Economists Toughen China Progress Forecast | Bloomberg: The China Indicate 5/29/2024

We are half an hour away from theWednesday opening bell in Hong Kong, Shanghai and Shenzhen.You're watching the China show. I'm David Ingles.Let's get to your top stories today. Traders are weighing mixed economic dataand all of these hawkish leaning comments coming out of Fed officialshere for clues in really rate cut outlook.The will be breaking the latest Aussie inflation numbers which are due thishour. And Goldman Sachs, he's defyingopportunities in and trying to stock rallies and despite the pullbacks we areseeing there.

Despite a four signs that a market isrunning currently running out of good news.And following protest and sometimes intense debate, Taiwan passes laws thatcould curb the powers of new president Beijing to. Good morning and again, welcome to theprogram. We're going into the Wednesday sessionwith really not a lot of tailwinds coming through just about across assetgroups here. So we'll start things off with theequity markets and the tone. There is really one of well, I mean,prices down.

Yes, volumes are not.There is a great outlook, not a lot of conviction as far as the downside isconcerned. We have seen some consolidation aroundmost of these benchmarks in the region. We'll talk about what we're seeing inmail and in particular in just a moment here, Hon Hai Precision.We're looking at that as we open things in Taiwan following data points onperhaps a better month, if that's the way to put it there for for iPhoneshipments in China, where we are seeing a lot of conviction, though, is reallythese are some of the declines in pressure we're seeing across the bondmarkets.

It was a horrible day to be in longtreasuries overnight. We're flat and sideways on treasuriesright now. The 30 year yield, of course, did see amassive pick up in yield, not the best two or five year auctionsthere, of course, And we are seeing a melt up in yields just about across theboard with the perhaps most pronounced moves we areseeing in the likes of Australia, for example, were up 11 basis points, as youcan see there on the Aussie ten year yield.Inflation is out in about 28 minutes. We'll break those to you a bit later onin the show.

The gold the dragon index up overnightup, in fact, for the first time in six sessions here.So within this space, we're looking at some of these education related names,New Oriental, for example. There's also separate news which mightbe related to the price. One we saw overnight from Xinhua.One President Xi Jinping talking about how youth unemployment is really the thepriority of priorities this year, half of 1% as far as this is concerned.He goes into the open today and more on this in a moment, but really an upgradedminer upgrades from private economists on the outlook for a Chinese for theChinese economy.

This year we're looking at a flat toslightly lower open here and excuse me, double China, as you can see at seven2663, going into the open today, where the 3600 level, as we're telling youright now, bottom of your screens is really the level to watch, which hasbeen holding these last couple of days or so.Right now we're looking at, I guess, perhaps day two here of the propertymeasures here and maybe market reaction or the lack of it.Yesterday going into the close yesterday, we sort of gave up a lot ofthe momentum to the upside there. So you have not just Shanghai, right.Your major cities now coming in, easing.

These housing rules.Stephen Engle, of course, is our co-pilots these next 2 hours or so.It's the England angle show as they as they say.What more do we know about the property trademark that name now?Yeah, yeah. Obviously there was a little bit of apetering out of that rally yesterday because a bit of an exhaustion on policyand jawboning coming from Beijing. Mao, the property developer that hasproperties in Beijing and Shanghai, it was up 16% at one point.It finally closed up about 1.8%. So you saw that momentum lose steam.But again, we had a further.

Clarification of some of these, youknow, easing of restrictions or the Yeah, the restrictions on home buying,such as down payment requirements and mortgages, not only in Shanghai, whichwas the news yesterday, but also the two megalopolis is in southern China,Shenzhen and Guangzhou, just across the border right here out on window,obviously. So essentially Guangdong will lower thedown payment requirements for first time homebuyers to as low as 15% of theasking price. So 15% down can get you into an alreadyfalling depreciate depreciating value new home.So again, these are trying to encourage,.

You know, to put a floor on thisproperty crisis in China yet so I guess now we wait now we wait now the dataturns and and if really home buyers start to kick in it's almost a chickenand egg really here when you look at home prices still falling and thenpeople staying away. But as far as the the outlook isconcerned to see, which is pointing out there as well.Right. So it's been enough.We have seen enough, at least on the policy front, for economists to startbumping up ever so slightly. Their forecast here for the Chineseeconomy.

Our latest Bloomberg survey is out.This is for May. And we're comparing April here, by theway. So as far as growth is concerned, as youcan see, Steve, we've gone from 4.8 to 4.9%.Others are also seeing a slight pickup. But, you know, as we were we've beentalking about these last, what, six weeks or so, It's really consumption andretail sales that so far has been wanting.Yeah, right. So, you know, I think in this forecastas well with signs of more policy moves being forecast, expecting the PBOCperhaps to cut the triple R requirement.

Of banks by another 25 basis points bythe end of June. Again, so there's there's monetary andfiscal support to this economy. Now we just need to get the consumerenjoying what has been a stabilisation of the economy since January was wasreally bad. Yep.There we go. Yeah.And certainly the the composition of growth now becomes a key part of theconversation. Right.So we don't exports are doing well. We know investment is coming in.We know the special bonds have been.

Raising a lot of money and that's goingto be eventually spent. And really where the consumer goes nowand how they really, I guess, in many ways take the money that's been part inthe bank, trillions of such and really how they deploy that into the propertymarket and also consumption here. So we're looking at property stocks andhigh yield specifically on the back of some of these pronouncements, Shanghaiincluded there in the last I think it was May 23, May 24,where Chinese President Xi Jinping, he was in he was in Shandong and actuallycame out with effectively some of the reforms aroundthe power power industry.

And we've have seen since that point intime, utility stocks have not looked back.We're looking at that earnings, of course, coming through as well.And of course, a Taiwan office briefing, affairs office briefing, of course, alsowithin the next 3 hours or so. That takes us into the marketconversation now. And have we seen enoughfor, I guess, long only funds, because certainly hedge funds have jumped intothis market long only funds to look at this Chinese equity market assomething. What is the word beyond tactical?Let's put that question to Ian Samson,.

The Multiasset portfolio manager atFidelity. He joins us out of Singapore.Ian, good. Good morning and thanks for making timefor us. We'll talk about the other facets ofyour portfolio tomorrow. I want to start with China.That's okay. And just your thoughts were 30% into therally, ten weeks in, give or take. How are you thinking about exposure atthis point and the rally in. Sure.We're quite a long way into the rally, but that's after a horrendous bearmarket.

So the way I think about it is the theheadwinds for China are very well known demographics, property, frankly, thelack of a policy narrative for investors to really get excited about.But if I look at some of the segments of the market, take even the the consumerintranet part, despite the sort of pessimism on the China consumer, you'veseen some really decent earnings numbers and earnings momentum.And if I look at some of the the best indicators of domestic demand, forinstance, imports import growth year on year last month was the strongest it hadbeen for for two years. So there's signs that the fundamentalsare turning a little bit more.

Supportive.And when you look at some of these names and see that a couple of years out, theycould be on single digit PS in a in a global context where stocks are veryexpensive. It does seem like there's a place from alonely perspective to to start looking at China from from an overweightperspective. Ian, this is Stephen Engle.Let me jump in. Is the excitement and exuberance sort ofpetering out, though? We've seen the markets kind of tradeflat in China throughout May, even though it's up about 12% since February1st, of course, on a lot of positive.

Moves on the fiscal front, possibly onmonetary front and just essentially the property market as they tried to put afloor on that. But again, the CSI 300 is flat in Mayand in Hong Kong, it's down five out of the last six sessions.So it's also, you know, just eking out very little gain in May.Have we lost steam or do you buy the dip?Look, these are these have become very volatile parts of the equity markets asmarkets have struggled to find a valuation anchor.And so it's not a surprise after a really strong run up to see a bit of agive back.

But I do think it's potentially anopportunity to add a little bit more on dips.You wouldn't want to bet the farm, but if earnings continue to to come throughin some of these preferred names, then market should find its feet again.Yeah. So, you know, on that point, whatspecifically? Well, specifics of a specific kind ofget my words a specifically do you own in China right now and how do you seethat changing. So currently we prefer to own the theoffshore and more consumer Internet names.It's just a bit easier to kind of get.

The story there.There is, of course, you know, a lot of potential in the in the onshore market,but it feels you have to be a little bit more selective there.And I'm an asset allocator rather than rather than a stock picker.And of course, there's the concerns that with all the money beingchanneled into it's kind of the industrial favorites by by the policymakers, which on one hand is a good thing, but it can also be a recipe forfor low profits and an overcapacity.So that's why I'm preferring to to stick a little bit closer to the source ofwhat's kind of known to the offshore.

Investors.Those Internet names, you know, it's one PD,not that we'd pick anything specifically, but you can allocatebroadly to the Hang Seng Tech index. Uh, and how should we be looking atcurrencies right now and the renminbi in the US dollar?You advocate sort of a carry trade there.Again, we're going to talk about the Fed in a little bit.But again, you believe, you know, higher for longer from the Fed.Does that equate to a King dollar and that will continue?And how does that relate to the.

Renminbi?Yeah, we believe in higher for longer. If you look at where inflation is in theUS services, inflation services, CPI, inflation has been analyzing about 6%over the last six months. You know, the economy is clearly doingpretty well. There's no strong reason for the FederalReserve to to ease policy significantly. And so when you've got 5% or so yield onthe US dollar and something in the range of 2% on the renminbi, on a very stablecurrency cross, that's an attractive and attractive trade.And it's one reason we stay long dollar versus renminbi.It's also a good portfolio hedge with.

The dollar continuing to to rallywhenever you see wobbles in markets. And given that you can't rely on, say,US Treasuries to protect you in the way that you used to, we believe that thedollar is the place to be overweight. Right.And just broadly there, Ian, do you think the carry conversation issomething that we can trust still looking at the second half?Because that's been fairly consistent in the last couple of months?Absolutely. I mean, the carries have volatilityratios, which is a key thing to monitor kind of across currency pairs, whetherit's within Asia, India and Indonesian.

Rupee and rupiah, whether it's in LatinAmerica. These high carry currencies relative totheir volatility are continuing to look really quite attractive.And also you can you can position yourself again to be kind of have a longdollar bias while being positive carries so getting carry while being defensive.And so I think that's the reason why this trade is going to continue into thesecond half of the year. All right, Ian, we'll talk more aboutthat and we'll unpack some of your other ideas as well across other assets.In a moment, Ian Samson there joins us out of Will, rejoins us, of course, outof out of Singapore in a moment there.

Just ahead, you're in shows, just apreview to see Hong Kong police arresting six people using the city'snew securities laws for the first time. The details and that story later thishour. Also, counting down to the open of tradehere in Hong Kong, in Shanghai and in Shenzhen.We're just approaching, what, 16 minutes away to the opening bell.Futures are pointing lower going into this Wednesday session.Hope you're all well. Good morning, by the way, and thanks forjoining us. This is the China show.

I've been asked many times, what do wetake? The interest rate increases off thetable? I don't think anybody has formally takenthem off the table. Even even me, I say that we could sithere for as long as necessary until we get convinced that inflation issustainably going back down to our 2% target.I'm not ruling out potential interest rate increases from here, but I thinksitting where we are for an extended period of time is a more likely outcome.But of course, if we get surprised by the data, then we would do what we needto do.

And that was Neel Kashkari there out ofthe Minneapolis Fed, Just reminding us really at the messaging coming out ofnot just him, but his other peers, of course, at the Fed, that, you know what,those rate cuts might not be coming any time soon.The renminbi thinks it today is that maybe they're adjusting to the strongdollar story. We're back.We now have again a 711 handle there on the midpoint of the session here.We're coming off data and unexpectedly strong data, by the way, coming out ofthe US. Plus, of course, you have to couple thiswith those softer two and five year.

Auctions out of the Treasury market.So what you're seeing is yields effectively the price action iterationof all of that that I just mentioned, pushing through as well, unexpectedly upas far as the US consumer confidence been topping all forecasts.And then on top of this is this yield picture across Japan where ten yearyields in Japan at 107, that's a new 2011 high.Let's bring in Ian Samson who rejoins us out of out of Singapore, Multiassetportfolio manager at Fidelity International.Ian, do I have any business at all being in the bond markets, given what we justlaid out there?.

It is hard to make a strong case for it.You know, you've got inflation in the US really much stronger than than the Fedwould like to see, probably higher for longer interest rates.You know, markets are pricing in one, maybe two this year.There is a possibility of zero. But most fundamentally for me, as amulti asset portfolio manager, these U.S.Treasuries, not only are they yielding less than cash, but they're notprotecting my portfolio. You know, bond yields are rising at thesame time as as stocks softening. So we kind of look elsewhere for whatwe're doing with our bond portfolio,.

Looking at some emerging market localrates where at least you're getting paid a pretty nice carry waiting for forinterest rates to come down. But it's hard to make a compelling caseto be overweight. U.S.Treasuries at this point. Right now, just on fixed income here, asmy producers just laid out some notes that you've sent through.You're saying replace duration with U.S. dollar in option stop.I understand that. But that's Greek and marsh And maybe toto to some of our viewers. What does it exactly mean?And replace duration with U.S.

Dollar in options.So if we think back to pre-pandemic the two or three decades before that, toprotect your your equity portfolio or your multi asset portfolio, all you hadto do was buy US Treasuries or German bones and you'd get paid a positiveyield. And when equities sold off, your bondscould rally and protect the portfolio. That's just not what you're seeing nowin this more inflationary world, because these are worried about inflation andbonds are worried about inflation. When markets go down, they're notprotecting you. So what can we look for for protection?One place is the US dollar where you're.

Getting a higher yield than than theeuro, than the Aussie dollar, than the Swedish krona, than the renminbi.And on days when markets go down, the dollar strengthens.So that's a positive carrier way to protect your portfolio.On the other hand, you can use options, markets, things likesimple puts on the S&P, which are historically really, really cheap rightnow because markets aren't that volatile, aren't that worried to tostart to buy some some cheap protection on your portfolios.And we just saw on the screen there the yen at 157 and change to the dollar.What's your view on that, given your.

Outlook that the dollar, the Kingdollar, will continue? I mean, kind of the conviction tradeacross Asia in the beginning part of this year is that eventually with theDOJ going on a tightening run, if it will, the yen will will start gainingsome traction, but it hasn't at all. There's been intervention.It hit 160 and pulled back only slightly.Is 157 in the cards for quite some time. I think the reason why you're strugglingto see the yen rally is, is quite simply that yield differential that isn't goinganywhere. So even if the yen does rallysignificantly, you're going to lose.

About 5% just on that negative carryoverto the dollar over a year. So it's hard to really structurally buyback in to the Japanese yen. That says we do expect that there couldbe some interesting developments in the Bank of Japan.You've got wages growing as fast as they have since the early nineties.Actually, just a few days back, you had the Services Producer Price Index, whichagain, the three month annualized number there is is as fast as we've had sincethe early nineties as wages start to pull in.And the Bank of Japan is hinting that it could do a little bit more havingalready started its policy.

Normalization.So I think we could see to maybe even three interest rate hikes from the Bankof Japan throughout the course of this year and and into next year if thingsremain the way they are. Wow.Three. Okay.That's that takes us on a different road.And just very quickly here, you know, your key risk, just looking at yourcurrent portfolio and how that's constructed, you know, what would whatwould cause the biggest pain? What's what's what's your kryptonite,sir?.

So I think it would be a repeat of whatwe saw in September or October last year, where for whatever reason there isUN anchoring in US yields and the US ten year went and tested 5% or above, youknow, inflationary fears, lack of a fiscal anchor and just the view that,you know, with yields at those levels, equity multiples became harder tojustify. So that's again why beingquite cautious on on the US bond market, on U.S.treasuries and looking to the US dollar protect your portfolio is the way thatwe're positioned to kind of mitigate that that key risk.Ian, fantastic having you in show.

Let's do this again.Ian. Ian Samson there.Multiasset portfolio manager there at Fidelity.Okay. Just going into the open today, FuturesHang Seng index. We now should be getting a quote in thatfor down 9/10 of 1%. So we'll get to the movers in a moment.On the other side of this break, this is well, this is Bloomberg. Right.We're just approaching here the the Wednesday.So it's hump day session here across.

These markets.And we're going to flash on your screens right now what the approach is lookinglike and declines just about most of the part of this equity market complex herein Hong Kong. Weakness coming through in the currencymarkets. What you're not seeing is yields pushinghigher. And perhaps that's really where the painpoints is coming from. When you look across asset right now.Right. Couple of analyst actions to tell youabout. I think one that maybe in particularthat I'd focus on today is new Oriental.

Because that it's actually reinstated atHSBC. These are the ADR.So that price you see that in US dollars, that's of course on the back ofthe pop that you get. Also overnight, it's a 110 a pop.HSBC, in fact, we are seeing that play out here in Hong Kong.Flip the boards, please. And New Oriental should be coming outlater on the novel. Of course, convertible bond, that's abig story. Will unpack this in a moment here.2 billion sold to the Saudi sovereign wealth fund and that's promised newOriental up 3% more in these other names.

In a moment, the open 3 minutes away.This is Bloomberg. Good morning.Welcome back to watching the China show. 40 seconds to the opening bell.It's fairly uneventful on the macro news flow.I mean, what's new with the Fed telling us that we'll probably need to wait upsome strong data coming through as well out of the US, maybe more in the form ofthe easing measures across these major cities across China.And certainly, Steve, you recall business yesterday, Shanghai and moreare coming in here. Yeah, gong to in Shenzhen gong go 15%down on the asking price right now of a.

Lower asking price at that.Yeah the lower asking price for first time homebuyers they're trying to get,you know sparks with demand. Yeah we'll see.Now it's a waiting game whether or not all of these cities in fact we mighteven get more of course, more of these tier one cities fall as to to Shanghaias well, because if you certainly leave it to the rest and you see the money goto the rest, really flat open across these markets is our 300 has beenconsolidating. Volumes have remained light this week sofar. So two or three days now from Friday,where we have seen the 15 day average.

And volumes trending lower, certainly onprice. We've been stuck in a very tight rangeon the major benchmarks here as well. In terms of the fix today, 711 north ofthat out of the PBOC, we're also getting some lines coming through here out ofXinhua news, talking about how President Xi Jinping is talking about youthunemployment. That should be the focus of focus, ifyou will, the priority among priorities of the government to really try andbackstop their to skill set. More on that in a moment there.Flip the boards, please have a look at Hong Kong.And perhaps within that too, names like.

Oriental which you will see in about, Iwould say 30 seconds or so, are starting to see some upside.Most, as you can see, are lower here in Hong Kong.In terms of earnings today, I think you've linked rates and you also haveAlibaba pictures coming out with earnings today.As promised, the Oriental, there we go, 3% up 80 hours were were well reinstatedby the HSBC. The Hong Kong listing also coming outwith HSBC, also coming out with their price target on the Hong Kong listingthere today. As promised, of course, some of yourearnings coming through today.

We talked about this with a moving up inthe oil price overnight into today where you are with Brent prices, for example.That's also one part of the market. Equity markets also watching veryclosely. And of course, also on Lenovo, that'sthe words very quickly. We should be down 2% in the pre markets.Their convertible bond, 2 billion, if I'm not mistaken, sold to the Saudisovereign wealth fund. We're now down 4%.They're four and a half percent on shares of Lenovo here in the openingbell. Okay.In terms of some data coming through.

Aussie inflation and we're now lookingat consumer prices there, 3.60, that's hot.Okay, That's hot, 3.6%. The estimate was for 3.4%.The Aussie dollar is climbing, unsurprisingly.So on the back of those numbers, ASX 200 is now down about 1% following thatnumbers. So any sort of plans or hopes that youhad for the RBA, the probability take that a little bit and slash that ever soslightly. Right now, first quarter totalconstruction down about 3%. The estimate was for half.So this one actually falling even.

Further.The dilemma for a policymaker at this point in time, but I think the headlinereally here is a hawkish tilt across assets followinginflation, which came in coming through out of Australia here for April, 3.6%higher than the median estimate of 3.4%. Now, David, let's pivot back to theproperty story out of China. Bloomberg Economics says the Chinesegovernment's plan to buy unsold homes can be scaled up, with the PBOC playingan even bigger role. Economist David Chiu, he joins us now.David, thanks for much for coming in. So how do you see the government and thePBOC indirectly or directly scaling this.

Up and to what level the latest plan wasfor ¥300 billion? There was another plan for about 200.So beyond 500 billion. How did they get there?Oh, yeah. The first the question when we assessedthe total package was that whether it was big enough to boost the whole marketeconomy or to absorb the inventory. And after the calculation, we found thatthe inventory may be bigger than what people think, because if you look at theNBS National Bureau of Statistics data, it tells us that there was about 400million square meters inventory in the market, but actually that was only thethe homes were built, already built.

There are still a lot of homes inconstruction. So that going forward, this inconstruction projects will become unsold and the build homes in the market sothat the authorities. Need to have a way to absorb thatinventory as well. So that is why we call it that.The size of the whole package can or should be expanded or doubled to absorbabout a 2% of the total inventory. Yeah.The question now is how will they be able to pay for it?But before you answer that, just some breaking news to tell you about.For three or 4 minutes in today, the.

Onshore market session and the renminbi,This is the onshore rate just opening up right now.It's seven well, we're trading at seven 2478 right now.And that open, as you can see, of course, there's that gap.It's now taken us above the high on dollar onshore China, to be morespecific, that we hit back on April 26, which means in very, very simplelanguage that their onshore currency or the Chinese currency is now trading atits weakest level going back to November.And unsurprisingly, because the PBOC came out with a I guess on a fixing sideof things, maybe a looser, looser fixing.

There north of 711.David, I'll bring you back in to talk about the currency, what you want totalk about how the PBOC is going to pay for all of this I think is the almostthe same thing. Okay.Okay. Okay.The PBOC, how exactly is the PBOC is going to fund this repurchase plan?Yeah, we saw that last Friday.The PBOC side, the other guy, they are going to provide a $300 billion sorryrenminbi to to fund the whole home purchases project.And after that, since this Monday we.

Have seen the renminbi depreciationagainst the dollar so that the the market.Well, I think the the thing is straightforward because the market Ithink the market's reading on this all through operation is that it could be ora limited and the target of the QE is that the PBOC can expand this balancesheet on this. So the first reaction of the market isokay, okay always we saw the hope for for the Chinese Chinese economy to to torecover. But then they realized that that thiscould be QE. So that is why I think that thedepreciation pressure is getting back.

Now this rescue package that is comingout. Yeah, it lifted sentiment.Also, we're getting more piecemeal approach to, you know, removing therestrictions for first time home buyers now in Shenzhen and Guangzhou inincluding yesterday Shanghai. Does all of this combined put a floor onthe falling sentiment? And yes, we can say that it helps thesentiment, but to be honest, I think it's still a bit too early tocall stabilization or bottoming out over the housing sector because we have seena lot of issues that that they need to solve inthe in practice of when they when they.

Do when they implement this homepurchase plan. Well, I have to say that the easing homepurchase restriction is easier, but to put into putting the home purchase intopractice is a bit harder because firstly you need to identify which project theyneed to buy and the how. You know that because the PBOC set upsome limitation on using of the money and the how you can,you know, use if you want to use the PBOC withthis money, you need to take this on and this old column this long so they don'twant it to go to the stock market or other risky assets.Right.

Taking their proceeds from the policy.Right. I don't think so.Yeah. Of course it's not necessarily equity.Yeah. Yeah.Okay. All right.Well, David, thank you so much. David Chu, they're just unpacking reallytheir latest take here on the latest news coming out of mainland China.So in terms of affordability. Can do get nuns order.Okay. All right.I'm just shifting language there.

Okay, Tianjin.Oh, here we go. Okay.So on that news that we were just talking about here of more Tier onecities moving to ease home purchase restrictions here, according to areport, and this doesn't seem to be official the way this headline isactually phrase Tianjin which is that megacity of course right next to next toBeijing is easing some home purchase rules.Steve. So this is just as another tier onecity, Tianjin, obviously a tier one city, the port city southeast ofBeijing.

Beijing hasn't done it yet, though, keepin mind. Yes.So Shanghai, Guangzhou, Shenzhen, Tianjin, we'll have to see what Beijingpossibly does, if at all. So incrementally better, of course, withmore and more of these cities. Okay,Very quickly here. So the BOJ and just to abrupt pivothere, we talked about the bond yield in Japan is not to the highs in 2011 here.So the BOJ actually releasing the tech. Of a speech of a board member.So that just qualifies these lines coming through.The board member is Seiji Doshi talking.

About how well a couple of things thatsticky inflation is likely to rise steadily.That's hawkish inflation may pick up pace from the summer to fall.That's hawkish. It's important to keep real ratesnegative. So thatis phrased counterintuitively. That effectively means we might needhigher nominal rates given where you are with those inflation expectations downthe road. But they must avoid a premature ratehike that takes us maybe into debate as we approach the June meeting there outof the Bank of Japan.

Right.Okay. We'll leave those two stories there fornow. A glance at Japan assets as we speak.In the meantime, though, Steve, I think we have some other stories we'retracking. Yeah, that's right.Some news that we're tracking out of China.Chinese President Xi Jinping is pledging to prioritize youth employment anddirect more resources to the job creation.State media says they use the Politburo session to emphasize that graduates mustbe able to find employment.

Nearly 12 million graduates, newgraduates will enter China's job market this year.Youth unemployment hit a record high in 2023.In the summer of last year, before Beijing changed the counting method toexclude students, China has sentenced an ex official with China, Hong KongInternational to death on bribery charges as authorities crack down onfinancial crime. CCTV state media reports that bytemplate took bribes totaling $153 million.By is the second former executive linked to China Foreign Asset Management facinga death sentence.

Its former chairman was executed forbribery in 2021. All right.Well, coming up, Taiwanese lawmakers passing legislation that could curb theauthority of newly inaugurated president lighting up details on the divisivedebate coming up next. This is great. Mixed to mostly to the downside acrossthese major markets, major stocks right now.But as you can see, some upside. We're seeing onshore up 11 or 12 points.I'll be generous with the CSI 300. Okay.Let's pivot now to Taiwan, where.

Lawmakers have now passed legislationthat could curb the authority of the new president, Beijing.The debate, of course, prompted days of protests both inside and outsideparliament. Let's bring in Chen one one ourBloomberg reporter to just talk us through this, joining us out of Taipeihere. So, yeah, so this has now it's nowpassed. Give us some context here.Yes. Hi.The lawmakers yesterday just passed this.Oh.

Well, the society thinks it's a verycontroversy. Controversy.A bill that will give the legislator more power over the executive, over thegovernment, so they can now bring in people, bring in governors, bring in ofcompany CEOs and e for general public to the parliament for hearing and they canstart their own investigation on certain cases right now.And they are now. So right now they can also ask thepresident to answer their questions on site in the parliament.So, Jim, one I understand that lies a ruling DPJ party will seek aconstitutional review of this new bill.

What are the prospects for possiblyoverturning this or essentially arresting that movement by theopposition, KMT and their partner TPP, to undermine Lee's presidency?Well, this is like it has been the argument if those bills are actuallyconstitutional. So right now they will face way goats.So the first step is for the executive to send the bill back to the lawmakersto review once again, but is very likely for the legislator to to again pass topass these bills. And after that.So the DPP, the DPP will will seek for a constitutional review and that thatmight take, I don't know, maybe up to.

Months for a review and a results.But if that well before the result comes out andlike saying it's unconstitutional and to, to upend the law.So but before that, the law will pass and to take effects on the governmentright now. Juan, thanks so much for your time.We'll be checking back with you as this, of course, story develops.Let's pivot now to Hong Kong, where police there here have arrested sixpeople using a new security law, the domestic security law, for the firsttime. Among them is a former organizer of anow banned annual vigil to commemorate.

The 1989 Tiananmen Square crackdown.For more, let's bring in the Bloomberg editor, Allan Wong Allan.One, how significant is this and how did it transpire?Because I believe the person who was arrested was already in detention thisMs.. Chow.And apparently she was communicating with another five people, allegedlyabout a sensitive date that is upcoming. We all know that to be the Tiananmencommemoration. What can you tell us?Yes, that's right. China is the target of these arrests.She has been under detention for many.

Months now in a maximum securityinstitution for other crimes, other alleged crimes.But she was accused of using Facebook to make these posts, inciting people tojoin some unnamed unlawful acts around this very sensitive date, which, by theway, Dong government has just refused to name.We know that those. But, you know, those photos were made ina Facebook group. And I took a look earlier today and thenI saw a bunch of posts about a child herself and also the Tiananmen Squareanniversary coming up. I don't know which posts where theoffending articles, but they're.

Apparentlyagainst the new domestically made national security law.And in terms of the timing on why now, it's probably not a coincidence thatthat date is coming up. Yeah, we're just less than a week awayfrom the 35th anniversary of the Tiananmen Square crackdown.And it's an occasion that Hong Kong democracy advocates used to mark everyyear without fail until until Beijing's national security crackdown ended.The vigil and the organizer actually was shut down under this pressure.So how do you see or do people see this, which was Article 23 that became thedomestic national security law,.

Working in tandem with the nationalsecurity law that came into law? What is in 2020?Is this the concern that this could be used, again to crack down on free speechhere? I think that is one signal that thegovernment want to send is that even if they said just two months ago that theywant to move on from all this talks about security by passing the securitylaw and to focus on economic development, they will use this lawagainst perceived threat to national security.And the Hong Kong officials also said that,you know, they will take resolute action.

Against these threats.And the use of this law at this time will help set the bar on when you know,when the government will move against these targets.Allen, thank you so much for getting us up to speed there.Allan Wong There are China economy government.Ed, just some other stories that we're tracking across the world.Here is the latest on Israel. The military says that its tanks havereached the center of the southern Gaza city of Rafah as it conducts a limitedand precise set of operations. Israeli Prime Minister BenjaminNetanyahu insists a ground invasion of.

Rafah is needed to root out thousands ofHamas fighters. The U.S., meanwhile, says Sunday'sairstrike on a Rafah camp that reportedly killed 45 people will notmean a change of policy on supplying weapons to Israel.Now Saudi Arabia's Crown Prince Mohammed bin Salman, says his father, KingSalman, has recovered from a recent illness.The Saudi government announced earlier this month that the 88 year old monarchhere was being treated for fever and also a lung infection.Questions. Over.The king's health came as Iran was.

Rocked by the death of its president andother top officials in a helicopter crash.Now, closing arguments have wrapped up in the hush money trial of Donald Trump.New York prosecutors say a mountain of evidence connects the former presidentto illicit payments to a former porn star.I'm talking about Stormy Daniels here to keep quiet about an alleged sexualencounter. Now, Trump's lawyers earlier accused astar prosecution witness here. Trump's former attorney, as you can seeon your screen, on your right, Michael Cohen, of repeatedly lying.Now, jury deliberations could begin as.

Soon as Wednesday.Right. That's a wrap of stories we're trackingat this point. We'll get to a wrap up the big movesacross these markets where 20 minutes into the catch market session, a glanceat the Treasury curve right now where gains we're seeing on the short end.Still declines in the long end. This is the China show. Welcome back to Shows.You're some top corporate stories that we're following right now.So Toyota's proposal to reelect chairman Akio Toyoda as well to its board iscoming under pressure from two leading.

Proxy advisory firms.Institutional Shareholders Services is urging investors to vote against thefounding family members, citing improper vehicle testing and also regulatoryviolations. And separately of a glass, Lewis hasalso recommended a no vote. Now, Chinese carmaker BYD and shares aredown believe, what, seven straight days now has unveiled this new hybridpowertrain that's well able to travel more than 2000 kilometers withoutrecharging or refueling. The upgrade means that some of theautomaker's hybrids could cover the distance from New York to Miami orMunich to Madrid on a single charge and.

Full tank.Now, the first two vehicles with the upgrade will be midsize sedans,including the SEAL oh six. Now, official Chinese data suggests thatApple's iPhone sales bounced back in April with shipments jumping 52% from ayear back. That's thanks to a flurry of discounts.Sales first showed signs of stabilization back in March after steepdeclines in the first two months of 2024.Now, Apple and its Chinese resellers have been cutting prices since the startof this year. Right.Just a glance, quick glance to be more.

Specific at these markets right now.So we're looking at Dollar China. So we opened at a level that was abovethe high of back on April 26, which effectively means we're now trading at aweakest level here on onshore currency going back to November of this year.Property stocks in focus. Of course, we had a flurry of newscoming out the last 48 hours, Shanghai. Other mega cities in Guangdong province.And this report today that Tianjin is also following that, easing some homepurchase restrictions there. That's on the back of report.As you can see, of course, we're looking at gains across many of these benchmarksin many of these names here as well.

The benchmark story is one that ismixed. So the Hang Seng index is giving up thatwe were going into the close yesterday, taking a guess a step back here, losingsome momentum. So we're down a further 1.2%, 4/10 of 1%to the upside. Certainly, we have been in a very tightrange on shore and the glance across assets across the region, weakness inequity markets, a lot of weakness in the bonds based on your screens.Plenty more ahead. This is Bloomberg. Welcome back to the China show.Here's a look at the Hang Seng index for.

About an a half an hour into theWednesday session. So just in price, we are down a sixthsession in the last seven. You can say the same certainly acrossmost of the other benchmarks, given a sort of overlap in an indexconstituency. We're now 1% of the Hang Seng H-sharesindex as well. In terms of momentum, we've certainlylost some momentum. So we've come off really, and I thinkcontext is really key here. We've come off really some extremelevels of momentum and overbought conditions we were trading at.Well, the fourth in the RSI in this one.

Was trading north of about 80.We're now back to about 53. So in many ways we've sort of reset hitthe reset button, Where do we go from here?What are the next catalysts really? We know with earnings season in terms ofjust policy prescription, we are getting more news coming out on the propertyspace. More on that in a moment here.Sorry, the macro picture is concerned here.So context to the we had a horrible session, by theway, in treasuries overnight. So hence we're seeing yields already onweaker footing as we welcome to the Asia.

Pacific.And then you had this hot CPI print coming out of Australia, 3.6% forecastfor sort of 3.4%. This is putting pressure on currencies,for example. We can talk more about that in a momentwith Mary Nicola. Just very, very quickly here, Asia,China and look across these equity markets.And we were pointing out that just lack of conviction out there.So S&P futures are down. We're looking at 7/10 of 1% to thedownside here on MSCI Asia-Pacific two and ten bond futures.So I would give bond futures.

They were trading way down any case.Of course, we are seeing some pressure onon the long end of the curve and dollar we're looking at.Do we have the pound against just shot out here to my producerearnings if we can get that up, please. At some point here, the pound isactually trading on fairly strong leveled against the Japanese currency,too. So that's actually one specific majorpair that we have been tracking. So the close on Tuesday was north of200, which effectively puts that specific cross at the high is going back16 years, the 30 year yield in the US as.

Well.Just to mention that that's where you really saw the biggest move overnight.We've seen that move the opposite direction right now.But all that being said, it's certainly a conversation around going into this ofcourse, CPI print and some comments coming through out of Neel Kashkarithat, you know, what these your hopes that we're going to get a rate cutSeptember, maybe not. Let's push that back even further.We're in a date date dependent month to month basis as well.Anyway, more on that in a moment. Let's get a context here and maybe someadditional narrative from Mary Nicola.

With us from Singapore, our AMLO'sstrategist. Mary,I guess the story today is not so much in the equity markets, but this melt upwe're seeing in yields. Just your thoughts on what's happeningtoday. Yeah, you've had a combination of justtepid demand from the auctions, whether it was a two year or the five year.And then, of course, some comments from Neel Kashkari just compound this thewhole but these this three sum just compounding the effects on on on yieldsthat we've seen. Obviously, it's still that the narrativeis higher for longer.

But of course any mention of a rate hikejust spooks markets. Even if Neel Kashkari added that hewould that it was a very low probability.It's the fact that yields are going to stay higher for longer.That is going to continue, continues to resonate with markets and continues tospook them. And of course, then it emphasizes howdata dependent the Fed is. So we're still going from one data pointto the next data point, which means that every single one is significant, whichmeans we get significant swings in market and market volatility and inprice action as a result.

Yeah, well, that takes us into the thedollar China story. Should we be surprised that the on shorerate is now trading at the weakest since November?I think we opened above the high that we hit back on April 26 and dollar Chinamemory. You know, I think the key thing herewith China is that we're going to remain steady.So any sort of depreciation that we get from China is going to be very slow andsteady. And largely the fact of, yes, there'sdepreciation pressures on China from increased capital outflows and ratedifferentials, etc..

But at the end of the day, it's veryhard to see that the there's a significant depreciation in the yuan.When there's when trade tensions are escalating, because that could also beseen as a move by the US and Europe as a way to exasperate tensions.So any depreciation that we see in the yuan will be slow and steady.Okay. What else is on your mind?I think some of the main things right now is just what's happening with theyen, especially on the crosses. That is has it whether you mentionedearlier about sterling, whether euro, Aussie yen, all of it has been showingthat the yen is coming under pressure.

And it's going to likely remain underpressure. The key thing here is that there is noalternative funding currency that you have within G10.You're getting news everywhere that is highlighting this higher for longer,whether it's from Australia, from the US, which puts pressure on the yen.And then you've had some comments from some BOJ members this morninghighlighting that there is going to some dovish miss still that is spurringwithin the BOJ. So it kind of will exacerbate some ofthe pressure that we're going to see on the yen.And then also, if you look at how the.

Yen is moving against the crosses, it'sactually been in line with what we've seen from risk.So as risk appetite improves. That also weighs on the yen.And how should we be looking at this this DOJ meeting in I think it's midmid-June. June 14.I could be mistaken on that. But Maria, on the back of comment of thepushback, that's fine. You know, there's a massive ratedifferential that we're looking at here. But you know, what expectation should wehave when the rate path of the BOJ in the coming meetings?Yeah, I think every meeting is going to.

Be a live meeting.That's for sure. But the fact is of whether they pull thetrigger is going to be another story with you.When Bloomberg Economics expects that you're going to get your first hike inJuly and then you can in October, but even then, you only bring rates to abouthalf a percent. How does half a percent really compare?And a lot of that is already baked in to some degree.So it doesn't leave much room for a yen. Yen appreciation as a result, especiallywhen the global central banks are sitting on their hands and being alittle bit more patient when it comes to.

Rates.Rate cuts, Yeah. Oh, absolutely.I like how you compare that. My comparison there, Mary would betaking three bottles of tequila and then half an Advil and then hoping things aregoing to be okay. Mary, thank you so muchin Singapore for us. You got a couple of movers, too.Well, I guess in some ways things would be okay for a moment until they're not.I mean, take take the full Advil. Have to, but make sure, of course, youtake antacid, because that is that that tends to have negative effects on yourstomach.

Anyway, what am I talking about here?Lenovo convertible bond here, 2 billion. This was the big story this morning.2 billion U.S. dollars worth of convertibles issued.The Saudi wealth fund is here. So the PC maker says it has inked thestrategic partnership. And more Chinese firms, of course, havebeen seeking these cheap funding via convertibles recently.If you recall, Alibaba was the one, of course, to tap a similar part of thecapital structure in New Oriental four and a half percent.Now, big move up overnight, HSBC came out ads and also the Hong Kong listingmight also have to do with the fact that.

President Xi Jinping reported by Xinhuatalking about how youth unemployment might be should be actually should be.Let me rephrase that should be the the focus that the top priority of thegovernment and also the president talking about how they might need tolook at some of these educational courses, just making sure that graduatesare, you know, had the proper skills to match where China wants to be as far asthe economy, as high tech economy is concerned.Right. Bhiwadi And up on your screens as well.Energy stocks on the way up, of course, on the back of what's been happening inthe Middle East.

And of course, Bhiwadi, you have this,of course, this new plug in hybrid. So as things stand, snapping, I believe,which should be about a six day, six day decline on that specific stock moversthere. For now, let's get an update on what'scoming up here on shows the the business outlook for DBS, this part of the worldhere. And so of course, we're privileged to bejoined in a couple of minutes here with Sebastian Barrett is the head of NorthAsia for the Bank. They're also having a pause.Their fourth GBA conference is my understanding.So more on that also in a moment.

We're talking all things Greater BayArea in all things banking with the bank together for the region.This is woman. We are seeingsigns of recovery. But yes, there is still more that needsto we need to see more evidence of that. But I think despite that, we do expectthat growth to be around 5%. There you go.That was the IMF second in command where he took notes on just well, the outlookhere, really. And by the way, speaking of China here,so in terms of just the upgrades here, it's not just them.Right.

So you're looking at also some of theprivate economists have also bumped up their forecasts here for the Chineseeconomy. In fact, more on that number, soprevious and current. So when I say previous, which was April,the current forecast for this economy, 4.9%.Okay. What else has changed here?Retail sales has been slightly lowered as well.It's the composition of growth, isn't it, where we really need to have a hardconversation moving forward. So we know exports have been doing well.We know the central government has.

Raised quite a bit of money in a specialbond market there. So that's going to go intoinfrastructure spending, that's going to go into investment spending.But really where you are in the consumer is the big question here as well.4.9%, though, is the thinking from private economists as well.Now on this property story. Okay, this story keeps giving.So I remind you, right last 24 hours, I think it was Shanghai, two other citiesin the Guangdong province, Shenzhen and Guangzhou.In fact, in Gwangju, if I'm not mistaken, you can now take out amortgage, 15% down payment on the.

Already lower asking prices.The latest here to come out is Shenyang also scrapping their home buying curbs.So that's an official announcement coming through and about 30 okay I'mlosing track of time of 32 minutes back. The Tianjin Daily reported that Tianjinis also looking to follow some of these Tier one cities as well.So as we were talking about earlier on shows, it's just a matter of time.We wait, right? We wait, we let it simmer and then we'llsee if these buyers then come in and take advantage of really what frankly,is really a very relaxed entry points to thisproperty market.

Anyway, I digress.Let's talk about banking. Let's talk about the state of theeconomy that goes into this as well. Let's talk about Hong Kong.Joining us exclusively here on set is Sebastian Perales, head of North Asia.He is also the bank's China chairman and Hong Kong CEO.You are so many hats. I'm struggling where to start?Why do we start with Hong Kong? How how's the business doing?Thank you, David. Thank you for having me.Hong Kong is, as you said before, experiencing a very important slowdownderived from the slowdown, of course, of.

China and the impact of post-COVID, slowopening and so forth. But the banking sector is continues tobe resilient. The banking sector, despite interestrate differential from mainland China, despite high interest rates and despitethe tourism not meeting, our expectations post opening is doing quitewell. Is resilient.DBS, Hong Kong, for example, last year we grew 12% net profit after tax.For the first time ever, we reached 9.2 billion net profit after tax, which is1.1 billion U.S. dollars.That for the fifth largest bank in Hong.

Kong is significant are our return onequity has continuously being above 20%. This is something that I don't disclosepublicly, but it's been a one of the highest return on equity franchises ofDBS Group. Our cost income ratio is 37%.So I think that we have performed exceedingly well in 2023.Most importantly, our losses related to China property derived customers havebeen very insignificant to our size. So we've managed that our portfolioquite well in in the last seven years. Right.You've reduced your activity there. I think to your point, seven years ago,a couple of years back, you've started.

To really pull back because of the riskinvolved there. In fact, we didn't really reduce it.We we have progressively in the last ten years the property, I mean.Correct. We have progressively focused on themost important and resilient names in China.So we didn't really go into second tier cities, second tier names.So that's why we avoided the accidents that some did not.Yeah, some challenges. Let's let's put it that way.All right. So you've done well, 2023.How did you manage to do that amidst.

What was a challenging time for,particularly when you look at loan books, for example, you know, theeconomy slowing as well? Well, year on year, the first quarter,as you know, loan book for the industry dropped again 5.4%.The interest rate differential as well as the high interest rates is having atoll on the loan book for the industry in Hong Kong.However, the same aspect of high interest rates is helping the banks thathave a very strong funding franchise like ourselves, and that is offsettingthe impact of the loan decrease at the same time and reflecting the criticalposition of Hong Kong as an.

International center, wealth managementbusiness continues to be one of the drivers of higher rate of growth for forbank. In in Hong Kong.So I would say wealth management, our funding franchise as well as insurancepost opening, have been one of the key drivers for our growth and high returnon equity. Right.What do you make of the Hong Kong government's moves here to shore up HongKong as a wealth hub? How does that tangibly help a bank,which you point out is doing very well already?I think it is very important to promote.

The continuous access of Chinesetourists coming to the city. So the efforts that the Hong Konggovernment is doing, engaging the China government to allow more tourists tocome to the city is very important. Also, the efforts around, you know,positioning the city as an entertainment hub, as a conference hub, as a tourists,a multi tourist hop is also very important.That will take some time to to materialize.But nonetheless, I see the government making a huge amount of efforts to toimprove the positioning of the city not withstanding.It is very clear that the linkages.

Between Hong Kong and China are very,very strong. And whilst China is facing theseeconomic downturn, clearly Hong Kong will experience as well.The tourists, for example, which we see that the tourist growth in domestictourism in China is so high. However, in Hong Kong is still 70% ofcompared to 1920 19. So we still have a long way to goto to have the positioning that we had pre-COVID.And on top of that, the strength of the dollar, because we have a currency tothe dollar. Yeah.When you look, we have to import what.

Powell does.Exactly. When you cross the border to Shenzhen oryou go to Japan, you see the competitive disadvantages of pricing is is pushingan outflow of tourism from Hong Kong rather than getting more inflow intoHong Kong. Well, since you mentioned D.C.rates coming down this year, what are you planning on?How is view our house view is to to rate decreases starting from the third,fourth quarter. Okay.But still, you know, the inflation, the global inflation, that proves to be verysticky.

Right.And I would say that the probabilities of those of those rate decreases arestill questionable, I would say. So rate higher rates for longer.I think that's my my own view. Okay.Now, the on wealth specifically, are you seeing more assets coming to the city,whether that's from the mainland or separately?Your Singaporean bank, of course, from Singapore, you have some moneylaundering issues there as well. Do you see that in some way benefitingHong Kong somewhat? I think that the there is a veryimportant wealth management centers in.

In Asia, Singapore and Hong Kong.Singapore clearly attracts a huge amount of wealth from Southeast Asiancountries, from India and also from China.Hong Kong at the same time from China, mainly in Taiwan now, wheremore and more is at the bulk of your wealth business.I know our ability both in Hong Kong private banking business in Hong Kong ismainly homeowners of wealthy homeowners. More and more Chinese wealth.And now in the last 12 months, I've seen a substantial amount of Taiwanese moneycoming into the city. Okay.We have had our our highest business.

Growth last year was our private bankingbusiness. So we are now probably one of the of thehighest growth private banking business in Hong Kong.Are you. Does that mean you're hiring becausesome of your other peers are reducing their headcount?Well, we've we've never reduce our headcount.We continues to hire even through the cycle.This year, for example, we are expanding more than 25% our headcount in privatebanking business alone. So, yeah, we are hiring, we are takingadvantage of the changes in the market.

We're taking advantage of, you know,some of the older international banks, probably de-risking.And DBS is very well positioned in this environment.Okay. Yeah.Since you brought it up, I was at the UBS conference yesterday, and I believeyou guys have a big conference, too next week.We do. We have our fourth GBA conference inShenzhen. We expect to have about 500 customersfrom all GBA cities, including Hong Kong.We are going to focus on A.I.

Gen AI and of course, high advancedtechnologies. We do seem to talk a lot about realestate and the challenges in China about real estate, but there are some pocketsof industries that are creating substantial amount of GDP growth inChina, and that's in Hong Kong. And therefore, we are we are making surethat GBA continues to play a very important part to the bank franchise inChina as well to the bank franchise in Hong Kong.Right. So how are you looking to get involvedin the GB? Right.So you have key drivers.

What are the specific opportunitiesthat. We, for example, the the ecosystemgrowth of advanced technology manufacturing.Are we still talking EVs or is this something else?No, it is it is clearly is a is a very important part of the industry growthand the ecosystem around EVs, solar panels and clean energyproduction, manufacturing as well. Not only on the product itself, but onthe ecosystem that that creates in advanced technologies.Now we are adding these here in our conference in Geneva and what it meansin terms of software development, in.

Terms of the utilization of datacenters,in terms of the ecosystem that Jini may bring to bothheart hardware as well as software, the. What does it mean for your loan book,though? Are you looking to put some money towork as far as loan growth in those sectors?I'm not very optimistic about total loan growth.Why this interest rate differentials remain so high.But indeed, our loan growth in mainland China, for example, for DBS, Chinacontinues to grow double digits, very robust, especially in these newindustries.

However, in Hong Kong, because of theHong Kong and U.S. dollar denominated loans are still quitehigh. Okay.So do you see that changing, though? But most importantly, deposits, growthin the industry, new customer acquisitions.That's very important. Give you a data.Go ahead. This year, we acquired close to 1200 newChinese mainland customers in our wealth manager business in Hong Kong.We acquired close to 700 companies in Hong Kong every month.So those are significant numbers that.

Are beefing up our franchise in HongKong, as well as giving us opportunities in mainland China.Well, we wish the conference, of course, goes fantastically well.Of course. Thank you for joining us here on.So we didn't get to talk about time one where I believe you're not the biggestforeign bank there because of the city and city transaction.Maybe next time, like that's about that. Sebastian But it is there.Head of North Asia at DBS stock price bottom of your screen should come out aswell. If you're a Bluebird subscriber, you cancatch up with that interview you might.

Have missed here on our interactive TVfunction. There you go on your screens, TV, go onyour terminals. Happy Wednesday morning.You're watching the China show. Welcome back.Some breaking news right now on your screens.You'll see a number of names. I would ignore the top three and look atSamsung Electronics. So we now understand from the companythat these wage talks have failed. Earlier on Yonhap News, this is about 30minutes back reported the labor union would be going on strike.And now we know that the labor union.

Says it will stage that first strike,that strike for the first time. They'll be holding a press briefing inSeoul at 11 a.m. today.Well, effectively, we're getting these lines from that press briefing, just tobe more specific. There we go.That's the line there. Also breaking news coming through thishour on the city, on the property story in China.A major city in Shenyang has now also scrapped their home purchaserestrictions to look at property names on your screens.This is Bloomberg.

We're just going into the Tokyo lunchbreak. And so a couple of commentary will comein, comments coming through out of this. Well, for one, this the BOJ releasingthe speech of a board member talking about how the need for real rates toremain positive, although that being said, of course,maybe pushing back against the notion that we might need to see immediate rateincreases on the horizon right now. But all that being said in terms ofprice action is really this bond bleed we're seeing not just in Japan butacross the region. Treasuries were absolutely whackedovernight.

We're seeing that play out here in theAsia Pacific. And then we had that hot inflationreport in out of Australia. I think 3.6%, I believe was the was theprint there above estimates and hence we're not trading at 1.7.Is there ten year yield in Japan. That's a new 2011 high.On that specific one as well. Right.So flip the boards please if we can and talking about that too.So we have just a flavour of the region here.So we're down 7/10 of 1%. By the way, I should mention equitymarkets are not really a big story.

Big story today, volumes are on thelighter side of things across most of these markets, with the exception, Iguess, of some pockets of strength, like the CSI 300, about an hour into thatsession here, 6/10 of 1%. The 30 year yield, big move upovernight, restores incrementally up right now, the ten year yield inAustralia, of course, that's a big movie had early on.We talked about the inflation story and the weakness in the Japanese currency,not just against the US dollar, but let me just call your attention to the thebottom row. One, two, three, four from the leftcable of the pound against the Japanese.

Yen, 200 spots, 61.Last time we had a print of this story, it was way back 16 years ago.So it's certainly broken through some key, not just psychological levels, butI mean what you know, how do you extrapolate this chart now if you haveto go back 16 years? Right.And just very briefly to just some news coming through out of China, in case youmissed that, too, as you look at where you are in the bond yield right now.So the Ministry of Finance has now come out.I believe I'm looking at this as well, has now come out with a specific figureon how much how.

Yeah.The the amount of bonds it's planning to sell this year in Hong Kong, to be morespecific. Right.So we're looking at ¥55 billion in government bonds to be sold in Hong Kongthis year. That's according to the Ministry ofFinance. It takes us into this broaderconversation in China. Are things getting better?The short answer is yes. The qualifier is incrementally.If you ask the IMF, if you ask a private economist, they bumped up theirforecasts for the Chinese economy 4.9%.

In fact, the IMF also raised their ownforecast there for China. So the fund now expects 5% expansion onthe Chinese economy instead of this 4.6% that they had for an earlier projection.That now puts it in line with Beijing's own growth target of around 5%.First deputy managing director Geeta Gopinath spoke exclusively withBloomberg about why they upgraded that specific forecast several.We've upgraded China's growth by 0.4 percentage points for this year and fornext. So we have growth now projected at 5%for this year and 4.6% for next year. There are two main drivers for that.The first is the better than expected.

First quarter GDP numbers that came outfor 20/24. That is lifting up our growthprojection. And the second is we have incorporatedsome of the newer announcements that have been made on the policy front.So those are the two main reasons for the upgrade.But some say 5% is actually out of reach for China.They say private sector sentiment is still weak.The property sector is also in the doldrums.60 million homes still unsold and some point to China bunker under a lot offinancial stress.

At some point, Kita, that is likely toweigh on confidence, weigh on sentiment, weigh on growth as well.What's your take on that? So China's economy is continuing torecover. So we certainly are seeing thatconsumption is recovering, but still it has some ways to go.The strength we're seeing in public investment remains Private investmentsis still weak, mainly because of the weakness in the property sector.So we are seeing some signs of recovery. But yes, there is still more that needsto we need to see more evidence of that. But I think despite that, we do expectthat growth will be around 5% this year.

What more needs to be done?So firstly, I would like to recognize the policy steps that have been taken.I mean, the recent announcement, which involves upgrading equipment of farms,but also consumer goods of households that can help.But yes, in our view, more will be needed.And so specifically on the property sector front, I think what would be veryhelpful is dealing with the problem of pre-sold housing.So there are a large number of housing houses that have been pre-sold but havenot been completed. Here we see a bigger role for thecentral government to come in and to to.

To deal with that, to be able tocomplete those pre-sold houses, because when that happens, that's going to helphousing confidence, which is really essential at this time, and also willhelp with the exit of non viable developers.Secondly, in terms of providing support, while overall we think that there shouldbe a fiscal neutral stance, I think it is important that the spending goes inthe direction of helping low income households because that they are theones who are able to consume more of that additional income and that willalso provide a boost to the economy. Hmm.How are you assessing other risk?.

Some say that there a risk of a newtrade war. Of course, we heard from G-7 financeministers calling out China on its trade pact practices with the U.S.that it will reimpose those tariffs expiring.And we have China itself saying that it might impose 25% tariffs on importedautos from the US as well as Europe. How might this play out high?Might it impact China's economy as well as economy of the world?Yeah. I was just in Australia for these G7meeting, so I'm coming from there. And, you know, there is certainly we'recertainly living in times where there is.

Questions being raised about the globaltrading system and the fairness of it. The IMF, as a general rule, we arestrongly in favor of an open rule based trading system and therefore anydisputes the countries have with each other, we believe should be handled tothe through the multilateral trading system, I mean, through the WTO.Now, there are concerns that are being raised.Industrial policies is something that comes up in conversations everywhere.Many countries deploy industrial policies that has implications not justfor their own resource allocation, but also potential spillovers to the rest ofthe world, and that is generating risks.

Of greater fragmentation.But here is where we think it's critical for countries not to move unilaterallyoutside the multilateral trading system to address this, but to work with eachother to strengthen the trading system, to come up with better rules ofengagement when you have countries using subsidies.So there's a common agreed principle on how to deal with these kinds of issues.You're talking about industrial policy overcapacity.That was one issue that was raised to us by the mayor in an interview withBloomberg. He says that perhaps cheap Chinese goodswill be detrimental to the whole global.

Economy.How are you assessing that? So firstly, I think when we when we arelooking at China, we should just step back and recognize the the macrosituation. So the fact that overall demand in Chinaremains weak, we still have a negative output gap predicted for China.So in an environment where there is weak demand, of course that's going togenerate imbalances and that's where action needs to be taken.Keep setting aside the implications for the rest of the world.Just with China itself being able to raise demand is going to be veryhelpful.

Secondly, again, for all countries,including China deploying industrial policies, you have to make sure you'redoing this in a targeted Internet manner, which is also temporary.Otherwise, you're going to end up with just mis allocating resources withinyour own country again, setting aside the spillovers to the rest of the world.So for individual countries perspective, it is important to make sure theresources get well allocated, that sometimes these industrial policies justdistort signals and you end up with a much less productive economy.So these are, you know, issues the countries need to pay close attentionto.

Yeah, there we go.That was has, of course, there with the first deputy managing director of theIMF. Key to that.Got it. All right, let's get you up to speed onsome other news taking place around the world right now and the updates here.So it's been an eventful few days, ofcourse, in Taiwan, going back, of course, to the inauguration of thepresident there. And so now the update here is theparliament has now passed legislation that could curb the authority of the newpresident relating to the new measures,.

Allow lawmakers to summon the presidentfor questioning and give access to confidential documents.Now, thousands of protesters gathered to oppose the changes.The bill was actually backed by the opposition KMT and TPP, both of whichhave backed closer ties with China. Now Hong Kong's national security policehave arrested six people using a new security law for the very first time.Among them is a former organizer of a now banned annual vigil to commemoratethe 1989 Tiananmen Square crackdown, police say.CHOW Hong Kong made online posts with seditious intent, inciting people tojoin unlawful acts.

Now, she is currently in detention for aseparate charge. A brief look at oil prices right nowcontinuing to move up, albeit, of course, modestly.The big move really took place in a few hours before the last four weeks, giveor take. We're back above 80 bucks in the mostactive here on West Texas. Brent is now 80 for 50.Perhaps it's a line in the sand we can talk about there.Now, certainly news in in the Middle East and the latest here in Israel.Tanks have reached the center of Rafah. In a sign here, the military could benearing, of course, its goal here of.

Taking full control of that specificcity. And residents have been reportingclashes between Israel and Hamas forces. And in the center of town, in fact, BillFaries is with us right now, our senior editor to talk us through this bill.Yes. Are we are we closer toan end here as far as Rafah is? Concern here is based on our reportingso far. Well, from what we know, we may be atthe what could be the beginning of the end.I think, you know, Israeli Prime Minister Benjamin Netanyahu has said formany weeks now that he would send forces.

Into Rafah, despite some of thecondemnation he's gotten from overseas allies and other world leaders.He said that Israel has to do this to get the last remaining battalions ofHamas and the Hamas leadership that he believes are holed up there in Rafah.So what we know at the latest is that some Israeli forces, ground troops,tanks have gotten into the center of Rafah.There appear to be some some clashes taking place.But whether how close Israel is to its goal of of of going against those largerbattalions and getting the leadership, I think that that has still not happened.So it's hard to say how close we are,.

But it's certainly one of the finalstages in terms of what Israel has laid out basically since the beginning ofthis conflict. Now, Bill, related to the story onSunday, we started out the week, of course, with that strikeon Sunday and the. Well, what's been the update there andwhat's one part of the question? The second part is where's the WhiteHouse now come out and what are they said?Does that change anything as far as their support to Israel is concernedhere for Israel's concern? Well, yeah.So we we still are feeling the.

Repercussions from this strike on thetent refugee camp in Rafah. It killed at least 45 civilians,including a number of women and children.That strike was condemned around the world, including by Israeli allies.And Prime Minister Netanyahu called it a tragic mistake that they areinvestigating. The Israeli military now is saying thatbased on the weapons they used at that site, that their weaponry could nothave, would not have likely started the fire that that burned through a lot ofthe tents. They are raising the idea that possiblyammunition was being stored there.

They've put forward what they say issome evidence that there was an ammo depot among the refugees there.They've long said that Hamas tries to hide it, hide among the civilianpopulation. It's still too early to to know whetherthat whether that's credible or not. But they are saying that there were someconfounding factors that probably made the situation worse.The White House has since come out and basically said that they are reallydon't plan any policy changes. And that really means that they're notgoing to hold up more weapons shipments to Israel because of this latestincident.

There was some questions about whetherthe attack on this tent camp would have crossed one of the red lines thatPresident Joe Biden had set out in terms of the invasion of Rafah.The White House so far indicating that it does not feel that way, that thatIsrael's incursions have been smaller scale than the kind of mass incursionthat it has warned Israel against undertaking there.Bill Faries, our senior editor in Singapore for us.Plenty more ahead here in shows. We'll have a closer look at what'staking place over in Japan, of course. It's also the time of the day for ourChina briefs.

So stay tuned for all those segmentsjust ahead. This is to. The Japanese government.And just a brief look at markets where we talk about the story going into thestory here. So the government is embarking on amajor review of its energy strategy with a debate certainly heating up over therestarting of this fleet of mothballed and idle nuclear reactors there thatcould actually include the world's biggest nuclear power plant.It's operated by TEPCO, the company, of course, blamed for failing to preventthe disaster in 2011 at its Fukushima.

Facility.Our Japan Energy Report, a show called As it is right now, to talk us throughthis fairly consequential, globally consequential if it does happen, ofcourse, story sugar. Let's start with this.Why is this specific facility so importantfor the Japanese government? Right.So it's a it's incredibly symbolic facility.Costco, as you call, is the last nuclear power plant that TEPCO owns.And of course, as you mentioned, TEPCO is the company responsible for the 2011Fukushima Daiichi nuclear power plant.

Disaster.And the Japanese government has been pushing proactively to use more atomicenergy in the recent years. And so to them, if they're able to putnuclear back in the hands of the company that was responsible for and gain thepublic trust to restart this facility again, I think they see it as a positivething, as a as a something that could boostsentiment for use of more nuclear power moving forward.So I think they see it as a very critical piece of the puzzle.Okay. So let's maybe take a half a step backthen.

Now.So why why the need why the the intention now of of using or bringingback nuclear power to the power mix? So there's two to large reasons why theJapanese government wants to use more nuclear.One is, of course, energy security. Japan is incredibly resource scant.Japan imports a lot of its energy needs. And while it is trying to push for rollout of renewables, things like offshore wind projects could take years to getthem back on line. So in the meantime, the Japanesegovernment wants to use nuclear power as a way to curbdependency on imported fossil fuels.

And then the second reason is, ofcourse, climate change. Japan is heavily reliant on oil, gas,coal. It relies 70% of its power on coal andgas plants. So by using these idled capacities,these nuclear power plants, the Japanese government wants to make a step, wantsto make progress on its decarbonization efforts.Right. And Shoko, why?Why then? This nuclear plant is getting attentiontoday and correct me if I'm wrong, weren't didn't you go?Weren't you at this plant?.

Right.So there's been some development over the last few months in terms of whycustomers like Icardi was getting a lot of attention.In December, the nation's regulator lifted the ban on the nuclear powerplant from operating. And then in March, the Trade Ministry,which oversees the energy policy for Japan, sent a high ranking official toNew Qatar. That's where the nuclear power plantsare located, to speak with the local governor and try to gain hisunderstanding and his endorsement for restarting this nuclear power plant.And then along with that, TEPCO has also.

Loadedthe unit number seven of key with fuel to run some inspections.So there's been a lot of development that points toward, you know, steps.It's progressing that that restart is it could potentially be coming.But of course, these things take a long time.It's a very political politically, it's a politically sensitive issue.And there's no specific timeline for when the unit will restart at themoment. Should go to our Japan energy reporterthere on certainly on this massive story.And of course you can catch more on the.

Big take on today's big tech and thisspecific one on the big Tech Asia podcast.New episodes are dropping, of course, every Wednesday, which my brain remindsme is today. There we go.You can listen to this specific one on iHeartRadio Apple Podcasts, and also onSpotify. Subscribers can also read more onBloomberg's big take on the terminal. Also on the terminal is the price of thebenchmark. We're down about six 7/10 of 1%.What you don't see are volumes, and I'll tell you what volumes are doing.We're about 20, 21% below us and nothing.

Is happening across these markets thisWednesday morning. This is one of. Here's a look at your China brief today.A look at. However, back on the air.I guess we are right. Okay.Yes, we are. Okay.Look at you trying to brief today. Let's try to take three.There we go. The People's Daily of Chinese PresidentXi Jinping pledging to make youth unemployment or youth employment,rather, a top priority, is making the.

Front page news here.The People's Daily quoting President Xi is saying high quality, full employmentis a key objective for the development of China.Almost 12 million graduates are set to flood into the job market this year.That's 2% more than the number that we had back in 2023.Also on the front page here on the front pages, to be more specific, authoritiesare issuing regulations on disciplinary actions against SUVmanagers. So the new measures standardize the typeof behaviors actually deemed illegal and the punishments that will be applied tothose behaviors.

Now, the regulations then take effectthis coming September. Meanwhile, you have the Securities Dailysays China's new special bond issuance accelerated in May, with localgovernments selling about 100 notes totaling almost 300 billion renminbi.The focus of investments will be on things like transportation and also oninfrastructure, and that it goes into also what we're seeing in the propertyspace and moves to shore up activity there.A reminder of some of the rescue measures we have seen out of China.And we should emphasize these are measure that have been announced, Ithink, in the last just in the last day.

Or so.So you have Shenyang coming out and scrapping their home, buying curbs.You have Shenzhen coming on and perhaps mulling converting some of these idledoffices there into public housing. And early on we had a report out of theTianjin Daily that Tianjin City, which is of course that massive city next toBeijing, is also considering something along those very lines.It goes into the property story and property boom is we're seeing acrossthese the equity markets as well. Have a look at some of these some of theequity names there as well. We are seeing some some upside right nowin some of these names across the yield.

Space here in the Asia Pacific.So this bond bleed, global bond yield is really filtering through across region.We are seeing here on the back also some CPI numbers coming through out ofAustralia, which were on the higher side of things.We're up 15 basis points today alone on the Aussie ten year yield.Japan ten year yield now trading at one or seven.That's a new 2011 high. And the breaking news this hour onSamsung Electronics, I leave you with this.So the we're now down 1.3%. This perhaps we need more details onthis could have more implications.

Broadly on production.Why the labor union just announced this hour that it will stage a strike for thefirst time. That's it for us here on the China show.Bloomberg Markets Asia is next. This is Bloomberg.

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