China Inflation Stalls While US Runs Hot | Bloomberg: The China Indicate 4/11/2024

All right we're just about half an hour away from the opening Bells Hong Kong Shanghai and Shenzhen you're watching the China show I'm David englon men our top story this morning Asian stocks decline with bonds under pressure after hotter than expected US inflation data the Yen plunge prompting a verbal warning from Japan's currency Chief.

China set a report and speaking of inflation March inflation comes out this hour with consumer and producer prices expected to show further deflation signals and Chinese State media slamming the US Japan and the Philippines as their leaders prepare to meet in Washington yep um you could say there's.

Some declines when it comes to equities but you know a stronger world where you seeing what fixed income is doing right now basically Asia are getting a bit slammed after waking up to that us CPI print that came out hotter than expected and a third straight print where we have seen better than expected numbers coming through when it comes to US inflation so.

You're seeing a lot of the short end of the curves really getting roiled here the Aussie 5-year yield is up some close to 14 bases points the 10year jgb is at the highest we've seen since around November so certainly there is that sense that you know we can probably say goodbye to that June rate cut right now that's at least what the FED pricing is.

Is changing in the Moment The Narrative seems to suggest maybe September could be the time when the FED starts cutting so certainly that has led to risk assets to be on offer here today you're still seeing a decent upside or at least holding on to the gains when it comes to oil prices obviously there's been some uh you know our sources saying there's.

Some potential risk here of Iran uh doing something we're watching very closely crew Market Shanghai crude is also up by about 1% it's an ECB decision as well and we continue to watch the question of the day are we going to see ity for euro dollar just given the fact that you know if the fed's not going to cut anytime soon ECB seems more inclined.

To do so maybe potentially as early as June 10742 a pretty decent drop in the Euro overnight as well dollar Yen we talked about briefly touching 153 we at 15285 territory here right now we just heard from those cond lines uh and talking a little bit more about how they're not ruling out any options right.

Now but certainly just given the volatility we have some sort of indications here Bloomberg crunching the numbers this cond index will'll show you about a little bit later on perhaps the volatility is not enough at this moment for beij uh I should say Japan to step in take how US futures are we're still on the back foot there dollar is still.

Catching a bid here this morning you take a look at what's going on in treasuries and basically the entire treasury yield curve is again once again higher and we're talking about close to 5% for your 2-year yield here right now 455 for the US 10 year year that's the first time we've broken that level since November so we continue to see the short.

End of the curve at least stabilized here in the Asia session but we continue to see uh interesting moves in the fiveyear as well I think at one point the 5year yield was higher than the 30-year yield uh at briefly overnight as well you take a look at how the China setup is okay so we got through the US CPI print we're still digesting that.

Chinese inflation could be potentially quite interesting as well right so if we see some more signs of maybe a positive print for a second month in a row is this a sign that maybe deflation Ary pressures are abating that's a key question there 50 Futures are still on the back foot looks like it's still going to be a riskof day throughout the.

Region here 229 for your Chinese 10-year yield and a 726 handle for dollar China hangon Futures does show that too as well keep in mind also the REM and be against the yen is at multi-decade highs right now so there is still some say that competitive devaluation risk going on there when it comes to some of these currencies here in the region how say.

Futures are doing this so it looks still the last two days though it looks still elevated but we could be seeing a pretty decent drop here today Dave yeah that rise and fall the rise was yesterday into fall about when when that inflation print came out and really you could almost draw a line and turn that page in markets you really see uh when the.

Inflation print dropped in fact just in the Japanese currency to build an evance point right you on against the Yen we haven't seen these levels going back to the early 90s the language coming out of Japan and the chief currency uh named to watch of course Mr K coming out with fairly stronger not quite extreme just yet but fairly.

Stronger language as it pertains to how they're describing some of these moves rapid significant and decreasing in terms of the benefits of a weaker currency we're watching that very closely today apart from that you Chinese inflation coming through we are as we've been in the last few days or so in the window for credit numbers coming.

Out of China speaking of declines across these Market csi300 is already on the longest losing streak uh going back to early Feb day six would actually take that streak back to August 2023 levels uh China Taiwan tison of course this massive crash by the wind is cement stock Tren Ray uh that stock crash yesterday we'll see what happens with.

That and a reversal lower we were talking about this on hangang index probably gives up most if not all of the gains uh coming out on Wednesday I forget what day of the week it is but yeah it's Thursday today it's been a long week though yeah you've been covering HSBC you have to though yeah uh then we had new voices which I'll tell.

You about a little bit later on but certainly talk about that inflation print I mean across the board it was it was pretty strong uh when it particularly when it comes to the core CPI 0.4% month on month and really we talked about how B expectations for a third straight month you have the likes of Goldman pushing back their forecast.

Now for a cut to July Barkley's only talking about maybe one cut this year and then of course you have the Larry Summers commentary say look maybe we need to talk about a move upwards for rates versus the other way around okay yeah let's hear from someone those G earlier on inflation is getting just becoming a.

Very stubborn situation for the fed this is too much for the FED inflation's not doing what they wanted on average and this is a problem for them the sound that you heard there was the door slamming on a June raid cut it's uh that's gone I do think it shuts the door in a June rate cut the FED is not in our opinion is not going to be making any.

Moves anytime soon they're more likely to hold status quo pretty good reason for them to remain on hold here see how things go A rate cut in June it seems to me would be a dangerous and egregious error at the moment I think they'd probably set up for September and December two rate Cuts this year there's a real risk of no rate Cuts you know.

That's starting to come into the narrative and I think that's new they're you know creating a problem for themselves in terms of the promises of rate cuts the inability to actually execute on them Bill Maldonado is with us CEO and interim CIO at epr Investments Group Bill a pleasure to have you on the show.

It's been a while you've traded periods of sticky inflation in the past bill remind us how to trade this part of the cycle what would you do this time around I mean I think the key question for investors here is um the strength of the economy uh because we've been you know the market has been very very focused on the FED action on rate Cuts.

We've seen inflation moderating particularly on the good side lot more sticky on the services side I think the the number to watch now is the labor inflation number uh I think that will be the main thing that'll allow the FED to to ease if if they are going to ease a bit later this year but the economy remains strong uh and and that's.

Probably good news for investors in in Risk assets um us equities are not that expensive X the sort of Magnificent Seven stocks that have been flying high over the last 3 4 months or so uh the broader Market is is not that stretched uh high yield still looks like it's got good value to offer and if we look internationally there's even more.

Opportunities if we're going to see that growth persisting uh in emerging markets and and across Asia so I think there's a lot of interesting things to play even if the Fed rate cuts are going to be a bit slower in coming slower in coming so you still think they're going to come this year.

Bill I mean if if fed pricing is Right September that gets very close to a nove November election will we see a rate cutting cycle at all yeah it's an open question Ivon I would say um it is possible I think there is a a material probability that we're heading for a soft Landing no Landing scenario uh and then maybe rates.

Stay where they are the other thing I think that in investors need to consider and which which needs to come into the conversation is the Fed balance sheet I mean we saw uh a lot of um QE measures uh during covid even lasting postco and I think the the Central Bank is still running a balance sheet that's that's a lot larger than than it needs to be.

Under normal conditions so so what's what's the play there we've been very very focused on on the level of rates but but the bank is running an enlarged balance sheet which is in itself stimulative right and that takes us also into this relative value conversation if you could call it that between fixed income and equities Bill and how do you.

Look at the bond markets right now with effectively 5% yields uh on a treasury curve yeah so look I think that um corporates particularly in the US the high-grade corporates are a bit stretched um spreads are are very very tight there and there's not a lot of wiggle room but if you look a bit further than that as I said high yield.

In the US and then if you come across to Asia both the investment grade and high yield I think offer very interesting opportunities yields are pretty high there's no real fundamental reason for that to be the case we're not expecting for example default rates to increase materially in Asia um we're not expecting any big surprises in terms of.

Inflation or Central Bank action across Asia so I think there's there's great opportunities there and and as you as you both know very well um we've got the Indian bond market coming into Focus increasingly with the addition into the Benchmark indices and that's a new area for a lot of investors so there's there's a lot to play for there's a lot.

To do if you look a bit further a field that's right um I was just talking to HSBC Asset Management yesterday and they're they're expecting I think a hundred billion dollars of flows into that market in India bill um I was going to talk to you more about you're you're talking about the Asia credit space and and the opportunities maybe in bond.

Markets there are are you adding duration in this area right now I think selectively our fixed income teams are doing that and and I think you can afford in this environment to be patient and to wait for opportunities to wait for blips maybe like the one we're we're going to have now and and today so I don't think there's any big rush to do.

That but yes I think selectively that's something that that our teams are looking to do build a temptation to go back into Cash just your your thoughts and your advice around that well there that's that's been one of the sort of main plays that investors have had there's a lot of cash sitting.

On the sidelines um you know when you can get 4 and a half five to 5 1 half% on your on your dollar deposits uh if you go out you know 3 four five months that's very tempting for a lot of investors particularly in in such an uncertain environment but that that cash that's that's sitting there is also the the dry powder the the the the the the.

Kindling that might get uh markets going um rather well and and particularly in China we saw Bank deposits hit uh all-time highs about this time last year and they've stayed more or less there so there's a lot of dry powder if and when um the growth Dynamic comes back into play and and and people look more towards that than worrying about the.

Slowdown and worrying about what's going to happen when the FED has to cut rates bill you mentioned at the top the the focus has been too much in the fed and we need to look at the economy let me let let me add let me use that prism and look at the Chinese market and the valuations on offer in this greater Chinese Equity market and the state of.

The economy and also the policy push that's taking place there are you getting a sense that people are warming up to more exposure uh to this Chinese Equity Market bill yeah David that's that's a great Point um I think that certainly in terms of sentiment uh the negative sentiment that we've had towards the Chinese.

Economy from International invest investors that seems to be um bottoming out I think that investors are now beginning to look at China a little bit more objectively uh with a little bit more of of a positive slant and I think there are there are many opportunities we see growth edging up we see quite strong earnings being delivered by by a.

Lot of companies in China and we see very very cheap valuations across many sectors um so there are a lot of opportunities again once investors decide to come back into The Fray in China I think we could see some some quite interesting moves Bill hold that thought one more from Bill Maldonado there from East.

Spring Investments Group he's staying with us coming up we're set to get some inflation data out of China next those figures in just about what 16 minutes or so could we see a retreat from March that certainly is one story we're tracking we'll bring you that data shortly.

Okay so the reference rate for today is out and this is actually the strongest on record relative to estimate so we're getting a spread here and unsurprisingly so given the strong dollar that's com through in the last what 12 or so hours uh north of 1,500 Pips uh in fact near 1,600 Pips stronger uh than the estimates out there so a little bit of.

Anchoring coming through as well and unsurprising again so given a strength in the US dollar yeah I mean certainly we we need to see signs of that that support we're certainly seeing that verbally in the Japanese markets and here today with what we heard from kesan this morning we're back with Bill Maldonado CEO and interim CIO at East.

Spring Investments Group the asset manager funds under management and advice Rose 7% on year back last year to more than $237 billion dollar bill um you know before we get to the business side of things you you mentioned in the last block about how investors are getting more objective when it comes to looking at China how are you know what.

Sort of exposure do you have in the mainland here right now and and and does the nature of this Market has it changed in your view so we've been on the more positive side of of the sentiment um for for quite a while while now we think there are a number of of sectors which uh are very um uh robust in in this environment.

There's a lot of sectors which China needs to invest in has to invest in from clean tech Green Tech Battery Technology EVS semiconductors and and there have been opportunities in those sectors all of this time uh as we mentioned in the earlier segment I think sentiment is kind of bottoming out um 6 12 months ago.

It was kind of hard to have a discussion with investors International investors about China their exposure to China the opportunities there it's now become much easier to do that PE people people want to have that discussion uh I think that's the precursor to seeing more money being deployed in in China so um I think we remain we remain very positive.

We remain exposed uh and I think there are great opportunities there and Bill simply from a strategy or mandate perspective and not that this would indicate sort of views on the Chinese market but some of your peers have started X emx China strategies and funds does that make commercial sense in your.

View it does and we were one of the first firms actually to establish uh uh an ex China Benchmark but I think we need to be a bit careful as to how we interpret those moves it doesn't mean that people will do allocations to Emerging Markets or to Asia by completely uh removing China what it means is that they sometimes want to.

Appoint different managers for their gem or Asia portfolios and for their China portfolios and they maybe want to have a more Dynamic allocation uh to China so I don't think that in itself is a negative signal on China it's it's an interesting development in the way that people allocate to to those benchmarks um can you tell us a bit more.

About the business on Shore what are your plans there this year bill so we've got um we've got a really great JV there with with our partners with with CTIC um we're expecting that to pick up um this year uh uh along with the with the rest of the market with the rest of the industry um uh we're quite excited about the possibility for for.

Growth there as we mentioned earlier um there's a lot of cash sitting on the sidelines do domestic Chinese investors have been sitting on that cache for for quite a while now there's signs that that's beginning to come back into the market we see some data on opening of brokerage accounts and mutual fund investors and and things like that which.

Are indicating early signs of that so I think there's good reasons to to be positive we also have a lot more interest from offshore investors as I mentioned earlier um and and that external money flowing to China could also be a very interesting Dynamic so I think we're we're exposed to both sides of that trade in in the business and and.

We're relatively constructive bill just a final thought just a pivot to India which has done very very well and I'm wondering how that's affected how you're looking at that commercially as well the Indian market bill yeah look India is is fantastic and we've got an amazing business there uh.

It's a JV ICI credential Asset Management it's the second largest asset manager in in India it saw phenomenal growth last year from about 60 billion to 80 billion AUM in one year that was a combination of the market and of of flows and uh I think the macro environment looks pretty robust pretty good in China earnings are going to.

Deliver this year likely the big caps look undervalued so from a business perspective that's a really great cocktail um that should be able to continue to power um investment business in in India and we're very very positive from an investment perspective as well Bill a pleasure to have you on the show thank you for your time and.

Speaking of let's not wait this long before we can have another chat like this bill Maldonado the CEO and interim CIO East Spring Investments Group in Singapore uh for us this morning right just very briefly looking at this open and we're just what 7 minutes away but indications are after The Fairly strong fix coming out of the pbd equity markets.

Gap lower enhancing index we're looking at 168 right now on the index after we briefly top 17 yesterday plenty more ahead a full preview of the trading day including the inflation numbers coming through today this is Bloomberg all right five minutes away from that China CPI data coming through.

Here and we are expecting possibly a bit of a retreat from those bumper numbers we saw in February which was during that Chinese New Year holiday so certainly we'll see if that deflationary pressures you know linger and come through again once again prices I think we're expecting an 18th month of contraction Dave yeah there we go so quite the the.

Contrast there with the inflation numbers which came through obviously overnight and that rate differential that inflation differential the the PE differential where you are in the cycle differential uh Market differentials in fact have a look at this Equity Market's going into the open today 1.7% to the downside so we just have just about.

Revers the the gains yesterday on the hangsang index that lasted quickly didn't it okay 2% on a h Tech index uh USD cnh offshore we trading at 725 here against the US dollar and all that against a backdrop of this inflation this rat poison that's back in the mix for risk assets right now Bond stocks down 3.

Minutes of the opening bell this is the China show welcome back you're watching the China show we're kinding down the open of markets and of course that a China CPI print that could be coming through here.

Any second now along with PPI prices and hoping maybe we'll see some sort of maybe a continued at least in expansion when it comes to CPI prices but that again February was a different sort of month so maybe we might see a bit of retreat there according to Bloomberg economics and really we might not see something sustainable in terms of prices.

Until we see a Revival of domestic demand 10 10 seconds I was looking at my timer right here so waited with baited breath um I have 5 Seconds to tell you that Goldman Sachs and Morgan Stanley upgraded their growth forecast for China 5% and 4.8 for Morgan Stanley the data should be out any second now as with the open we're still not seeing it at the.

Moment declines though across the board as we wait for that 1.6% to the downside on the hangsang index msci China 1.3 we are now on day six of losses on the csi300 which would take this losing streak on short on this specific index to the longest streak going back to August of last year we do have the inflation numbers oh man that's a really.

Bad number yeah 0.1% for CPI inflation um so we're back to seeing prices actually uh heading down south still waiting for the PPI number but yes so after that brief sort of blip I guess you could call February now on the back of of course Lunar New Year we are seeing CPI prices pretty much close to zero now and there you go PPI prices yes.

Another month of contraction we're down 2.8% and that marks the 18th straight month of deflation yeah just a little bit more more context on the CPI print Ivon so at 0.1% that came in at the very at the lowest end of forecast so the range was .1 to 8% that came in just barely above zero so effectively no inflation do the math with where you are.

On your yields bottom of your screens and you get a sense really of where yield interest rates are at at the moment dollar China uh seeing a little bit of strength coming through at now 725 72 here against the US dollar at this point yeah let's bring in our Asia economics correspondent ktia demitria to to walk us through these numbers what do.

You make of them well it's not good news uh for the economy in general I think think every Economist you talk to will say that they're waiting for this exact number to start perking up just a little bit I mean industrial production and Manufacturing growth is fine but without consumption without retail sales kind of perking up higher than where they have.

Been it's not uh it's not really possible for China to have this sustainable growth and that's why I think economists are calling the 5% uh around 5% growth Target for China quite optimistic because of numbers like this um and ppi is is much the same um because those are really representing the price pressures or in this case uh.

Deflation that might be coming through the pipeline into consumer prices so it's it's not um it's not looking great on that end at least on the on the growth end though we're getting some Wall Street Banks coming up and just notching up some of their earlier projections on growth here yes that's right so we had Goldman overnight um.

Interestingly right after uh fit downgraded Outlook but you have Goldman that came out and said no we see uh Stronger industrial production we see stronger manufacturing and that's enough that's good enough to sort of upgrade our where we think the economy is going to be to the 5% Mark which is exactly where the government wants it um looking.

Through some notes earlier this morning I know City had upgraded uh earlier this month as well uh their year-on-year Outlook um as well as other Banks kind of taking a look and that's really on the back of all the pmis we've been seeing the really strong pmis in China the first two months what does that mean when it comes to policy do you think you.

Know there's a weak inflation print but then you also have more solid macro data as well does that mean that you know we're still going to be in wait and see mode when it comes what policymakers might want to do yeah I think I think that's right I mean you you have very strong investment from the government um which is interestingly ironically maybe.

Exactly why Fitch uh downgraded where it sees the economy or rather where it sees um where it sees debt levels so fit is really concerned with debt um and that's exactly what the government is going to be doing it's part of this growth story we know the government is trying to Pivot away from being so reliant on real estate and to do that it needs to invest.

Heavily which means more debt at the same time that's exactly why economists are actually quite confident in the economy because all this provincial debt all this local debt it's implicitly guaranteed by the central bank by the central government so so um in in some ways economists actually see that as a positive rather than a negative there we.

Go uh Kata thank you so much uh on the latest there on China Captain Demitri our Asia economics correspondent they're just taking us through inflation some of the growth forecast coming through and uh just ahead in about just 30 minutes from now we'll be talking about these inflation numbers which did just come through with hang sing Bank China Dan.

Wang joins us in fact in our studio normally based out of Shanghai so she is gracing us with her presence uh this morning at at those times on those screens and we'll see what she thinks about growth and whether or not she's seen enough maybe to lift her growth forecast I don't know we'll ask her that question I think this is the first time.

We're meeting her in person too yeah which is big for us but yes no we're happy to have her here in the studio you take a look at how movers are doing here right now obviously it's a tech space that's getting really pbl here this morning uh yesterday it was the EV sector that was the standout you're still seeing that when it comes to.

Stocks like xun but look at what Billy Billy's doing what Neo Alibaba seeing some sizable declines across the board here we're still watching what goes on with gold with oil obviously oil continues to Edge higher just given some of these tensions that we're seeing in the Middle East as well uh so we're taking a look at what is going on here.

Yep you're seeing a bit of Divergence so gold is gold miners are taking a step back energy players still doing quite well here Petro China up about half of 1% plenty more ahead this is Bloomberg Henry MC who's our CIO and head of macro calls it a higher resting heart rate um.

Higher inflation for longer and higher interest rates for longer um so returns will naturally have to reflect that um having said that you know R versus uh return is very much dependent on where you're investing and you know private credit is the saf end of the spectrum and then you have your more um risky private Equity assets we don't do.

Venture Capital all right that was part of my conversation with the KKR head of APAC institutional sales and family Capital Kate Richdale at Bloomberg's new voices event in Hong Kong yesterday we'll have more of that discussion later on in the show yeah we we'll somehow continue some of the conversations and the the.

Thoughts that were just brought up there uh Ivon of course was had a very long day yesterday um it's amazing you're still here have you have you had any SLE Still Standing I'm okay don't worry about it yeah yeah we'll be fine we did have a good thanks for checking though there we go Matthew melen is with us here partner and head of Asia Pacific at.

Apollo Global Management good morning it's nice to see you here thanks for having me back so I'm not sure if you heard one of the comments coming through but I'll just recap it KKR they're sticking speaking of private credit they're sticking to the the top high quality the top end of the capital structure still I know you guys are big.

On that as well high quality are you tempted now given all the players coming in given the yields on offer to start looking looking down to capital structure um well thanks for having us and the sorry to go directly into it but no no problem um for private credit by and large we manage about $450 billion of credit as it is we're the largest.

Alternative credit provider um we chose to Mo to focus our platform on senior credit okay um the way that we've done that is we've invested about $8 billion of our own Capital buying origination platforms so these are the businesses that banks used to own these are the businesses Regional banks used to be in it's trade Finance it's aircraft leasing.

It's um lending to Planes Trains automobiles consumers and so we own now 16 of these that originate senior credit for us every single day and so for the last 15 years we've been building this business and we're the largest we also at Apollo provide um senior Capital to investment grade companies so we did a multi-billion dollar deal for AT&T we.

Did a multibillion dollar deal for ADN a multibillion doll deal for abmv and that's because they were looking for Capital that the banks are no longer providing and it's not plain vanilla where the markets easily digested right they needed something tailored and bespoke and so we were able to step up with our capital and provide that what.

Are you seeing in terms of demand uh in the private credit space right now I mean it seems like institutional funding as has at least dried up a bit our wealthy investors are they kind of stepping into that role in some way look there's a there's significant Demand by companies and consumers for private credit again because the banks have.

Really pulled back especially in the US and the Regional Bank business model is still in question of what it's going to be over the course of the next several years and so private capital is stepping into that from an investor perspective absolutely I mean there's a there's a a once in a generation shift from Equity value to credit and in private credit.

When you can earn top of the capital structure 12 13% and then investment grade mid to high single digits that's that those look like pretty good yields when you compare that to what long-term Equity returns have been and so that's why our investment strategy has been on senior credit and also on hybrid which is senior Equity Geographic Focus this.

Year for you would be which bit like what what are you guys busy with right now so our business has been very active in the US and Europe um deal activity for the whole sector has been down in Asia given that the relative value of what the US has offered has been much better the fed raised rates 500 basis points yeah um Asia didn't need arue.

With that Asia didn't need to because you know a the Asian central banks didn't print as much money they didn't expand the balance sheet as much so they didn't have to raise rates as much over the last two years to fight inflation uh the C the US did and so that dichotomy has created a bit of a a challenge in relative value but you've seen deal.

Activity pick up quite a bit across Asia we've seen a lot of activity in India we're seeing activity come back to life in Australia and we're seeing a lot of activity in Japan as well M um in terms of deals I mean are are the deal sizes in Asia a little bit smaller now as well and are you looking are you able to look for those investment gr opportunities.

Out there um there are large deals to do in Asia so we just recently announced a big carve out from Panasonic one of their big businesses that make cockpit systems for for cars um a year and a half ago we did a $750 million deal for the Mumbai airport um we do but but by and large you do need to be they are going to be smaller deal sizes in Asia.

Because you have to be local I mean the big change in the Asian markets over the last 10 years is the local markets have gotten very sophisticated on the equity side and on the private credit side filling in the gaps where the banks are not and so you have to be local to be able to Source those deals if the deal is large it's going to typically come to.

The big deal centers like Hong Kong or Singapore or maybe even New York and London uh but yes the deal sizes will be will be smaller but you'll also find some very large deals to do how how small do you guys go in other words what would you leave to the um it it depend it depends on the risk reward so at Apollo we tend to do 100.

Million and up but we do a lot of smaller deals through our platforms so we own a stake in Max cap which is a real estate development lender down in Australia their average ticket size could be anywhere from 10 to 50 million we own when we bought credit s's securitized products business that came along with a great Australian Australian.

Business that Anthony Herman is now leading and we'll do small deals out of that platform um and so through our platforms we'll do smaller deals at Apollo we tend to to stick to the the large slightly larger deals 100 million in up here in Asia uh I want to take your take on China obviously this is the China show but um are you looking at.

China as an attractive investment uh venue or even just for Capital raising right now look the headlines if you look at the headlines we always start with where the banks trading and the banks are trading at somewhere around 0 2.3 times book that's a good reflection of investor sentiment whether real whether that's reality or not it's a reflection.

Of investor sentiment right what that tells us is that viously the property sector was 20% plus of the economy it won't be 20% plus of the economy going forward it was a it was a big driver of the economy but we do see a lot of green shoots in in China we you know if you look at all of our Port private Equity portfolio companies and hybrid value.

Portfolio companies we would be the size of Ford in the globally um and all of those businesses are doing very productive business in China today we have about 10,000 employees in through our portfolio companies in China over $5 billion of Revenue and they're seeing great growth they're seeing growth in Auto auto supply Logistics warehousing.

So on and so forth so there are really interesting things in China to get excited about but the point two times price the book in the property sector overhang is it's going to take some time before sentiment turns around and how are you probing that Demand right now is it through private wealth wealth managers here in Hong Kong so we exe we.

Will execute deals through our hybrid strategy so China obviously has a very robust banking system and they have a very sophisticated Equity system now both domestic and foreign players um our job is to provide the capital in the middle that that isn't easily provided um but and going to your question about our our wealth business.

We've absolutely seen demand from Asian investors generally who have been heavily allocated to real estate and domestic equities here in Asia um demanding credit um Global Credit um so we have a a semi-liquid private credit vehicle that has done very well out here in Asia through our private bank channels um and you know when you can.

Get top of the capital structure again low low double digit returns that's a pretty good alternative when you're looking at um Equity the equity outlook here in Asia or even where real estate prices are going yeah and also given the state of the equity Market uh that as well when you look at your portfolio companies just to get a sense of how the.

Econom is doing for example the greater economy are you seeing any particular signs of repayment stress or are things business as usual for examp things are by and large business as usual for us because in our private Equity business we always we've always had a purchase price matters mentality we always buy buy good companies at six to seven times.

IA that means we need to roll up our sleeves quite a bit to find good companies at those prices but that's what we've been able to do for 35 years um and so as a result we also lever these companies much less right and so we don't we don't feel this of course we feel the increase in cost of capital but we feel it less than if you'd bought.

Something for 20 times levered it 10 times and you were really hoping on low rates to preserve your terminal value multiple and you hoping that the cost of of capital didn't go up in terms of the cash flow coverage for your debt so um yes we certainly feel a little bit of the the cost of capital increase but our purchase price matters discipline has.

Has really helped us how much has your cost of capital gone up the last you know since the FED started raising interest rates and I'm wondering has that affected really just your Universe of uh possibilities at this point um it's it so on the on the equity side specifically um it actually hasn't so one of our biggest deployment years was.

In private Equity was last year mostly because the financing markets weren't available for large deals um and so we were able to find creative ways to finance these buyouts and finance these transactions and then you take advantage of Market opportunities like in January February where you had a record issuance of IG record issuance of of of credit in.

The public market and you refinance into a lower cost of capital um can you talk us a little more about other geographies like India Japan obviously I mean there's there's so much hype about both these markets here right now um what Benchmark metrics are you are you using to determine if these markets are are going to deliver yeah so Mark our CEO.

Has has said that Japan is one of our most important markets outside of the US and and for for a really good reason it's interesting you look for the last 20 years it's they've obviously been in deflation or at least no inflation and if you're a consumer the rational thing to do is to hold cash so they've held 50 to 55% cash for the average consumer 25%.

In domestic equities and then 25% in other but if you look at the last 20 years that means that their portfolio has gone up only 1.2 times versus the average Saver in Europe or the average Saver in the US went up two and a half times but now you have inflation coming in both domestic as well as imported you've also have something else that.

Happened over the last 20 years people got older and so in the time in there in the period where Savers could have been allocated to Beta allocated to risk that's when they should have done that but now that they are ready to retire failure is not really an option on the investment side and so what they're looking for is they're looking for safe.

Guaranteed product that can generate Alpha generate excess return because they're now facing inflation for the first time in 20 years and the government needs this because you think about it it's uh over 50% of of Japan's GDP is consumer-driven but if you have a bunch of retirees who are worried about worried about inflation and invested in.

Cash you're not going to get people spending and so you've seen the government really focus on Asset Management reform to bring good qual good high quality investment products to the average Japanese saver and we've announced Partnerships with with namora and Sumi trust and we have a a very fast growing business for through our.

Retirement Services Armine in Japan looks like you're going to be announcing some big moves I imagine anyway we'll see that speculation Matt it was great to see you thank you so much thanks Matt molini there partner head of Asia Pacific at Apollo Global Management we'll leave you a look at the semi state of equity.

Markets about 20 18 minutes into the session csi300 thank you for our producers here matching the longest losing streak since July of 2023 that's 6 days in a row plenty more ahead this is Bloomberg all right so we are hearing some news now when it comes to South.

Korea on the back of these parliamentary elections the Prime Minister Han has offered to resign that's according to Yap news and this is according to yun's Chief Aid and Senior secretaries have also offered to resign so we have seen the Cosby we're coming off some of the lows now but certainly seeing some declines here on the back of this.

Significant loss for president yuku in the in these elections so uh that's probably why we are seeing that downside on the back of this stronger us CPI print the ju also is weaker we're we're hovering on those 17mon lows right now yeah speaking of CPI just to recap in case you missed the Chinese inflation report which came out about 22 minutes.

Now back and really a discouraging number when you look at CPI for example so inflation itself so consumer prices actually came in at the very low end of forecast missed just about every single one with the exception of that low one at 0.1% um how many more how many months have we been in 18 months produced price deflation there 2 negative 2. uh 8% now.

That is in somewhat of a contrast to the thinking around growth and some of the banks have come through and revised their forecast on Chinese growth yeah Goldman came out I mean basically Haan thinks 5% growth for 2024 uh is their new projection here so that's in line with of course the country's growth Target and she basically said recent.

Macro data has been solid so it suggests perhaps we saw that bottom in the economy in late 202 23 and now things are looking on the way up Morgan Stanley also upgrading there is to 4.8% so really it seems like you know what we're seeing in exports and and Industrial profits the like and those things are certainly enough to really uh spur up.

Those growth forecast despite what Fitch saying and and putting a negative outlook there on the country around the debt risk as well so yeah the team at this is Robin Shing of course at Morgan Stanley just to add way Shen's point from Goldman uh it's a strong export volumes coming through it's the strong man manufacturing cap back so the bank.

Now expects Q andq growth to moderate an average below 4% but on a year and year that's now they've ratet it up now to 4. 8% all right yeah we're looking at markets here right now obviously it's a down drift across a risk assets here today we're watching property stocks in particular with China wanka shares there you go we're down close to 3% after.

There was a downgrade from S&P on their rating to junk now and that's really sending a lot of these property names lower here this morning link reachs down so 5% that's more of a Fed story I'm guessing as well you take a look at how some of these benchmarks are doing here as well we talked about the longest losing Street we've seen in the CSI 3.

And since July of 2023 6 days now yeah and and basically we reversed all the gains that we saw in Hong Kong here so we're we're back below that 17,000 level I think your alpaca suit is is still fine you don't have to take it out of the box yet not yet just yet hint hint if you guys need some reference maybe you can scroll down my my my ex my.

Twitter feed to find out joke that that that now if you are feeling depressed looking at these Equity markets look at the bond markets and you'll feel a lot better about them yourselves so we're looking at just about almost I would say on the long end Australia New Zealand uh J Japan 10year yields are up six basis points we're now at 833 double.

Digigit gains right now as far in in basis points that is here on Australia and New Zealand so you do get a sense that the Bond bleed is really where you are feeling this is the pain point of the session today and by the way we haven't even talked about the ECB great decision later today some great guests coming out to talk us to All Things.

Economics and all things investment strategy this is Bloomberg welcome back to the China show second hour here's a look at the CSI 300 a half hour into the session and it's just marginal declines but we're still on track for a six straight day of losses.

There in the onshore markets but certainly look a little bit out zoom out a little bit and it's looking pretty ugly out there Dave yeah well ugly ugly CI CPI print in the US um really Market's rethinking not just a number of rate Cuts uh maybe the possibility that we might get one to the upside out of the FED might might be of course in the.

Extremes and end of that sort of projected Spectrum but it is certainly part of the conversation when you look at you know we were talking about this earlier right if you're depressed about the equity markets look at the bond markets and you're going to feel really good about really the losses we're seeing here so we are coming off so just.

To give you an example right the two-year yield nominal yield biggest jump in about a year biggest drop in about a year on twoyear Futures treasuries as a whole are coming in or we're coming off the worst day on US Treasury second worst day in about six or seven months or so just to give you a sense and you know 5% right who would.

Have thought we'd be back in 5% and near that level on the two-year yield but that's we're we're we're a bad day away from that as well just to give you a s well Equity well currency markets are more fairly mixed more fairly balanced following what happened uh overnight we're still paying attention of course to what's happening with the Japanese.

Currency um at 15 15 283 were off up highs of the day we were above 153 early on Thursday about 4:00 a.m. 5:00 a.m. local time if you're think ing uh Tokyo as well keep an eye on that of course it's ECB day so ECB is going to be very much in focus in what they say and how they say it uh later today apart from that of course Ivon we're still.

Digesting what's taking place across these markets and we haven't even talked about Chinese CPI yet yeah we haven't and it was still a bad print so uh but showing something very different what the US is dealing with right now as well um you talk about the Yen I mean certainly we've heard from kesan as well if we see some sign I mean we briefly.

Touched that 153 level if we see anything more we already seen signs of that verbal intervention here this morning but are we seeing enough that volatility for Japan to step in let's bring in our M strategist Mark Cranfield he's with us right now out of Singapore Mark I mean it's it's a blood bath out there what's top of mind for you.

Today I love the way that David found some something optimistic in a sea of red I think that was great he's always the POS in in a way that but in a in a way that that's actually that's actually right because the the equity markets will probably be able to absorb this a lot quicker and a lot easier than the bond markets will.

Because if you if you think about particularly if you think what's driving us equities especially earnings are still very good the economy is coming along very well and they've been used to to 5% interest rates for some time that they factored that in a while ago there may be a little bit dis appointment that the FED looks as though it will only cut.

Rates much further down the road but really that's that's a marginal difference if you're an equity investor plus you got the European Central Bank coming up today and who knows maybe the maybe the European Central Bank is going to be the the dove that saves everybody today Traders are expecting a pretty dovish Outlook from Christine lagard.

Today they're probably going to be lowering interest rates before the FED even gets started and we may actually see that European equi has get a bit of a boost out of the message from ECB today and it may filter through to the US a bit so really that's probably the biggest takeaway message from all of this is that bonds are going to struggle.

For some time because that inflation print just knocked everybody offside but equities can probably get over this a lot quicker than the bond market can right and we are entering earning season in the US tomorrow you have the big Banks reporting and I'm wondering to your point mark and the point our other guest this this time in the last hour.

Bill Maldonado of East Spring being said you know don't look at the FED look at the economy and I'm wondering whether earnings is able to somehow save this Equity market and we can ignore inflation for now well certainly investors will be very reassured if they if they see that the major companies are still making.

Very good profits and they have a positive outlook that will certainly make them feel a lot more comfortable just because a CP number was hotter than expected and fed speakers are being a little bit more cautious on their outlook for interest rate Cuts in the end earnings cash flows um people seeing more more business being generated.

That's really what helps to drive the equity market so yes the earnings this earnings season in the US comes at just the right time providing that the most of the companies beat and the Outlook is positive it comes at a very good time in relation to what's happening in the fixed income market right Mark speaking of fixed.

Income the jgb yields are up uh I guess following what taking place in in treasury markets U how worried do we need to be about intervention from Japan while the prime minister is whining and dining of course with the US president at the white house uh today as we speak I believe I I would have thought that the.

Prime Minister being in the US will not dissuade the Japanese authorities if they feel they need to defend the Japanese Yen I think they will go ahead and do that regardless of where their prime minister happens to be we um to our colleagues in Tokyo have built this model the kander model which he's the the chief man for intervention from the.

Japanese point of view and they say the model doesn't yet justify intervention from the Japanese authorities it's getting closer but it hasn't reached the extreme levels that we've seen in previous situations October 22 was the last time when they when they did so but we are certainly much closer than we were before the CPI print yesterday so.

Yes we're moving into that Char and of course the Japanese authorities may feel that um Market Traders here are getting themselves too long of US Dollars already and they may want to do something about it they've had a lot more success outside Asian hours than they have inside so it could well be they'll wait for London or probably New.

York trading time if they're going to do something so really FX Traders need to be on the alert on a 25-hour basis from here on um I mean I think most Asian currencies are are at the mercy of of what the fed and and what the dollar does here at the moment and the REM andb certainly is is part of that right now.

I'm just wondering you know you know what what what can policymakers do at this point Beyond just that stronger fix that we saw today yeah I mean as as you say that there's not a lot they can do when when Dollar yields are moving the way are we just we were just writing about it on M live that if you look at in the Chinese.

Case for example in the the one year forward point have just moved to the widest since 2008 so basically the Chinese side have done nothing but because dollar yields have gone higher it's even cheaper to short the Yuan against the US dollar than it was just a couple of weeks ago the Central Bank in China they may be trying to keep the.

Fixing very tight they're trying to reduce volatility in the spot rate between the doll1 there's nothing they can do about us interest rates so as long as they they keep on going up it makes it even cheaper for Traders to short their currency that's out of their hands so in the end as you can see with the Japanese Yen.

Eventually central banks just have to allow the market to take over they may try and modify it which is quite reasonable but you cannot fight the US dollar is the biggest currency it's got a lot of momentum you cannot fight it indefinitely right so I guess to Travelers right now at the airport headed to Japan if you're thinking about.

Doing it right now or when you arrive do it when you arrive Mark Cranfield in Singapore for as our mlife strategist uh on and by the way I didn't mention a location right it could be Beijing Shanghai or Tokyo there we go uh speaking of China speaking of growth speaking of inflation speaking of forecasts uh coming through Goldman.

Sachs Morgan Stanley have changed their forecast on the Chinese economy 5% and Goldman 4.8 uh for Robin shing's team at Morgan Stanley uh this is how they look and this is how the forecasts actually are coming from four and a 4.8 from Goldman Sachs 4.2 from Morgan Stanley right in between these two numbers is a 4.9.

Forecast for my next guest Dan Wang is with us here on set Chief Economist at hsing bank China 4.9% upside risks to that figure well it's hard to be too optimistic at this point especially with the ugly data coming out for quarter 1 and the 4.9 is towards the lower end of the government target range and we think.

There's a chance that we might have to lower this forecast um given how difficult it is for a lot of projects to roll out in China right now where is the defl inflation right now I should say um with that inflation print it seems like we're still not seeing any signs of domestic demand coming back in a big way yeah and if we're talking.

About Goods Market uh there's really no sign of any prices going up U maybe from the second quarter on the pork price might take up because the supply demand start to shift on the supply of the pics are starting to decline uh from earlier this year and then when it comes to the services prices tourism Transportation entertainment they do have a tendency to.

Go up in the first quarter especially we have a longer holiday season this time in April and that has uh incourage a lot of people to get out and spend more money and slightly we see this kind of improvement in consumption so that's one slight source of this small inflation and you're normally based in ch I'm wondering what the mindset of consumers.

Are as it pertains to inflation is it are people thinking prices are going to fall because that's a bad mindset to get into for consumers well if you're living in China um people have this um uh perception now that inflation is a is is nowhere to be found probably it's going to be a permanent phenomenon that China will be.

Stuck in this sort of lwi inflation environment and a big reason for that is uh when you look at different Industries there's still a trade war going on in almost all the consumer goods sector and the factory inflation has been going down and down for over a year now uh for Chinese companies they are under huge pressure to actually adjusting down.

Their prices instead of adjusting up and for Chinese consumers they're still quite conservative about where the economy is going uh with the housing market down and people actually still have very high tendency to save up more so that brings me to this over overc capacity conversation that's taking place Janet Yellen was in was in China.

Recently and is there an overc capacity in in Chinese industry right now uh from an economic perspective uh you have to Define over capacity um because at the inflation or inflation exactly so um at the right price you can basically sell anything um but before covid started China was going through this phase of overinvestment in the.

Manufacturing industry so it is true across the board it's uh not just only within those green Industries like the emerging industry uh new Energy new material but also in traditional Industries like cement glass you name it almost every single industrial sector is going through this overinvestment and now we see a lot of.

Idol capacity and part of it was because there's a lack of demand for housing and construction but the other part is really coming from this huge effort from the government to help uh China to gain more advantage in its Green Technology and green industry so as a result we do see this uh lack of um lack of momentum in the industry to curve back it's uh.

Its investment in those Industries but I think the bottleneck still is in the demand side so if the global market is still open to China then we won't have a long-term overc capacity problem but now it just seems that not just the Americans but also the Europeans start to be very concerned that China's cheap products including the green products.

Will wipe out some of their industry and how do you think that's going to play out do you think that there's going to be more consolidation within the EV space are we starting to see signs of that right now in any way uh within UV space there are 77 oems in UV industry in China and only about uh 20 to 30 of them are under this sort of uh normal um.

Utility usage range so the rest of them are probably have to go through this really rapid consolidation phase and the government support although though still very strong there are signs that some of the subsidies still uh are a bit behind schedule um because the government also need to be uh be sure that they can find a proper outlet for all those capacity.

You can't just keep producing and put them in storage and the domestic consumers they have been the main driver for the eBay Market um but without further support from the government I just don't see a real um incentive for the families to buy new cars and that goes back partly to the the Note coming out of Goldman and Morgan Stanley the.

Reason they've upgraded their forecast is because maybe that that capacity is exported and that brings in growth and I'm wondering if when you look at the export picture new you know new export orders PMI came in at 51.3 somewhat high for example it do you think the export pillar will be able to support growth this year more than what we can think.

More than what we think right now I actually think uh exporter will be the main driver for China's growth this year uh in the first three months it already exceeded Market expectation uh and the highest growth to many people surprised it was with the US so since the trade War started around 2016 China us trade or more towards a third country trade.

And for Chinese producers they're trying to relocate some of the supply chains overseas and we all see that uh and over time uh during the past three years especially we see this deeper integration between China and uh greater Asia so the export from China to Southeast Asian countries to Latin American countries are way faster and.

Still accelerating and I think that Trend will actually uh help China's growth in export and the global market uh especially in the US it's doing better than a lot of people had thought so the demand from the industries demand from consumers are quite strong and that will basically Boer the fundamental demand for China's exports um it's given.

That we're still seeing quite a bit of deflationary pressures given how weak the currency is right now I mean is that are those two big handicaps on whether policy makers can actually ease more and and and unleash more stimulus well uh we don't believe that there will be any substantial stimulus uh in China this year uh the main reason.

Is still housing uh there is a understanding now that the Chinese government has no intention to blow up this housing asset bubble again and uh the main effort is to stabilize the local banks that are highly exposed to housing market and local government debt and also to stabilizing uh to stabilize some of the regions that have huge.

Pressure to see housing prices fall for more so um we we think what's going to happen is that the government will try their best to shore up their support for affordable housing program low cost renter housing program but for the commercial housing market we believe this year probably will be even more difficult than last year at least in the.

First two months the housing sales uh and housing prices have worse performance than last year overall wow okay Dan thank you great to have you here in our Hong Kong studi Dan Wong there Chief Economist at hangsang bank China still ahead we get Deutsche International Private Banks view on markets as of that hot inflation print.

In the US and of course on what this selloff that we're seeing across risk assets as well when it comes to bond markets here in the region this is Bloomberg well China's investability was a key topic as Financial Executives gathered for Bloomberg's new voices Hong Kong launch event I did speak with KKR.

And HSBC Asset Management with both sounding quite optimistic so first of all the context is that um the global fund allocation to China hit like fiveyear low right so the room for further like sell off is like significantly reduced put it this way and then I think the concerns of our.

Investor um where we talk to primar like um relating to geopolitical events like us election uh the weak property like Market in China the long-term growth right right um of of China and all that so um at the same same time the big discount valuation discount right to the global markets and Asian market versus China also explaining why they the.

Underweight like situation for so long right but as we talked about right we see the sentiment has improved um because of um for example the cycal growth like stabilization and then we also see cack like expansion meaning that actually the market is already out of the deflationary cycle so with that we started we started to see some.

Regional active manager cutting back the underweight position in Hong Kong and mnan China and then add back to for example the TCH or the growth stock starting in February so this is what we have been like seeing having said that again I think um investor eventually they still need to see the U earnings revision before we can see more.

Sustainable like B inflow to the market so I I I believe I um this will um will knit some time right before um the the the the key trends right uh like moving back to China yeah Kate um do you how attractive is China this Market to you now I mean obviously you've been trying to tap into the the wealth and and what's the way to capture that in China.

Right now so we um we have invested in China we continue to invest in China we do think that China is investable um you know if you talk about some of the trends that Daisy's highlighted um you know China has uh come under pressure obviously in the real estate sector um but if you think about the new economy the green economy.

The Industrial Automation um this comprises about 20% of the GDP growth but it's you know 50 it's actually 50% of the growth um and so that sector is definitely of Interest consumption upgrade technology upgrade so we're we're a simple investor we invest in retail pharmacy chains we invest in hospitals we invest in white.

Liquor we invest in Pet Food mushrooms you know it's it's the consumer that we are after and if you think about 850 million odd of Millennials you know these are the uh consumers that we invest into um now I do want to add that REM andb as a currency um when you look at trade um has an increased transaction uh you know volume today.

Uh we see the REM andb currency as an in as an ecosystem in China and we want to invest into that Daisy um you mentioned a little bit more about you know putting cash to work what are clients telling you right now I mean obviously equities have done quite well so far this year it was supposed to be the year of the bond we haven't quite seen that yet and.

Commodities are doing quite well as well even the likes of Bitcoin I mean what what are their preferences right now what are the fund flows telling you so I think um for us because of the riskof L mindset of a lot of the retail clients that's why we see a lot of like um assets being piling to cash on money market fund like I said right so um I'm.

Trying to generalize um um some of the investment Behavior here where um in Asia um there's one secular theme uh which is income people here like they love like income product like with different payout with regular dividend payout so I think this is the one Trend that we have been seeing in different markets cyclop and then um as I I.

Mentioned earlier on um I think um for those who want to have like higher like return seeking High return they would be like going to equities going back to equities and then India I think India is a very obvious like choice for uh somebody invest um not even on the equity side even on the fixed income side when you look at India because of.

The JP Morgan um the bond index inclusion of India Government Bond right so only after announcement until uh March we have already seen um around 88.8 billion into the local like Indian bond market so you can see right the the potential there and then we have like large institutional clients already looking into like uh allocating to um.

India like fix income as part of their um like allocation and I think over time this large institutional clients they would definitely look into Beyond just like because of the in inclusion right they will put it as a strategic ACC location so we are envisage uh we try we we envisage the fact that like for India for example the fixed income Market um.

We will see for example in the next 3 to five years 100 billions of like investment getting into India for the market and of course right you guys can see it in in the stock market where it has been performing very well and I think the story will continue so that is a very very strong inflow um as as part of the investment like I theme um over.

The past like 12 months that was my conversation with HSBC asset Management's Daisy hoe and kkr's Kate Richdale and Bloomberg new voices is an initiative focused on amplifying the views of women and underrepresented voices in business and finance you can find more information from that launch.

Event on the terminal and online plenty more ahead this is Bloomberg one particular part of this Market that's really moving Against the Grain is oil oil pric is continuing to move higher Shanghai crude as you can see and.

Against the backdrop of equity markets falling that sector in the Asia Pacific is up uh just on the back of what we're hearing from sources that from us sources that this a strike on Israel from Iran might be imminent watch up space very very closely ahead of that we go we are going into the Japanese lunch break cash Market that is but we'll.

Continue to track anything uh that goes on in the currency markets especially where we are at this point this is one 11:29 a.m. in Tokyo Japanese Market is heading to that lunch break and O they probably do need a bit of a break here right now take a look how uh the dollar Yen trade is looking here I mean.

After we briefly touched that 153 level we're just slightly off that here right now uh so we're seeing a little bit more strength come through but certainly the last couple hours it's been the lines that we saw from the foreign well the FX Diplomat as you you can call him himan talking about uh what what it means for intervention and whether they're not at.

This point uh excessive of course moves are bad for the economy um but you know at this point they're prepared to address any event still on the Diplomat side I think markets will start rushing to the door when that language and tone starts becoming undiplomatic all that being said 84 basis points right now on the 10- year.

Yield so that takes you back to the highest levels of the year the broad uh the broad read across these markets right now Asia X Japan down about 6 to 1% every sector is down with the exception of energy uh it's ECB day euro dollar as you can see on your screen 10746 which just takes us to the question of the day just to plug that at.

What point do we get to a point where we see parity here against well on on both currencies dollar China bottom of your screens we are just getting some lines coming through here from traders that Chinese State Banks speaking of maybe some relieving of the pressure here selling dollars above 72350 there we go maybe more a different.

Form of intervention if you will here so we'll just leave that there for now but as you can see it's still very much risk off in bond markets in stock markets as well let's hear from some of our guests in the last couple of hours talking about that hot inflation print out of the United States inflation is getting just becoming a very stubborn situation.

For the fed this is too much for the FED inflation's not doing what they wanted on average and this is a problem for them the sound that you heard there was the door slamming on a June rate cut it's uh that's gone I do think it shuts the door in a June rate cut the FED is not in our opinion is not going to be making any moves anytime soon they're.

More likely to hold status quo pretty good reason for them to remain on hold here see how things go A rate cut in June it seems to me would be a dangerous and egregious error at the moment I think they'd probably set up for September and December two rate Cuts this year there's a real risk of no rate Cuts you know that's starting to come.

Into the narrative and I think that's new they're you know creating a problem for themselves in terms of the promises of rate cuts the inability to actually execute on them let's bring in Stephanie Holtz Jen now Apex CIO at Deutsche private bank she joins us here she's in town from Singapore it's good to see you here in.

Hong Kong Stephanie you've been calling this for for a while now that that some you know disinflation in the US seems to be taking much longer and stalling corre um it seems like the Market's kind of catching up to you in the reality yes and but every time I come I look like I'm a consensus uh person and that's not the case so I just quickly want to.

Reiterate last year we were the only firm talking about no rate Cuts last year we entered this year with our yearly Outlook when everyone was pricing rate Cuts saying there will be only three and then we've just had our quarterly CIO day and we actually took one of these rate cuts out into next year first quarter and are now at two.

Cuts for this year and now the market is repricing to exactly that okay and now that reality has moved closer to your initial projection what do you think the next few months looks like in terms of you where you think your assumptions might go yeah well I think a big part of the debate is right now about the timing so we've been looking at um and this has.

Actually been the reason why we've taken one of the cuts into next year we thought we may not want to be cuted too close to election time in terms of timing so the market seems to assume June would be too early to start um and now pushing it back closer to election time so we'll see whether you know that timing uh debate I think that's the.

Biggest one that is injecting volatility right now where that ends because um I think maybe nothing wrong with starting to cut and then not just follows through because that's the market is used to starting aace cut cycle with the consecutive Cuts all the time maybe you know the ability to start cutting because the the FED has put in a very.

Strong pivot to start cutting start cutting and then maybe leave some room before the next cut could be also a possibility what does this mean for risk assets I mean we just had bill malano on from East Spring and saying that you know if you don't focus on the fed you focus on fundamentals and this is still a very resilient economy and that can.

Maybe still lead to risk assets to go higher is that the the sort of narrative that you're still tracking here or do you think that it's still need there's still a need to be defensive right now well so far we've seen risk assets holding on quite well despite the constant repricing and that was quite dramatic from the beginning of the year.

Until now where we we're talking about seven cards were trying the narrative was trying to interpret that this is why risk assets and you know um us equities are able to climb higher and yet we have reprised to such an extent and we're still where we are so I think um as you said the narrative is now to focus on a fairly strong economic backdrop that can.

Drive risk assets um and and that I think is a valid approach to take I think and when you look at risk Assets in the Emerging Markets most probably tactically once the rate cut cycle starts for sure and the market sees it coming that's also something that can can get more momentum right it's been more difficult to time things in the.

Bond markets Equity Market I think you have the strong economy that you can lean on what do you think what do you do now with this treasury market Market at 4 and a half to 5% duration actually yeah it's actually a level clients have been waiting for so we'll see what the flow Dynamic will be around this level because it's difficult to start pricing.

In even more I know there's been commentary that there may even be a rate hike I think that is a bit uh too enthusiastic because the disinflation When has you know it has started you know inflation has turned the other way it's just not coming in as fast and there's still risk around the Outlook so you have to digest data as it comes.

Along and that's a prudent way of of digesting these news but I wouldn't go to The Other Extreme now um and and and kind of you know hope for even more to be priced and I think this level is is fair um you mentioned about people are looking to go into this bond market is 5% yields is that sort of that cap then that we could see in this treasury.

Market then it depends I think right now is already an interesting level um to go in from from the feedback that I got from our client base well 5% we 5 and a half% on cash and cash again is you know this time last year people were going into cash and the stock market was cheaper last year yes and now we're back to the same levels on cash and the stock.

Market is more expensive tell me it's a bad idea put and cash is is is an attractive value proposition but as you as you go along expecting rate cuts to come ultimately you know that's deposit base will have to shrink and look uh at at opportunities and there's very valid um um rationals around why some of the.

Markets are higher you know you talk about the US uh being driven um by technology advances that other markets cannot offer possibly you look at the region um Japan having their own structural story plus a CLE go on on the Yen you look at India very long-term you know decade long possibly infrastructure and structur structural story that will.

Carry along so I think there's very valid reason to see this higher not just look at valuations but at the real macroeconomic data that we're pointing out and macroeconomics behind it but if the dollar stays as strong as it is now I mean is that going to have such a a drag on On Em for for one thing and and in particular some of these currencies.

Like the Yen and like the REM andb that are really being dragged down and and maybe Weighing on sentiment in these Equity markets as well now it it has been a drag for a while I think so we're getting used to this kind of setup especially against the Yen I think it is a driver that makes it difficult obviously as uh the government officials.

Or the Ministry of Finance have been informing us they really don't appreciate that the Yen dynamic is just gaining more momentum as we continue to reprise and the US dollar strengthen and this rate differential is is um kind of um still in place um but um you know it's a double-edged sword as well because you have we currencies in the.

Case of Japan you have an export lead economy these are cyclical drivers that are also behind you know a very exciting equities Market story so to Really Turn it the other way um is very difficult so for for some of these markets that Dynamic works for others maybe a bit more difficult ult and I think we have seen some central banks not cutting.

Rates although in the Emerging Market space although they would have the room in terms of the inflation picture because they wait for the FED to go first and not to have this Dynamic negative Dynamic on the currency what what other message do you want to leave investors with as we look at the SE that we haven't already touched on as well we.

We keep on talking about equities we keep on talking of bonds very important in terms of portfolio construction we very strongly feel you find growth in both and and valid value proposition in both but in terms of what a portfolio should also comprise as gold and we've been early on talking about industrial medals industrial Commodities and all of.

This is ring right now as well why do you think gold is is at a record high yeah so gold gold is and again I want to go back quickly to to you know the beginning of the year when we were out there with an Outlook talking about 2,250 people looking at me a little bit beused and now again you know we've just up the forecast to.

2,400 which now looks very conservative because it's it's where everybody is now trying to to picture it um we have um the usual drivers on gold I will not re urit on this but Central Bank diversification is still very strong and I think for this year in particular I think it's the Chinese retail demand that's also driving it and I think you.

See it in terms of data validation you see it on two ends you see the ETF um um volume spiking up and when you look at premiums being paid locally for gold these are also UPS we monitor this and I think this is in a setup where you have and we got inflation data this morning you have a deflationary environment still you have possibly a currency that.

Doesn't offer store of value at this moment in time as much you have still a property Market that doesn't give you the same confidence like a US consumer that can still purchase because it has a good property value in the in the back of the uh pad um that is where you find store value so I do not think this trend to go away for this year 5 Seconds.

What's the Target on gold now what are we 2,400 okay sorry I missed that there we go B musing who's beused now Stephan host Jen thank you so much APAC CIO deutche private back in fact you can follow more on that conversation we just had uh and what's going on in the market our Market live blog mli go rundown one.

Click commentary analysis from our expert editors you can also find out what's affecting your Investments right now plus later on the show we'll be talking about that particular angle to Gold the demand coming throughout of the Chinese consumer any more ahead you're watching the China.

show Welcome Back here's your China brief uh today here look at stories making headlines in Chinese media the China Securities Journal is reporting that ETFs tracking gold and related stocks are attracting retail investors now it says analysts expect gold prices to Rally even further with the pboc also.

Continuing its purchases the Central Bank bought gold for its reserves for a 17th straight month uh that's in March now the economic information daily says several Chinese cities have eased rules for their residential property markets and according to that report 15 cities including Guang Joo removed the lower limit for mortgage rates on first home.

Purchases that's as of Wednesday now meanwhile the global times is waiting into these tensions in the South China Sea with today's newspaper spread you can see it here and the article includes views from Filipino analysts and Ordinary People to support its argument against growing US influence and Military presence in the Philippines and.

Basically you can see in the big text there quote stop meddling now Philippine government actions are causing unease among its aen neighbors as well the paper is also critical of the US Japan Philippines Alliance ahead of their leader Summit in Washington it says that behind their pursuit of cooperation peace and security is a quote.

Undercurrent of Confrontation danger and conflict some some harsh words there Dave yeah ahead of that trilat Summit which I believe is scheduled for 400 p.m. eastern time Thursday so that takes place early morning Friday if my math and my brain is still working let's bring in our Manila Bureau Chief Manny serapio he's.

With us right now to talk us to Manny let's start with just the general expectations that you guys particularly the view in Manila ahead of this this meeting uh in Washington I I think the tensions with China would be at a center of this uh first ever trilateral Summit between the Philippines um uh us and Japan and uh as.

M president Marcus said yesterday before before he flew out of Manila he said that he expects there to be an agreement on keeping the peace and stability and uh freedom of navigation in the South China Sea and obviously these comments are coming um shortly uh because of the recent clashes between Philippines and Chinese ships in the disputed Waters uh.

Which uh obviously uh because of the videos that we've seen uh showed that uh uh Chinese ships have been deploying water cannons on Philippine boats so what what does this then mean for I think the Philippines in terms of their assertions in the South China Sea in other words what does President bong bom Mark is then hopefully come home.

With as far as that initiative or that exercise is concerned mat firstly I think it strengthens the Partnerships that uh president Marcus is trying to build uh in with its allies and like-minded Nations uh to strengthen its po posture uh in the South China Sea and um it it aligns with the goal of of the.

US and China which is um keeping keeping uh peace and stability in the indo-pacific region and maros has been trying to Rally allies it's obviously it's uh long-term Ally the us but besides uh the US there's also Japan Australia the UK in terms of uh for for the world to recognize the rules-based uh order uh in in the South China Sea uh.

As you know there are other um claimants to to the South China Sea in terms of the uh structures there but um it's China hasn't been has not really recognized um uh these claims and continues to to make sweeping uh claims in in this um very vital Waterway and Manny just a final question apart from Securities security of the.

Seas do we expect any other areas of cooperation uh between the two the three nations of course uh and this meeting coming up I think that there should be um agreement and discussions um in terms of U boosting uh economic ties between between them uh in terms of critical infrastructure sorry in semiconductors.

And renewable energy and critical minerals because um the Philippines is uh has been trying to partner with uh with countries with companies to uh boost processing of um its resources mainly nickel Manny thank you so much Manny serapio there our Manila bureau chief joining us uh with what to expect out of.

This triap meeting and of course ahead of that meeting President Biden's been hosting a state dinner at the White House for Japanese prime minister famio Kido they seek to boost security and economic ties and the guest list yeah was pretty good right you talk about Apple CEO Tim Cook Amazon founder Jeff Bezos JB Morgan boss Jamie Diamond the.

Two leaders earlier announced efforts to improve collaboration in Tech and AI yeah meanwhile the US Department's uh justice department has reportedly opened this antitrust investigation and this is the big one of course uh nipon Steel's takeover of us steel political sighting two people with direct knowledge of the matter as far as that's concerned now.

Earlier on President Biden repeating his support for you as workers opposed to that deal 14 billion dollar bids but speaking alongside kishida Biden stopped short of repeating his call for continued domestic ownership we heard from both leaders earlier I hope us steel Acquisitions discussions will unfold in directions.

That would be positive for both sides Japan believes that appropriate procedures based on law is is being implemented we are the largest investor to the United States I stand by my commitment to American workers like a man of my word I'm going to keep it Meanwhile we're tracking another.

Meeting that's going on or has already gone on China's president Xi Jinping has met with the former Taiwan President maing Joe in Beijing in a rare active diplomatic engagement between the two sides for more let's bring in our chief North Asia correspondent stepen Engel I mean this was a nine years ago they had that meeting in Singapore and had that.

Famous handshake yeah how important is this meeting well it's more symbolic than actually an indication of any kind of thaw or change across the straet no doubt he is the former president and they're the opposition the kmt and the DPP has now won three consecutive presidential elections we were there in January but I think that there is maybe.

A view in Beijing and that's why they have not taken a very strident uh approach they have not done any war game or done some economic coercion as it's been alleged in the past since the election of linga in January maybe they're waiting to next month in the inauguration but again keep in mind that and we were there Ivon at the election.

You had a three horse race and the two opposition candidates if they had joined forces would likely have beaten linga linga got 40% kenja and hoo e got a combined 60% so that tells you that there's maybe an in for um the views of more engagement across the straight As kenja and hoyo E wanted and keep in mind as well maying Joe was sort of the power.

Broker to try and get those opposition candidates in Taiwan to join forces it failed unraveled so now he's here in Beijing talking to Xi Jinping they're Smiley they're friendly they're shaking hands and they're talking about a a more of a unified greater China right they share culture they share history they need to avoid war so it's it's highly.

Symbolic yeah well I was about to say next month is the inauguration of course of President linga and should we read into this as China changing its approach mainland China changing supports is it soft power from she or do we expect the pressure to continue from Beijing ahead of the inauguration well the pressure has always been there whether it's overt.

Or behind the scenes keep in mind on the day uh essentially that uh Ling to became the president-elect Beijing was able to get another Pacific island NAU to commit uh to Beijing to switch diplomatic allegiances since mayang Joe left office in Taipei in 2016 10 Nations have switched allegiance to Beijing including five Central American.

Countries three in the Pacific kabadi was another one Naru and Solomon Islands too in Africa so that diplomatic pressure has been ongoing and will continue there's another dozen or so that still recognize type economic uh pressure will be consistent the big question is between now and the May 20th inauguration will there be any military.

Provocation or pressure that is yet to be see Steve thank you Stephen Angel our chief North Asia correspondent there right the plenty more ahead here in shows we'll get you a recap of these markets so we're coming up lows a little bit so we're looking at slightly better footing question Mark Strong dollar still though this is.

Bloomberg right welcome back so we're looking at well this is really one are of the market we don't normally look at but you know given the moves globally ging the moves you're seeing in this specific uh pocket of this Equity market so these are uh Environmental linked equities and plays in China and as you.

Can see from some of these names if it hasn't given you get that away just yet uh there's this low carbon support plan that I guess in some ways Traders are latching on to at least for today so we'll see how long this lasts the broader read across these markets though uh we are coming off by the way a very strong session yesterday on MCI China.

We're giving back I wouldn't say all but most of that as we speak 59 5593 right now that's a look at how this session has so far panned out Gap lower and then we've recovered about halfway through Global macro movers Equity markets are in offer post us CPI uh the dollars more currency markets are more slightly more balanced at this point in time but it's.

Really in the bond markets where you're really feeling the pinch so if there was a I guess a visual iteration of what it might look like if you pull your nose hair out look at the bond markets that's good and I was going to say bleeding but yeah that causes that too but yes no it's it's painful across these Sovereign Bond markets here right.

Now Commodities so you're still seeing a slight bit when it comes to oil but nonetheless risk off this is wer

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