China’s High Leaders Trace at Property Toughen, Rate Cuts | Bloomberg: The China Designate 5/2/2024

I do think it's clear that that policyis restrictive. I think it's unlikely that the nextpolicy rate move will be a hike. Jay Powell there outlining a path forFed policy after keeping rates on hold. Welcome to the show.We're half an hour away from the opening bell, Hong Kong.You're watching, of course, the China show on David Ingles with Yvonne Man.Our top stories this morning. Asian stocks cautious while Treasuriesgive up some gains after that rally overnight, with Powell downplaying thepossibility of rate hikes. We're looking at the Japanese currencyvery much in focus after the top.

Currency official refusing to say ifthey stepped into this market after today's sharp moves in the Japanese yenand Chinese property stocks in focus on fresh measures to support the market,including a ban on new land sales for regions with huge stockpiles. It's a pretty mixed picture out there interms of what we're saw after the Fed. Yes, Jay Powell was expected to behawkish. He didn't quite get there.He did acknowledge there's a lack of progress there heading to that 2%inflation goal, which was added to that statement.But then again, he also reiterated that.

Rate cuts are still on the table.They talked about, you know, that that tail risk of a rate hike possiblyreduced here right now, as he talked about, unlikely the next move from theFed could be a rate hike. So certainly that helped.And then an earlier announcement on the pace of reduction of cu t that's reallymy less risk assets here today as well. You're not quite seeing that sort offollow through. In fact, we saw the biggest crash as asurges intraday in the U.S. but it didn't last long, perhaps becausethe market is still wondering the timing of these rate cuts and is this really aFed that is willing to cut rates during.

In November, during an election year?That's certainly something that the market is contending with.You take a look at where yields are right now that two year initially didsee a drop of about seven basis points or so.We're still around well below that 5% level at 496.A ten year is not doing a whole lot at 462.But Treasury yields did drop a moderate. So to the dollar as well, we're stillseeing some weakness when it comes to the greenback here this morning.And perhaps that's why you're seeing a little bit of movement, that massivemove.

Once again, I think we went from 157 to153 at one point in just about 30 minutes for dollar yen or hover aroundthat 155 level right now. Dave mentioned those kind of commentssaying, look, I'm not going to comment whether we intervene or not, but thereis speculation once again that perhaps we did see intervention for a secondday. So watching if we could see to see thatstrong pull through. You take a look when it comes to Brent,obviously, that that weakness in oil is what we're watching out for.There's been inventories of bonds filling up when it comes to the U.S.as well.

That's what's driving Brent around 83bucks right now. WTI actually broke below that $80 levelas well. And we're watching very closely whathappens to US futures. It's rare to see a move like this.So, you know, a gain about 4/10 of 1% in the Asia session.So we'll see what's driving that overall.You take a look at what's going on in China here.Of course, Hong Kong is coming back from that holiday.China remains closed, though, mind you. So we'll see.You know, the lack of southbound flows.

To Hong Kong, Is that going to impactthis market in any way here as well? You talk about what's been going on.We look at foreign investors piling into this market.We basically saw them boosting the holdings of China stocks for a thirdstraight month. That's the longest run that we've seenin terms of monthly net purchases day in more than a year or so.Mind you, though, in April, you exclude just one record day of buying andeverything else was sort of negative in terms of flows.But foreign investors are certainly looking very closely at this market hereright now.

That pull up.You mean that we got just a few nights ago?They're talking more about reforms, we're talking more about growthmeasures. Some of these targeted more targetedmeasures in the property market, especially when it comes to inventoryreduction. That certainly seems to be a key focusnow. Yeah, absolutely.And in fact, right now the conversation then shifts to will there be a budgetallocation for that specific exercise if indeed, of course, that's the path thatChina goes, as everyone is pointing out.

The other question, too, as you look atthese markets, we're seven days up when the Hang Seng index where we open today.Where would that money come from now that at least for the next today andtomorrow, the stock connects. The program is shut because of theholiday, of course, in mainland China. Still a couple of sectors to watch.Bottom of your screen, a big drop in oil overnight.GDP numbers coming out of Hong Kong later out later today as well.It takes us straight back into the macro stories.We talked about the Fed. We didn't get that boost in the USdollar overnight that might have.

Actually led to and this is sort ofhindsight. We look at Dixy, for example, we wereflirting with the highest level here so far this year, dollar yen.Who knows if they did. They're saying no comment for now.And I guess in some ways it's hard to imagine of someone waking up with thatmuch muscle and deciding the yen is too cheap right now.Dollar yen right now, which is interesting because as we and move,we're not actually back to 156. That's not the chart we're looking at,by the way. We'll get to that in a moment.But yeah, let's why don't we go back to.

The Fed while we correct.That was interesting, right?Because you mentioned that 3% gain on the news, the largest intraday gainwe've seen since December of 2023. Most of the traders that you talk to sayif it's not intervention, you know, almost anything else that could have ledto such a big loss and sometimes swing. Right.But I think people are saying, you know, unless we see some sort of change andBOJ policy that actually, you know, supports this intervention, these gainsare not really going to last. Yeah, we keep to just the I think it'sto stabilize things between and lots of.

People are talking about is it 152 to155. Is it 155 to 160 where they want tostabilize things until the Fed eventually cuts rates.So the dip overnight in this morning took us to 153.Real four. And just like that, we're back to 156.Watch us very closely. Yeah.All right. Back to the Fed now.And we heard from Jay Powell, who talked about the need to keep those rates wherethey are. I do think it's clear that that policyis restrictive, and we believe over time.

It will be sufficiently restrictive.That will be a question that that the data will have to answer.I think it's unlikely that the next policy rate move will be a hike.Nancy Davis joins us now, founder and CEO of Quadratic Capital Management.Nancy, hawkish statement, dovish press briefing.How did you read into the entire exercise overnight?Well, Powell was definitely trying to sound balance, talking out of both sidesof his you know, both both sides dovish and hawkish.But the reality is they're reducing the quantitative tightening, which is easinglike less QE means easing.

So overall, it was pretty dovish,especially given how strong the data has been in the US.So you say we still need to be cautious about the current pricing.We've gone from six rate cuts to maybe now one or more.Why? Why?I think the Fed is easing with their balance sheet, not cutting rates rightnow, reducing the quantitative tightening band, especially when youconsider the piece of the Fed's balance sheet that is the denominator of thisequation is $7 trillion. Right?That's a piece of the Fed's balance.

Sheet that the New York Fed went out andbought in the open market. So reducing quantitative tightening iseasing. It's just not the easing that the bondmarket was looking for at the beginning of the year with the rate cuts.Okay. Is that another way of saying the Fed ishaving its cake and eating it, too, Nancy?Oh, the Fed is creating. Inflation is what's happening.There's so much money supply out there. The Silicon Valley Bank, the Fedimplemented this, the BXP program, the swap lines that literally just expiredin March.

And boom, we get a bank in Philadelphiaalready blowing up. And so I think the the quantitativetightening easing or reducing it is going to happen in June, but it's justanother way to push more and more liquidity.And so I think investors should really be positioning to actually own inflationprotected bonds. You've already seen this reflationhappen in commodity stocks and cyclical equities and other markets, but therates market, the inflation markets are still incredibly complacent in the US.They. They've got a problem.Inflation is going to go back to 2%.

And to me, that seems like a reallygreat buying opportunity. So a little bit more on the cute side ofthings, right? So they're starting a as you mentioned,from that cap of 60 billion to now at 25 billion.Is that going to be a boon for risk assets in particular?Nancy, in some ways, Does that at least relieve some of the upward pressure onTreasury yields moving forward? Well, mortgages are really the trickyone. So they've said they don't want to ownmortgages. They're not reducing the quantitativetightening with the mortgages.

And there's basically no cap onmortgages because when the mortgages expire, they're going to reinvest backinto treasuries. So I think it's really important forinvestors to look like when you have the Bloomberg AG Index, for instance, whichis a wonderful core fixed income index, but 25% of that is mortgages.And so I think you have to be really careful about spreads there with the Fedkind of allowing Q to continue there and saying long term they don't want to ownmortgages on the balance sheet. So, Nancy, then you mentioned it's agreat probably time to get into tips. For example, what about steepness?Because that's burned a lot of investors.

In the past.And is it time to revisit that or is there time still, too, to wait until thea clear trigger for steepness at this point?Well, steepness and the linear format, which is basically buying one part ofthe curve and shorting the other, is really dangerous because the yield curvehas been inverted longer than it ever has in our lifetime.It's been, you know, inverted for the longest period ever in history in thefinancial markets. The question is, when will it normalize?You know, talking about Japan, Japan, if you pull up the twos tens curve on theJGB curve or the JPY swap curves, you'll.

See it's about positive 60.The U.S. is exactly opposite.It's -63 in the twos, ten. So four curve right now.So having that normalize, becoming less negative in the U.S.will eventually happen. But I think the tricky thing is doing itin a linear, linear format. You can have a lot of pain.The curves inverted about 30 basis points additional this year alone.So using options, fully funded options, I think is the way to go to play curvesteepening, because then when it happens, you have that asymmetricpayoff.

But at least as it's continuing toinvert, you know, what you can lose. Okay.You mentioned about these rate differentials between Japan and the U.S.I mean, the the massive moves we're seeing in dollar yen here right now.I mean, if it's not intervention, what else could it be?Is one the question. But then again, how do you how do youtrade around this sort of environment now?Well, it's probably short covering, you know, being short the yen long.The dollar is a very, very popular kind of macro theme right now.And everybody is sort of waiting to see.

Which central bank moves first, likewhether it's the Fed cutting rates, which is, you know, something, today'scommentary was more dovish than what a lot of people were worried about becausethey sort of took the hike off the table.They are being dovish by reducing quantitative tightening.So I think we should expect more volatility in dollar yen.More volatility generally in any of these cross currencies because affectsis all about rate differentials and it's really hard to pinpoint where to go.But I think it's a great time to be hedging because generally volatility isnot super expensive across asset.

Classes.And regarding what your currency risk is, it's why not put on a hedge and not,you know, not kind of put your future in the central bankers hands.Nancy. That's Booker Gaines post Fed.Do you do you think that the bottom is in for Treasuries?And do you think, Jay Powell, by not really biting any opportunity to soundhawkish overnight, do you think he's also cemented rate cuts?Maybe November, maybe December doesn't matter.But as has he, has he done that for 2024?Well, Powell has a great history of what.

He says.The opposite happens. You know, I'm not trying to bully him atall. But, you know, transitory.That was not right. Not even thinking about thinking aboutraising rates. Then we went into one of the biggesthiking cycles we've ever seen in our lifetime with about five, five and aquarter and a 12 month period. So I think the thing we should all belooking out for and I think, you know, Powell kind of cast us tonight with itis making fun of stagflation. You know, he's like, I don't believe inthe stag or deflation.

You know, I think that should be reallyon investors list now, because whatever Powell says won't happen does happen inthe future. So sorry to be the Debbie Downertonight, but I, I really just don't have a ton of trust in these academics whoare, you know, it almost feels like The Wizard of Oz where they're pulling thislever. They have no idea what's going on.All right. On that note, we're gonna leave itthere. Nancy Davis, thank you, founder and CEOof Quadratic Capital Management. We're also going down the open of tradein Hong Kong.

Markets.Shanghai, Shenzhen are still closed as well.Of course, we're seeing if we can see continue this world topping rally inHong Kong here after just one day break for Labor Day.Futures are pointing higher here this morning.This is the China show. But Japanese currency is weakening yetagain after a surge for a second time. The scrip almost sounds like Monday andTuesday. Speculation in the market that theyintervened. No confirmation.The chief currency official coming out.

Came out and said, I have nothing to sayon whether they did it or not. Paul Dobson's Widows are executiveeditor for Asian Markets. Paul, sometimes you really say it bestwhen you don't say nothing at all. Is the song does it?Does it look like they intervene? It certainly smells right.David's one of the one of the telltale signs is typically a move of around ¥5.That's pretty much exactly the scale of the move that we saw late in the UStrading session. And the timing would seem apt as well,both waiting until after the Fed is done and then coming into the market at atime of lower liquidity.

So it makes it easier to jolt it furtherin one direction or the other. So while Canada is not being candidabout his comments, he's kind of continuing to leave that kind ofambiguity out there. I think the market is starting to getthe message here. And yet, you know, as you said, the yenis weakening again. That pressure is still coming back.Each time that we see one of these moves to kind of slap it back a little bit.And and it's important because we're heading into this four day holidayperiod for Japan. And officials probably don't want to seea great deal of currency market.

Volatility.Well, they're trying to have a little bit of a holiday and everybody else isaway from their desks as well. Yeah,we're breaking that strap right now. Just to show our viewers, Paul, of thisweakness that is extending in the yen right now.In fact, you're seeing moves up about weakness of 1% or so.So it really is just paring what was suspected, the surge and what's driven.It was maybe intervention. It brings us to our next question.I mean, obviously, we knew that this would be an uphill battle for Japaneseofficials to really stem this decline.

But are we getting closer to really one$54 yen or 160 now? Haha, it's it's interesting, isn't it?We might be buying around in this range for a little bit, but only because ofthat pushback that we're starting to see.It feels like the market is still very much minded to test the weekend.So the 160 rather than the 150 here are the very wide interest rate differentialbetween Japan and the US being one thing.So what else could happen? Well, I mean, the Fed was relativelydovish, now hawkish versus market expectations.That's a good thing for Japan.

Bond yields did fall a little bit, butthat dollar weakness is not really showing in a great way just yet.And it would really require something on the US side as well as on the Japan sideto break this kind of cycle of ever weaker yen.For us, it would seem. Paul Dobson, think you're executiveeditor for Asia Markets there, joining us from Singapore on these massive movesand this reversal that we're seeing around here this morning.Once again, you take a look at what the going on.What we may have missed during the holiday was this Politburo meeting thathappened on Tuesday night.

Right.So what we got overall is this. Right?So policymakers are they're talking about increasing fiscal and monetarystimulus. Talk about flexibility there to supportthe economy, are also study policies to digest the housing stockpile.There were plenty of rumors about this, slightly different from what people wereactually anticipating, which is maybe that buy versus build sort of program.We didn't get that much detail and that's a fact in some ways.So something to keep in mind. Let's bring in our Bloomberg economists,Eric Zhou.

He's with us here.What did you make of what we got from that meeting?Yeah, I think on top of that, I think a key message is they set a date for theplan. So the plan they had a meeting in July,and I think that's for us, probably for me, I think probably it's a morepositive message than other things because the markets have been lookingfor the states for a long time. I think things last year.So it's it's if sometimes suspicion whether they're going to stop thismeeting so they no longer care about reforms, economic policy in the longterm.

So I think there's a kind of affirmationthat, okay, we're still going to have this meeting or although it probablylater than the tradition, but still welcome to discuss something on theeconomic reforms for China in the coming years.I think although we don't know what they're going to discuss yet in the Julymeeting, but I think it is at least a positive signal that China is still onthat path. Right.So, yeah, can China afford to buy up some of the inventory of unsold propertyinventory? In other words, are we seeing do we needto look for signs of budgetary support.

And allocations to to do all of thesethings that they're seeing? Yeah, I think definitely because this isright direction of some. Some good ideas.You know how to support the economy. But the thing we also noted thatactually the specifics missing that due to you do really have to, you know, findthe fiscal power to support those measures.So that's a thing I think we're going to look forward in the next probably in thenear term. You know, every Bloomberg economistthere we're looking at the Hong Kong reopened today.So we're looking at one specific stock.

We're up 15% on NIO.Let me just briefly look at what's perhaps driving.The monthly deliveries were up 32% yesterday.So that's how we saw the 8 hours jump to 3% in the U.S.But this is a much bigger jump that we're seeing here in Hong Kong comingback from that holidays. There you go.We're watching that. Plus the rest of the Chinese space herethis morning. And the approach to Hong Kong is lookinglike this. Pretty flat in the pre-market here rightnow.

Is tech also not moving a whole lot?724 for dollar China. But any more ahead.This is Bloomberg. Right.Just an update here on the Japanese currency following the second bout ofsuspected intervention. And that did not last very long.As you can see, dollar gets back above 156.It's down against every single G10 peer by a lot right now.So we're looking at weakness of about 1% following that big drop that we had adollar yen earlier. Yeah.You got to wonder if they did intervene.

Was the timing right?I mean, you could say they took advantage of the liquidity of the marketto really kind of intervene when they fell, if in fact it's true.But then again, it was right before this Fed meeting.And then you also the jobs report tomorrow coming up as well.So are they going to continue to defend? If so, rise.That's going to be one thing that we're watching out for here today.The free markets looking like this in Hong Kong, not too good.Pretty slow going on this Thursday morning here.So we'll see if we continue this rally.

Analyst actions to tell you about.Jp morgan raising industrial bank here, saying that improving revenue andearnings outlooks in heavy industry reinstated by its steel and securitiesand watching some of the semiconductor so supply chain TCL tech cut to neutralat Citi right E these are very much in focus following April delivery numbers15% is the big move out of NIO specifically.And while we're staying gently on EVs and energy oil, big drop overnight oilcounters didn't like this going into the open today.Bottom of the screens this Brent crude plus or ETF on oil the Hong Kong open isjust ahead.

This is the China show. You're watching a channel show.We're kind of down to the reopen of markets in Hong Kong after that LaborDay holiday. It looks like we're pretty slow goinghere so far. Maybe now after this record run or atleast stunning rally, we've seen Hong Kong stocks.There's a bit of recalibration going on here as well.And even those slightly less hawkish or more dovish comments from Fed Jay Powellnot really doing too much when it comes to Hong Kong here this morning.China remains shut for the last few.

Sessions there.So we're up about 4/10 of 1% for futures here right now.A little bit of weakness in the currency this morning, but we're still tracking alot of things, including whether there's any sort of spillover effects on thispolitburo meeting that we got Tuesday night, too.Yeah, maybe a indication of policy preference as it pertains to property,for example. We also did get some news yesterday.Effectively, one of the ministries came out and said, you know, if you have acertain number of inventory that's unsold and you can't buy new land,that's for developers.

We'll talk more about that in just amoment. Speaking of Hang Seng property, we'reflat right now as well. Really, most parts of this market in theearly going, you got to wonder why we are at work today.If you really think about it, China is closed.Nothing's happening. Oh, by the way, one thing did happen.We had a rate decision in Hong Kong. No change there.HK man, Of course, thanks to the Fed, HSBC and some of the big movers we'retracking here on the Hang Seng index as well.Dollar China dollar.

Hong Kong, as you can see, 782 rightnow. So we're flat on the Hang Seng index.Now, by the way, this is just a bit of a tidbit and we'll flip the boards,please, if we can. We're up seven straight days on the HangSeng index that matches the longest winning streak going back to 2018.Back then, that's going to be hard to top that.That was 14 straight days back in January of 2018.We talked about property, a glance at some of the big moves there.We're also looking at oil plays on the back of that big drop in oil pricesovernight.

And look at where we are, that Brentcrude of screens and very, very quickly and we'll talk more about this in amoment. Casino stocks very much in focus, too,at the open here. We did get some data coming through forApril, I believe, on gaming revenue. And of course, it's the holidays.So we're also trying to figure out just to what extent we are getting thatpassenger flow from the mainland into Macau.We're looking at maybe a move against the green here given some movementacross your screen. So, yeah, MGM China is interesting,right, that they said that MGM Resorts.

Sales hit a record as that casinorecovery continues in Macau. We're going to get his take on it injust a second here. For more, let's bring in our age ofstocks. Reporter sandy shot first on thesemarkets and you know, obviously with mainland markets closed today, sammy,what are you expecting during this holiday ride be hong kong and thechinese equities faltered. It's advance a little bit ahead of thismini golden week that we're seeing even though the PMI numbers expanded for thesecond month. So we're watching the Hang Seng indexclosely today and how it's on the cusp.

Of entering the technical bull market,in fact. And it's actually had the best weekperformance last week, the best since 2011.So it's doing really great. But again, there are some concerns thatthe southern a southbound traders with them not here for the next few days.There would be a little change or a little volatility in the market.And we're also looking at the of course, because, you know, stocks, just like youmentioned, because of the holidays, how the MGM, China and then some of theother other casino operators are in focus today.You're also looking at property.

Why?We're looking at the property because over the weekend, not over the weekend,it feels like it was effectively a weekend.Okay. Just yesterday, China actually said thatsome of the cities that have a lot of these home stockpiles are not allowed tosell more land to developers. And of course, that's not going to be agood news for the developers. But of course, JPM just said that theyare going to the right direction of divesting these inventories.And so this is not the wrong move. But in the meantime, we might see someof the stocks trending down perhaps.

There we go, some which are getting usready for the trading day ahead. Or if a stocks reporter Satomi justtalked about casinos is really one of the groups we're tracking here today.So revenues, in fact, we got it for April more than expected, despite weeksof really bad weather, extreme weather in some cases in southern China.Let's bring in our Bloomberg intelligence senior research analyst forAsia-Pacific Gaming and Hospitality, Angela Huntley.Just your initial take on the numbers that we can talk about other things.The numbers in April was very strong just because we thought there would besome seasonal weakness.

If you think about the Labor Day holidaylast year started April 29 and then this theory for starting in May 1st.So that means that actually less Chinese tourists has been to Macao like inApril, in the end of April, because the holidays are delayed.So for that reason, we saw some weakness today, but there was no weakness at all.So that's why we are expecting even stronger numbers in May.It is also a bit different from the direction of other survey sectors.Think about like the same store sales will be unchanged like in coffee werevery weak in fourth quarter of this year.But that means that we are seeing people.

Really want to travel and spend money.Yeah. Yeah.You mentioned about, you know, there's weaker per capita spending everywhere.You said may look encouraging rise out what are expecting for the this LaborDay holiday this summer. Yeah it should be very strong forMichael because we saw that most of the rooms are very full and it looks likepeople are. So if we talk about the China Chinesepeople, it looks like they are going out more.They try to they're not just going to Macao with Hong Kong, but they also goto other countries like Thailand, Japan.

And others.So that means that probably some weakness for China travel names.I think that's why you also see that the performance in April last year, in Aprilthis year, we see that the stock price of Shangri-La and Trip.com has been verystrong while some domestic travel names were weak.Yeah, the I think it was one or two some days ago.I want to get your reaction to this. The I think China introduced moremeasures to make it easier to come in visas, visas and passports as well.What's your initial prediction projection and how that that that helps?Is it easy to model that sort of thing.

At this point?I think that benefits Macao more than Hong Kong, because it means that thepeople who used to come to Hong Kong and Macao for business trips can stay forten days now compared to seven days like until now.But apart from that, if it looks like they are going to implement a multimulti entry visa between Hunting Island and Macao, that means they think about acouple that is expensive for some people.Then you can just stay in Hong Kong Island, which is a part of China, andthen just go to Macao to enjoy other stuff, maybe even gambling by motorboatlike other facilities.

So I think people can can go to my homemore often and they can stay longer because they can they can spend less onaccommodations. Yeah, I just had lunch with some mommyfriends and they went to Macao for the weekend with their kids and a bunch ofother families and they said we didn't even touch the casinos.They just went to the waterpark. Yeah.So there's there's certainly that sort of fun there.You talk about the FNB side of things. So you mentioned Yum China.You mentioned like in week sales there. I mean, how bad are things right nowwhen you saw this?.

So think about the Luckin coffee.It's supposed to be a chain which sells the coffee at a very, very cheap price,¥9.9, a cup of latte and others. And that has been very good sales likein the fourth quarter of last year. And after all this promotions, theythought that they don't have to continue doing this.It's like a credit too much like a price war.That's why they have been reducing the number or like a pluralities of sellingat ¥9.9. And then they saw like a plunge of 20%decrease in same store sales in the first quarter of this year.That means that like a see how people.

Are so sensitive on price changes andvery competitive. So I guess that also means that theycould probably say, boy, China yum. China sales was actually not that badbecause like a people already having like a seeing that but still like thosesame store sales has actually been down for KFC and Pizza Hut and it's justbecause the average ticket size was down the volume is up, but the people who paylike a ticket is smaller. So they all means that people are tryingto choose like a less expensive stuff, less expensive than 9.9, 9.9 renminbifor a cup of coffee. All right, Angela, thank you so much fortracking all that.

Angela Holly there I BloombergTelevision, senior research analyst for Asia-Pacific Gaming and Hospitality.We got plenty more ahead. This is Bloomberg. Welcome back to the China shows and thestories we're following this morning. China is starting sea trials for itslargest and most advanced warship as it enhances its naval capabilities amid USconcerns. The Fujian is China's third aircraftcarrier and is named after the province across the street from Taiwan.The trial will focus on the warships, propulsion and power systems.The U.S.

Is barring a four way laboratory fromapproving telecommunications gear for use in the U.S..The Federal Communications Commission says the move will ensure labs forwireless devices aren't influenced by untrustworthy actors.Regulators also proposed similar moves against other providers deemed anational security threat, including several Chinese companies.A survey by Pew Research has found that Americans are increasingly viewing Chinaas an enemy. Most also think that limiting Beijing'spower and influence should be a top foreign policy priority for the U.S..The findings come as Washington and.

Beijing continue to spar over issuesincluding trade, overcapacity and the South China Sea.Yeah, but one area, though, where perhaps there is some common groundbetween Beijing and Washington is really the issue of climate and climate change.Stephen Engle, our chief North Asia correspondent is live for us right now.Steve, I think you've I believe you've spoke to someone who might have some sayover China's climate policy. Yeah.Leo jun then he is the new climate envoy for China, appointed by Xi Jinping inJanuary and he will be heading to Washington this month.He tells us exclusively in this.

Interview, which we're about to play,essentially to go meet his new counterpart, John Podesta, who isAmerica's climate envoy, replacing John Kerry.So they have a clean slate to a certain degree.But again, you know, geopolitics have come into play, into the green spacewith claims by the US of overcapacity. Europe has echoed those.We're also hearing about potential tariffs on Chinese EVs.Again, the allegations are all about unfair subsidies and driving down theprice and then dumping the overcapacity that is here in China on to globalmarkets and distorting prices.

That's the Western view.Now, it's rare when Western media like us get a chance to speak directly to asenior Chinese official. And I guess this interview that I hadreally plays to that, why the Chinese leadership really should offer up thesekinds of interviews, because it broadens the dialogue and that is good.So I sat down with Liu and he is said essentially as the climate envoy, buthe's also the former vice foreign minister of China.Also, you know, he represented China at the United Nations.He has the diplomatic and the scientific background.He said cheaper from China is good for.

The global climate fight.If the Western countriescontinue to insist to decouple from imports offered to China products forclean energy, it will cost the world four maybe additional 6 billion U.S.dollars. And it means that the 20% increase ofthe overall cost we need to maintain the low cost.Otherwise, nobody going to afford to wait for this energy transition process.And officials in the US and Europe claim that China is giving unfair subsidiesand that has led to the situation we're in right now that could distort globaltrade in these clean products.

He.I think the for the EU plus us to a European court and to really going to toto to talk with all Chinese enterprises. You can say oh these are renewableenergy equipment technology. They are innovated and developed andmanufactured by our private companies. This is very unique, very unique.I think private companies and normally they do not receive any governmentsubsidies. I think we should really highlyappreciate the dedication, the contribution by these enterprises.So after more than a decade of their heyday, for us now we have a chip, bothsolar and wind products, which we are.

Not affordable to start the energytransition. I think this is good for both for Chinaand the possible world. While we're talking about overcapacity,we have to also talk about the domestic economy here because, yeah, we've beenseeing profitability sink at a lot of these solar companies and evencompanies. Price wars are driving down theirmargins. What does that do to the climate fight?If the world is bifurcated on trade. We can talk about capacity in twodifferent ways for global demand. Either way, as a China domestic demand,we're still in high demand for the.

Renewable energy products because forChina to come and we are I think we're determined to increase our renewableenergy capacity to a high percentage, maybe below 80%, I think for the nextdecade. We're still in the process of increasingour renewable energy capacity globally. I think that is much slower than whatChina's. Where do you see that be?High demand for the renewable energy. As for the so-called overcapacity amongthe manufacturers? Amano At our Chinese manufacturers, it'sit's a temporary issue. It'd be also good that it'd be throughthis country kind of a competition.

They can continue to improve theirmanufacturing and make a much more better products.And little did say that he will be heading to Washington later this monthto meet with his counterpart, John Podesta.He also weighed in on the US elections. Six months to go there.Obviously, there's going to be and we have, as we've seen, some anti-Chinarhetoric coming out of Washington that could be amplified.And he says the risks of Donald Trump returning to the White House is a riskto the fight against climate change, essentially because the Trumpadministration, the last time, did pull.

Out of the Paris accord.He says he appeals to the American public not to go that path again.Yeah, the timing of the visit is quite crucial there, it sounds like.Steve, thank you. Our chief political correspondentStephen Engle bringing us that interview for us.Of course, if you are a subscriber, you can always catch up with all of ourinterviews by using our interactive function TV.Go can join the conversation, send us instant messages to our team and ourguests, even questions, if you have any, during our live shows.Check it out at TV.

Go.This is Bloomberg. Let's look at some of the big corporatestories we're following for you today. DB's first quarter profit rose as itcontinued to benefit from higher lending income and strong wealth managementfees. Net income expanded 15% to $2.2 billion,beating analysts expectations. CEO Piers Gupta says the bank sawmomentum across businesses and highlighted that Treasury customer salesalso reached new highs. National Australia Bank says it will buyback up to one and a half billion Australian dollars of its own stock.The lender's cash earnings fell 30% in.

The six months ending in March 31st andthe CEO Andrew Irvine, says a disciplined execution of strategy helpedthe bank manage the impacts of slowing growth and competition.Irvine took charge of NAB last month and appointed Rachel Slade to head thefirm's business bank. Jp morgan is expected to pay anadditional $100 million for its trade monitoring gaps.Sources say this is to settle a new complaint from the U.S.Commodity Futures Trading Commission. Jp morgan earlier agreed to pay over$300 million to two other regulators, including the Fed, at a settlement overgaps in its trade surveillance program.

Barclays has begun cutting hundreds ofjobs as the firm embarks on massive on a massive cost cutting drive.Sources tell us the cuts will impact several hundred staffers in globalmarkets, investment banking and research.Barclays is seeking to cut £2 billion of costs as part of CEOs.The CEO's plan to boost returns. Yep, we talked about the Fed there.In case you missed it, held rates, no change there.Fairly hawkish statement, fairly dovish press briefing.We got the views from Bill Dudley at the Bloomberg opinion column is of course analter, the former New York Fed.

President.Now he's got the opinion that the latest comments coming out of Jay Powell showthat the central bank is actually on track with its current rate strategy.And he basically said that despite the news, it's come in economy stronger thanexpected, inflation not so good in the first three months of the year.The whole game plan is basically unchanged.We're going to keep rates here until we're highly confident that we're goingto get inflation down to 2%. No hint whatsoever of a rate hike, nohint that it's not going to work. So market reaction, I think, was prettyappropriate given what he said.

You know, he basically said we've got itback to Dudley Mckelvie of a few years ago.Bill Dudley, you're in the trenches at Goldman Sachs game in the laboureconomy. What data in the labour economy isimportant to Chairman Powell to really become accommodative?Well, I think it's that the notion of the labour market is really starting tosomehow fall apart and the unemployment rate is starting to rise significantly.He was asked a pretty explicitly about that and basically said one or 2/10 of apercent rise in the unemployment rate went really disturbing.You know, I think the interesting.

Question is, is the labour market reallystarting to deteriorate? You know, the problem is that the nextstop typically is if this is a recession, we've never had a half apercent rise in the unemployment rate without having a recession.So I think it's you know, the unemployment goes up a couple of times.I don't think it really bothers them. But if it feels like the labour marketis really giving way, then the Fed will put a lot of weight on that almostregardless of what inflation's doing. Bill, you said something.He basically said, We got it. The playbook hasn't changed.Was that the right move.

Of time will tell if the playbook isactually working as with as well as he thinks.I mean, my own personal view is that the lags monetary policy probably are not aslong and variable as he thinks and I put a lot more weight on financialconditions, I think, than he is currently.The fact that people are taking his comments in a very positive way fromfrom a financial market perspective means that we're having an easing offinancial conditions which will support the economy.So I think it just reinforces the higher for a longer story over the medium term.Now we go to Bill Dudley, Bloomberg.

Opinion columnist and former New YorkFed president, just for a look at markets right now.So a couple of pockets of this equity market we're tracking and there we go.And why on your screens? Why me?It was up 17% and out with some disturbing numbers across the sector.To be more specific here, this is for the month of April.We're up 18% on that stock. Others are perhaps not playing as muchball. But all that being said, as a group,these these names seem to be moving against the grain of what's really beenjust cautious trading across markets.

Here in Hong Kong.Oil stocks, that's fairly consistent with the the drop in I think Brent's up83 near Crude's below 80 bucks. And as you can see across the region, inthe markets that are open, you have Petro China, Costco Energy Transport isa stock traded here in Hong Kong, Oil is in Korea.And Woodside, of course, is over in Sydney.Those are seeing declines unexpectedly, 1 to 3%.Yeah. I mean, there was talks about, you know,cease fire talk, you know, whether those talks are going to go through, that's.Really kind of reduce the risk premium.

You also have these U.S.inventories which make up as well recently as that's why maybe that dropin oil is holding here in the Asia session here today.But yeah, overall, your Asia dashboard looking like this, you're still seeingsome decent gains across some equity markets here in Asia.U.S. futures we talked about it's rare to seeabout a half point move on the U.S. So maybe it could be voting well forthat Thursday morning for you guys and Wall Street.And but really, it's mostly green in terms of sectors with the exceptions, asDave talked about, energy, tech as well,.

And real estate here in Asia.Jim, I was looking like this. It's a it's all sorts of colors herethis morning. But really what's been the big red isJapan and the yen. There you go.We're up some 1%. And that certainly is sort of, you know,are these traders just kind of betting for another round of intervention?These they're daring the Ministry of Finance to go, you know, do it again ifin fact, that's what you're you've been doing the last few days or so.But really the last two days of gains that we've seen are quickly evaporatingnow, too.

It's so at these level, it's one 5622.It's reversed about 75% of the way. Now in terms of that gap lower earlieron in dollar yen. Well, we were talking about that.We're also getting a lot more commentary coming through on this Politburo meetingthat that took place and some of the headlines coming through that this timeHSBC is just dropping this note in our inboxes, talking about how, you know,for one, we haven't been talked about this, but the significance of the thirdPlenum. Yes.Coming through in no specific date, I believe.But we know it's in July, for example.

Yeah.And I think the fact that top leaders are even talking about digesting theexisting stockpiles of in the housing market and the supply issue and reallytrying to come up with some solutions around that is going to boost sentiment.Does it turn around the overall picture? Maybe not, but at least as a first stepin. Right.Something more constructive there. We got plenty more ahead here.You're watching the China show. Happy Thursday. Welcome back to the China Show Hour two.Here's a look at the AC a half hour into.

The session and coming back from thatLabor Day holiday. And we're actually seeing a little bitmore momentum come through. We're up about 7/10 of 1% here thismorning. But, yes, as Dave, you've been talkingabout, it's pretty slow going at first. Looks like things are picking up now,but volumes are watching very closely, too.Yeah, we're about 30% lighter than your 30 day average, which should not come asany surprise, really, given the fact that, you know, the one source of flowsthat is shut today is the stock connect, of course.Right.

So we've been talking about this day in,day out, the last, what, two or three weeks or so, nearly every day of inflowsso far. So let's see how this market holds up,you know, as that sort of avenue of entry is dried up effectively because ofthe markets being shut. We'll talk more about that later.The other big story that we're tracking here today, this is a look at dollaryen. So that's Thursday, Friday.There's a drama on Monday. This was Tuesday.Wednesday, and this is where we are. So we woke up this morning here in theAsia Pacific and we were wondering, did.

Someone wake up and decide the yen wascheap? There's no confirmation, of course, outof Japanese officials that they intervened again.It's quite a wide range you've had now, since that point in time, we've retracednow about 75% of the way up. Rate differentials is a completelydifferent story, really. And the question now is, even if theydid intervene, of course, and to what extent is that going to stabilizethings, in what range we're talking about here, given the fact that ratedifferential is still quite high? Now, they came out, Japanese officialsand said there's nothing to say as far.

As something to see is concerned, andwe'll certainly have to wait a few more weeks before we do get confirmation fromthose numbers when they do come out of that.And very quickly, the mood across these markets right now, U.S.futures are up half of 1%. Asia is doing better than we were about15 minutes back because of the pick up we're seeing here in Hong Kong.We're looking at what's happening in oil prices, a bounce, but we're bouncingfrom fairly low levels now, 83, 84. As far as that's concerned, the moveacross the Treasury markets, we're looking at yields pushing even lower atthis point in time, although you could.

Call the trading sideways.Really the big move really was overnight five.You know, we dipped below 5% on the two year yield, for example.And currency markets are doing this iron ore one.I'll leave you with this. Just final thought.We're coming off one of the best months so far in years, 17% move up in iron oreprices in April. And we're continuing to see that to alesser extent. Devine Up 1%.Yeah. I mean, the moves in the Treasurymarkets perhaps, you know, of course, a.

Little bit of what the Fed said, but Ithink the announcement of an earlier start to the reduction of q t and onethat was actually deeper than expected in terms of that cut certainly is.I think maybe why we're seeing this Treasury market breathe a sigh of reliefin some ways as well. Let's bring it back to the Fed and whatwe heard from Jay Powell, who talked about the need to keep rates where theyare. Take a listen.In recent months, inflation has shown a lack of further progress toward our 2%objective, and we remain highly attentive to inflation risks.I do think it's clear that that policy.

Is restrictive and we believe over timeit will be sufficiently restrictive. That will be a question that that thedata will have to answer. I think it's unlikely that the nextpolicy rate move will be a hike. So you really kind of thread the needlethere. But really what we saw post that FOMCpresser was that yields dropped the dollar took a bit of a drop.Maybe that helped the yen in a little way.But, you know, what do you make of these moves?And yeah, in the last 24, 48 hours or so,yeah, it's been very surprising if that.

Was an intervention that we saw late inNew York last night, the timing of it was was very good from the Japaneseauthorities point of view. If they if they did it because theywaited until very late in the New York day, by then, a lot of people havealready finished and packed up for the day's trading.So to do it then, obviously it has a much bigger impact.And they obviously they must be getting the sense that they need to pick theirtiming very, very carefully because they're up against an enormous market.Apparently the foreign exchange market is something like $7 trillion a day now,which is almost doubled since the global.

Financial crisis.And they're intervening with a matter of billions of dollars.So you can see they're up against a big mountain here.Now, they in people think that they spent about 35 billion us on Monday,still to be confirmed, of course, in the official data.But you can see that didn't have a huge impact itself.So it's more about the timing. You have to get it quite right.You have to catch traders off guard. And doing it late in New York iscertainly a very good time because you can move the market with with smalleramounts of money, but they're probably.

Going to have to do it several moretimes. People will be looking at this longweekend. Japan is about to have a four dayweekend and purely on a a cost of carry basis.Actually, she pays people to be long of US dollars over the weekend.So they need a very strong incentive not to be buying dollars and selling yen andthe Bank of Japan through to the Ministry of Finance orders.They'll just have to keep on doing it. The ideal position would be for them toget dollar and below 152 before the weekend because that was the bigbreakout we saw after the April CPI.

Numbers in the United States.And there's pretty good evidence that people have been selling more yen afterthat CPI number. So there's some fairly fresh positionsin there which could be flipped fairly quickly if the authorities can getdollar in under 152. They didn't quite make it last night.Maybe they'll try again tomorrow or before the weekend.I was about to say it should be effectively be bracing for possibly, youknow, another round of suspected intervention before the weekend to getus to that level because we're about ¥4 from that, which is quite a bit ofdistance here.

Mark.Yeah, I think it's a very high chance. And if you if you see what Masaki waswriting about on MLive earlier, when the yen moves by at least five big figures,that's usually an indication that somebody with a very big hand is givingit a shelf and we know who that is. So they just about managed it lastnight, but they probably need to push it again is that the traders don't seem tobe convinced yet. And if you think back to 2022, there hadto be several rounds of intervention before the market really got themessage. And of course, at the same time theywere getting help from US yields which.

Are falling fairly quickly, which is notreally the case this time round. Yeah, I mean, I'm just taking a look atbroader markets here right now. Mark, the Hang Seng is up another 1%.Again, that's a spy. Even getting mainland investors to takepart in this that the Fed. I'm just wondering what your take is.I mean, it seems like he was threading the needle.He you know, he he was the statement was hawkish.They out of that extra line talking about, you know, that lack of progressof getting to 2% inflation. But then he ruled out the possibility ofrate hikes.

What does this mean for risk assets now?It was a pleasant surprise If if you're if you're in the equity market or thebond space. What Powell did yesterday was that was abetter than expected outcome because he could have been a lot more hawkish thanhe was, obviously, by saying no rate hikes.That was some kind of comfort to the market.But probably more important was what you spoke about earlier, the cut numbers,because by bringing that threshold down much more than expected, he's takingpressure off the bond market. He's not reducing the Fed's commitmentto the market by as much as was.

Expected.So he's really helping the bond traders out here, and it's going to happen quitequickly. By June already, they're going to see aneasing of the the Fed reducing its balance sheet.So that's a net positive for the bond market.Doesn't mean to say that yields are going to slide dramatically, but it doestake away one negative element. He's also saying that there won't berate hikes as well, even though it's getting tougher for them to justifylower rates. But at least net net, it was a positivesignal to both equities and bonds.

Mark, thank you.Mark Cranfield in Singapore for us or MLM strategist there.Just ahead here in shows, we'll dig deeper into the Chinese story here withS&P global ratings. They put out a recent report hereeffectively talking about developers and maybe are we bracing?Are we? Question mark, bracing for a third waveof defaults. Charles Chang joins us in a couple ofminutes. This is Bloomberg. Welcome back.You're watching the China show.

President Xi Jinping is convening seniorparty officials in July. That's for a closed door gathering atthat meeting is closely watched for any long term policy signals.And a date for the so-called third plenum was announced after this week'sPolitburo meeting. Now, it's the first time that the plenumwill be held in an off schedule year in over three decades.We've talked to several people about that.At least confirming that meeting is actually quite significant given it'sbeen delayed. Yes, certainly that may signal we won'tbe getting more news on the stimulus.

Front and the like here.But what we also got from that statement from that meeting was everything about,you know, monetary policy, more, maybe more of a push to fiscal policy, theflexible use of that interest rate and the triple R.They also want to study policy to digest the housing stockpile.This was something that everyone was sort of chattering about leading up tothis meeting about, you know, was the government going to step in to buy upsome of the stockpiles from these developers and what to do with it?Right. But certainly that's certainly one thingwe're watching out for as well.

And of course, we're going to talk aboutthe corporate debt side of things. China, S&P find that the real estatesector has $34 billion worth of offshore bonds maturing this year.They've also conducted this long research about where we are when itcomes to defaults in China. Let's bring in Charles Chang, M.D.and Greater China Country lead for corporates at S&P Global Ratings.Charles, it's always great to have you as well.Get your take the fact that we're hearing maybe this new plan to fix theproperty market and the supply issues there.How significant is that?.

I think it's significant to the extentthat the government continues to be very proactive on this.I think the thing that we're watching is that the government continues to findsolutions to these problems. Unfortunately, the latest set ofmeasures relating to the wait lists don't seem to be kicking in veryquickly. So sales in the first quarter are stillvery weak and actually weaker than what most of us expected.So the wait list may need yet more time to to take into effect.And in the meantime, it seems that the government is not sitting on their handsand waiting and they're trying to find.

Other ways to tackle this problem theyhave. Have you noticed an improvement insentiment at least you talked to a lot of people in the market.Well, among investors, the sentiment is basically more or less the same amonghome buyers. We're seeing sentiment take a step backand this is showing up in the first quarter sales numbers.Some of the sales figures that we've seen, even for the biggest andgovernment owned developers, are down anywhere from 30 to 35%.So that's that's quite a big drop. And that's coming from people who are,you know, still quite concerned about.

Home delivery, about buying the homesthat they purchased, getting the homes that they purchased.So that sentiment doesn't seem to have really been reversed by the by the waitlist. And it may probably need more time forthat to to really be anchored. But as it stands right now among thehome buyers, it seems that the sentiment is still quite weak.Property obviously has been what drove a lot of this pulse and what you'recalling the second wave of where are we now in this cycle?Well, we're in the trough of the second wave, basically at the bottom.So in this year's study, this is a study.

We did every year.Every year we tried to find something notable to say.Two years ago, we noted that the market seems to be seeing bigger and biggerdefaults and that the government's tolerance for it seems to be gettinghigher. And lo and behold, a couple of monthslater, Evergrande fell into distress. So this year what we found is a distinctwave like behavior of these defaults. And these waves don't seem to be timedwith economic cycles. They seem to be timed with policycycles. So we found that when you kind of map itto the contractions in the financial.

Markets, that the the majorcontractions, particularly in shadow financing, seems to have, you know, beentriggered by some of these two major policies.First in April 2018, which is a fight against shadow financings through theasset management market. And then in January of 2021, when thethree red lines against the real estate excessive leverage policies came out.And in both of these instances, we saw a major contraction in financingconditions and a wave of defaults that followed.So this is something that we're looking at now.The concern I think, that we get from.

This year's study is that the defaultrates now are so low that it doesn't look like a result of the functioning ofthe market. Right now, it's about 0.2% globally isabout 2%. So that gap is quite wide and to acertain extent not particularly natural. So the question that I think in ourminds is what's going to happen when some of these directives against bonddefaults in the market. When that gets taken out.What happens then? Are we going to see another wave?Because then the government will be in a position to allow the market tofunction.

So that's what we're watching for in thenear term. Do you think they've loosened policyenough to prevent, as you mentioned, arguably the two waves were causedbecause policy was too affected to some extent.You know, what would be the trigger for a third wave?Do you see a trigger? And what will be the natural defaultrate given the fact that you think it's artificially low?Well, I mean, the natural read, I suppose if you want to compare globally,that's probably the place where we start.Right now it's about 2% range, whereas.

China is 0.2.So that's a very low default level. Now when the governments start to allowthe markets to function, one thing I think we need to keep in mind is that isnot necessarily the government's objective to to eliminate or to reducedefaults. The government's objective that theyhave stated repeatedly in the recent years is to improve the efficiency ofgrowth in the country. And if efficient growth is what they'relooking for, then you need to ensure efficient capital allocation.And the bond market and the functioning of the bond market is very important forthat.

So at some point, perhaps when thegovernment is more comfortable to allow the markets to function, we should seedefault rates go back up to a more normal and typical level.What's normal? What's a reasonable level now fordefault rates in your eyes right now, if you compare it to the global benchmark,it's about 2%. Okay.What does this look like for 2024 then? You mentioned if we start to see thosedefault rates pop up, our debt restructure is going to be you know,you're see more of that. Is it really just be focused on theproperty sector or do we have to broaden.

It out a little bit wider now?Well, the restructurings are happening right now and we're seeing more and morecases of restructurings happen, particularly in the real estatedevelopers. And I think that's because a lot ofthese cases have dragged on for a year or two.So it comes in the aftermath of a default wave, and we're now in thataftermath. So we see more restructurings, you know,happening. And also we're seeing more winding uppetitions. Yeah.Investors are getting impatient in some.

Of these situations and and filingwinding up petitions. So the next thing we should be seeing ismore of these restructurings occurring, but perhaps at the same time moredefaults occurring when we get into a more normalized market condition.Just one thing to note is that if these defaults are timed with policies ratherthan economic cycles, since policies tend to be countercyclical, we couldvery well see defaults pick up at the top of the market, not the bottom of themarket, as the economy improves, counterintuitively.Yes. Yes.I wanted to then ask you about, you.

Know, that the functioning is at a ratein the functioning of onshore bond markets, because what a part of this hasdone is, you know, corporates who haven't been able to access the bondmarket are now looking at the banks for that for that financing.Are you seeing that dynamics start to shift back into the bond market?Who dominates the onshore bond market this year, for example, in terms ofsupply? Well, you're right.Over the past year, the corporates in the country have increasingly shifted tobanks. I mean, they've has historically reliedmostly on banks and banks anyway.

Okay.Yeah, exactly. So.But that percentage went from 85% to 88%.So it is quite, quite an extreme level. And to a certain extent, that's notnecessarily what you want because you do want some market forces to play out incredit allocation and that's where you get in the bond market.So overreliance on the banking sector is not necessarily positive.So we would expect that to also go back down to a more normalized level.That's something that we're seeing a little bit this year.So issuance onshore has ticked up in the.

First couple of months.So that's a positive sign. Hopefully that continues and we see moreissuers come to market and, you know, more of that play out.But are those private issuers, are those mostly still sort of the quasi LG ofthese in the world, out mostly the stronger LGA vs the stronger LGA?Exactly. So in the last year, we've seen theweaker LGA essentially, you know, get shoveled out out of the market and theprivate issuers have also seen very little issuance.So both of those groups are, you know, seeing very limited issuance or netnegative issuance really in the last.

Year or two.So it's the stronger LGA VS that have been able to access the onshore marketsunimpeded. But even for them, the issuance level isquite low from a historical perspective. Charles, fantastic report.Hi to your team for us as well. Charles Chandler, M.D.Greater China Country lead for corporates at S&P Global Ratings.Right? Hang Seng Index.Oh, there we go. 18,000 now.So this should just put us within reach, if not already on track to enter a bullmarket.

More on that story just ahead.This is Bloomberg. Right.Welcome back to shows here. So let's talkall things markets here. So our CFO here says he doesn't see anyFed cuts this year. So Robert Levin was speaking withBloomberg after the firm's first quarter profit topping estimates following a newreporting metric, KKR, rather. There we go.Since the beginning of 2022, we've raised about $180 billion of capital,which is a really healthy number for us. But we've been able to do that with allof our a lot of our large flagship.

Strategies in the market.So as we've talked about to go forward, we've talked about fund raising, beingable to accelerate from here. If you look at where a lot of thatcapital raising has been over the course of the past, you know, number ofquarters, you know, in Q1, we had a final close of $6.4 billion in our Asiainfrastructure strategy. That's the largest fund by a good marginin Asia Pacific, focused on infrastructure.Lots of real good tailwinds there in terms of longer term growth,a lot of capital raising across our credit franchise, that's asset basedfinance, that's direct lending, leverage.

Credit north of $20 billion in just thisquarter alone. So there's a lot of momentum for usacross capital raising and we would expect that to accelerate.What we've articulated to our investors is we believe that we can raise 300 plusbillion dollars of capital over the course of the next three years.How do you think about what the investment opportunity looks like withrates potentially staying at this level? We're not sure.One of the unique things about our model, right, is we have over 200companies that we're invested in across the globe.So it gives us a pretty good lens into.

What's going on from an economystandpoint. And we're seeing goods inflation comedown, we're seeing shelter inflation come down.We are seeing core services inflation remain stickier.And we've been feeling this way for quite some time and we've been able toposition our portfolio to be able to address this.And so we do see interest rates coming down over time, but we don't see anycuts in 2024. We would expect the ten year to probablycome down to somewhere around 4% plus or minus.But all have been very front of mind for.

Us as we pursued investment themes.We've been focused on businesses now for some time that we feel can sustainmargin in a higher cost environment. You're starting or you're really seeingthat play out in our portfolio really healthy back to we've driven realinvestment performance on behalf of our clients again this quarter and over alonger period of time. So we're quite proud of that.And back to areas where we've been lean again, asset based finance,infrastructure, both have a component of inflation protection baked into thoseasset classes. KKR CFO Robert Lewin there to clear thismarket.

And Hong Kong is finally waking up.It seems like they just need a few minutes to wake up and come to theirdesk needed by Wednesday. It feels like almost like a monday, butit's not. There you go.18,000 back the levels here. It's day eight if we continue to see anend this way. In fact, if we are actually closing atthese levels, we are set to really enter into a bull market by the end of today.So we're up about 1% or so for eight shares, one and a half percent movesthere. HS tech, There you go.Things are really firing up here.

We're up about 2.6% overall and we'rechecking very closely what's really driving this.The Abby sector certainly is one thing to watch.Casinos are doing very well here today as well.Dave Yeah, so sense time is up again. That might also have to be one of thebig movers here as well. Are we looking at that?Yes, we are. So you're looking at NIO up 19 Sensetimeis up 10%. In fact.No, it's not the opposite. They're both up 20% as we speak.Meanwhile, we're still trying to figure.

Out what's moving.Have been looking at some of the headlines we can't quite figure out justyet. But as you can see, that's also addingto this rally across some of the places everyone is pointing out.We're just headed into the Tokyo lunch break where we are ever so slightly justabove water. And dollar yen has been all over theplace this week. One 6153 We're back to 156.And flat. Now we go.Plenty more ahead. This is Bloomberg.

The whole game plan is basicallyunchanged. We're going to keep rates here untilwe're highly confident that we're going to get inflation down to 2%.No hint whatsoever of a rate hike. I think there's a lot of relief herethat the chairman stayed true to what we've seen from this chairman.I think Jay Powell was particularly disciplined here.I think he stayed on message very well. There's a clear bias towards easing andhe stuck to that. They've left wide open the question ofwhy has the progress been slipping less than they expected on the inflationfront?.

Let that tight policy work for longer.I think that's about as far as their they're ready to go today.That's that's hawkish and may we'll see what hawkish might look like in June.This is really good for the markets because here is a Fed that's telling uslook at the longer term, look where inflation was and look where we'vegotten to to don't worry about the last couple of months.We'll see what happens there. All right.Some of our guests are reacting to the latest Fed decision.Welcome back. You're watching the China show.Asian markets are doing this.

There's a little bit of that optimismflowing through some of the equity markets here in Asia.Certainly one to watch. Hong Kong certainly is getting fired upall of a sudden here. So we don't really need those southboundflows, it seems here today. We continue to see quite a bit ofoutperformance there and that's why that's plunging.The Asia Pacific index up about 7/10 of 1%.U.S. futures are continuing.That's like session highs right now and the dollar continues to stay prettyweak.

Yeah, so markets have been taking thisone. Well, just a couple of things to notehere. As we are going into Apple is coming outwith earnings. That's number one.And number two, of course, the jobs report and maybe, just maybe, who knowssomething out of Japan before before we enter yet, by the way, that market isshut tomorrow. So not that that would be a a theyexclude any possibility of a big move in dollar yet but just to watch it as well.Right. Let's put all things together for youmarket wise.

John Woods.Asia CEO Ron Burgundy joins us right now.Nice to see you. Nice to see you, too.And the takeaway so far from this Fed meeting was good for markets, good forrisk assets. Agree, Disagree.Yeah, I know, I agree. I mean, the market went in quiteconcerned that there was going to be some hawkish shock from the Fed.That didn't happen. In fact, if you look at the impliedprobabilities, both from interest rates all the way down to the performance ofbond yields on the dollar, actually.

There was a small positive dovish tiltsubsequently to the market. So our view is that this base case of adecelerating inflation or a mild recession, a mild soft landing is likelyto play through. And so I don't think there's any majorrisk to base cases around the market right now.So do you think rate cuts are just delayed, not so much derailed at thispoint. Do you think this is a Fed that canstill cut the second half of this year? I mean, the market is pricing in only amoderate possibility of that happening, although I would point out we've gonefrom seven cuts at the beginning of the.

Year to less than one at the end.So the pendulum is swinging, I think, quite in quite a volatile way once thedisinflationary trend begins to reassert.And I do think that's going to be apparent even in the jobs market in themonths, in the weeks and months ahead. I think maybe interest rate cuts can getrepriced in the.Well. What's the what's the prescription then?A 6040 on the 40 part, Is it more duration on equities?Do they build more exposure to equity markets at this point?The S&P so back at 5000, for example,.

That each of them very well from anallocation perspective, actually we're tilting closer to 5050 right now wherebias towards fixed income. We have an overweight there.We suspect that once interest rates do start to cut, then we will see arotation from cash into bonds in particular amid duration.David, to your point in the IG space, that's where we think the sweet spotwill be found. And that's where I think the highestlikelihood of capital gains is likely to come from.But at the same time, earnings are looking quite resilient, quiteconstructive on the equity side.

Yeah.So that 5050 allocation I think makes some sense is that still mostly in theUS that is there any other equity market that you see in this universe that couldactually beat what we're seeing in the U.I mean, we're obviously buys on dips of countries like Japan and India.These are major markets. Maybe China not so convicted, but yes,it's overwhelmingly a US story for now. Why not China?I think China is a tactical play, David, right here.I think it's it's a trading opportunity coming from, I think, a very lightpositioning, particularly amongst.

Foreign investors.And we're seeing some flows into that, particularly as they rotate out of tech.I think that will benefit China over the near term.But my sense is that consumption as a as a swing factor, which for me in China itis still remains quite depressed. Broadly.I look at retail sales, I look at home sales, I look at consumer sentimentbroadly and I don't see any green shoots in that critically important space.And until I do, I think I'm looking at the equity market as as something as ashort term trading opportunity rather than a medium or long term investmentcase.

So the US I'm just wondering though thenif that's still the better, I guess, house in the street,is the earnings picture going to be able to sustain this rally in some ways andmaybe overshadow what we've been hearing from the Fed?Well, we're getting Q1 numbers now, aren't we?And again, they're not remarkable, but they're not unremarkable.We've seen EPS growth of around six, 7%.We're looking at earnings growth for the whole yearat around 10%. And in my mind that that is looking.Reasonably constructive.

I mean, perhaps not as as good as lastyear, but next year, 2025 earnings growth could tick a little higher to13%. So I think you can make a case thatearnings is likely to sustain performance and ideally breadth of themarket starts to widen as well. You mentioned Japan.What's the what's the case for Japan now that we're at 40,000, that the bulk ofthe gains are not behind us, but ahead of us, for example?Well, over the medium to long term, David, I think this is a consumptionstory. I think this is a renaissance inJapanese consumption and derives from a.

Shrinking working population, upwardpressure on wages, greater spending, greater corporate revenues andsubsequently earnings and profitability. That's where I think the case is.It's very much a domestic story. I don't think it's so much a storydriven by foreign investors. And certainly the weak yen has helpeddrive and generate momentum and gains from that side, But into the mediumterm. I think this is a domestic story,actually, and I think it will be Mrs.Watanabe essentially selling bonds and buying equities, which is exactly theopposite to what I think will happen in.

The States.But Mrs. Watanabe will be unwinding her positionin the post office savings, which is essentially a GDP story and putting itinto equities. And I think that's the next leg higherin the Japan equity case. What do you make of what's going on inthe currency, though? I mean, just given the massivevolatility that we've seen? Yeah, I mean, that's to me, that's canstill be a factor for the equity market. And it is quite concerning for me.And I think we've already actually seen intervention.We won't actually have hard evidence of.

It until the end of May, but I thinkwe're already actually seeing intervention and that's probablynecessary to smooth the yen into the second half of the year.But actually, when you look at Asia as a whole and and observe the extraordinaryand weakness we've seen, we start to get concerned, don't we, about relativelevels of competitiveness, particularly with China.And you'll probably be aware of these devil stories coming out of China on theback of the gold. Speculation on the back of southboundflows into eight shares, all as potential currency hedges.And you have this sort of Damocles and.

Sort of yen weakness hanging overeverything. So to me that is a risk that I'm quitefocused on in the Asia space right now. I mean, you've watched this market for along time. You know, we were talking about this afew days ago. I mean, the yen went from, I don't know,85, 90, 260. It's effectively halved in value overten years. Why hasn't that been a problem?It's just been bizarre to me how no one's really pushed back at that.Well, I mean, in previous instances, David, of course, you'll be aware thatactually caused a huge amount of turmoil.

And volatility in globalcurrencies. And we had these very famous Plazarecords, etc., which were convened to address that.I think right now the the monetary phenomena or the or the monetaryimperative is overwhelming yen weakness. And actually, if you look at renminbi,if you look at euro, if you look at the dollar, they've been relativelywell-behaved. Actually, it's only the yen that's gonewell and off reservation. And, you know, were they really to starttightening monetary policy a little more at the margin?I think possibly you could start to see.

Some strengthening with the added threatalso of intervention. But as I say, from a from a from an Asiaperspective, this rampant weakness does concern me from a from a pure relativecompetitive level. Okay, John, thank you so much.John Woods there, Agency, Lombard Audio joining us here in our Hong Kongstudios. We got plenty more ahead.This is Bloomberg. All right.There you go. It just takes up to 3% here right now.And we are seeing this Hang Seng really getting into that bull market territoryhere.

If we could do see these gains of about300 points or north of that here this morning, 18,066 for your Hang Seng,that's an eighth straight day of gains. Looks like we're continue on thiswinning streak here, the longest we've seen since 2018.We're talking to this one other story here Right now.The U.S. is barring a Huawei laboratory fromimproving telecommunications gear for use in the U.S.The FCC has also proposed similar moves against other providers, includingseveral Chinese companies. Let's go to our executive editor forAsia Technology, Peter Ahlstrom, joining.

Us from Tokyo.Peter, just maybe tell us how significant this move might be and whatis the U.S. essentially trying to achieve?Yeah, sure. It's a little bit of a strangedevelopment. So the Federal CommunicationsCommission, the regulator for telecom communications in the US, is deciding toban Weiwei and some of these other companies that you mentioned fromparticipating in what's really the authorization of technical standards forgear that sold into the United States. So the FCC relies on these private labsto do a bunch of testing around do.

Things conform to technical standardslike radiation levels or what frequency certain things are operating at.And what we had been participating in that.That's probably a bit of a historic artifact.While we, of course, had been very active in telecom, networking equipmentand smartphones and the like and in the past had probably participated in thesekinds of technical authorizations. But more recently, and this has beengoing on for years, the US government has been cracking down on what way it'sbeen barring its equipment from being used in the United States.It's also gone to allies and tried to.

Get them to pull telecom equipment outof their networks because of national security reasons.So there's a little bit of a leftover artifact here that while we were stillparticipating in these kinds of authorizations.Peter, let me combine just two questions for you.I suspect the answer to one will be very short.And have we heard from Huawei as a response to this, number one and numbertwo on Huawei, but in a different story as well, we're getting some numberscoming through, eclipsing Apple. What can you tell us about that?Yeah.

On the first point, we haven't formallyheard from one way on this front, although it has said repeatedly that itsequipment and its company does not represent any sort of national securitythreat. So it's been very clear about thatpoint. You're referring to their earnings.And in your second question, you're referring to in their earnings for thefirst quarter, very strong results are always their profit.Probably the headline number is that the profit increased more than 500%.So just a huge explosion in profit at this point.They don't give a whole lot of breakdown.

About which businesses are doing well.The company's two primary businesses are telecom equipment.So what you put into the backbone of telecom companies around the world andthen smartphones in particular. And it almost been knocked out of thesmartphone business because of the blacklisting from the United States.It couldn't get key components, including semiconductors.But as we've reported, we've talked with you guys about a few times.They now are getting some of those semiconductors that they need for theirsmartphones domestically. And that's led to this huge increase intheir smartphone business.

We saw shipments up about 70% in thefirst quarter. And as you alluded to, that has hurtsome of the foreign players, particularly Apple, which has lost a lotof ground as Huawei has sort of come on strongly.Peter, thank you. Peter Electrum, our executive editor forAsia Tech and Tokyo for us will leave you with a look at currency marketswhere it's generally a story of a softer dollar, but curiously also a softer yento the comments of our previous guest, John Woods.The ends on a wall. This is Bloomberg.

Welcome back.You're watching the China show. China's top climate chief is set to meethis US counterpart in person for the first time next month.Speaking exclusively with our colleague Stephen Engle, the urgent man says healso sees common ground for the US and China to work together on climateissues. I bring a delegation from differentministries and look for different issues.I think we are looking for to have a very sincere and practical conversationwith our U.S. counterparts.Where to start?.

The cooperation with you in some way,obviously. How do you see in the United Statesthey've had a changing of the guard as well.Mr. Podesta, how do you see thatrelationship building between China? When I said that we had relatively goodcooperation ever since the last 30 years for the climate change process, ofcourse, you know, the over the over the 30 years during the Bush administrationand during the Trump administration, US stayed away from the climate process.But I think the rest of the years, we had a very good collaboration.Is it even possible to have a separate.

Dialogue, you know, diplomatic dialogueon climate? Because there are a lot of other verycontentious issues that are clouding the US-China relationship?Is it possible or would you rather see a more dedicated climate dialogue inseparation from, say, the other issues that whether it's the, you know, theSouth China Sea or geopolitical relations?And that's really clouded and, you know, deteriorated the US-China relationship.China US relationship is really very complicated.But I think climate change, both China-U.S.has a common but differentiated.

Severity, and we have to cooperate andas soon as possible to to continue to lead the global process.What happens if Donald Trump is reelected?What's your view? That's one of the worries in any ofthese climate change community. I definitely hope that the Americanpeople will support the government to stay in a year in the climate changeprocess and stay in the Paris Agreement, even that Trump wins the next election.In March at the Boao Forum, you said protectionism and economic competitionare becoming another problem for the global fight to combat climate change.How much is this holding back the global.

Fight for climate change?When I mentioned that the issue is going to be I'm focusing on the impact if isprotectionism, unilateral measures and it's a non trade tariffs woulddefinitely if are putting this I mean that North America and the Europeanpartners would continue to follow this practice not to talk about trade, toimpact a global process if the Western countries continue to insist to decouplefrom imports for the China products for clean energy, it will cost the worldfour maybe additional 6 trillion U.S. dollars.And it means that the 20% increase of the overall cost.We need to maintain the low cost.

Otherwise, nobody going to afford towait for this energy transition process. And officials in the US and Europe claimthat China is giving unfair subsidies. And that has led to the situation we'rein right now that could distort global trade in these clean products.I respond, I think if you push us to call a European court and to reallygoing to to to to talk with all Chinese under president, you can see, oh, theuse of renewable energy equipment, technology.They are innovated and developed and manufactured by our private companies isvery unique, very unique. I think private companies and normallythey don't receive any government.

Subsidies.I think we should really highly appreciate the dedication, thecontribution by these enterprises. So after more than a decade of their hotAir force, now we have a chip that both solar and wind products, which we arenot affordable to start the energy transition.I think this is good for both for China and the of world.While we're talking about overcapacity, we have to also talk about the domesticeconomy here because, yeah, we've been seeing profitability sink at a lot ofthese solar companies and even companies price wars are driving down theirmargins.

What does that do to the climate fightif the world is bifurcated on trade? We can talk about capacity in twodifferent ways for global demand. And the way I see it in China, domesticdemand, we're still in high demand for the renewable energy products becausefor the time to come and we are I think we're determined to increase ourrenewable energy capacity to a high percentage, maybe below 80%, I think forthe next decade. We're still in the process of increasingour renewable energy capacity. Globally.I think that is much slower than what China's.Where do you see the high demand for the.

Renewable energy?As for the so-called overcapacity among the manufacturers, among our Chinesemanufacturers, it's it's a temporary issue.It be also good that it'd be through this kind of a competition.They can continue to improve their manufacturing and make amuch more better products. That was China's special envoy forclimate Change, Linda Ming, speaking exclusively with our chief North Asiacorrespondent Stephen Engle in Beijing. Checking these Hong Kong markets now andit is on fire. All these tech stocks.HS tech is catching a massive bit here.

This morning.Wow. 29% good for sensetime.NIO is also up from 23% on the back of those april delivery numbers, may 21.These are some of the big tech heavyweights that are really punching upmuch higher here this morning as well. So the tech space is doing very, verywell. We're watching property as well.So no one but gosh, what, Maggie? There you go.It's up 11%. So there's there's talk about, you know,the China banning these cities with big home stockpiles of new land sales aspile up.

You're talking about they're findingsolutions to deal with the inventory side of things or at least a supplyissue in China that's lifting this this industry here.It took a long pause, also up close to 9%.And we're watching the move in oil, obviously, with that drop in oil prices.We talked about WTI back below 80 bucks. That certainly is leaving a drag here,at least in the energy space. You're seeing a looks of Petro Chinadown some 3%. Dave.Yeah, more on these market rates. So the Hang Seng index, MSCI China arenow up 20%.

We just stopped short of that early thisweek. So as things stand, we are on track toenter a technical bull market, which is 20% from a certain low, maybe more inthat Politburo meeting that took place, because, you know, the type of priceaction you're seeing in property in particular, you know, when you get a daywhere you have ten, 15% gains is indicative based on what we've heardfrom our guest of really a sea change on policyand the magnitude towards property. Right.So the Politburo meeting, for example, one of the things that stood out was itwas the first time in a readout from.

That meeting that they'd mentionedeither interest rate cuts or interest rates specifically or reserve ratiorequirements of first time. It mentioned those two things, policytools since April 2020. What happened in April 2020, That's whenthe pandemic first hit. And China's economy, of course, wastrying to get itself stabilized. Of course, at least there's a chancethat monetary policy could still be a big play know, maybe later on this year.You have to wait maybe until the Fed moves or the ECB moves.Right. I think Bobby was saying that's in linewith what they're projecting here, that,.

You know, we could still see some cutswhen it comes to triple R, when it comes to maybe even the LPR.But I think what I what I really took away from it was that the studies tosuggest how to digest the supply issues here, there's something new that'scoming through in the property market. I think people are reacting in a big wayon that too. Yeah.Next I would be see how they fund that as well and how they get rid of theinventory. Right.Keep the numbers behind it. Absolutely.Okay.

We'll leave you with that positive endto the show. 4% on the tech index.Plenty more ahead. This is Bloomberg.

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