China Tensions at Center of Biden’s Trilateral Summit | Bloomberg: The China Indicate 4/10/2024

We are half an hour away from theopening bell in Hong Kong, in Shenzhen and in Shanghai.Welcome. You're watching the trying to show I'mDavid Ingles. Our top stories this morning, stockinvestors playing it safe here in Asia while treasury yields fall from 2024highs ahead of the all important U.S. CPI.Fred, New Zealand's central bank is set to hold its key rate next hour.You have upside risks to inflation. You have sluggish growth if an economythat's in recession also and also slumping business confidence.Plus, President Biden is set to host.

Leaders of Japan and the Philippines inWashington, aiming to send a message to China as tensions rise. All right.As you can see, it's pretty quiet, right?It's pretty flat. Asia, U.S.futures and dollar index. And there really is only one game intown the next 12 hours or so. What it really is that U.S.CPI print as well. So we're basically sort of treadingwater here right now. But it had a decent session in the U.S.despite some of these nerves around that.

U.S.CPI print as well. So stocks as well as bonds did actuallyrally. We're seeing that stabilize here in theU.S. and the Asia session, but we're stilltrade around that 435 level for U.S. ten year yields.Also, bond markets here are still catching a slight bit here this morning.That Aussie ten year yield is down some seven basis points.Keep in mind, we talked about not just the U.S.CPI, it's the RBA that as well, given the fact that they went into a technicalrecession, is there more of a preference.

To lean towards a cut now from the RBA?And that certainly is one to watch And will we see much pushback from thecentral bank? You know, we're seeing a little bit moreelevation when it comes to iron ore prices and Diane in particular, we'restill up about 1.7%. So the last two days have been verystrong buying into or as well. Equities in Tokyo, though, for example,are slightly on the back foot. Singapore is also closed here today andwe're watching very closely what goes on with, of course, treasuries here thismorning. You felt the board's Golden Dragonindex, though, did see a pretty decent.

Day.So watch this NetEase story. We saw the stock in Hong Kong popyesterday on speculation about this strategic partnership with Microsoft.So that certainly something that could really drive the tech gauge here today.But the golden down index was up one and a half percent or more.And futures are looking like this here this morning.You take a look at just the amount of money piled into bonds in the jobmarket. That one year yield is now sub 170.So that brings us back to those 2022 lows here this morning, seven 2374 foryour dollar.

China, not a whole lot of movement, butyou got to wonder what's going to happen.We talked about treasuries, right? The amount of short interest being piledinto treasuries leading up to this US CPI print just goes to show how bearishthis market is right now. Dave Yeah, and what's interesting tooabout the timing, you have the CPI print, well the CPI report coming outand then a few hours after that, I think you have a ten year bond option as well.So I guess one would determine the outcome largely of of the latter aswell. Since we mentioned bond auctions aswell.

We have several today as far as Chinesebonds are concerned over rally that Yvonne talked about, this drop in yieldsplus 2026 and 2031 bonds are set to be auctioned out today.Massive move up in iron on iron ore prices.So we're tracking that and obviously the equity derivative of that specific tradeHang Seng index, 17,000. We've been testing that.We briefly touched and surpassed that level.We have yet to see a sustainable close above that level recently.So that's one to watch. A spree shares, of course, on the backof this strategic partnership that the.

Companybasically put out this morning a few hours back.All that being said, of course, NetEase is a story to track.We're now looking at 163 a pop in the early going.So we are indicated higher from yesterday's close.That's about one and a half percent. I'm doing some rough math there very,very quickly. US CPI the expectations are a pickup inheadline a drop in core from the prior month a drop month and month perhapsmore importantly is what we're expecting there as well based on some of theseestimates.

And our guys at Bloomberg Economicsthinks that this report will back the Fed's faith in this ongoing disinflationnarrative. So we'll see how that comes out.Pricing on your side on futures right now, it's effectively a coin toss inJune. It's a full rate cut, this priced forJuly as we speak. Yeah.So I think, you know, we can easily see the market bending those the three cutsfor this year from the Fed. But let's see what the low says from BNPParibas Asset Management senior market strategist, he joins us now.Charlo, it's interesting, the last two.

Inflation prints how the US came outhigher. If we see another print that's hot thistime around, is this going to be more than just an aberration now and more ofa trend? Well, it could well be, but I think fromthe Fed's perspective, as Chair Powell was saying recently, that he stillbelieves that the January February inflation print was sort of a short termnoise thing. Now, when you look at the fundamentals,if we get CPI numbers come out higher than expected, as long as it's not toohigh, I think the market will have certainly see a short term correction.But then once when the dust is settled,.

When you look at the fundamentals, whichis basically what I'm talking about here, is productivity growthhas always also been rising. The rate cut picture in the medium term,i.e., you know, in the second half of this year.It's still pretty much intact because the economy's going to slow down after15 months of policy tightening and so on.But the point here is that with productivity rising in the US, it sortof also offset a lot of the inflationary pressures which should make a rate cutcase still intact going forward. Okay.Well, the follow up there would be how.

Many rate cuts do you think are we infor for this current cycle with possibility of a higher neutral rate?You mentioned productivity, this shift up in bond yields.Where do you how low do you think we get this cycle?Well, I guess it all depends on the relative dynamics between inflationgrowth and productivity growth. Now, at this point, the market islooking at three cuts, maybe even two. I intend to think that we could stillget three cuts starting in the fourth quarter or latethird quarter this year. Now, if we do get inflation come downfurther in the coming months, you know,.

We could get three cuts earlier andprobably we get back to a full cut. You know, at this point, I think themarket is quite uncertain about the dynamics between deflation andproductivity, which is shifts depending on the data release.And like the Fed, I mean, we are all data dependent and we just have to go bythe data releases. And it's all this confusion you say hasreally kind of shifted this whole Treasury curve higher.Do you think we've seen the highs in terms of Treasury yields for the yearalready? I tend to think so, but I can't reallyruled out a short term near-term spike.

In the Treasury use.But I guess at four and a half this level, if the rate cut story is stillintact, as I described just now, it could be a good level to get intotreasuries and it could be the pick. What's interesting, as well as how wellstocks have done cello globally, perhaps with the exception of China, which youknow that we can talk about that later, that specific group has lost momentumrecently. Why do you think equity markets havedone really, really well in the in the absence of rate cuts at this point?Well, I think it's mainly the expectation of no recession, sort oflike a soft lending scenario or simply,.

Tony, bit at best inflationary growthscenario going forward. Now, that's good for stocks becausethere's not going to be any rate hikes. Inflation will be steady towards the 2%target of the central banks and growth is still there.Even though we may be looking at slowing growth.You know, the rate cuts eventually that comes into the market will push growthfurther into next year. Now, this is it.It is this expectation that is now driving the equity markets, which makespeople still more willing to get into the risk tree and bet on the stockmarket rather than on the bond market.

What's also been doing well this year interms of what asset classes is commodities of China, whether it's oil,whether it's gold. Is this something that you think is justmainly driven by geopolitics or something more fundamental going on?Gold is mostly driven by geopolitics. And then there's also fundamentalsbecause demand for gold is rising in China and India, retail demand is quitehigh. Central bank demand for gold is alsorising, especially from China. The energy market, I think, again, itgoes back to the expectation that there is no recession.And when you look at a global.

Manufacturing cycle, it is actually aturned up since about two months ago, which means that, you know, theexpectation is that going forward we are likely to see a recovery in globalmanufacturing, which in turn will increase demand for energy andcommodities. So right now, I think the market is sortof late in that in the expectation of a sweet spot that we don't have recession,we don't have rate hikes and inflation is coming down steadily and so on.And that buoys stocks and and commodities.We're in a good place, as they say. Sheila, we stay with us.We want to pick your brain on China and.

Really what type of exposure is isappropriate at this point in time. Market strategist, Asia Pacific, ofcourse, at BNP Paribas Asset Management rejoining us in a couple of minutes.But still ahead here, this AIG frenzy has been igniting has been igniting thisETF boom in Taiwan. Check this out on your screens.And some investors even taking up reverse mortgages.What what are you doing to buy into this?The details of that just ahead. Counting down to the open of trade, 20minutes away. Opening bell in Hong Kong and Shanghaiand in Shenzhen.

Teachers are pointing higher thisWednesday morning. This is the China show.Good morning. All right.So we are coming off four days of weakness on share markets.I think three or four days of relative strength in the Chinese currency bondauctions today, 2026, 2031, bonds on deck, 34% net ease.Initial pricing will come out in 7 minutes time.The stock China right now with Shiloh, BNP Paribas Asset Management senior APImarket strategist still joins us right now.Charlo, we had a guess yesterday from a.

Monday.CIO says it would be a big mistake not to get exposure to China at this pointin time, although they did acknowledge as well that 90% of their clients don'teven want to hear about China at this point in time.They're still in this I don't know, this phase where you don't give me anythingbut that. Why do you think that premium, that riskpremium in China still remains across global equity markets?Well, first of all, the market is not convinced that the Chinese authoritiesare now going full force into more aggressive easing to bail out theeconomy.

They have.The market has been disappointed for too long.But more importantly, I think this negative sentiment has sunk into theinvestor's mind for too long that that, in my view, makes the market way toobearish on Chinese growth and hence Chinese asset market recovery, forexample, is that when you look at energy consumption growth, there is dataserious showing that in China energy consumption growth has been risingfaster than the official GDP growth rate since the fourth quarter of last year.No, this indicator energy consumption growth is supposed to be more accurate,reflecting the underlying economic.

Activity and the market.You should take it as an argument when the this indicator was growing less thanGDP growth rate as an evidence that China waslaying you know, growth was worse than expected.And so what now, when this indicator is now growing faster than GDP growth rate,why hasn't the market talked about it? I mean, this is to me, this is strange.And then when you look at other indicators like, you know, tourism,personal passenger traffic growth and so on, there is life in the in the economythere. So my point here is that we need to seethe Chinese authorities to continue the.

Aggressive policy easing, which theystarted only, you know, through two and a half months ago to sort of underscorethe momentum for growth going forward. When we get that in the next few months,there's a very reasonable chance, high chance that the Chinese growth will comeback, Chinese asset markets will recover.But then at this point, I don't think the market is pricing that in which in asense I think this mispricing in the market.So. So you think despite, you know, thestructural issues we're seeing in the property market, which we haven't seenany turnaround in the data there yet, it.

Seems.Shiller Maybe you could prove me wrong. Or even, you know, inflation stillremains quite low. You know, asset prices can still recoverdespite those structural issues. You're quite right.I want the property market is quite clear here.And that goes back to my point about, you know, the need for Beijing tocontinue the aggressive easing because the aggressive easing measures, the bigjob of that is to stabilize the property market.Now, without property market stabilization, confidence won'tstabilize, confidence won't come back.

And what I talk about, the eventualrecovery will materialize. So we need to see policy to helpstabilize the property market. And it seems to me that there are somegreen shoots in the property market that it's trying to stabilize.And we do need more data to show that the market that the property market isstabilizing. If we get that, say, three months in, inthree months time, then, you know, it's likely that we do get confidencestabilize consumption growth roster and then the economy momentum will pick up.Well, what do you think we've yet to see from policy makers that they haveindicated they're ready to do?.

Well, when you look at monetaryindicators like the net injection by people into the system through all thislending facilities, it's been rising quite sharply since late last year.Beijing is picking up on those liquidity injections by issuing more bonds andused that funding into new infrastructure spending and so on.So the public sector is more active now and proactive actually, and try to bringthings up so that the private sector can be reachable.There's a lot of talk about whether this economy needs some sort of Western styleQE. And then certainly, Joseph, I want toget your take on this because it seems.

Like some economists have to say that'sjust displaced. You know, these comments that we heardfrom Shane in an old speech didn't really indicate that they're evenconsidering it right now. And it just doesn't fit with thefinancial goals of China in some ways. But do you think China needs this sortof stimulus like QE? No,not not in China. I think China doesn't need QE.The reason why central banks do QE is because interest rate has hit zerolending in in China, where its interest rate is still way below about zero.So there is a lot more way for monetary.

Easing through, you know, creditpricing, easing and so on before they need to do it.And secondly, you know, when central banks do QE, their system are in direstate that need liquidity to boil things up.But in China, I mean, the loss of confidence we all talked about.To me, it is a cyclical issue which aggressive easing can turn around.It is not a permanent problem there in China.Asset bubble burst in China. Yes, it did burst.The asset bubble in property market and so on.But the extent of the property bubble.

Property bubble burst in China ascompared to, for example, Japan back in the early 19 9090s was way smaller,which means that the wealth, destruction and confidence destruction in China isway less than what Japan went through. So without this permanent big hit orshocks in the Chinese system, I don't think that the authorities need to endthe QE and I don't think it is on the agenda.Oh, let me sharpen that cello. I know you wrote about this China versusJapan comparison.Is is China now comparable to Japan before the bubble burst?In other words, high debt levels or.

After the bubble burst?No inflation. Low rates.Which which which version of Japan. There's some some similarities, butthere are more differences. As I explained, I did cut the long storyshort. I don't think China is sleepwalking intoa Japanese economic problems because, as I said, the bubble bursts.The wealth, destruction and destruction are not as big as in Japan.And most importantly, Japan committed a policy mistake of having too long aconservative, even contractionary policy, especially on monetary policy.When you look at China, monetary money.

Growth is still at double digit or closeto double digit. Without monetary contraction, you willnever get deflation in any system, not just in China.So these are the big differences that we, you know, we have to be mindfulabout when we compare China with Japan. I still am of the view that if theChinese authorities can come in with more assertiveeasing with conviction, the system can be turned around and the outlook willnot be as dire as Japan back in 1990. Sheila, thank you.A senior market strategist for Apex Asset Management, renminbi fixturescrossing the last few seconds or so.

It's pretty much steady as she goes,seven or 959. So still seeing some support from thePBOC, of course, as at onshore rate, still under a bit of pressure.We're still hovering near the lowest level since November for the onshorerate. You're seeing a little bit of movement,a bit of whipsaw on the offshore right here this morning.Seven 2414 but certainly not much of a story here.We continue to see that's fixed in line. What we saw yesterday, too.Yeah, there's a big event later today. I think the eclipse is happening.Is that okay?.

Okay.Maybe it's inflation net ease.There we go. Just very quickly, pretty markets outhalf of 1%. Maybe the bulk of the reaction wasyesterday, confirmation of 30 minutes back.The company renewing its deal here to distribute blizzard games in china,NetEase and microsoft to enter a strategic partnership there.We got the open 8 minutes away. You're watching the China show. Here's some big corporate stories thatwe're following here this morning.

Intel will roll out a new version of itsAI chip in the third quarter in a bid to compete with a video.The gaudy three processor focuses on helping to train AI systems and reignthe Finnish software. CEO Pat Gelsinger says the chip willcost less than Nvidia's current and future processors.But shares fell the lowest in five months after The New York Times reportedthat the Federal Aviation Administration is investigating complaints about safetyissues. They say a Boeing employee who worked onthe firm's 77 Dreamliner aircraft alleged that sections of its fuselagewere improperly fastened together.

Meanwhile, the playmaker handed over 83jets for the first quarter, logging his lowest deliveries for the period sincemid 2021. The majority of the planes were 737 maxjets. Metra is downplaying the threat of airdisinformation in a big election year at an event on Tuesday, as top leaders saythey haven't seen that happen yet on their services.Last week, Merah announced plans to label all air generated content onFacebook and its other properties. Experts fear such media could misleadvoters or spread disinformation online. We're looking at an update in the earlygoings.

5 minutes to the opening bell.In fact, 1% following the 1% gains in its tech index yesterday led by vs inthe early minutes. Xpeng up 5%.NIO up 5%. So we'll watch those names as we getinto the opening bell. And that's a story in Hong Kong.The story in mainland China has been different.We're looking at four days of either losses or just generally weakness.That market has fairly been lethargic of late into SGB space.It's busy because in the short end to things are continuing to fall and we'relooking at the one year yield getting.

Closer now to the 2022 low below, whichare back to 2020 levels unless actions act back.I think we both come in also lens tech in focus at a rate of new buy course andsecurities Changjiang bulk of Asia is rated reinstated by a CHANGJIANG and ofcourse as research AG Bank Asia's rated new buy as far as that is concerned.A couple of stocks to watch too. Yeah we are watching very closelyNetEase and that stock we already saw a bit of a pop there yesterday onspeculation some local reports talking about this a partnership with Microsoft.So they have confirmed it this morning that they will enter into that strategicpartnership and now we're around I think.

That's the stock 8% higher than beforethat pact broke back in January 2023. We're also watching out for the sectoras well as in March. Retail passenger vehicle sales prettystrong for the month as well. The open is next.This is Bloomberg. All right.You're watching the China show. Okay.Now, the other two markets, Hong Kong, Shanghai, and when it comes to Shenzhenand you're seeing Hong Kong, the free market still catching a decent bit herethis morning. Futures, though, are still flat.We're seeing no movement really in the.

Markets, of course, as we count down tothis U.S. CPI, Fred.We're still tracking everything from EV's, from net ease to even thoughyields a could do to edge lower Dave. Yeah.On the one year, the two year all the way I think the the 30 year CGT yieldwe're now at multi-year lows if you would talk about 2002 lows in on thelong end as well. So the short end is really what's beenpicking up. Everyone is talking about thisconfirmation net is in Microsoft. So Activision Blizzard there.And of course, as it pertains to some of.

These these, for example, data yesterdayout of the Passenger Car Association. We'll get to the reaction in just amoment. Favorable, whether that's year in, yearor even month and month, the open, it's looking like this 1% higher on the backof the 1% gain that we had on the tech index yesterday.And a lot of that in the early goings we just had a look has to do with this moveup. We're seeing it these big move yesterdayin Hong Kong. Big move up overnight Xpeng nio.So those same names we're tracking here, we talked about the ten year yield.We were 20, 26 and 2031 bond auction.

Today out of China as well.Weakness coming through. So this is day five.If this closes below that sort of zero level as we speak, here's a day five ofweakness in CSI 300 Hang Seng, though, is going the opposite way.Flip the boards, please. We talked about this one year yield justto show you how close we are. That's where we are.That's what we need to take out. It takes us all the way back to pandemiclows. We're very close to that, just below1.7% at the moment. Okay.As promised, Hang Seng bank buyback.

Announced this morning.Bottom of screens comes out with that. The aggregate amounts, 3 billion HKD up5% in the early going. Thank you so much.Xbox is up 5%. We talked about this and check out wewere having this debate whether or not we would need to go big on a spreetoday. I think the stock price is telling usexactly what that decision. It turned out to be correct.34% strategic partnership. Emily, you this is mostly in Europe.We believe company came out with a statement today and AG bank of course,getting an upgrade.

If I was talking about this earlier onNetEase and other gaming stocks very very quickly here initial reaction 4%move yesterday not a lot as we checked it earlier on 5/10 of 1%.But as you can see, of course, some of the other sort of related names areseeing some upside today. Might have to do with the fact thatstocks, generally speaking, are doing quite well today, did very wellyesterday as well even. Yeah, they are doing quite well.In fact, hand back, as you mentioned on the news of that buyback program isactually the number one gainer when it comes to the Hang Seng index here thismorning.

New worlds on the other side as well aslaggards. But as you mentioned, it's really theheavy sector tech that seems to be what's driving this rally here.So certainly that's a lot on tap here this morning.Let's bring in our Bloomberg Asia equities reporter Charlotte Yang to tellus what our team in particular you guys are watching this morning.Yeah, i think the gaming space is one because of the latest report about thatis resuming this partnership with blizzard the shares and that is itselfhas gained alliance yesterday so we're not saying that much today but was youknow that yesterday they also approved.

This new batch of gaming which could beshowing that, you know the regulatory environment is getting better for thisgaming stock. So we'll watch the action then also withthe EV space, as you mentioned, Axel NIO, they having the more volatileshares because I actually just checked the short interest level of the ADR isNIO is now stage over 90%. Wow.So you know the march sales for the EV sector is pretty strong.But the first week sales for in April, according to Citigroup, it's actuallynot looking good. So yeah, we'll watch to see if the moveshold on there.

This just on a broader market.Let's keep it on that Jp morgan out with some advice on how to bet on thisChinese rally. Yeah so the Jp morgan strategies havejust came out saying that they're suggesting best is to buy cheap optionson the larger cap indexes, you know just to capture any potential rebound in theChinese stock market. As we're saying, you know, things areimproving on the bottom market level and also was economy know PMI in March wasthe official data was the highest in a year and so you have strong exports aswell as as well as rising consumer prices.So this specific trading strategy.

They're giving is to buy like narrowcore spat on FTSE ten a 50 or like Hong Kong shares or just buy China, callChina equities, Hong Kong Hong Kong contacts and also to show how sentimentis improving. If you look at the Hanson and Enterpriseindex, the volatility skew is actually has been falling, which suggests thatthere's less demand for buying protections against declines.Charlotte, thank you so much. We'll check back with the China marketsteam, of course, Asia stocks later on. Fellow gang of asia equities.Reporter right. Let's talk about EVs and really thismassive move up and literally some.

People are actually betting the house.This surging interest in AA stocks has triggered this just almost crazy $50billion ETF boom in Taiwan. Rebecca in our Bloomberg intelligenceETF analyst joins us this morning. She's in Shanghai for us today.Well, it's easy to see why it's become so popular.Rebecca, what are you seeing from an ETF perspective here?So from an ETF perspective, this was the largest ETF launch ever globally.And so record numbers. So you launched a Taiwan Value HighDividend ETF just last week and they amassed $5.5 billion in assets undermanagement on the first day.

And so it's a record number.Prior to that, BlackRock held the record with roughly $1.8 billion.And so this is significantly more than what anyone expected.And to give you an idea, if we look at all of the top ten ETF launches globallyin Asia-Pacific, five out of ten of those ETFs came from Asia, specificallyfrom China, Taiwan and Hong Kong markets.And so we expect that this ETF can get as much as 8 billion by the end of themonth. And so it's a huge amount, lots ofinterest coming out from investors. And record ETF launch globally.Yeah I mean we were just talking to our.

Colleagues in Taipei about there there'sinfluencers that are talking about it on YouTube and what to buy these ETFs.You have people taking reverse mortgages even just to buy an ETF.I mean, what are regulators saying about this frenzy here right now?So I think it's really interesting that there's such high demand.What was most surprising of this launch was that most of the assets came fromretail investors. Traditionally, when you have a large ETFlaunch like this, most of the initial seed money comes from institutionalinvestors. But in Taiwan is mainly all retailinvestors.

And I think the reason why there's sucha frenzy around this is ultimately this ETF provides for first monthly dividend.It's very rare to get monthly payments. And so a lot of these people that arebuying these ETFs are Gen-X people born between 1965 to 1980.And ultimately these people are in the retirement phase and they're looking forstable income, which this ETF provides. I think the other thing is the yield onthis is pretty good. Last year and 2023, this ETF had an 8.6%yield. And I think thirdly, it's a multifactorproduct and historically ETFs were a single factor.So for instance, only dividend paying or.

Momentum or value.But this ETF combines both dividend and value.And so there's a lot of interest in this.And I think specifically with the Taiwan market, Taiwan's market is very techintensive, very focused. So, you know, semiconductors and a lotof these companies have done very well recently.So if we look at the Taiwan index, more than 70% of the constituents are techrelated. And so the yield on these companies arequite good. And I think with the peak dividendseason coming out in Taiwan, which is.

Usually over summertime, this provides agood opportunity for investors to get in at the right time.So this ETF has exceeded everyone's record and expectation and there's hugefrenzy around retail investors. You know, to your point, some peopleremortgaging their house, putting all their investments into this.So it will be very interesting to see what happens with this launch as itgoes. And we could see more products comingsimilar to this. Yeah, but personally, that's my sign toget out when someone does a reverse mortgage on on something else, you know,one to watch of course, some of these.

Influencers, but that's a personalopinion. Rebecca.On a more serious note, what's the cost of this ETF and do people distinguishbetween costs now, or are they just going gangbusters on this?I think for Asian investors, cost Asian investors are not as cost sensitive.We have this theory that we say Crazy rich Asians and in the US they're alittle bit more cost sensitive. Everyone looks at management fees.So if we look at the Bitcoin ETF, everyone, a lot of the ETF issuers wentto zero management fee. In Asia, you had the opposite effect.If it's cheap, people get scared.

People are like, Oh, there might besomething wrong with it. So actually in Asia, people tend to paymore and they feel that higher fees may lead to a premium product.And so in terms of this ETF, you know, is priced about ballpark, not tooexpensive, but I think that there is a lot of demand for this coming in to thisproduct. And so we could see more ETF launcheswith dividend in it. Traditionally in Taiwan, anything withthe word dividend has done phenomenally well.Last year there was another dividend ETF that launched.I gathered $1.8 billion on the initial.

Day.And so I think that the cost is fairly accurate and fairly priced.And so I think that we could see more demand coming from this ETF.Rebecca. Thank you, Rebecca.And there are Bloomberg Intelligence ETF analysts.As the U.N. chairman says in this story, everyonejust needs to take some rest. If you're if you're sick, you go to thedoctor, you get the medicine. But eventually, everyone's got to rest.In some ways, they're as well. So thank you so much for Rebecca joiningus from Shanghai there.

Coming up next, we'll look at thetrilateral summit in Washington between the US, Japan and the Philippines andwhat message it's sending to China. We have plenty more coming up.This is Bloomberg. China's whole strategy is to isolate thePhilippines, isolate Australia with their economic coercion, isolate Japanby not accepting their fish to be exported.Our strategy is to flip that strip and make the isolated party China.They're the ones that are isolated in the South China Sea as it relates to thePhilippines. They're the ones that are isolated whenit comes to trying to use economic.

Coercion to coerce Australia to changetheir posture. And they become the isolated party,which is why they throw in the towel on that effort.The US ambassador to Japan, Rahm Emanuel there speaking to us as Prime MinisterFumio Kishida prepares to meet with President Biden at the White House inthe South China Sea is expected to be top of the agenda when Kishida and Bidenhold security talks on Thursday with Philippine President Ferdinand MarcosJr. So Biden and Kishida set to meet onWednesday today as well before that. But let's get a bit more analysis onwhat this all means.

Joseph Gregory Mahoney is with us fromShanghai. He's a professor of politics andinternational relations at East China Normal University.Oh, yeah. First and foremost, Professor, thanksvery much for joining us. How important and significant is thismeeting in your eyes and how do you think Beijing's got to respond to it?Well, you know, I think we of course, we had to put it in the context of therecent Yellen visit, which was trying to promote some sort of positive image withrespect to bilateral ties. But, you know, there's always this, youknow, one step forward, two or three.

Steps backwards that we see from theU.S. whenever there's this sort of positiveoutreach to China. And I think, you know, clearly whatwe're seeing here with the meetings with Philippines and Japan is this effort toreally establish once and for all, certainly with the Marcos presidency,which has been much more amenable to Washington than than his predecessors,to to establish once and for all this U.S.strategy, which which appears to be driven by the need to sustainmilitary capacities in on China's borders, including the SouthChina Sea.

And one of the things that we're thatwe're not really told about from the U.S.side is the extent to which its militarization of the South China Sea,including incredibly dangerous and destabilizing actions by nuclearsubmarines, some of which we've learned about through accidents, have led Chinato take a stronger position there above water.And of course, the irony here is that, you know, before we started seeing thesemeetings that are that are coming now, you know, the longstanding history hadbeen that no, no, other than that. And in terms of the Philippines history,the U.S.

And Japan have probably brought the mostharm to that country over the last century or so.And so now we're having this positive meeting about a threat that is is notreally real. Could you be more specific?What threat do you consider not really real?Well, you know, I think when we look at a lot of strategic analysis, one of thethings that led China into the South China Sea to take a stronger positionthere was not the desire to harvest more fish or to take oil in contested watersfrom Vietnam. And on this point, I think Emanuel iswrong.

I think China's relationships withVietnam have improved over the last few years, and that relationship is beingwell managed. But but to counteractwhat the US has constructed underwater, which is, according to a number ofexperts, an underwater sonar wall enacted by a submarine strategy thataims to be able to impose a naval blockade at a moment's notice shouldWashington want one. And China has been struggling.This is part of this struggle related to the value, but also in the South ChinaSea, to push back against these restrictions as a matter of ofself-defense.

But the U.S.has characterized this as China taking an aggressive position against itsneighbors and drawn the Philippines and Japan into this narrative as strategicpartners. Understood.So let's let's, I guess, take a step back because we're literally in betweentwo fairly significant events, Yellen in Beijing, in China.And of course, we're going into this trial out between the three countriesthat we just talked about there, the former largely positive for relations.The latter, I can't seem to think of a scenario where that would put Beijingunder a under a favorable light.

Net net next week, do you think, Joseph,how do you think this relationship. Are we better or worse off between Chinaand the US? Well, you know, I think Yellen made thepoint that relations now are better than they were a year ago withoutacknowledging that they were worse last year due to false assertions regardingan errant weather balloon, assertions that were later conceded were false bythe Pentagon. But, you know, again, I think thatYellen I don't see her visit as a positive.I think she came here selling a lie. A lie that Bloomberg itself hassuggested is is false with with regard.

To overcapacity.And I think she came to to foreshadow more protectionism in tariffs.And keep in mind, she was doing the same thing in Africa last year promoting thedisproven. Story about bride promoting debt traps.So I think she's become this very effective grandmotherly figure that hasattracted some positive attention in China, some Chinese admirers giving herher attention to Chinese female colleagues or appreciation for Chinesecuisine and her genial demeanor when meeting with Chinese officials.But I think her real purpose was to come here and to sow fear, particularly as weare expecting some positive first.

Quarter reportingwith the Chinese economy, with the understanding that consumer and investorconfidence still isn't where it needs to be.And as you say, she has the charm. She brings the charm.And what is her role, do you think, now when it comes to diplomatic relationswith China? Is she more the leading face, more sothan that? Antony Blinken now?I think so. I think Blinken has spoiled his image.You know, we've had so many means of of Blinken in China where he comes and sayssomething positive and then, you know,.

10 minutes later or a day later, hismessage is being undercut by Biden directly.And Blinken himself has, as you know, been someone who's promoted a lot ofanti-China discourses, including the the the spy balloon nonsense.So I think that he has he's taken more the role of being the lead and promotingpositive relations with countries like Japan, the Philippines, and trying toadvance the anti-China narrative in Europe.Whereas Yellen has taken the lead here and inChina. And Joseph, to build on your earlierpoint there, then, do you think Beijing.

Sees through this veneer, thisovercapacity narrative veneer? Absolutely.You know, the Beijing knows as well as Bloomberg knows that this is not a realissue. Beijing said that, you know, the U.S.should examine this issue objectively and with an eye to understanding themarket. We all know why the United States isn'tcompetitive and is. We know that their legacy automobileindustry suppressed the development of that industry for decades.And we know that China has been very open and competitive.And it is especially almost a textbook.

Casewith regard to how they welcomed Tesla and others and forced the Chinese heavyindustry to compete. And that's one of the reasons why it hasemerged in the forefront of that market worldwide.But, you know, the other point here is that, you know, Beijing is very muchaware that this is an election year and that there's a lot of pandering.Right. And that Biden needs Michigan.He's is fighting a tough battle. He needs Michigan.There are a lot of autoworkers there who are afraid of competing with Chinabecause they don't have good TV.

Products.And he's pandering to those votes. So, you know, China understands as everyyear that we have an election year with the United States, we see China beingtargeted. So I think China's trying to maintain apositive narrative, trying to still keep to this this positive image that theythat they took out of the APEC meeting between Xi and Biden late last year, butalso trying to avoid getting into a negative discussion, realizing that thereal goal here, I think, is to try to convince Europe to come along and tokeep moving forward with Chinese goods where Chinese cities do have a foothold.And, of course, the tremendous success.

That these Chinese leaders have had inAustralia. So the real battle here is not about theUS market. It's about these other markets that theUS is also trying to influence. Certainly one way to look at it, to yourpoint, China's doing well with EVs. The US is trying very well I guess insome ways to do with wood chips, for example.Right. So apple oranges or maybe the same fruitbasket there. Joseph, thank you so much.Joseph Gregory Mahoney is China Normal University.Thank you so much, professor for your.

Time.Let's talk again soon. Plenty more ahead.You're watching the China show. Now for a check of markets.One stock in particular is leading these gains here.Hang Seng back a few hours back announces 3 billion Hong Kong dollarbuyback plan. We're up 5% and that's biggestshareholder of course h as the c citi analyst coming out and saying we viewthis as a positive surprise, demonstrating management's commitment toreturn excess moolah. They didn't use those words surpluscapital to shareholders, but they could.

Have you satisfied.That's how we make finance fun. Excess moolah.All right. Take a look at your benchmarks here thismorning. Of course, we've been talking about thisrally when it comes to the tech space here.But Hang Seng Bank clearly is one of those outperformers.Hang Seng is now up, get this, 17,060 days.Wow. We talked about that 17,000psychological level. We're way above that now, it seems like.And it just tech seems to be helping.

Out.We're supercharged by 2% in the tech space.It's the sector that's really driving that as well, pardon the pun.Iron ore also doing quite well in we're up close to 2% and we're continue towatch, of course, what goes on with the KGB's.They're stabilizing now. But you watch at the short end that oneyear yield is now back to the lowest levels we've seen in two years.All right. Later on.Yeah, there's a big one coming up. If you want to stay up with me, I'll bespeaking with KKR.

6 p.m., 6 p.m..It's late for me. I'm back late now and we work veryearly. Kerry still on KKR, also, Daisy Ho, HSBCAsset Management is going to be joining me at a special event here in the city.It's Bloomberg's new Voices, an initiative focused on developing seniorwomen in finance and business, where subscribers can watch the launch a livego from 6 p.m. Hong Kong time.We'll bring you highlights of those conversations later on on BloombergTelevision. Do you have a sense of what the the thethe the crux of the private credit?.

That's all they want to talk aboutclient interest a lot in China, not so much in China, but maybe more so Japanand India. That's really one thing they're watchingvery closely. But it's all about product developmentaround the private credit space. Now it's all everyone wants to talkabout. Yes, there we go.Okay. Stay tuned for that.At those times on your Bloomberg, I think we read a function there.I think it's live go. Also, if you want to keep them oncompany.

Coming up in the next hour, please.Markkanen CIO a group joins us to talk things all things macro he thinks weshould be adding more risk to your portfolios our BNZ decision also comingup next is a swimmer. Right.Welcome back. We're counting down to this ratedecision out of the RBA, ANZ. Will it be a great decision?Is the question there? They've kept rates unchanged.Certainly inflationary pressures do look slightly elevated.That's a question mark. The economy, though, as far as growth isconcerned, we're in a recession there.

So how do the those confluence offactors come in and really, I guess in some ways carve out what the tone and ina statement looks like? Are they going to be any any change,material change from the last one? So that rate decision to be out in about10 seconds or so. Yeah.And are they going to push back on one of these expectations that they aremaybe leaning towards these cuts? Right.That certainly is sort of the narrative that we're seeing among many centralbanks now, particularly when it comes to the FOMC, seems to be not in a rush tocut as well.

There you go.We're getting a hold here from the RBA as maintain that benchmark interest rateof five and a half percent. This was basically no surprise seen byall economists that we surveyed as well. We're waiting for some more lines comingthrough in the statement here. Yeah, here we go.The economy has evolved broadly as anticipated that.Does it really give us incremental information evolved in some in what wayinitial price action suggests? Well, it's slightly lower or slightlyweaker on the Kiwi dollar, as one is pointing out.It will take us some time to get through.

The statement and note any sort ofchanges, restrictive policy stance remains necessary.Okay, That's the initial line coming through.So that does strike a fairly more hawkish tone.But again, in the early goings, anything else you've seen so far?Nothing else so far, Yeah, not so much here this morning, but we're watchingvery closely what goes on with the Kiwi dollar unchanged at the moment, which isinteresting as well. Let's bring in our Asia economicscorrespondent Demetri. Eva, your rate on this, It seems likethey're still leaning a little bit more.

Hawkish and pushing back on the prospectof even rate cuts here right now. Do you think that's that's justified?It's a great question. I think everyone's asking that rightnow. It's it's an interesting move to make,especially when you've just entered a double dip recession there in NewZealand. So typically you would expect withpolicy to come in and try to stimulate the economy and perhaps even startwalking back some of those some of those conversations, some of those views thatthere's hawkish views. But if they're keeping things elevated,you know, I think more than anything, it.

Really highlights how perniciousinflation has been, not just in New Zealand, but I think globally.You know, it's the same story with the FOMC, It's the same story in centralbanks globally where you have maybe an economy, not a double dip recession likeNew Zealand, but you have economic conditions that are starting to weaken abit and then you still have rates that have not only been at these generationhighs, but they're staying there. And I think what New Zealand shows isthat, you know, I think the inflation rate is something like 4.7 right now,way above the 1 to 3% band that they're looking for as a sustainable and yetthey're still holding rates at this.

Level.So I think I think it really shows just how dangerous there's this inflation, ifyou want to call it a menace, is in New Zealand, but also in other countries aswell for the line coming through here that they're keeping their cash raterestrictive as CPI returns to target. To your point, still above target onthat one interesting line coming through as well here is that most central banks,according to the RBA and said have been cautious about easing monetary policy.And that takes me back to capture in terms of all of them are you mentionedthey're all in the same boat, they're all waiting for something to tell themwhat to do.

Guess And I think they're waiting forthe Fed. I was like to go there, but you broughtit up, okay. I mean, the Fed is is a big one.But also, I think labour markets and in the case of New Zealand, not only isthere the housing market that's keeping things quite elevated, but they havethis surge of immigration that they're saying is also threatening to keepthings elevated for much longer. In the US.It's very much a labour market story. I mean we've had several months nowwhere job growth has gone above 200,000, has gone past economists estimates andinflation there you can see well, we'll.

See this week I guess.Yeah, that's also been lingering. Can we talk about this US inflationfront how important it is. I mean inflation has been higher thanwhat the Fed wants for some time now. We talk about whether it's just a blipor now a alarming trend. Will we see any relief later on today?I think the answer from economists, if you ask them, is no.Hopefully. I mean, everyone can hope.But the part of the problem is that rents have remained elevated.We have these sort of faster moving indicators like the Zillow Home PriceIndex that's showing that.

Things are still elevated and rent, Ithink has been kind of this pernicious. It's been higher for longer than thananalysts thought. So we're kind of in a waiting game forthat. Also, food prices have remained quitehigh. So overall, I think analysts areexpecting, you know, either a bit of a on the headline, we might get somerelief core, maybe not so much.And year on year, it's actually expected to be elevated as well.Cathy, I think you Katja Dmitriev, our Asia economics correspondent.Let's bring in Markkanen now our guest.

For this hour, CEO at Air Group.It seems like there's this long ongoing debate about whether the Fed can deliveron three cuts this year. What do you make of this right now?Are we likely to see any? Well, it's not that long ago I was inthe studio and the market was talking about six rate cuts in the year.I think the market over interpreted the Fed pivot in the end of last year.The Fed are keen to cut rates at some point and make a statement and buildsome insurance into the policy set. But they will always be guided by thedata. And the data so far is not indicatingthe need to really cut rates.

We've still got, as you've justdiscussed, we've still got inflation trends that are that are causingconcern. It's proving stickier than perhaps themarket had anticipated. You've got a tight job market.You've got an economy which is growing well and you've got very, very strongfiscal tailwinds which are really supporting the biggest economy in theworld. At the same time, you've still gotrecovery, you know, early signs of recovery in China, recovery in Japan,early signs of recovery in Europe. So all of these all of these items pointto the fact that there is concern that.

Inflation may hang around for longerthan was originally anticipated. It might also point to just maybe thestrongest signal yet that is it time to add further risk to portfolios as well?So so there are there are risks associated with economies running toohot. But in the short term, great news forequities, because, you know, the earnings will continue to come through.Investors will be invigorated by the economic activity and we'll still seemarkets respond to that and we'll still see positive momentum even in thisregion, in China, in China, since early February, we've seen 10% put on,depending on which index you're looking.

At, which particular aspect of themarket you're looking, you're still seeing, you know, some good performancenow. And hopefully that will encourageinvestors to come back into the markets. So you can say basically you cancontinue on go long risk assets. Equities.Even if the Fed doesn't cut this year, do you think we could still see a decentrally? Possibly.I strongly suspect that the Fed will cut this year.I think it will be later rather than sooner.So that expectation of two cuts, first.

One in June is probably still needs tobe adjusted. So there will be a rate cut.That's a statement that needs to be made according to what has already beenstated. But can equities perform in thatenvironment? Yes, they can.A little bit more elevated inflation in this current environment when growth isstill strong. You know, employment is looking good.Why not? Which equity market seems most favorableat this point in time? Let me dig deeper into that.So we're just we're seeing probably the.

Next stage.The next phase in the cycle is to see a broadening out of the key markets.And many are still very focused on the US.You know, you've got a very significant publicprogram which is encouraging a lot of investment in infrastructure andtechnology. It's bringing global capital is bringingin firms that want to onshore in the US to take advantage of the InflationReduction Act. So that that is clearly a very strongtailwind. And the broadening out of the market iswhat we expect beyond that so-called.

Magnificent Seven.And then as we look out into this region, Taiwan and Korea obviously doingwell from the enthusiasm around II. And as we get into the second half ofthe year, we'll see a broadening out across this region with the Philippinesprobably being our most favoured markets where we're seeing economic activitysupportive of that. And also Malaysia as we see theelectronics industry more generally outside of a direct play on how I startto benefit from some of these some of these factors.Is it is it more rotation into those laggards?Well, as a tide rise, I think until we.

See the rate cut and still we until wesee some some clear policy direction is a little bit of rotation.But I think as we go forward, when we see a bottoming out of expectations andwe're starting to see that even in China, we're starting to see a bottomingout of earnings expectations depending on the sector in Internet plays inmanufacturing, we'll start to see more capital allocated.But it's all about relativity as well, of course, as long.As investors can make good money in the US, there's there's a lack of appetiteto move broadly outside of that. Okay.And you mention about earnings revisions.

And China bottoming out.Is that a sign to start increasing exposure to China?So we've closed our underweight. Okay.So that's the first step. I think we're going to we're going toneed to see more convincing evidence that the slight improvement that we seein the so-called green shoots of a recovery are start to take hold.And we built some momentum. The big issue in China, of course, isconsumer confidence, which has been massively depleted.And it's going to take a big effort to to to move that back to where what we'veseen pre-pandemic.

Mark, there's a lot to unpack withChina. So stay with us.Of course, more with Mark Cohn and of course, he'll be rejoining us in acouple of minutes here. Very, very quickly.We're about 40 minutes into the cash market session, CSI 300.Looking like this. Just keep in mind, in case you missedit, we are coming off four days. So at this point, we are still on trackfor five days of weakness across the equity markets.Asia, excluding what's happening in China, excluding, I should also note,many, many markets that are shut today.

In the region are effectively flat aheadof the news inflation. One sector we're tracking also veryclose the auto stocks. He had a big move on xpeng and nioovernight. He had some cardata numbers coming out of the pc eight. That's a passenger car association inchina talking about, you know, to mark's earlier point, some green shootsstarting to emerge in EVs, for example, in generally cars, for example, we'veseen a pickup year on year and month and month in the month of March.We're up substantially across some of these names.And that's a problem is the broader read.

Across these markets as we approach thatCPI print later today. And right after that RBNZ that we haveone more rate decision by the way, in the region, Thailand of Thailand.There we go. Okay.Equity markets looking like there's plenty more ahead.This is Bloomberg. Right.Welcome back to Shows. Marc CONAN is still with us.Oh, age group. Mark, one thing that's been causing alot of heads to be scratched is this 25% rally in gold prices.What's what's your theory?.

Well, it seems to have been born in inour part of the world. I think since the BOJ announced the endof Y, c c, we've seen the gold ETF there take off.So I think it's a it's a retail play that's built momentum.The prospect of in real terms at least if if the BOJ if the BOJ sorry BOJ hitsits inflation targets, the average you know, savings pool that's invested inbank deposits and low risk assets, the prospect of that losing value in realterms is causing concern and we're seeing flow out into other alternatives.Gold being a key part of that. And we've seen that spillover intoChina, of course, where, you know,.

There's reluctance and confidencedepleted in terms of really embracing an a rally in equity markets.We've seen a weaker currency, We've seen interest rates and deposit rates fall.So a move into gold makes perfect sense. So we've seen it there.And we also see, of course, always in India as well.So if you take those those three components together and then on top ofthat, there's movement from central banks looking to hedge out some ofpotentially some inflation risk. That's what really driving.And it's going to be felt self-fulfilling because these ralliescan come run.

So that's the reason.I'm curious, what what role does gold play for someone for a buyer likeyourself, for example? Does that have a role?It doesn't. It's a non yielding asset for us.And of course, we're liability driven. We're backing long term, long datedliabilities that come to us from our policyholders.So we're really looking to match our cash flows.So predominantly we're fixed income, but we increasingly are looking to takeadvantage of where there are opportunities with risk risk assets aswell.

But gold doesn't feature in that.Fixed income, though, is interesting. There's a lot of short interest intreasuries here right now. There's also calls of of maybe time toextend duration. Is this the right time to be doing that?Mark Honan Well, if you've got concerns about inflation, probably not.You know, so you're going to have you're going to you're going to get hammered atthe at the long end. And we need to see a steepening of theyield curve at some point. The first signal for that in terms ofthe next phase of the market cycle is going to is going to be when rates startto pick up for us, of course, we're.

Matching now cash flow.So we need that long duration exposure regardless because that's what that'sthat's what we're paid to do. Right.What about credit? How does that feature into.Well, spreads are really, really tight in in high quality credit, but it hasn'tdeterred investors because that prospect of rate cuts means that investors arekeen to lock in yield wherever they can. So we saw an extraordinary January andFebruary in new issuance in the US. Record levels of new issuance.Corporates took the opportunity to to to extend themselves and make sure they'remanaging out their their debt.

Requirements and the market had a hugeappetite for it on the prospect of rates being cut.Now, of course that's going to moderate now as we're starting to see commentaryaround whether or not rates will be cut. As we just discussed, we saw Jamie Dimoncome out and say, well, they have you know, they're more symmetric about whichway rates will go. You know, he's not pulling not puttinghis chips down on one side or the other. Unusually so.Unusually so for him. Yes, indeed.And so, so, so so perhaps the market won't be as buoyant.But of course, you've got the Fed.

Cutting the size of its balance sheet,but you've got a strong, as we've discussed, tailwind of fiscal support,which is driving driving the economy in the corporate sector in the US islooking in very good shape. Obviously, you're talking about creditin the public markets. What about private markets?So so we've seen there's a lot of discussion around this and I think it'sa permanent feature now of capital structure.We've seen banks pull back from for many of the direct lending because of thecost that it brings to their to their balance sheet.And a lot of that has been has been.

Disintermediated, pushed out into intoprivate credit. And there are very large operators nowin that in that space we have we're active there.We see opportunities to pick up a yield in the short term and the credit at thecredit rating and the credit quality is good at this point in the cycle.Do we need to worry because everyone's coming in here, everyone's starting afund, everyone's getting together. Do we need to worry about competency?I don't know if that's a well, it's like a stupid question because, you know,it's a great question, David, and we do we put a lot of effort into our duediligence in who we work with a long.

Track record, stable teams from trackrecord companies that have been at it a long time.These are critical. It's not something that you can you canpick up, you know, on the fly. You need to have a lot of experience.We're in unique circumstances, of course, compared to where we've beenover the last 20 plus years. So having a long term perspective ofwhere rates can go and how inflation impacts economic activity and what theFed are likely to do, these all come into play.I think you were talking to Helen. I was starting milking about two weeksago.

Disparity between the west and the Eastwhen it comes to the private credit space where the US market is quitemature. But here in Asia, there's still muchmore opportunity. Nothing compares to the US structure.The US is a deep market with a strong backbone of of demand coming out ofprivate equity and private finance and privately owned companies and the needto be able to tap into sources of of funding.Nothing like that exists in this part of the world.And as you look forward, this is what's needed in the biggest economy here inChina.

But we're a long way away from thatlevel of of liberalisation. And so you mentioned that this might bea permanent feature. Structurally,give it to us, if you could, in percentage points from our globalportfolio, what is now appropriate public and private markets, if thebenchmark say, was at a no, was at 20% in alternatives, for example, or evenless. So what is probably less so depends onwho it is, which which which asset owner you're looking at.But, but you see talk of, you know, somewhere around 15 to 20% in privateassets for it's for a typical asset.

Owner.So they're the sort of numbers we're talking about split across, whether it'sprivate equity, private credit, real estate in fund format.So so it's a significant it's a significant asset class.It operates differently to the public markets.Of course, it's opaque, less transparent and needs, you know, really specializedcapability to be able to deliver sequentially across all three cycles.Mark, it's great to have you. Great to see you, Kota.Thank you. I agree.Joining us here in Hong Kong, if you are.

A subscriber, of course, you can catchup on all our interviews by using our interactive function TV.Go to join the conversation, send us instant messages to our team and ourguests. If you have a question for Marc Cohn alittle bit later on, next time, when he comes on, make sure to send us amessage. Check it out at TV.Go for more ahead. This is Bloomberg. That magic number, 17,000.Who would have thought three years back? That would be a good thing?We're above that level right now.

But such has been the delta in thenarrative in this Hong Kong market will take that in any form and shape.It comes 1.3%. Hang Seng index.We're down to a fifth day on shore. Yep.And we certainly have with regard to the RBNZ a hold there, the Bank of Thailand.I mean, this is the one that's that's potentially could be interesting, right?Because Rama, how long has this been going on between the government, thePrime Minister and the central bank now? And it seems like now it's not just apolitical sort of manoeuvre if they do cut, I mean, the economy is slowing downin some ways yet I can't remember.

Whether it was the mower most recentconversation we had with the Bank of Thailand or the one before that,but it was for economic policymakers. The economic case was it was simply amatter I think of time. They were simply waiting for the data toreally justify. And I think we were also waiting for thedigital wallet scheme that was supposed to take up some of the growth slack,which I believe is not coming any more. Yeah.This year. So it strengthens the case for a cut tocome at some point. And you do have a small percentage Ithink that might come today seven out of.

The 17.It's interesting, I think PMI has been in contraction.We were just talking to Markkanen about why he's still pretty underweight onThailand because you know they haven't seen the tourist numbers come backpost-pandemic in a big way. 60% of pre-pandemic I think is Yeah.Yeah. So you know the the fundamentals don'tlook that strong right now to justify maybe that higher for a longer scenariothat many central banks seem to still want to hold because they're waiting forthe Fed. The question is no one has, I guess, thenerve to preempt the Fed right now.

Yeah, especially because we don't knowwhen that first cut comes. Right.And you know, you could you you could simply be buying and, you know, it's youknow, this was a point that was actually brought up, I forget where there was onLinkedIn or Twitter because the conversation around do do other centralbanks, can other central banks, do they have the room to reduce rates and andwait for the Fed to cut interest rates? And you know, the Bank of Japan is agood example of that. Yeah, actually very expensive tointervene and stabilize a currency. It's not like they can.That's a free lunch.

Yeah.And I guess, of course in Thailand's case there, because the bot hasdecoupled it, of course, you were pointing out that there is also noinflation. So I think it's headline inflation is,of course, which has been negative for about six months now in Thailand.So the case is increasingly there for a cut.Yeah, the last decision, it was 5 to 2 split vote.So we're watching very closely how the voting turns out and if we see any sortof maybe is there a starting point from central bankers even start talking aboutcuts here as well?.

You take a look when it comes to thesemarkets, we talked about how, you know, there's still some quite a bit of aprice action across these markets here. Despite that we're holding for that CPIprint as well. Take a look at these Chinese turbinestocks, turbine maker stocks. So there's this probe that's going on inthe EU when it comes to wind power. And that's why you're seeing a bit ofdownside here. I would like of Jiangsu, wind energydown some three and a half percent. Machinery stocks are very much in focusas well. We talked about obviously, there's thiskind of industrial equipment upgrade.

That China has been trying to talk aboutas well. So we're seeing a jump, looks at someeven the Met up in China, Russia, Hungary, heavy machinery up 10% rightnow. Yep.So a lot of that was this the sector to borrow upon is powering up and the otherone seeing some headwinds right now and yeah so we'll leave it here for now.Markets apart from Hong Kong are effectively flat or shut really acrossthe region. We'll have plenty more ahead.So we're about an hour into the session here.This is Bloomberg.

It's a slogan.11:29 a.m. in Tokyo.Japanese markets are heading into that lunch break, of course, but there's alot going on with Japan. But overall in the US side of things,where the prime minister is there, set to meet that bilat with Biden later ontoday and then on Thursday that try with Biden and Marcus as well as withKishida. We're hearing some lines, Moira as wellsaying not aiming for rigid 2% inflation target, which we'll see how the marketinterprets that. We're not seeing a whole lot of movementwhen it comes to the yen.

We're still hovering around that one5152 level and the topics is slightly on the back foot here today.Not a whole lot when it comes to JGBs as well.But of course, we talk about that U.S. inflation could be a trigger.The big catalysts for dollar, yen and everything.Everyone's waiting for that. And of course, on top of that, it waswhole list of markets that are open. As you look at a snapshot of the regionexcluding those markets. Just to give you a sense, South Korea,Singapore, Indonesia, Malaysia, Philippines, Bangladesh, Pakistan andSri Lanka are shut today, missing out on.

This well, volume less pick up we'reseeing across price as well. Now it's time to check in on some ofthese forecasts as it pertains to the gaming sector in China out of BloombergIntelligence. And of course certainly the this thismodest they're seeing a modest boost to NetEase earnings it's if it provides ofcourse this partnership and it did of course revive that partnership withMicrosoft on Activision. That news came out 90 minutes back andof course the growth in also Tencent video gaming it looks set to normalizealthough some risks remain to lay that all out perhaps in better form than Ijust stumbled on the scripts.

Robert Lee is with us here, our senioranalyst. Let's talk about the the what theoutlook is for the gaming sector this year.Let's start very, very basic. Okay.So within the domestic game sector, within China, growth normalize becauseobviously the economy reopened last year, gave a short term boost to themarket. The market grew just below 14% year overyear in 2022. So going into a more normal year in aslowing economic environment, then growth will likely slow to around 6%,which in terms of headline growth is.

Quite a significant slowdown.But I think that that lower figure reflects the, you know, maturity of themarket and a degree of high saturation in the market.I guess all the potential game is in China already, though.I think there's 800 million or so of them.So it's you know, it's a well, very well mature market, well-developed, maturemarket. And as a consequence, growth will slow.I think one brief additional points the market is increasingly reliant onfranchise titles. There's been a lack of new smash hitscoming on.

So particularly companies like Tencentand others are relying on perhaps the hits of the past, which they, you know,put a lot of effort into reinvigorate and come up with new releases, etc..But also I think that is also tying into the slower growth outlook we're seeingwithin the China games market. Yeah, I mean, it's hard to see if theycould still continue to monetize on some of these old names.But for Tencent, what are you seeing in terms of domestic gaming sales?Are they at risk of of disappointing again?Yes, I only saw 2 to 3 weeks ago we saw the disappointment on the key phonenumbers.

I think that is a residual risk, butmarket expectations have been brought down.So looking on on our own calculations and estimates, we're only looking for afew percentage growth of the net domestic business.And I would say, you know, arguably the risk is potentially to the upsidedepending on the success of their forthcoming titles.So, for example, TANF, which is a sort of Dungeon Fighter game, if that youknow, it does go down well in the market, then there is potentially alittle bit of upside. But the core view on Tencent is it's thegrowth of in their ads business, in the.

Fintech business, which more than halftheir sales which are driving margin expansion and driving overall growth.It's not games sitting. The residual risks in games arecontained to some degree. Contained is one where you coulddescribe this this relationship between NetEase and Blizzard entertainment.They've continued on and collaborating. What do you make of this sort ofannouncement today? It is.It's sort of one of these things that has been a bit speculated in the marketin recent months is you know, is on is it off because the partnership brokeapart at the end of last year.

So the fact it seems to be back on againis definitely an incremental positive and that is the read across across thewider sector is fairly limited. But I think probably the most noteworthything of the news is that this will potentially allow NetEase to port someof its mobile games onto Microsoft's Xbox so that could open up new marketopportunities for them. But having said that, looking at marketforecasts, I think consensus looking for around 4% EPS growth this year that willprobably be bumped up a little bit. But the growth that NetEase shoulddeliver this year will not be matching the 44% growth that they delivered lastyear.

So the business will still.Slow down markedly based on, you know, really stellar year they they had in2023. Yeah, but those World of Warcraft fansare going to love this, right. Return to Chinaon this news as well. Robert Lee, thank you.Our senior analyst at Bloomberg Intelligence.All right. Some other big corporate stories thatwe're tracking for you today. Intel will roll out a new version of itsAI chip in the third quarter in a bid to compete with in video.The Audi three processor focuses on.

Helping to train AI systems and runningthe finished software. CEO Pat Gelsinger says it will cost lessthan Nvidia's current and future processors.Boeing shares fell to the lowest in five months after an employee said thePLANEMAKER took shortcuts to ease production bottlenecks for the 77Dreamliner. The engineer who worked on the planesays the alleged issues could dramatically reduce the life of morethan a thousand for the jets and service.Meanwhile, Boeing headed over 83 jets for the first quarter, logging itslowest deliveries for the period since.

Mid 2021.The majority of those planes were 737 max jets and Mehra is downplaying thethreat of disinformation in a big election year.At an event on Tuesday. Its top leaders say they have not seenthat happen yet on their services. Last week, Merah announced plans tolabel all air generated content on Facebook and its other properties.Experts fear, though, such media could mislead voters or spread disinformationonline. Now just ahead, South Koreans are votingfor a new parliament in what's effectively a referendum on thepresident and their performance.

A live update from Seoul just ahead.This is Bloomberg. So 37 minutes back, the RBNZ, asexpected by all economists, kept rates unchanged at five and a half percent.And based on what's come out so far, have well, the bank has struck agenerally more hawkish tone really that they do need to see policy remainrestrictive for a sustained period of time and that they're cautious alongwith other central banks of cutting. Acknowledging this patience scenario ofmost central banks right now are in cautious about easing monetary policy.Kiwi dollar stronger as you can see on that news.Now let's get more on this.

This big meeting is taking place, ofcourse, over in Washington. Yet the Japanese prime minister there.If we make a shift to the agenda at the US Capitol, his first state visit, infact, the first state visit by a Japanese leader in almost a decade.U.S. Ambassador to Japan Rahm Emanuel spoketo us earlier from the White House lawn, saying that he has high expectations ofthis meeting. This comes at a historic moment for bothcountries as they change dramatically their kind of deterrence,posture and position. Japan's change in the last two years,five separate policies that have been.

Basically on the books for 70 years fromthe size of the defense budget, the current strike capability in the defensearea normalizing and level, bringing the level of relationship with the eryk, theRepublic of Korea to a new, more solid strategic level.The United States also has made some fundamental changes going from a hub andspoke system to a lattice multinational type of strategic architecture.And I kind of see this state visit the fourth from a head of state in theregion out of five that the president's done.It's kind of putting a period at the end of one era that's defined as allianceprotection and beginning to write the.

First chapter of the new era of allianceprojection with Japan. And that's not just for theIndo-Pacific, but also as a key strategic partner in a global set ofissues. The second thing it's kind of bookendthe week started with Australia, the United States, Japan and the Philippinesdoing naval and air exercises together in a new multinational effort and havethe end of the week with a historic first ever trilateral between the UnitedStates, Japan and the Philippines head of state that reflects and symbolizesthe change in the United States approach.It also symbolizes the kind of role that.

Japan's going to play as a constant inour era, in our relationships in the area.But it also symbolizes China's whole strategy is to isolate the Philippines,isolate Australia with their economic coercion, isolate Japan by not acceptingtheir fish to be exported. Our strategy is to flip that script andmake the isolated party China. They're the ones that are isolated inthe South China Sea as it relates to the Philippines.They're the ones that are isolated when it comes to trying to use economiccoercion to coerce Australia to change their posture, and they become theisolated party, which is why they throw.

In the towel of that effort.So that's how this state visit, it's been a long it's been nine years sincethe last Japanese prime Minister has had a visit.But it comes at a critical juncture where the relationship will pivot into anew kind of posture and a new position. I wanted to hone in, Ambassador, you'vementioned, of course, the first try out summit with the Philippines.How far do you expect Japan to involve itself when it comes to theseconfrontations in the South China Sea, where, of course, these encounters tendto be more aggressive than what we see in the East China Sea?Well, the whole goal is not to have a.

Conflict.That's what credible deterrence is. And understanding that this is not Chinaversus the Philippines. This is China trying to coerce thePhilippines into changing their policy, which the international court in 2016ruled was in favor of the Philippines, not China.And understanding that China needs to understand that the Philippines has somevery, very important friends in the neighbourhood the United States, Japanand Australia in this situation. That was the U.S.ambassador to Japan, Rahm Emanuel, speaking to our colleague Heidi Star.What's earlier?.

Meanwhile, we've got to talk about thisdeal. Nippon Steel's $14 billion takeover bidfor U.S. Steel had been widely viewed as a slamdunk. But in a historic intervention, thebiggest U.S. steel union has decided to do everythingin its power to block the deal. And what did the backing of PresidentBiden? For more on today's big take, let'sbring in our commodities reporter Martin Reggie.MARTIN why has this deal become so complicated?Yeah, it's a $14 billion firestorm, I.

Think is what our big tech articlecalled it today. Look, this should have been or couldhave been a fairly straightforward transaction.It's a big advance. Well-known Japanese company buying asteel plants in the US, Japan in the US, as we've just heard from the USambassador to Japan, very strong allies. But this transaction has ended up notjust with the unions bulking, but Biden andPresident Biden also saying, you know, this moves this this company, thisiconic American industrial company should stay us.So it's all a bit politics.

Obviously a very complicated politicalyear in the US and some of US Steel's operations, some of its key operationsand the ones that are seen perhaps most at risk are in Pennsylvania, a swingstate. So Biden really wants those union voteswhen the unions come out fighting against this deal because they'reworried about what might happen under new ownership,Biden's look to back them and that's thrown into disarray.Added to that, there's also US company Cleveland-cliffs, which has Mode makinga rival bid for union backed bid to keep the company US own.Well, okay, Ken, can the deal still.

Happen here?When I first heard about what Biden said, I think he said this company mustremain US owned, obviously. That's a that's a pretty big thing foran American president to see about a transaction.And when I first heard that, I really thought, well, this this is just dead.This this deal is not going to happen. But it does seem, from the reportingI've heard coming out of the US that people do think there is a possible pathforward, perhaps after the election, especially if Biden is re-elected.But I don't think the politicians really want to rock the boat during an electionyear.

And we've seen this of DemocraticSenator John Fetterman is quite well-known in Pennsylvania, you know,come out strongly against the deal as well.It's very important for the Democrats to get Pennsylvania.And in that context, they're going to try to do their best to kick it alongthe route, I think. And it's interesting that that's what'shappening domestically in the US. But if you take a look the geopoliticalimplications with this, I mean, Biden is basically meddling in a deal thatinvolves not China or Russia. We're talking about a close ally here,Japan.

MARTIN So is this a problem forJapan-U.S. relations?And do you think it will be discussed this week in this trilateral?Yeah, that's right. I mean, this idea that timehas ended up with the National Security Review Board.Don't know if I've got the exact title there.Right. But, you know, it's been referred to thegovernment organization, which typically reviews transactions involvinginvolving, say, Russia or China, which is unusual, I think, for for a Japanesecompany.

But an it is a sort of elephant in theroom, I guess, for the talks between Kishida and and Biden in Washington.But then again, it is a relatively a relatively small matter.And I think from the Japanese perspective, they likely understand thatthis is a very complex political year for Biden and they understand whyhe's had to sort of respect and go along with what the unions are looking for.So it may come up in talks, I'm not sure,but I don't think it's enough to derail the relationship, which obviously has alot of other complicated aspects, not least dealing with the the rise ofChina.

Okay, Martin, thank you so much.Marc Rich here, commodities reporter in Shanghai for us.You can read all about it. You can read the full story on today'sbig take on the terminal or also by heading to Bloomberg dot com now.Speaking of heading somewhere, South Koreans are headed to the polls herevoting for a new parliament in what's effectively a referendum on president inskills performance. Now the results will determine reallyhow much power the president has during the remainder of his three years inoffice. Let's bring in John Herskovitz, our EastAsia government editor with us out of.

Seoul.John, for foreign investors, why do we need to care about this?Well, if you lose people power, a party can get control of parliament.That means for the final three years in office, he can implement somepro-business reforms, some market reforms cut.He's looking at cuts on real estate, on businesses.Trying to advance an agenda that is probably investor friendly and businessfriendly. And this is the even the one vote forparliament while he's in office. It's a single five year term in SouthKorea after the vote of three years.

Remaining.And this will determine if he's in a more powerful position or in a weakerposition for the remaining of for the remainder of his three years in office.So what are we watching out for? What are some of the key numbers that weneed to to really pay attention to? Yeah, the vote is for all seats in the300 seat parliament known as the National Assembly.The big number is one 5151 for the majority.If the Democratic Party, the opposition has the majority now, if it builds onits members and gets to 180, it can block things like filibusters if it getsas far as 200.

It has the power to override vetoes andeven implement impeachment procedures, which could hobble an even possiblyenduring government. Okay.Well, what are the what are the key items that people are thinking about?What determines these votes? What is on what dominates mindspace ofvoters at this point, John, is the big issue is really the pocketbook issues,pocketbook issues. Inflation is eating into paychecks.People have seen rises in prices for basic foodstuffs, fruits, vegetables.Housing prices have been on a tear for several years.And also it's just getting basic.

Strength for the export driven economy.So people are looking at their finances and they're voting with the directionthat their wallets may take them. That's the key issue for the race.The the bigger geopolitical stuff, the security issues policy with North Korea,it's not really a dominant part of the election.And that's actually expected to keep on track regardless of how the votes gotoday for parliament. John, thank you.John Herskovitz there, our East Asia government editor joining us out ofSeoul. I just want to track what's been goingon with this rally underway in Hong.

Kong, that it seems to be getting quitea bit of momentum here in terms of the share market.Yes, we have now bounce back 20% from the lows that we saw back in the earlyJanuary 22nd or so. That's certainly been something thatwe've been watching for, I think, a few weeks now.We're finally reaching those levels if we actually close at that level as well.So that's really one to watch as I is also flirting around the highs of thisyear. So quite broad based.It's a good Wednesday. Okay.Well, tell you about some of the movers.

That are pushing these benchmarks tocurrent levels. Plenty more ahead.Suffice to say, this is Bloomberg. Here's a look at your China brief, alook at stories making headlines in local Chinese papers and trending onsocial media today. Well, she want a news agency ishighlighting regulations cover the economy.And when it comes to consumer rights, it says the government has publishedspecific measures for industrial equipment upgrades to develop so-called,quote, new quality, productive forces. So we're seeing some of these industrialequipment stocks really rallying here.

Big time today.Meanwhile, the Internet regulator is banning businesses from collectingexcessive personal information when providing services through apps.The report cites an official who says companies should not force consumers toprovide information irrelevant to their operations.Plus, the Securities Times, echoing many economists and analysts and investorsout there, said it is important for macroeconomic policies to maintain theirstrength in the second quarter due to its, quote, practical significance.So something still people still want to hear to, I guess, justify the rally thatwe've seen this year.

Dave Yeah, real proof helps, doesn't it,sometimes, though. Yes, right.And it's really an intention, I guess, signal the policy intention that we arelooking for more things to latch on to, particularly when you look at where thismarket is. Right?We just broke that headline earlier. The Hang Seng China index already 20% upfrom those lows on Jan 2020. Well, Jan 2024, 22 of 2024.Okay. Sorry.Something auto stocks really more so in your vantage point earlier on.Right.

More proof coming through passenger carassociation with some very good industry numbers for March a pickup in these Ihad a very big pickup of course as well in the US session Hang Seng index bottomof your screens Kiwi assets we're looking at that's a fairly unexpectedoutcome out of the RB in Z, although quite a bit of a hawkish tone gettingmore time in terms of just being meeting policy restrictive for a fair amount oftime as well. Now we're going into the CPI reportlater today and I think if this gets lost in a noise, may maybe a kind publicservice reminder that stocks have actually done very well, particularly indeveloped markets like the US and.

Europe.So 20 out of the 23 weeks from November, we've seen gains.Europe's 19. China is about half the time.So it's been good, but I guess good in a spectrum.It's a good way to put this. It's still very much the Dems that haveoutperformed still at this point are point.You take a lot when it comes to the rest of Asia.What we're dealing with here today, of course, that US CPI print is still frontand center here in the next few hours or so.We're still seeing a decent rally.

Right.And in particular, I think a lot of as the Hong Kong market that's drivingthese gains here right now. But in Hong Kong, every single sector isin the green on this Wednesday morning. That's it from us here from the Chinashow Bloomberg Markets Asia is up next. Stay with us.

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