up after posting record profits.China Merchants Bank also rising and we saw a beat in full year net income alsosurprised when it came to that dividend as well.And coming up next, this is Bloomberg. Welcome back and good morning from theAsia-Pacific.

You're watching the China show countingdown to the open of trade 40 seconds away.A couple of big themes we're tracking here as we go into the Tuesday open.We have an economic survey, at least the latest economic survey from privateeconomists in China should be out in the next hour or so.4.6% growth. Point 8%.And inflation was the last thinking. We'll see whether that changes, ofcourse, in this new addition. And of course, we're in the thick ofearnings season, which Yvonne, I know you'll talk about in just a couple ofminutes.

Yeah.You're seeing a lot of the low the price moves at least upside surprises arecertainly helping lift some of these stocks here in the greater China regionhere this morning. So certainly that's one to watch here,of course, as we start to see this equity rally globally.Take a bit of a breather here today, as well as our earnings are very much infocus to see whether we can resume this rally in China as well.We certainly are seeing a little bit of positivity when it comes to thesemarkets here today. Hang Seng is up about three quarters of1%.

Shanghai slightly to the upside here,but we're seeing tech catch a bit. It just takes a 1%.Shares are also up in similar measure. On the flip side, you are seeing when itcomes to yields, we're at 231. The renminbi is still the one to watchrise 724 ten So that strength continues for another day.So a second day where the PBOC has set that reference rate stronger thanestimates there and they continue to send that message that perhaps Fridaywas a bit of a blip on what they did there.But J.P. Morgan had interesting call that thatmega move that we saw on Friday might.

Just be a bit of a outdated or a longoverdue story. We'll take a look out there, but we'rechecking very closely what goes on with earnings.We talked about some of the oil plays. We have the banks coming up this week aswell. A sector by sector is what we're lookingat. It's really up mostly to the green, withthe exception of real estate as well as Macau gaming.But everything else seems to look pretty solid here right now.So sentiment seems to be pretty positive except for the boards and see whatexactly is driving that.

What we talked about, the fundamentalsis back to what we're seeing in these results.Right. Petro China is certainly one winner herethis morning. So we're talking about record profitswith stocks up some 2%. But it really was well, we saw thatrebounding gas demand, that's really helping to offset some of the impactfrom falling oil prices. That's helping the likes of Petro ChinaChina Merchants Bank. Also it when it comes to earnings andalso that surprise payout ratio, Citi said, was quite pleasant.Again what we heard from the lender.

There and bid and so we're going to getthose coming up. So certainly a lot of talk about whetherBYD can maintain those price margins and secure that lead when it comes to the EVspace and really where we are in this consumption story when it comes to andas well. All right.Take a look at this particular the renminbi very closely as well.So, yes, we're seeing a rebound. It's really happened the likes of theAussie dollar here today as well. But you take a look at what's stilldriving this weakness and perhaps why traders are still so hypersensitive toany sort of movement when it comes to.

The affects and what whether the PBOC iswilling to let it weaken. Further rate differentials still havebeen favorable for the renminbi for some time now.Right. Take a look at how these two yeardifferentials look and the spread between the US and China yields orbasically at 260 basis points. Last time we saw that sort of wide gapwas back in October when we put this line down here.That was when the renminbi was trading around 730.Dave We're at what, 724 as we speak here.So does this mean there is still some.

Foundation for the renminbi to weakenfurther? Jp morgan certainly thinks so.There's say despite that multi sigma move on Friday, they're still fairvalue. The renminbi is now more than 2% abovethat fix. Of course, we talk about where we areclose to that weaker side of that trading band, but maybe we are furtherto go, Dave. Absolutely.I think this is really one of the most underappreciated catalysts for riskassets, not just in China. Right.So you were talking about the fix.

Earlier on.I mean, the strength coming through in the Chinese currency.Right. And immediately immediately after that,the Aussie dollar started moving up as well.I know Korea has been doing well even before the fix, but Korea is evenhitting a lot more highs right now in the equity markets.It really underpins this risk rally that we're seeing across the region.So certainly there's a micro story in terms of the market reaction today.There's a macro story. The Fed cuts rates and that ratedifferential then tightens a little bit.

Further.That could be a further tailwind for risk assets, not just in China.In any case, of course, if I mentioned be it, I'm here at the Milken InstituteGlobal Investment Symposium, be wide, be White is executive vice president SalAli is actually speaking. He is scheduled to speak here today.So we'll keep an eye on what they say about current demand trends and thetrends. Now, generally speaking, of course, wetalked about EVs. The other big play there is Seattle, ofcourse, world's biggest battery maker. We spoke to them.They said the company's pressing ahead.

With expansion despite its globalslowdown in EV sales growth. There's a squeeze in margins, a surprisefor taking place in its first interview with international news outlet sinceMarch 2020, Robin Tong told Bloomberg he is not worried about overcapacity andwill crank up the output of more technologically advanced products.For more on this, let's bring in Katrina Nicholas, who leads our Asia transportcoverage. Katrina, certainly a milestoneto have a conversation with this type of company, of this scale and importance atthis point in time. Just your key takeaways from thisinterview.

Yeah, well, I think one of the reallyinteresting things was how John was talking about how China's sector is nowmarket driven. And it really is survival of the techsavvy is this view that sort of market forces are taking hold in China isreinforced by the fact that the central government has done away with nationalsubsidies at the end of 2022. And around that time, Tesla also firedthe opening salvo in a price war that's been squeezing profit margins, as yousaid, for for many manufacturers and putting others further into the red.So, you know, John was saying that some companies may fall behind and naturallythere's going to be some consolidation.

But, you know, while consolidation amongthe manufacturers could lead to a shrinking of that shoemaker's customerbases, Seattle, for its part, it says, you know, the technology developmentsthat they're working on that gives John confidence scale is working on fastercharging batteries that John was saying could charge a car in 10 minutes or evenless. And they're also playing with a chemicalmix within batteries to get sort of a maximum performance under variouscircumstances like extreme climates. So it's been pretty interesting outlookthere from the world's biggest battery maker.Yeah.

And I think for international audience,you know, they're not too familiar with this name, but certainly their customersare as big as BMW, Mercedes Benz. Tesla perhaps is one of their biggestcustomers abroad. I mean, how would you classify thisrelationship as Seattle has with Tesla now going to be a deeper relationship?Katrina? Yeah, well, that's another thing that isreally keenly watched because isn't Tesla is pretty much Seattle's mostimportant customer. And John had some pretty interestingthings to say. When we sat down with him yesterday, hesaid that Seattle is working with Tesla.

On these faster charging cells.And interestingly, he made mention of a $25,000 eBay in the context of robotaxis. But but that's interesting because ElonMusk is also working on a Tesla model that would hit at that real mass marketsweet spot. Junge also confirmed that Seattle issupplying some machinery to Tesla's factory in Nevada.It was reported last month that Tesla plans to expand battery production inNevada, opening a small facility using some idle equipment in Seattle.So certainly, you know, there is a deepening relationship, I think youcould say, between these two absolute.

Heavyweights of the industry globally.Yeah, well, Katrina, you would know. Let me sneak in.Be Whitey. We can't talk about Tesla withouttalking about why the company comes out with earnings later today.I mentioned earlier, a few minutes back, I'm here at a conference where theexecutive vice president, Stella Lee, will be making an appearance at Slate,at least based on the schedule here as well.Talk us through what's important to keep an eye on as far as these earnings golater on. Yeah, So Brady has already flagged thatfull year net income will come in.

Between somewhere between ¥29 billionand ¥31 billion. That's a record the company has kickedoff 2024, though, with discounts across almost its entire lineup as part of areally aggressive campaign to persuade drivers to ditch their gasoline cars andgo electric. And I think this focus on volume andmarket share, particularly as competition intensifies in China, couldreally be squeezing margins. And also, analysts are expecting netprofit in the fourth quarter to be down on the third quarter.So amid that changing sales mix. You know, just to give listeners alittle bit more information about the.

Scope of these price cuts, we did someanalysis earlier that showed BYD has cut prices on more than 100 existing modelversions compared with just December, and it's relaunched a further 70 modelterm to lower prices. In fact, the only unaffected vehiclesare in its new Yang Wang brand, which is this sort of, you know, really high endluxury supercar that sort of go through around200,000 USD. So the extent of the price cuts hasshocked even longtime observers that are quite used to the nature of China'shyper competitive auto market. We had the head of China's Passenger CarAssociation.

He wrote on his blog last week that thissort of discounting has become ultra intense and reaching an astonishinglevel. You know, so I think what impact that ishaving on BYD's bottom line as one of the key players in this pricediscounting is something that investors are definitely going to be looking outfor. Yeah.Sounds like we're still in the thick of this price war here.Katrina, thank you so much. Because you know Nicholas there from ourAsia transport team. Talk a bit more about Seattle and BYD.Speaking of earnings, though, here's.

Where we are.If you want to do a bit of a pulse check of where we are.So we're about 25% into the earnings season.We're just a quarter of the way in. What we heard so far is, though, overhalf, 54% or so of companies in the MSCI China have missed their estimates sofar. So maybe it's leaning a little bit moreto the negative side. And this coming one, we're starting tosee broad sentiment in this market lose a bit of momentum.Certainly, we saw that last week. We'll see if earnings can kick in alittle bit more to change that.

Discussion and some other big corporatestories that we're tracking for you today is, of course, Boeing.And really shares closed higher after the PLANEMAKER announced a sweepingleadership overhaul. The CEO, Dave Calhoun, is stepping downat the end of the year. And commercial planes chief Stan Deal isleaving immediately while Chairman Larry Keller will not be standing forre-election. Our Guy Johnson has more.News that Dave Calhoun is going to step down as the CEO of Boeing alongside StanDeal, the head of Boeing commercial in some ways does come as a surprise, butit's certainly not a shock.

We've seen investors, customers, unionsand politicians piling the pressure onto this company after a series of mishapsthat started five years ago with two fatal crashes involving the 737 max andsubsequently have never really been dealt with.The latest crisis coming back in January with the dual blow outs on the AlaskanAirlines flight. Since then, this comes this company hasbeen in crisis mode and pressure has been growing on Dave Calhoun,particularly from customers who have been calling for change increasinglyover the last few weeks. The real question now is who couldultimately replace him?.

He will be there until the end of theyear. In some ways, as a lame duck CEO, thename that is being floated, Larry Culp from G.E..But our understanding is that maybe Larry Culp doesn't want the job.Why would he want such a tricky job at such a tricky time, particularly afterhe has just fixed G.E. and put it back into a much betterplace? Many people will be asking all kinds ofquestions as to whether or not there is an insider that could potentially fillthis role. But I suspect that many customers andregulators and politicians would like to.

See somebody coming from the outside tofinally fix this company. Guy Johnson Bloomberg London.Yeah, that's a certainly a difficult proposition given the year two.Well obviously speaking of Boeing's had so far.Right. Just ahead here on the China show, we'llget you guys an update. And certainly things have beenfairly toppy as far as China's XI is concerned and the tensions there.And given events that we've seen just this week, the latest clash betweenChinese and Philippine boats, they we'll be speaking with a reporter who wasactually on board one of those ships and.

Actually witnessed that exchange.We'll be live to Manila next. This is Bloomberg. Well, Beijing says the Philippines isbuilding a military outpost on the shore in the South China Sea that is claimedas Chinese territory. Now, China's vice foreign ministerlodged a protest with Manila, calling on the Philippines to stop what it callsprovocations at sea. Earlier, the Philippines summonedBeijing's envoy to formally complain about aggressive actions by Chinesevessels after this clash. When it comes to water cannons day onover the weekend in the disputed.

Waterway.Yep. Let's bring in Drea Kilonzo, our Manilabased reporter who was actually on board and witnessed that encounter firsthand.Andrea, thanks for joining us. Just give us a sense, what exactly didyou see? So it was a week long and bad trip tothe South China Sea, and it was an eye opening, firsthand experience.We saw how both China and the Philippines are asserting their claimsin the South China Sea. So as a background, China has sweepingclaims in that area, which is why it validated in 2016 in a ruling thatheavily favored the Philippines.

But.Beijing has kept its presence in the contested waters.So I saw firsthand Chinese Navy ships there in the area.Chinese Coast Guard vessels, which at one point I use water cannons on aFilipino supply boat for, I think roughly an hour.And then also there were Chinese stocks. Several Chinese military ships therethat acts as a force multiplier for Beijing.Andrew. I mean, this is really testing thelimits of this decades old defense pact between the Philippines and the U.S.now.

Yes, exactly.So. Analysts are saying that China isemploying water cannons to test howor when the mutual defense treaty between the US and the Philippines willkick in. So this this deal, this calls for anarmed attack in the South China Sea will be able to pull in American forces tohelp defend the Philippines. But analysts are saying the Chinese atthat's using water cannons are in a gray area.So there's the question, is this an armed attack and will this be enough todraw in U.S., the U.S.

In the South China Sea?So, Drew, I guess before a lot of other questions I want to ask you, but I guessbefore we we get to whether or not the strategy from Malacanang and Manila isactually working, Have we heard from the Chinese?Have we heard from Beijing on this latest incident?Yes. China has maintained that its actionswere lawful and restrained and it has warned the Philippines that it willcontinue to take actions steps to prevent its for what it calls the legaltrespassing in its territory. However, the Philippines, as youmentioned, also lodged a protest and.

Called that China's actions aggressive.And the Philippines said it puts into question China's sincerity in settlingthis maritime dispute. Andrea, we'll leave it there.Andrea console there. Thanks so much for your reporting.A fascinating video that we're seeing here as well.Some other geopolitical stories that we're tracking for you today.The U.S. and U.K.are accusing state backed Chinese hackers of targeting politicians andcompanies for years. Both countries have announced sanctionsagainst two individuals, as well as a.

Company in Wuhan that Washington allegeswas a front for malicious cyber operations.New Zealand has also accused China of hacking its institutions, saying itsparliamentary network was breached back in 2021.Russian President Vladimir Putin has for the first time blamed Islamic militantsfor carrying out Friday's deadly attack on a moscow concert hall.But he told a meeting of officials that investigators were still looking toestablish who ordered the attack that killed 139 people.Putin was quoted as saying that the US is trying to convince the world therewas no Ukrainian involvement.

The Israeli government has called off aUS trip by senior officials as after Washington decided not to veto a UNresolution demanding an immediate cease fire in Gaza, a decision reflecting ashift of approach by Washington. 14 of 15 U.N.Security Council members voted in favor of the resolution.The US abstained, citing the measure as failure to explicitly condemn Hamas forits October 7th attack on Israel. We've got plenty more ahead.This is Bloomberg. All right.We're checking markets in particular when it comes to commodities here today.Dave and I didn't think we were talking.

About this, but we're talking aboutcocoa. So chocolate set to get a bit moreexpensive here. Take a look.What happens when it comes to cocoa prices.Yesterday, it surged by $700 a ton in a single day and now it's topping $9,000 amark here. So it certainly is something that's veryinteresting because now it's more expensive, the likes of copper.It's worth pointing out that even the cheapest bid cars they were talkingabout in the midst of this supply, overcapacity and the like year.But certainly it's really comes down to.

What's happening in Ghana and thefunding challenges there is the world's second largest grower.And so there are some concerns about the shortages of cocoa.You know, our our colleagues have your blogs put out a fantastic sort ofroundup online on this. He really talked about, I think, at thecrux of it, to your point, Yvonne, you're right.It's it's really the worse the deficit as far as that gap betweensupply and demand is concerned. I believe going back to the sixties orat least 60 years, I could be I could be just confusing those two things.But effectively, you know, this is a.

Generational gap here.So. Well, I guess your chocolates are aboutto get more expensive. In fact, it's now.I was just checking. It's actually now cheaper to fly firstclass from New York to Europe to get your chocolate fix than it is to, Idon't know, put an order in for a metric ton of coke.But why would you? But just to put that into context.Right. So it's gone.This thing has gone vertical parabolic, as some would say.Oh, man.

It's not sweet, isn't it?Well, maybe it is. I don't know.I know where to get you for your birthday.Yeah. Chocolate.And that charter flight that Jane son was talking about on Trip.com.All those things. How you can pick one.Take. Pick only one.No, you need the chocolates on the on the flight to enjoy.All right, let's let's let's talk about what markets here right now.We're talking about a big trading debut.

That's happening in Hong Kong heretoday. This is a casino operator, I believePalestinian Holdings seeing about a 90% pop on its first day.So certainly that's helped lifting the market in some ways here and really theprospects of the gaming and leisure sector as well.You talk about earnings, earnings, earnings.We talked about Petro, China, China merchant, those are the standout oneshere today. Record profits for for Petro China.China merchants as well was upbeat and pleasantly surprised, according tostudy.

When it comes to that dividend or payoutratio. BYD and Ant as well certainly are theones that are watching out for coming up next.And to sports, though, we're seeing a drop some 2% ahead of those results aswell. You're talking a dashboard looking likethis year. I think it's looking a bit better thanthe rest of the region here today When it comes to greater China.Markets are you are seeing some upside of Hang Seng.About 4/10 of 1% would come off some of the highs, maybe a 30 minutes into thetrade here right now.

But it is pretty slow going when itcomes to equities here today. Teck is also paring some initial gainshere, but we're watching very closely China and looks like the initial sort oflift that we saw that strengthen the currency.We're losing a little bit of steam now after we did see a stronger fix for asecond day from the PBOC. Still, as we talk about the ratedifferentials are not really helping to support this currency, and particularlywhen it comes So broadly speaking, it is a broad based rally here with theexception of just a few sectors. We got plenty more coming on from Milkenand David on the ground there.

This is Bloomberg. Welcome back to the China Show Hour two.We're just about half an hour into the session here.The CSI 300 now not doing a whole lot, but we're still seeing some gains acrossmajor benchmarks, too, with the MSCI China up about a fifth of 1%.There's a lot of earnings on tap here as well.We're focusing very closely on the renminbi and this rebound that seems tobe at least losing a little momentum now.But we're still holding on to some strength here at around 721.I believe that is the onshore race here.

724 when you look at the offshore righthere this morning, but the rest of the region is looking okay.And you have some of these tech heavy benchmarks like the South Korea's Kospiof Taiwan is doing slightly well, too, but we're seeing Cosby up somewhat morethan 1%. So clearly the outperformer here today,the dollar is I mean, it's pretty mixed. But we're taking a bit of a breatherhere just given its recent strength here this morning.And we're watching very closely what's going on with sovereign bonds as a bitof a sell off here just after what we heard from the likes of Rafael Bosticfrom the Atlanta Fed overnight saying,.

Look, he's pricing in one just one dayof a price rate cut from the Fed in 2024.So this is that led to a bit of a breather when it comes to this S&P rallyand really a sell off in bonds here as well.Yeah. I know that, you know, no pun intended.One cup is not going to cut it. I think.Right. When you look at the bull case fromGoldman Sachs 6000 and its multiple expansion to I believe to 20 to 23 timesearnings. We've also heard I believe it was MikeWillison, if I'm not mistaken, talking.

About how this market does need ratecuts to justify the valuations at current levels.And then we need to talk about what what lies in store ahead.Now all that being said, this China, I guess in some ways provide thatalternative to you as equity markets that are looking for a catalyst.Right. And funnily enough, and ironicallyenough people are looking for earnings in the US at that price.People are looking for Chinese earnings at these prices as well.All that being said, I'm here, of course, at the Milken Institute GlobalInvestment Symposium here in Hong Kong,.

Just really one of many major eventstaking place here in Hong Kong this week.One Earth, you have Art Basel, of course, coming through this one, ofcourse, taking place here. So well for good.It's really another one as well. And, you know, so we're busy here as faras all the VIPs in the region are concerned.UBS chair, I believe, is speaking here today, Sir Jerry Marty.Paul Chan has been a very busy man, of course, trying to market Hong Kong andHong Kong is back and the economy is doing well.He was actually speaking at the One.

Earth summit yesterday.I saw some posts around that. He also just passed by about an hourback on the way to stage before he gave the opening keynote here at the MilkenSymposium. In fact, he talked about the economy inHong Kong. Take a listen to what he had to say.Paul Chan. The Hong Kong economy is solid andgrowing. Very solid and growing, according toPaul. Jan, joining us now exclusively here inthe studio is the Hong Kong secretary for financial Services and the Treasury.Christopher Hoy.

Christopher, it's great to have you herein our studios for the first time, I believe, and we talk about this megaweek that we're having here in Hong Kong, really bringing you some of thetop financial heavyweights to this city. What would be the pitch to them?MM I think the pitch is very easy becauseHong Kong has been in the National Financial centre and we continue to bethe major financial centre and we have a lot to offer.Like for example, apart from financial professional services, we have opensociety economy and also we have a very vibrant art scene that's illustrated bythe presence of Art Basel and many.

Events.So what you see in Hong Kong is a very vibrant cosmopolitan epitomising whatHong Kong has been and continue to be. You obviously I've been tracking a lotof these family offices that are trying to set up a shop here.How is that going so far? Give us an update.In fact, recently we have a independent party doing a report on the number ofour single family offices in Hong Kong as recorded.We have 2700 of them. And if you look at the composition ofthese 2700 single family offices, there are classified into four categories.And the top categories are those of AEW.

And more than 100 million USD basicallytick up one third of this number. And in that report, basically what wehave encountered is the multiple family offices.So we also count the multiple family offices as well.I would say we have a very vibrant and also very crowded family, obviously,number say how many those are new. Since you initiated these schemes backin 2021, I believe. I mean, are you confident you're goingto hit that target that Jolly said of 200 family offices by 2025?Definitely. If you look at what has been achievedsince we had our first, well, four.

Events last year when we announced ourhosts of eight measures to draw family offices here in Hong Kong.We have help through our investment entity, which is the Hong Kong with theinvestment promotion entity around 64 offices, the station here.But that said, in fact, many other offices has been inquiring about ourpolicies and also have been trying to set up family offices through their ownmeans. So I would say the number which isactually led in Hong Kong should be bigger.Obviously, we've been talking about the competition with Singapore when it comesto family offices.

I mean, what we heard last week with theArticle 23 being fast tracked into law. Is that a concern among the wealthy thatyou've talked to? Not really, because as highlighted byDavid, those of yourself, we have a mega event week.And also if you look at how business has been going, it's very much business asusual. If you talk to many of these high networth individuals or families, what they are looking for is ways to diversify theasset. And that's exactly what has to offer.Like, for example, in our wealth event, we have a number of themes.We have a luxury and legacy, We have.

Philanthropy and also we have tech andalso we have sports as a potentially emerging asset class.The ways in that we have this set up is that we look into ways to see how HongKong can help these family offices and family wealth to diversify into newasset classes and also continue to find value here in Hong Kong.I believe Dave has a question. Christopher.Hi, David here. By the way, it's nice to see you in ourstudio. Sorry I couldn't be there in person.We're busy here, of course, outside of Milken Institute Investments.And I guess my question for you would.

Also on family offices.I think about a week and a half back, you know, a relative of the Dubai royalfamily came to Hong Kong. You probably know they're setting up ahalf a billion fund. And I'm wondering how much traction youthink we will get between along this Hong Kong Greater China Middle Eastcorridor, which seems to be gathering a lot of, you know, a lot of momentum.I've got certainly we've gotten a lot of queries from the banking sector, fromfrom from from people looking for looking to place talent, for example, asit pertains to the business from the Middle East.If you could give us a sense of what you.

Are seeing on the ground.Mm hmm. As you rightly said, we have a host ofmeasures basically to grow Hong Kong as a family office hub.And among them, first of all, is the tax concession.At the same time, we have a capital entrance scheme, basically allow peopleto have 30 million hongqi to come to visit in Hong Kong and station in HongKong and also to be up here. And in fact, all these measures and ittogether is very much reflective of the very nature of Hong Kong, which is avery diversified and cosmopolitan city. And against this backdrop, we have beenworking closely with many of our Middle.

Eastern counterparts, like, for example,my bureau has and will you, with the Dubai Economic Cooperation Corporation,with a view to have cross referral of family offices.And of course, as a international hub, we welcome family offices from acrossthe world to set up here. Right.Christopher It's one thing for family offices to come and take that money anddomicile that money into Hong Kong. It's another thing to keep that money inHong Kong and not be allocated elsewhere in the world.What is the government doing to incentivize these family offices to asmuch as possible keep the money in Hong.

Kong or Greater China?Hmm. I think Hong Kong is a very opensociety. And also what we want to do is toencourage and facilitate family offices and also family wealth for otherinvestors to use. Our financial and professional services.Will more be the partner money here to invest in Hong Kong or the mainland, orthey use their money elsewhere so long as they use and also employ ourfinancial services and professional services.We are happy. We had a really interesting story out,Christopher, yesterday about this lost.

Generation of bankers in Hong Kong wherebasically you've seen financial services activity has slowed, the IPO,fundraising has basically been cut in half last year.It's hit VCs, it's hit private equity in many ways, job cuts along the way herein the city. And it seems like some of the thingsthat were used to be the norm, you know, China's explosive growth, the tiesbetween domestic and capital and global capital markets is looking more like athing of the past. What do you think can turn aroundsentiment? I think what is unique about Hong Kongis that we have an interest cell centre.

Basically surfing a square at a scalewhich is ten times even more of our GDP, because after all, we are city economyand also we are a global financial center which are seven times of acrossthe world. And you mentioned about capital marketsdevelopment and also how we be affected by heightened interest rate andgeopolitics. I think all of these are something thatwe see no difference from other jurisdictions.But that said, if you look at how Hong Kong is faring in other areas, financialservices, be it life example, in our trading markets, ETFs, we see doubledigit growth, more than 20% growth in.

Turnover.And also the same thing in insurance markets.We see business growing for the life segment more than 30%.And also at the same time, if you look at wealth management, for example, whilewe have a very solid base and also crowd of financial and also family officesentrusted to offices in Hong Kong, and recently, for example, we have launchedour capital intervention scheme as a highlights of what is going to besetting Hong Kong apart from Singapore when it comes to this competition forfamily offices. What do you think's going to be the keykind of swing factor for you guys?.

I think the key factor is ourdiversification in terms of what Hong Kong has to offer based on the breadthand depth of financial talent. Because if you look at Hong Kong, ourtalent pool is far deeper and also broader than the rest of the world.At the same time, our access to the mainland and also at the same time, thebreadth and sophistication of professional services is unique andthat's why we have very confident we are going to hit the target as a highlightedand also coupled with of the various mega events that we are hosting here,using wealth for good than others. We would definitely hit that.Are you mentioned about crypto, How how.

Are you looking at, you know, what'sbeen going on there? How prepared do you think banks are whenit comes to digital assets? Now we have been taking a sustainableapproach in terms of how we want to facilitate the growth of this market,because after all, if you look at many of the risk that this market has beenposing is very similar to conventional financial and also other type ofservices. And that's why the principle that wehave is very simple, which is should they present some risk?We were subject to them to a similar regulation.And this is something that we have done.

So far.We have already starting to regulate the virtual assets, the service of ideas,which is the exchanges. And also we will soon regulate thevirtual assets, OTC trading and is something that we can try to make surethis sector can grow in a sustainable manner.Christopher. Christopher, I want to ask you aboutprivate private markets and private capital and certainly direct lending.Private credit has been an extremely hot asset class, private equity, of course.And we have a number of well-established funds in Hong Kong.And I'm curious what you're seeing as.

Far as the outlook for making Hong Kongat least some sort of base for private to private money is concerned.In fact, we have been hearing a lot from our practitioners here in the region asa globally in terms of what are measures that we can do to facilitate moreprivate credit or other types of stimulus efforts development here inHong Kong. And we are looking at some similar sometype of tax arrangement, you know, to facilitate debt.And it's something that we are looking into as a committee because a chair byme in terms of seeing any types of tax arrangement that we can do to facilitatethat.

What about what else you could bring toHong Kong? I mean, there's been talk about not justcrypto bond futures, commodity futures. Is that something in Hong Kong's futureas well? Yeah, I think Hong Kong strength hasbeen well known and unique and also something we will continue to build onas a connector between the mainland and also the international global marketsand is something that we will continue to do and continue to deepen.And one thing you highlighted is in terms of the launch of the Chinese bondfutures offshore through us as a ways to facilitate more voice measurement to anarrangement for global investors to.

Access to make them bond markets.And this is part and parcel of our overall strategy really to first of all,grow the I and B international ecosystem through Hong Kong at the same time toconsolidate and solidify our role in the IFC.Christopher, it's great to have you. Christopher Wray there, Hong Kongsecretary for Financial Services and the Treasurer joining us here in our HongKong studio. Still ahead on the China show, we havemore on Hong Kong with home sales seeing some further declines as the briefrebound earlier this month starting to fizzle out a bit while the detailscoming up.

This is Bloomberg. All right.We're still trying to figure out what the direction of renminbi is reallygoing to go in. And if you're looking about the fixings,that certainly is one sort of counter balance that we could see for thecentral bank when it comes to what we could be seeing, because thefundamentals still maybe make it seem like those renminbi has further toweaken. Take a look at those two, yourdifferentials. Right.So J.P.

Morgan, a pretty interesting note outtalking about this, that spread between the two year in the U.S.and China right now is around 260, closer to around 70 basis points.Back then when we hit those levels was back in October when Dollar China wasaround 730. We're trading at, what, 724 here thismorning, Dave. So perhaps there is still a little bitmore to go. And really what we're seeing in thesefive U.S. fixes hasn't really sent a message tothe world that they're not allowed or they're not willing to let this beweakened further.

Yeah, because it's I think it's it's amore difficult proposition. And, you know, let let me complicate themath, right. You're talking about how, you know,conversations are not only just one rate hike from graduate cut from the Fed, youknow, what is that really going to do with up to that spread,if at all? So it remains certainly something thattactical and tradeable at the moment. But longer term fundamentals are quite,you know, oceans apart, quite literally, China and the US.Let's bring in our team to give us context on what they're thinking todayand maybe how this story plays out.

Moving forward.Mary Nichols, our strategists and of course, our graphics and rate strategistDavid Finnerty joining us right now to talk us through this.David, I'll start with you on the Chinese currency this week.And certainly we came into this week really on much weaker footing on China.How do you think the last 48 hours informs us of what the next 48 lookslike? Well, I think certainly the PRC has laidbasically a line in the sand and said, look, we don't want it to depreciatemuch further in the near-term and we certainly don't want it depreciaterapidly.

So the yuan fixing from the air isrunning about 7 to 9, seven, ten. I think it's a line in the sand.If it goes the fixing went above 710, then I think the market will quitehappily sell, which is what you saw on the five these move.So these prices very quickly cut and said well we're going to keep it at in aseven or nine territory. I think it will stay that way certainlyto quarter end because you did a quarter end and month and flows which cancomplicate everything. And certainly with the US PC datalooming the week which could see a rise in human shields, I think the PBOC willcertainly say look, let's end this quote.

On a stronger footing.We don't want any rapid depreciation. So they could do their best to make surethat yuan consolidates or stabilizes, at least I'd say, around the 725 area.And David, I mean, we're heading into a period where you have seasonality,right? When you have these Hong Kong listed,Chinese companies are start paying dividends.It's usually a time when the renminbi is leaning more on the weaker side.Does that mean the PBOC is still going to be that sort of counterbalanceagainst the wind here? I mean, are we likely to see moresupport from the PBOC?.

Yeah, I think so, because I think PBC isworried. Like if you let the yuan depreciate muchmore, the market's going to go, okay, well, let's really see how far youprepared to go and very quickly the market will go, well, let's try 730,let's go. 735.So I think with the PBOC, with these flows, you really want to get the yuananchored. So we say, particularly after Friday'smoves, you want to dim the expectation that you're going, yes, we can weaken.So I think the pressure will go completely the opposite way in goal atwork.

And I really said the yellow line in thesand on the fixings to indicate we don't want that yuan going anywhere.Really about 725 certainly for a long term in the near future.So yes, I think the yuan will the PBOC will fight against those headwinds forthe yuan to weaken. Mary, Mary, I'll bring you in with aspecific question, but generally speaking, where I know you put out apiece this morning on this, where is your head as far as the yuan isconcerned? Yeah.As you mentioned earlier, the fundamentals, whether it's especiallylooking at rate differentials, would.

Suggest that we would we would see amuch weaker CNY. But that hasn't been the message that iscoming through from the authorities. And the authorities are trying tocounter counter that. And as David mentioned, you have the PCthat's coming through. You've got loads of Fed speakers thatwill likely reiterate their patience on rates.But then as well, you've got domestic factors that are likely to weigh on theCNY. For example, you have bank earningscoming through this week and then you have earnings from some of thebeleaguered property developers too,.

That also add to headwinds.So it will be a struggle for the CNY, but it will have to be counteracted bywhat is coming through from the authorities.I mean, are you are you seeing that broadly sentiment is is now losing a bitof steam? I mean, after the five weeks rally thatwe saw in Chinese stocks and and do you think earnings are going to show usfurther weakness? I mean, are we likely to signal somesort of correction in the near term for Chinese stocks, Mary?There is likely to. We're expected to see headwinds in thenext few days, whether it's going to be.

The property developers, the propertydevelopers, whether it's a bank or country garden, are likely to show howthe woes continue within the within that sector.And then also, you've got financials. So the banks are are going to releasetheir earnings and then would like to see the ramifications of the propertysector on the broader on the broader economy.So these are some of the headwinds that equity markets are likely to face overthe next few days. Mary, our Question of the Day.How long before the S&P 500 hits 6000? I actually put that on on Twitter.The bulls, the bears and the trolls are.

All it's about lay the foundation ofthat debate for us. Yeah.Obviously we've seen such a strong rally in the S&P over the last few months andof course, since the start of the year. And what we've seen is that they don'treally need the Fed as much and that the Fed is whatever, even if they are evenif they decide to reduce their hikes, it could still do well.But that's all contingent on whether we continue with this Goldilocks scenario.So do we still see positive growth in the US?Does the economic fundamentals support that?So as long as growth continues to in the.

US to support an ongoing rally, as longas U.S. profits continue to accelerate, then youcould see the rally to continue.Mary, thank you very Nikola and David Finnerty both joining us from Singaporehere and talking about the renminbi and of course, where this U.S.stock rally is going to go. You can follow today's Trading in ourMarkets live blog. That is on the Bloomberg here at AMlive. Go get a market rundown, one click.There's commentary analysis from Mary and her team of expert editors.You can find out what's affecting your.

Investments right now.That's just Bloomberg. Backto our big take here this morning, an investigative piece here from our team,certainly a fascinating one on Elon Musk's SpaceX.StarLink touts as high speed Internet as being, quote, available anywhere onEarth. But a Bloomberg investigation has foundit's being used in territories it has no agreements with, including some ruled byrepressive regimes. For more on today's big tech, let'sbring in our Bloomberg reporter, Bruce Einhorn, who led the story and reallyjust telling.

What sort of examples are you seeinghere of these StarLink kids being treated illegally?So StarLink in many countries has agreements with the United States, forinstance, with Japan. So you can legally use StarLinkequipment there to access the satellites.A lot of other countries don't have agreements.So there places in, say, Africa, the Middle East and Central Asia, where youcan't use StarLink legally, there's no authorization to use it.But it's not that difficult to buy terminals somewhere on the black market,either within the country or somewhere.

Else.Bring them in. And they're workarounds that people haveused. And so we're seeing this in a lot ofcountries, say like in South Africa, but also in war zones like in Yemen orSudan. I mean, obviously, this is givingsecurity concerns surrounding a private U.S.company. How a regulator is looking at this hereright now. Well, in some countries, governmentshave issued warnings telling people this is not okay, you shouldn't be doingthis.

There have also been in some countriespolice raids here in this part of the world.We've seen, say, India, where StarLink has applied for a license.The government just has slow walked that it's it's unclear if and when they'regoing to get one. And then you have the situation inChina, which is just said, no, we're not having StarLink.They haven't authorized it. China's trying to build its own network.All right. We don't have enough time, but reallymake sure they go to the terminal and check out Bruce.Is there the big take here today?.

A very a great piece here, really on theinvestigation that Bloomberg has done when it comes to this company.And certainly big and I big take is where you go for that we got pay morehad this as Bloomberg. 11:29 a.m.in Tokyo. Japanese market is, of course, headinginto that lunch break here. We're slightly just mixed when it comesto the Nikkei and topics here this morning.We're still tracking what goes on with dollar yen.One 5131 We stabilized a little bit. We did hear from the finance minister.Mr.

Suzuki is on talking about not rulingout steps on excessive affects moves though, a second day where we've heardJapanese officials trying to at least stem the weakness in the yen here.It seems to be working, at least for now, but certainly.And what form could that take? Is certainly one thing that Bank ofAmerica is looking at may be likely to conduct a smoothing, they say, type ofintervention to slow the yen's weakening.And your Asia dashboard is looking like this year right now.So Japan's sort of a mixed picture here. But the rest of the region, there's nota whole lot of conviction out there.

But although we're still punchingslightly higher, we're still a bit cautious.We still have that. So PC inflation coming out at the end ofthe week. You have some earnings in China as wellthat we have to focus on. But for the most part, you're seeingmost sectors are in the green. US futures are also getting a slighttick up here just after what we saw. This rally seem to really stalledovernight as well. The dollar as well also stalling in thisrally, Dave. Yeah.And how much exposure does one want?.

Certainly in an equity market that, youknow, we were talking about China, right?We've been hitting we've been consolidating after getting close thetechnical levels. The U.S.has been consolidating as well, though there is a pocket of that equity marketthat continues to just move higher as well.And, you know, this call in duration and fixed income.Right. You know, people have been talking abouthow you should be building duration at this point in time.I wonder where those people are at this.

Point in time.This yield curve has been inverted for like 90 weeks now.So timing this thing is fairly toxic. Let's talk about allocation now.Private public markets within public markets, where do we go?Joining us here on set, Kevin Bond, senior managing director, chiefinvestment strategist, head of Singapore at Alberta Investment ManagementCorporation. It's nice to see you.Great to see you, David. Hey, um, how much are you guys managed?How should we manage? 160 billion CAD on behalf of governmentpensions, endowments and insurance funds.

For the people of broken health.That's quite a responsibility in in Europe.Your biggest overweight right now where whereas most of that allocated towards alot of our portfolio right now is actually in North America and U.S.and Canada from a geographical perspective.And it's one of the reasons why we set up our office in Singapore as well aboutsix months ago and actually opened our office in New Yorktwo months ago. We're really looking to internationalizethe portfolio somewhat, to improve the diversification of the portfolio as awhole.

Okay.And just before we talk about this part of the world, so the geographicaloverweight as is, it's North America, what about between public and privatemarkets? And I'm guessing we'll talk more aboutprivate markets in a moment. Yeah, absolutely.I think you'll find that the general trend for large institutional investorshas always been to grow their private market allocations.It's the same for us as well. It's gone from, you know, a 10th of theportfolio to a quarter to about a third and probably headed to it's about 40% ofthe portfolio.

Okay.Somewhat similar for the rest of the people as well.And that's, I would imagine, is a deliberate effort like this.It's taken on a life of its own, this allocation.It used to be 20% alternatives and that was already everything is you're talkingdouble that amount already. Yeah.Yeah. It's a it's been a deliberate effort tosome extent, but I think these things also have a bit of a momentum that buildon themselves. You know, the success builds on itselfas well.

There's been great organic returns froma lot of private market asset classes and for us I think that's been a part ofit. But a part of it is also just findingnew asset classes and opportunities to invest in.So infrastructure has been a growth area for us, private credit has been a growtharea for us. I don't think that's unusual.I think a lot of other large institutional investors are seeing thesame opportunities as well, and it really is a diversification in terms ofhow you can generate returns or in some of that illiquidity premia, expand theinvestment toolkit to make sure that we.

Can generate good returns for our state.Do you feel like private credit, just to take an example, do you feel like thingsare getting crowded? I mean, incrementally, you're gettinganecdotally, at least you're getting news of, you know, certain managersgiving up their fees. You're getting a squeeze on returns, forexample. Are you seeing that from your end ordoes that concern you even at all? Sure.I was always concerned. That's when everybody is excited aboutan asset class. There's a there's very strong inflows.I think private credit is a relatively.

Nascent part of the industry, but inmany ways a very natural extension after I think some of the regulatory changesafter the financial crisis as well. And it's been an opportunity for large,long term stable pools of capital to be able to provide new capital solutions tothe market. And so we've been a part of that and ourpartners have been a big part of that as well.I think what usually matters is when there's strong inflows, at some pointsomebody's going to get disappointed and it really speaks to better securityselection, better credit underwriting, better credit discipline, making sureyou pick the right partners as well.

These two domains of public marketmanaging public market funds and private market used to be just oceans apart.And, you know, that concentric that sort of Venn diagram has closed even furtherthan wondering. You talk about this concept of totalportfolio management. It's I mean, it's certainly changed thegame and especially for someone like you that's looking to match futureliabilities, for example. Yes, absolutely.And I think that that is the important part of it.It's future liabilities. It's thinking about not just the crosssection of opportunities today, but.

Really preparing for what we need to doto generate returns over a long period of time as well.And total portfolio management really allows us to think about the totalreturns of every asset class. So not just the index returns and thepassive returns, but the active returns, stack them together and compare themacross all the asset classes. And also think about how those returnsare going to look over a multiple time horizon.So today, tomorrow, three years from now, five years from now, ten years fromnow as well, and making sure that we have the wherewithal to commit capitalto some of these strategies that might.

Take a little bit longer and the furtherout you look into the future, that clarity muddle somewhat as well.So you talk about the illiquidity premium, what is what's a proper premiumthat can be comfortable with at this point in time?You know, the illiquidity premium is one of those things that is elusive.It's almost impossible to actually get rid of the people who tell you you canlook at the yield curve and see how that works.So obviously it's inverted right now. So that might say something aboutIlliquidity premium. But I think in general, when markets areat normal levels, you can think of it as.

Basically the amount you should becompensated for, basically locking your capital, not pretty.Okay. Public markets, he talked about the U.S.You're looking to diversify away from North America, for example.So what in Asia looks attractive to you? Something is Asia look attractive.So from a country perspective, you know, Japan is obviously interesting in manyways. I think there is a bit of a reflationstory that's happening that's driving corporate profitability and wage growth.There is also a corporate reform story which I think has a lot more legs to itthan ever before.

The government is a lot more committedto it. I think corporate management have foundthe wherewithal to do drive a lot more of these changes as well.And I think investors are excited about that.India is exciting in its own way. Its had a good tailwind from a supplychain realignment. It's got, you know, good relativepolitical and policy stability. I think their valuations are always alittle bit more of a challenge, but at the same time there's been stronginvestment flows that I think are driving some of that too.Okay.

But I was waiting for you to mentionChina. Okay.What comes to mind when I say the word China?Yeah, China is a you know, it's a little bit of a challenged story.I think, you know, there are debt deflation dynamics that that are a bitof an overhang from the real estate challenges that they face so far therein long term. I think demographic challenges as well,although to be fair, that's not unique to China.I think the rest of the world faces those challenges soon.It's just a matter of degree and time.

There is obviously the the cloud ofgeopolitical tensions, the ebb and flow of that that drives political and policyinstability. Yeah, that makes it just difficult toreassess. The macro economic opportunity is thereal economy and how that's going to play out in China.And of course, investment access, depending on where you come from and howwell the government, government relations can be at a point in time.It's not just about valuation, is it? Otherwise this market would have ralliedsubstantially. What do you need to see to to to be morecomfortable, to allocate more sure.

Or even allocate at all?I think if you think about it from a from a policy and macro perspective, Ithink the recent budget deficit expansion is a good indication of thegovernment's policy support for the economy, which I think can be excitingin its own way. But again, the investment access is alittle bit of a challenge and some of that geopolitical tensions, to theextent that they can unwind, I think would be a much better signal for manyglobal investors who feel a lot more comfortable to help us in China the wayperhaps we all aspired to just a couple of years ago.Well, do you expect to increase or.

Decrease allocation?That's a 2424 month window to China, to China particular?You know, I think we're open minded about China.It really depends on the situation. You know, we haven't reduced ourexposure to China. We've really been maintaining it.And so of thinking about how better to access the market, if at all.What about hiring manpower complement that goes almost hand in hand with whereyou want to be exposed, isn't it? Absolutely.Absolutely. I mean, we set up we set up shop inSingapore.

It is our only Asian office.I like to joke that we've grown, you know, 33% and 25%.But basically we went from 3 to 5 people.But I think we're looking to grow that presence over time.The way we think about it is there are opportunities here we like to access.And it's not just China, it's Japan. Again, it's India, it's Korea, SoutheastAsia really looking to do more here. And as we find those opportunities, asthe capital starts to flow, we'll think about the resourcing and making sure wehave people on the ground to do that. There we go.Well, five is enough.

I don't even have five friends.Kevin, nice to see you. Okay.Kevin Long there, Senior Managing director, chief investment strategist,head of Singapore at Aimco there, of course, right coming up here.So we'll take a very short break. As you probably can hear right behindme, it's a bit noisy. We're we're on the break quite literallyfrom some of these conversations taking place here.So coming up shortly is got capital move talking all things private equity inparticular as it pertains to real estate.And then next hour, of course, we'll be.

Circling back.Why not the private credit? Stay tuned for all of that if I'm backto you. Yeah, particular when it comes to whatmarkets are doing is really that what we're seeing from A, B or C, yen herethis morning, at least a second day of strength coming through for the offshorerenminbi. We're still holding around 724 levels.You know, is there momentum behind this Reversal is certainly one thing thatpeople are asking is given the fundamentals, as we talked about, one5133 for the yen here as well. So at least we stabilized a little bit.And, you know, take a look at where.

We're going.It's really positive in the likes of the Aussie dollar.What we're seeing with the renminbi here today, you take a look at how we'relooking at when it comes to the cost me, this is one of the clear outperformersamong the Asia region here this morning. We're up more than 1%.It's really what we've been seeing with the chip stocks of Samsung, SK Hynix,look at that. It's up some 5% micron.That's certainly led to some inflows here into the tech space in the chipspace as China's get this market cap is now reaching 100 billion market dollars,$1 billion.

I just say in terms of market cap.We're watching some of these financials, some of the automakers here today.There was reports of a potential reduction in punitive taxes for firmsincreasing their dividends as well. Any more ahead?This is Bloomberg. Hong Kong has been a natural financialcenter and we will continue to be the major financial center.And we have a lot to offer. Like, for example, apart from financialprofessional services, we have a vibrant society economy and also we have a veryvibrant art scene as illustrated by the presence of Art Basel and many events.So what you see in Hong Kong is a very.

Vibrant, cosmopolitan, epitomizing whatHong Kong has been and continues to be. That was the Hong Kong secretary forFinancial Services and the Treasury, Christopher Hoy, making his pitch on whyHong Kong remains an international finance hub.Meanwhile, we're talking about what's been going on this property market rise.So we started seeing weeks of surge in property sales volumes in the like hereafter, of course, the city did drop those cooling measures on, say, thosecurbs as was second hand market, though. A look what happened, though, that'sstarting to see some signs of cooling down after that brief rebound.So you take a sense, Alina, saying here.

Right now, the property agency reportingsaying that the ten biggest residential estates posted 19 transactions over theweekend. That was a 32% drop from a week ago andmarks the second decline in a row now. Local authorities scrapped propertytaxes last month to boost those sales. So where are we?Right. Hong Kong property tycoons are alsolooking to capitalize on home buyers ready to ramp up their purchase plansover fears of price hikes. Let's bring in our Bloomberg Opinioncolumnist Sheila Shelly Rand joining us now.So, you know, buying apartments seem to.

Be a bit of a weekend pastime for a lotof Hong Kong after these these measures were removed.What do you think is going on here? So the property developers, they aretaking a very aggressive approach to selling.For instance, recently there was a project in Cologne.What happens with a payment plan is you only need to put down 5% deposit and youdon't have to pay the rest 95% until the deliver it mid-next year.So a lot of people are taking it as a call option.Basically, I'm 20% levered and I'm only putting 5% down If one year from nowHong Kong property market is now.

Recovering, I can just walk away andfour feet, 5%. Is the market getting heated in youreyes? I think like all the primary markets,because the developers, they are selling very aggressively because we all knowHong Kong begs a kind of aggressive they're kind of very cautious thesedays. Right.And that they they the developers, they need to show that they can actually sellprojects. So that says primary market is heatingup and that there is plenty of demand. But as you just mentioned, the secondarymarkets now doing well.

Right.All right. We'll see how the demand picture lookslike you're actually think you are. Bloomberg Opinion column actually runtalking a little more about Hong Kong property here today.Let's get back to our coverage of the inaugural Milken Institute GlobalInvestor Symposium. David sitting by with our next guest.Yeah. Yvonne You know, we might be able todraw a direct line between that conversation you guys were having withJulia, at least as it pertains to broadly the concept of, of real estate,but really have a look at what it.

Pertains to the private private markets.It's really been a hot topic of late, particularly the last two years or so.Let's bring in our next guest here. Of course, joining us on set isglittering outgoing chairman, managing principal and, of course, co-founder ofCapital Partners. It's nice to see you and good morning.Good morning, David. I know you're the real estate guru inthe house and people gravitate towards you.I just watching you walk around here, I'm wondering, it's such a broad topicand concept real estate. What's what are you guys busy withspecifically?.

What is your investible universe lookinglike particular right now? Obviously, interest rate is not a fan ofreal estate, so there's a lot of disruption in the world and in the waterestate. Certain markets have reset much quicker,us in particular because of the reset mechanism built into the banking systemrequested versus non-recourse debt that allowprices to reset to market, to allow transactions to unfold.Right. Liquidity to come back to the market,which we're starting to see happen in Asia in particular.The banking reset mechanism is not quite.

There, so prices don't reset as quickly.So the distress that people perceive that's available is not quite there yet.So you have to actually look at alternative places.Obviously, the the obvious places I relate it, the real estate data centeris an easy one, are a contrarian office play in places like San Francisco,Seattle, where the companies of tomorrow that are going to displace jobs to makepeople more productive like they will be based or built out of those cities rightwhere the talent are in Asia in particular.Obviously, a housing market in Hong Kong seem to have found a bottom.Now that all these stamp duty order,.

Restrictive artificial restrictivemeasures have been removed. That's, I think, bringing money on thesidelines back to the market, saying this is the floor supply demand stillfavor the demand side in Hong Kong housing in particular.Yeah, China is a very different story in China when you have 20% housing pricecorrection in the secondary housing sector, that's a 350 trillion renminbivalue price. And then and when 60% of the house ofbalance sheet, well, it's tied to recede.I mean, 20% of spending is 50 trillion to 70 trillion of value.That will take, what, 10 to 12 years of.

5% GDP growth just to make that up rightoff the table. And that's our balance sheet.Yes, it is. People are not spending.So other than investing in growth sector like data center are looking fordistress, Well, there are a lot of distressedassets. Mainland developers, for example.Are you active whether that's onshore or is it more offshore?You're looking at, if at all you're busy looking at some of these assets?Those are much harder, right? May not.Developers onshore assets are usually.

Pledged to Chinese banks and the bankstakes their time, take a long time to work out the problems what kind oftrouble assets and they don't unlike U.S.banks, they don't just take the asset market to market and dump them.Right. It works an orderly process.It takes many, many years. And so that's actually much more youkind of have to be a state owned developer, a state owned banks to playin that sector. Yeah, but many of these distresseddevelopers do have assets outside of China, and those are where we couldprovide short term financing, we could.

Provide bridge financing, we couldprovide liquidity to them in the US dollar or non renminbi currency to helpbridge the liquidity crisis. Well you could would you we wouldprovide is offshore assets. Right.So that's where I think in a way a segway into private credit.Why private credit has been such a strategy for us as other many shops,because all of a sudden you've got the big banksabsorbing smaller banks, but the big banks tend to be more conservative.So that calling back many of the loans, creating a void in the market for highquality real estate, not very high.

Leverage, but where there's asponsorship issue or whether they just want to reduce the loan book or reduceexperience exposure, creating high quality assets that private credit canlearn and equity like return. But what debt like protection is quiteunusual. And this time I think the cycle is goingto play out quite a bit longer. It's a relatively new asset class.Look, to say, give or take ten years private, private credit.Right. And what happens if we enter arecession, for example? Well, the recession is in a recessionalready, right.

So it can get worse.I think private credit has been around for a long time.But private credit, previous definition are more mid-market.Mid-Market firms, corporations. It takes a lot more understanding of thebusiness to make the lending direct private credit for collateral back.Real estate has been more of a more recent phenomenon, I would say,especially in Asia, because Asian banks tend to be quite cheap.Asian banks until then, relatively high leverage because they like collateralback loans. Right.But with this interest rate cycle, well,.

We are even very low.Leveraged bank loans are quite expensive.So the extra percentage we need for private equity to play private credit,all of a sudden it is not so scary anymore when liquidity is actually notavailable by and large, is it? There was a lot of money raised as rateswere moving up quite rapidly. And do you think that money is forced tofind yield in the years to come? That money will be forced to find use,but then the credit market is very large, much larger than the equitymarket. Right.So that.

Still a lot of deals available becausesomething has to be done as long as the banks are still consolidating amongthemselves or reducing the exposure to risky assets which they deem many ofthem deem real estate to be riskier than before.Right. That void will always be there.And that void is significantly larger in credit than inequity.Okay. Final question.He talked about your place in office, which is quite curious.You could talk a little bit more about that if you can.China plus one.

I mean, what other things are you busywith and where are you looking in terms of assets across the region?Obviously, within Asia, the China Plus one is very interesting to us.I think Vietnam has been a big beneficiary of it, still still a verybig beneficiary because first and foremost, India should be veryinteresting. But I think one thing that's hamperingIndia a little bit is they are less welcoming to Chinese factories, factoryowners opening factories in India to take advantage of the labor, to producegoods, to sell export. If you are a U.S.buyer, it takes a long time to qualify a.

Vendor.So if there's a brand new Indian manufacturer, it would take some timebefore it gets into the vendor. Whereas a Chinese existing factory owneropening a factory in Mexico, opening a factory in Vietnam, if they can open afactory in India, of course, would be great.But they're going to go to where it's easier for them to open a factory, totake advantage of local labor to get around the tariffs.And India, it's more difficult compared to Mexico and compared to Vietnam.Okay. Very quickly, Vietnam in Mexico, youexpect those two trends to continue?.

Absolutely.For quite some time. As long as there's geopolitics betweenChina and U.S., that's the China. Plus, one trend will continue for a verylong time. It's not all about, let's pretendgeopolitics opportunities arise. GOODWYN It's nice to see you.Thank you so much. We could be here for a long time, andlet's do this again. Good, good.GOODWYN Glad they're, of course, chairman and managing principalco-founder at Gulf Capital Partners writes.We'll take a short break and we'll be.

Right back.The markets, how we're doing this Tuesday.Plenty more ahead. Good morning, by the way.You're watching the China show. All right.Take a look. When it comes to some of the moversacross the shares here this morning, we're still seeing some decent bit hereacross some of these China listed or Hong Kong listed Chinese companies andChina Merchants Bank is the clear outperformer here after their earningshour beat there. That capital ratio also I should say thedividend payout ratio was also a nice.

Surprise by too.Also up some 5% was only optical. On the flip side, they're down some 3%.That's it for us here, the China shop.

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