Nvidia Earnings Level to Fabricate-or-Break Moment for Stock Market | Bloomberg: The China Veil 5/22/2024

We are half an hour away from theopening bell, the Wednesday session, 30 minutes away.Hong Kong, Shenzhen and Shanghai. You're watching the China show.I'm David Inglis. Let's get to your top stories today.Stocks across the region slipping mildly.That's ahead of these key results out of India, even after, of course, a recordbreaking rally still on Wall Street. Bond traders trimming their bets on twoFed rate cuts this year. Now, investigations are underway aftersevere turbulence aboard a Singapore Airlines flight kills one passenger andinjures dozens more.

Plus, an exclusive with the Philippinetelco giant Globe Telecom and its latest result and also their plan to transitioninto what they call a tech centric company. Happy Wednesday morning from the Asiapacific. Welcome to the shell.Markets are in a holding pattern frozen in time if you will, ahead of well inbetween some key conversations around the fed and fed officials earlier thismorning. Well, Asia time have reiterated the viewthat rates are going to remain longer. It's probably a bonus that you'll get arate cut this year, effectively.

We'll dig deeper into more of thecommentary out of this panel early on. Wed bottom of your screen official toMr. Collins and Bostic, that takes us intothe other big risk event, of course, in just under 24 hours from now, in reasonwhy perhaps markets are frozen in time is in video.Right. Does that earnings story lead us intoinfinity and beyond or does it drive this down into this abysmal hole ofdepression across these markets? GOLD The driving index overnight very,very quickly here, have a look at where we ended the session on the back of WallStreet, ending at a record high, down.

2.3%, perhaps mirroring the drop that wehad in Greater China yesterday. Very quickly, kind of reminder thatMalaysia and Singapore closed note 50 futures.You have futures coming on line, though, here in Hong Kong and China, as you cansee here at 724, up 86 there against the US dollar.Right. So that's the market story, the agendagoing into today. So we're keeping an eye on a couple ofthings. Right.So southbound flows were still positive yesterday.Even amidst the decline in the equity.

Markets, there are new rules beingintroduced by the Shanghai exchanges on goal to that might affect really tradingin gold equities, gold really, and equities and gold futures also on yourscreens in terms of sectors EVs earnings story right.Li auto was very bad yesterday. Xpeng out earnings coming to a quitecopd data out of visitor arrivals and a one and five year one in five year bondsale are the kgb's today. Yeah.So. Well, we'll see what the next 2 hoursholds. Our co-pilot this hour it's the angle anEnglish show on the China show Stephen.

Engle of course, joins us to talk aboutthese key market themes. We pretty much have the same name doespretty much gives us an angle. Yeah.I mean, we're really going to be watching in video that's going to be areal bellwether or actually a potential laggard, because the concern obviouslywith NVIDIA is they've had this H1 accelerator that has been powering itssales. It's likely to be up 243% in the firstquarter or the quarter through April. And of course, that's just been a boonto the stock and a boon to investors. But again, they're the investors arekind of concerned about an air pocket in.

Sales going forward as they are waitingsome customers. We heard that Amazon is one potentialcustomer holding off on orders. Of the 100 are other advanced chipswaiting for the Blackwells series of more advanced chips.So again, will have to get the guidance from the video, how they see the salesgo. That's really going to be key, right?Because arguably to your point, you know, three quarters ago we could seeclearly three quarters ahead and we see three quarters ahead from this point intime, given those earnings, too. And to Steve's point earlier on.Right.

So you had the likes, for example, of,you know, the iteration of how investors invested around Air and Asia Pacific hadbeen and the some of the chip stocks in South Korea.So the fortunes are certainly tied to Nvidia, some of the TSMC that the worldof course in Taiwan. Well look Asus, I was just interviewed,I was in Taiwan a couple of days ago. We interviewed the co CEO of Asus.They are transitioning almost all their lines of PCs and laptops and servers toA.I. capabilities.They just launched their first air laptop.That's going to be a major theme.

Michael Dell says yesterday, of course,all computers by 2025 just about will be having a capability.Yeah, they need those chips. They do, but who do they buy it from Inbulk is a key question there. Of course right now have a look atearnings, you know, as far as the estimates are concerned here.So 24 billion is the median. I think we're looking at 23 to about 27and a half is the range for that. As Steve was pointing out, Of course,commentary on Blackwell, that's going to be key there as well.Plus, of course, some of the challenges. And, you know, some of these ships areactually which they were able to sell to.

China, are no longer is is no longer aviable avenue arguably speaking a nice features bottom of your screens now interms of what the market thinks or is pricing in video shares to do postearnings. I mean so where this stock goes, thestock market goes effectively. It's an 8% swing.One day is where options are pricing this implied move after the earnings.So just stay tuned for fireworks, as they say.So it's about 8%, ten and a half percent, of course, from the previousquarter. Right.Let's let's talk about this in the.

Context of this market that's alsorallied here, this part of the world in greater China.If who regional CEO and head of Asia Pacific Macroeconomics at UBS GlobalWealth Management is here with us in our sets.Good morning. Nice to see you.Yeah, good morning. You.And talk about Nvidia, how important is Nvidia?Yes, it's like a wall of the media I have.As for the Texas Tech like sector in the U.S., it's also, of course, somethingthat kind of drive my kind of global.

Sentiment.Right. So, yes, I think it's very important.So, of course, like we think we are like very positive for it's like a medium tolong term. And we think that is the driver.We actually think that the market will be probably like ha in the 60% afterannual like our combined across. So yeah.So what kind of spillover effect would you think investors are looking for fromthese results that we're going to get in the Asia Pacific?And how does that impact your projections?Before we go ahead and talk about the.

Bifurcated market and China?Yeah, sure. Like I think the for the like yeahstocks are still like out of like a wall of the most preferred sectors like ourfor the investors but of course like how we also suggest for the diversification.So we can see some medium size small size so tech and the probably is ourvaluation is much lower. So we think there may be a way this likea driver and they should be probably like a Palm pilot and also we think thatdiversification across 3G. So we also see some of like other nameslike Apex that's could also catch the attention of the like out of theinvestors.

So I think that, yeah, I think for thisone definitely is one of the key driver for the market.And it's you know, it's a to Steve's point, it was one of the reasons theoutperformance of Mag seven as a group that have, I guess in some ways provento be a good alternative to Chinese market.That takes me into China because we're nine weeks into China outperforming theworld. So about ten, 15 weeks into the rally inChina, 30% in. How are you advising your clients andexposure right now? We still see the positive like upsidebegets like in the past three years we.

Actually for the China like our for thesector is like a thong make up 50 to 70% now it's it's just a start has 10 to15%. So as we mentioned like our for examplelike it it's also alternative choice. It's like a for the investors for thediversification. So last year, almost all the marketsrallied except for China. So I think guess now it's the like othertime for China because we have the stabilizing growth and then we have likeour more like our policy preferential policy come out then also for theearnings for some of the like other sectors like tech, actually it's upbeatexpectation.

So there's obviously been a policy boostfor stocks, primarily as policymakers have been emphasizing manufacturing inthe industrial side. We saw that Friday with the big datadump for April numbers, essentially industrial production beatingexpectations. But again, it's the two speed economy.Retail sales were much worse than expected.So there's the consumer who's still cautious.And then property continues to have lots of problems, whether it's the unwindingof country, garden or other things. But they are throwing policy at tryingto put a bottom of that.

Are those still going to be the drags,property and consumption going forward through the rest of this year forconsumption wise? Actually, last year consumption is thelargest contributor to the GDP. Growth almost contributes like 80%.So we think this year like had the percent will down, but we still expectlike a 6% of the growth because for consumption like our for the firstquarter actually is quite resilient and we think it will also pick up like ourprobably you may want the major reason is because we know that a some of thesubsidies are now saying may so you like a process like how we tend to seesentiment and then we also see we have.

The accessories like almost a 6 trillionand to still at the peak, we think that's always a confidence recovery.It's will gradually like people like them spend.And also we see the service sectors actually is very strong spending.So as a whole, we think the consumption is very resilient, like at 6% for thehouseholds inside. I think the I should say it's almostbottom out because we saw new policy come out like item on the side that wecuts the down payment and also for the like our mortgage rates and the like andrelax the restrictions. More important, I think it's like forthe supply side, I think that maybe push.

The local government out to purchase forthe affordable housing. We the fact because that's veryimportant we also expect maybe some more policy come out in the plenary sessiontry in my view it's possible to set up our like our housing bank.So it's like how more like how the US style Fannie Mae, Freddie Mac, we buysome like a mortgage and base and also it's possible like a to provide the likeare maybe the long term stabilized like a low interest advance to like have forsome of that like our mortgages yet which is interesting not a lot of peopleknow this you have a PhD in economics so I'm going to ask you the economic sideto the question here.

Some people say this might be kind ofpurely with Chinese. Characteristics in some ways.Do you think they can pull it off in terms of, you know, the unused inventoryin the housing market? They're asking local governments to comein and buy that. And can China afford it?And it's not the right solution, too. Yeah, I think like because it's like adomestic. Right.So there's also like a need. So what they do is I think they have tobe more like, ha! Probably like a well plan because thisis immensely incomplete.

It is already some muscle finish aproject. So I think for the first batch nowcurrently it's a for the by the like how already like finish a project so it's a300 belly plus some of the bank loans so can up to 500 billion.Of course that's not enough. We also have a lot of like unfinishedprojects. So I think like how one side is morelike our commercial housing. So that's actually is we already seeover 6000 projects on the whitelist. So that's like a more supportive by thebedside. Then also I think that for some of likethe housing back, as I said, like this.

Kind of the housing related the like apolicy bank could chip and the maybe like our purchase and also loan for thiscan of affordable housing just like Singapore style you might you even whoof course will be staying with us here on set UBS global Wealth management justahead here and shows we have an exclusive conversation coming up withthe Boston Globe Telecom to be one of the biggest telcos, of course, inSoutheast Asia. Ernest Khoo joins us.A couple of things. They just released earnings.The STOCK Act salute has gone through the ceiling, as you can see, and they'vementioned that they want to pivot this.

Major pivot into being a tech centriccompany. Stay tuned for that interview just afterthe opening bell. Also in Manila, counting down to theopen of trade, just under which is over. It's, what, 17 minutes away.Futures are flat ahead of the open. This is the China show.Good morning. This economy has been incrediblyresilient, stronger than I expected.And I've been really pleased by how fastinflation has come down in spite of that.But I think it's a little too soon to.

Determine where inflation necessarily isgoing. Base case.I do think we're going to have inflation come down, but I think it's going totake longer. I think this is a moment when or aperiod when patience really matters. It's going to take longerfor us to see the extent of progress that I think is going to be necessary tochange our policy stance. Frankly, we're not taking a big risk bydoing that because so far the labour market remains very healthy.Some of the latest commentary there from Fed officials signaling that rates,well, you know, are probably going to be.

Where they are for longer than mostpeople actually expect as Christmas. That's key point.When Santa comes around and delivers that rate hike from Powell and Friends,fix it two days out seven 1077 against the US dollar.So on the weaker side effectively of where it has been in recent daysalthough based on estimates of course still quite wide variance there maybe toanchor still this Chinese currency still with us and set to talk us to dollarChina and the Fed chief and Hu regional CIO, head of APAC macroeconomics at UBSglobal Wealth management that is the Fed important because markets have done welldespite the Fed not doing anything.

So I'm wondering if that's just a bonusat the end of the tunnel, of course. And also never go against the Fed.That's also the model. Okay.So what does it mean then for asset allocation at this point in time?Right. So bonds, for example, yields aregenerational high still. Equity markets look expensive.Yeah, I think to overall like a globally we said to buy quality.So we still are like a positive for like a quality like equities and in qualitybonds, quality bonds. I mean like our quality like IG and alsolike our we also like are.

Like happy for these kind ofalternatives because like our that's could provide some like adiversification including this kind of hedge funds are private credit it's allpopular commodity on the other side I think to also can people like abide somehedging like our for the portfolio as but what is your call on the dot plotsas far as when a cut could come in September to premature or is itDecember? And then again, a completely other sideof the coin question and it's more longer term, what do these tariffs andthe potential trade war actually mean for increased steady inflation in theUnited States?.

Okay.So for the Fed, the cuts, all current view, it's a still September 1 to 2cuts. So I think the it's also like you meanalways a market so for the like for the trade tariffs I think it's not thatrelevant because like I think it's for the US and China the tariffs it'salready up to like I'll average 25% much higher than the like in China with othercountries 8%. So I think for for the US side, we knowthe driver of the inflation is mainly service sectors and also shelter.It's not like a product side for the side to actually the inflation isalready starts to like are already like.

A falling and but so it's more like aservice sector. So for the service sectors, for thewage, for the shelter, for the autos and we still see some of the like ourresilience. So that's three.Then we think that maybe for the like inflation will persistent for a while.And the same time I think the Fed already mentioned that's like I dependson data because we also see some of the softening signs of the like a job marketand also consumption. So I guess like as a whole, we stillthink September has a chance if and who. Thank you so much.Hope you brought the umbrella.

It's looking more moist out there.Here in Hong Kong today. It's a rainy day if and who thank you somuch for have a great rest of your week. Regional CIO there, head of APACmacroeconomics at UBS Global Wealth Management.Right. Just going into the open today, futuresare softer, if not sideways. This was the close yesterday.Just keep that in mind. We're down three.We were down 3.7%. So we'll see what the update looks likeon the other side of this break. Stay with us.It's hump day, by the way.

This is Bloomberg.Taiwan is at the epicenter of the world's technology supply chain.Without without Taiwan, it would be very difficult for Michael and I to do ourjobs. It would be very difficult for us toserve Bill and his company. And so the technology industry dependsvery heavily on Taiwan, and it continues to for some time.Just in case you didn't know that was that's Jensen Huang, their Nvidia CEO,speaking exclusively with us earlier this week.Now, somewhat alongside that story, the same theme, there's a Bloomberg haslearned that Taiwan's TSMC is among the.

Companies that have actually ways todisable the world's top chip making machines in the in an emergencysituation or scenarios such as China, for example, invading the island.Let's get more on the story with James, maker of China economy editor to talk usthrough this. James, what exactly do we know aboutwhat they're able to do and what kind of scenarios?Well, the story what we've reported is thatASML, the Dutch company that makes the lithography machines that TSMC and othercompanies use, is able to remotely disable those machines, you know, ifnecessary.

You know, there's the scenarioenvisioned in the story is that, you know, if China was to invade Taiwan,then the ASML can stop those machines from West, stop them from being usablefor any company that might come afterwards and take over the TSMCfactories that are in Taiwan. But I think I think to think about whenyou're thinking about this, you know, if if China was to invade Taiwan, I thinkwho has control over whatever chip factories survive, an actual invasion ofTaiwan is probably going to be pretty low on the list of things that we mightbe thinking about at that time. I mean, that would be just such amassive shock to the global economy and.

Just so destructive for, you know, anynumber of factories in Taiwan, even if they did survive the invasion withmissiles and bombs flying across the island.I think, as I said, I think that our concern and people's concern is going tobe less about who has control of these specific machines and also things likelife and death. But even if we are concerned about whohas controls of these machines, when you think about TSMC supply chains, evenwithout a kill switch like this, those factories can't continue to operate fora lengthy period of time without a global supply chain that goes through anumber of countries that would be very,.

Very unhappy if China was to invadeTaiwan. You know, they have other machinerythere, such as Dutch companies that are supplying TSMC, Japanese companies atSouth Korean companies as US companies, and all of those machines that are inthose factories need regular maintenance and need regular sort of tinkering byengineers from all of those countries to to make some of these machines workproperly. So, you know, if there was to be, Godforbid, an invasion of Taiwan, I don't think Japanese companies like TokyoElectron are going to be sending their engineers to fix the machines at TSMC,these factories.

I don't think Lam and Applied Materialsare going to be doing the same. So even without a kill switch in theselithography machines, the whole supply chain for these semiconductors willvery, very rapidly grind to a halt. And we people, no one would be able tomake those kinds of chips in Taiwan, even if they did have access to thelithography machines. That's not to say China can't thenreverse engineer those machines and if they get access to them.But I think that that kill switches is a really small part of a broader question.James, very quickly, I mean, does this also lend a lot of credence to theFrench shoring trend where Tsmc's.

Building factories in Kumamoto, Japan?They're building factories in Arizona. I think it does.I mean, this is very much a derisking of the supply chain by building factoriesin other places. I thinkpart of the concern of that is an invasion of Taiwan or even just amassive earthquake in Taiwan, which would put these factories out of workfor four months. Or if we saw in Fukushima, factories goout for a long time after huge natural disasters.As I'm moving. Diversifying your supply chains,building factories in Japan, in the US,.

Maybe in Europe as well, you know, is agood thing. And we'll make these supply chainshopefully more stable over time. Change maker in Beijing.First China economy editor on this fantastic report.Of course, you can check that out on the terminal and also on the Internets,plural, if you like it that way. Okay.A couple of stocks that we're tracking out of the open here.Xpeng is up 9.6 earnings out yesterday. Keep in mind that we were down ten and ahalf percent on this stock yesterday. So you split the difference.You do the math.

We're still down about 1.9 from two daysago. Chips and focus, JD.com, convertiblesraising that. And of course, in video got to talkabout that. More tech in focus.The Open is next. This is Bloomberg. Welcome back.You're watching the China show, counting down to the opening of markets here.So far, uneventful and prices certainly reflecting that as well across assetvolatility, actual and not so much in place.But, yeah, I mean, maybe even implies.

When you look at the VIX below 12 in aholding pattern ahead, certainly of well, you have a rate decision comingout in 30 minutes time out of the RBA, ANZ and shortly after that of coursethis press briefing laid out I guess the rationale for why they did what theywill announce they will do in 30 minutes time.And then it goes into maybe an earnings story, a didn't quite show in China.And after that, of course, around this time tomorrow, maybe shave off three or4 hours. It's that big event which is in the formof video. Anyway, we'll talk more about that in amoment here out of the gates.

A couple of stocks we're tracking here.I'm just looking at my screen. X pong is up, so we're looking at 10% onthat. More on that in a moment there.Mainland markets are effectively like perhaps many of you joining us fromhome. Thank you so much.Doing absolutely nothing. There we go.China selling one in five year bonds today, 2025 and 2029 bonds.More on that later on. We're looking at a mixed picture.The you're looking at the second row. Those are the heaviest weighted stockson the CSI 300 commentary coming through.

On how you and change the page, please,on how you adjust your exposure. You know 15 weeks, 30% into this Chinesemarket rally as you pivot away from some of the growth stocks that have been bigwinners and into the consumer facing names, discretionary and staples, maybemore in the services side. That's according to find who out of UBSwho joined us a couple of minutes ago. Right.Hong Kong is looking like, again, another boring session here.We end in the form of data. So we are still in the window for FDInumbers coming out of China. Macao will be releasing the visitorarrivals numbers later today.

This is, I believe is for the Aprilmonth. Flip the boards JD dot com raising quitea bit of money. Convertible bonds 1.75 billion U.S.dollars. Lenovo was an upgrade I believe out ofwhen my producers are about to help me outraised to outperform so that mistake in there at Marcus CLSA.Anyway I'm about to have a look at that in a moment there.We're also looking at exporting, of course.Oh, thank you so much, Morgan Stanley. Thank you.Overweight.

$15 a share.Expand 9% up li auto. Horrible day yesterday.18%, I believe, drop at one point. We're flat at the open there.We'll unpack, by the way, to any story for you this time in the next hour ofHSBC. We're talking all things TV's there andlooking at some of the other stocks that we're tracking in mining, drought inmining and Shandong, gold to gold mining stocks.The Shanghai Futures Exchange, I think on the back of a move that they made inmid-April, further widened the trading limits to gold contracts.Right.

To maybe just keep that in mind.I mean, it's of course, where you are as far as this melt up is concerned.Okay. Let's have a look at the Philippinestock. So that market is also coming onlineright now. And one of the biggest telcos there,Globe is not the biggest, actually reported a 7% drop in profit in thefirst quarter. You you have those sort of one offsthere, depreciation, non-cash expenses, their core income that was up 13%, onethree. Morgan Stanley came out speaking ofMorgan Stanley, upgraded the stock to.

Overweight one or two days after theyreleased earnings. Let's bring in the boss, the CEO, ErnestKhoo, joining us out of Manila to talk us through this earnings first, firstand foremost. Good morning.Thank you for making time for us. Let's, I guess, talk about the actualfinancial targets in a moment. But I want to ask you and sort of, ifyou don't mind, on your globe's efforts and you've said that you want to makethis a tech centric company, what does this exactly mean and what does it alsomean as far as resources go? Well, first of all, thank you for havingme, Dave and Steve.

Our pivot has a lot to do with ourconcern about the maturing telco business in growth all over the world.As far as telco revenues have been challenged, I think it's no secret,although we didn't really do very well in our mobile business in the firstquarter growing by 8%. You know, there's this paranoia.We have that one day this will all plateau and zero growth.And so what we have done over the years is take a look at the different assetswe've built as a telco, whether it's the consumer base, the DNA of our consumers,our marketing capabilities and of course our human and financial capital, andpivot that into building new businesses.

One of which we have been successful atis in the fintech area where we built Gcash into the largest e-wallet in thePhilippines. You know, our objective overall is tobring about a twofold benefit and one for our shareholders in the form ofincreased stakeholder value and of course also benefiting the Filipinopeople in the case of Gcash. Driving financial inclusion.So we continue to do that and continue to look at different sectors like healthcare and others that we can sort of effect through digital means, which iswhere we have the permission to pass. Right.And if you could extrapolate further.

Into the future for us, really the pieceof the pie and you mentioned telcos in maturing business.At what point do you see telco actually making up the minority or the minorityof your core business in revenues and might be also, to your point, selfengineered because of this deliberate pivot that you guys are doing at thispoint in time? Well, we're not the emphasizing thetelco business, just make that clear. It is our main business because verybusiness is a very healthy business. We still continue to derive 50% EBITmargins from the telco business. It's just that the potential that, youknow, was sort of promised in the 5G era.

Is has not really come about it.For most operators today, the use cases have been limited and and the hope isthat somewhere somehow maybe perhaps with the advent of A.I.and other edge use cases that that the need for, you know, low latency, highspeed mobile connectivity will come into being as far as revenue size, I think isstill quite a ways away. And our fintech business, whileprofitable and growing tremendously, is still far behind in terms of revenue,either in market value. We think that it is quickly approachingbecause the multiples in that segment or in that sector for, you know, are fargreater than what we experienced today.

In the telco business.Well, Ernie Stephen Engle here. Let me jump in and let's talk about yourfinancial services. You mentioned cash, which is sort ofyour e-commerce wallet. And I know Mint, which is the the shortname of your fintech side of the business, its income contribution goingfrom 4% up to 11%. So clearly there is that transition.But I also because this is the China show.I'd like to know how that partnership that you inked between Mint and AntFinancial of China, I think it was in 2017.Is there a scope there as your gcash.

Services build out and need moreemphasis? What kind of relationship do you seegrowing with Ant Financial? Well, the relationship with financialwas really a very, very good one. You know, when we put out the jointventure, our kind of agreement was, you know, give us the platformand we will take care of of building the business, because that's one of thethings we realised early on was that we are going not going to be able to buildthe platform quick enough to meet what the public needs.And so we took the A-plus platform and financial hand, which is the really thebasis for Alipay in China.

You know, at that time they had 600million people on the platform and we felt, you know, a platform like thatshould be stable, should have all of the capabilities that that we would need todrive financial inclusion and adoption in the Philippines.And sure enough, you know, helped out by the pandemic, which brought in people totry out the app. You know, it really accelerated theadoption after the trial. And, you know, we didn't look back evenwith the opening of the economy. So it's been a very, very goodrelationship with them. It continues to be one where we worktogether to was bringing more value to.

This company and scaling the company aswe build out the rest of the services. The biggest potential of which is inlending. So earnest if you can reveal what sizestake does and have now in the fintech unit.And do you see that increasing potentially and what happens if and whenthere is a Gcash IPO, which you've said in the past you've not had a rush to doso yet. So that's kind of a two parter.Where will Ant have its position, its stake in in Mint?And then what are the prospects for the IPO and ant's participation?Well, as share stands at around 34% at.

The moment compared to Globe's 35.So we are the two dominant shareholders in the business today.And as far as IPO is concerned, I guess from what I've been hearing and wehaven't really discussed it in any detail, is that they intend to hold downthrough their stake. Okay, understood.Well, the we've been down this road before EARNEST on this Gcash IPO.And I think Steve just also alluded to the fact that you're not in a rush.I'll try anyway, again. Are you in active talks withwith, with, with underwriters on on the deal?And also, since you brought it up, I.

Think it was a few months ago, thepossibility that you might actually be looking outside to list this outside thePhilippine market. Where where is your head around thisconversation? Well, our studies continue to unfold.You know, the complications of a dual listing are indeed there.I mean, we've looked at different markets across the world from thePhilippines, U.S., Singapore, Hong Kong. You know, there is really no perfectmarket. And each market has their owncomplications and listing. And do markets, whether it'ssequentially or simultaneously, also has.

A lot of issues.You know, you have to, you know, synchronize what are the rulessynchronize and other trading, you know, periods and so on and so forth.So it's really, really difficult. I guess I'll repeat what I said.You know, the study continues, but we are gearing up the company to run like apublic company. And I'm sure almost certain that by thethird quarter of this year, we will be running like a public company in termsof governance, in terms of the way we run the business, in terms of ourreporting. You know, we'll be ready in a pushbutton mode.

Obviously, our preference continues tobe to list in the Philippines where we think that, you know, we believe we arethe national champion in terms of fintech in the Philippines.Given that Gcash is now are used by 94 million users in the country today andremains, you know, an app that is used at least twice a day by close to over 30million people. All right.Including me, I should note. Okay, Ernest, how much do you think thecompany's worth at this point? What do you think the valuation is?Give us a ballpark putting me in a spot there.Well, let's put it this way.

Trying to do that.All right. We raised money in October, I think, of2021 at the valuation of 2 billion U.S..At that time, our user base was around, I think, 30 million or so.We were unprofitable. Today, you know, we're growing, youknow, revenues and about 30, 35% thereabouts.You can see the income has grown significantly.If you if you just walk back the numbers from the net income, you know, you know,and it's and the lending business hasn't even scaled yet, you know.So I'll let you do the math.

Right.Hey, Ernest, can you give us an update on your data center plans?I know you're building another one with a partner.And essentially, how does that dovetail with what the whole world is looking at?And we're going to have Nvidia earn soon and soon overnight again.How does that dovetail with what you want to do with A.I.?Well, you know, we think there's going to be significant demand for GPU as aservice type of environment, and people will look for locations around theregion to host their their servers. And we think that the Philippines as athesis for our business is a great.

Location.And given it's right in the center of Southeast Asia where no you know 3 hoursfrom everywhere, pretty much from Singapore, Korea, Tokyoand Japan for that matter, or even Malaysia and Singapore.So, you know, we the latency is perfect. We also looked at Hong Kong has been,you know, now eliminated given its the geopolitics involved there.Singapore has limited space, limited power.We wish to host data centers and we think the Philippines is really an ideallocation for data centers. So we partnered with a very capable firmstudy, GDC, which is part of Singapore.

On technologies and, you know, of of theTemasek group. And we are building 124 megawatt datacenter here in Quezon City in the Philippines, which should begin tooperate sometime in Q2 of 2025. Ernest, you mentioned you've justeliminated the Hong Kong option. Just talk us through the risk there.What about perhaps the presence here would you want to avoid, geopoliticallyspeaking? Well, I think a lot of U.S.companies are now going to be unable to locate in Hong Kong is really what Imeant. Right.And so they're going to have to look for.

Alternatives, you know, so thehyperscalers are going to have to look at other geographies like maybeIndonesia, Philippines and so on. But we just think we're just placednicely in our submarine cables are being built.We're expanding our domestic fiber networks that give us the backbone toconnect the different data centers will be building.And we just think it's an ideal location for these hyperscalers.So earnest is. They're going to also it's kind ofdovetailing on that security risk. I mean, I know there's a lot of issuesabout fraud and things like that, but on.

Geopolitics and national security anddata protection, how much more I.T. security spending are you going to need?Well, we are one of the biggest spenders in the Philippines today, Steve, and Ithink that just continues to go up. We have a very strong focus on datasecurity. Obviously, we are the keeper of a largecache of personal information, whether it's in our gcash business or our telcobusiness, and it really is our duty to protect it.And so our board has given us the latitude to invest immensely incybersecurity. Ernest, a pleasure to have you.Let's chat again when it back.

Of course.Ernest Q there Globe Telecom CEO joining us exclusively there out of Manila.Right. Of course the good markets 14 minutesinto the session here. CSI 300 MSCI, China and Hong Kongbenchmarks looking like this. Excuse me.And we're also just getting a headline coming through.We'll get you more on this in a moment once we have more details.This special local currency, government bond, 2.57% coupon here has beensuspended, will be resuming trade at 10 a.m.This effectively looks like in just.

Given the time gap between when theheadline broke and that time stop you see on your screens might be down to aprice move or an automatic price move. What we're seeing here anyway.Okay, more on this in a moment. Plenty more ahead.Stay with us. This is Bloomberg. Okay, There's slightly more down sidecoming through here in Hong Kong, which is typically the case any way in eitherdirection. CSI 300 effectively flat there.It's a interest index, 4/10 of 1% to the downside.Let's call it modest declines at this.

Point in time.Speaking of declines, one of Wall Street's most prominent bears isactually turning positive. Yep.Morgan Stanley's chief US equity strategist, Mike Wilson, actually nowsees the S&P 500 touching a record high by next June, An about turn, of course,from his earlier view that the benchmark would slip by December.Have a look. I wouldn't be surprised if we hit bothsides. You know, I mean, that's kind of theworld we're in, which is, you know, think about this year and we talkedabout this the beginning of the year,.

Which is we had three sort of equallysimilar operating outcomes. One was a soft landing is theGoldilocks, which is kind of consensus now, and that's our house view.Then you have the no landing, which is kind of a reacceleration to stickierinflation and even maybe a stagflation area outcome, which is what the marketwas thinking about in April. And now you're back to a soft landing.But you still can't rule out a recession either, right?So like all of these are very possible and, you know, they could all happenwith a higher than normal degree of certainty.So that's the that's really the headline.

That should have been out is that, look,nobody knows anything. Right.I mean, and particularly at a point in time and I think maybe maybe our mistakeis just admitting that we don't know as much as maybe everybody else claims to.That's called humility, something that we've learned the hard way over life.But anyways, the point here is that the meat of our report this year, or this isthis update was really more about how do you make money in an environment whereyou have basically 0% upside and the base case and you could have 20% upsideor 20% downside and that's where clients pay us for it, right?Is the process is understanding, okay,.

What kind of environment and how are wegoing to navigate that and manage that. So we spent a large part of the reportyesterday talking about trade ideas, specific sector ideas.That's not the headline that people want to write about.That's fine. That's your prerogative, but that's whatwe want to talk about. That was never going to fit in theheadline. We will talk about some of that stuff injust a moment. Let's talk about the headline justbriefly you to emphasize in the 5400. Are you saying it's a price target?It's not actually that important to you.

In a firm.What is that? Well, it's not important to mostclients. Institutional clients don't care aboutthe target. And the S&P 500 being is that they'retrying to pick stocks. And look, one of the most importantthings we've talked about in the report is alpha generation.This year has been spectacular. The way we measure it with our clients,our client base, which is significant, is this the best alpha generation alphacapture we've seen since we've started recording it since 2010?So that's what people care about.

We're trying to help them in thatprocess, their process of, okay, what kinds of stocks work in thisenvironment? Oh, by the way, when we skew from thesedifferent outcomes, you need to be ready to pivot towards different types ofsecurities. Right now, like our House Call is it's ait's a soft landing Goldilocks outcome. We're not that confident that we want tomake that bet fully. We think it's still late cycle, whichmeans quality. Okay, large caps over a small cap.Still, we like staples over discretionary.We have two defensive sectors,.

Overweight utilities and staples,because that kind of protects against slowing growth risk.So there's a bunch of different things. But the main factor that's been workingis quality. Quality has been the most consistentfactor and we don't see that changing. Are there specific sectors that winregardless of the overall index? Do you see certain areas that are kindof independent of this overall shift of whether there is this momentum andinternational money that pours in and keeps valuations high and some higher?It's large cap quality? I mean, that I mean, that is what'scontinuously and by the way, it's not.

Just high growth, it's also cyclicalscan work in that, but it's still up the quality curve and we show it in the notevery clearly. I mean, it's just it's it's the it'sbeen the best carry factor for the last year, year and a half, which is aclassic late cycle winner, which is where we are.Mike Wilson there with, of course, Morgan Stanley speaking with Lisa andJohn in New York. All right.Just very briefly, speaking of US markets, the two things are actually andthis is a China angle to the story here. So when you look at, say, short interestin two years, we have a story on this,.

By the way for interest and China ETFsloan China. Egypt has picked up some short positionso waning confidence is the headline in the stock rally here in Hong Kong.You have some inverse ETFs that are listed here in the city and nearly what,half a billion million that were half a billion dollars, rather half a billiondollars of inflows total year to date. The bulk of those inflows, in otherwords, bets or maybe hedges you could look at the messages still have come inthe last month or so. So nearly 450 million USD of the nearlyhalf a billion of inflows into bearish ETFs have come in amidst the melt up inprices and amidst the rally that has.

Taken the index to the bottom of thescreens. 19,002 hundred.Anyway, just some food for thought. Plenty more ahead.This is Bloomberg. Right.We're just looking at some of these movers tech in particular the big growthstocks here. So Alibaba, the big news this timeyesterday was the cloud business cutting and slashing their service fees by quitea lot actually might not have to do with the stock move you're seeing today.JD dot com. That is a convertible story raisingfunds 1.7 billion U.S.

Dollars each of bottom of your screens.And Xbox has just been all over the place really like some of my mood swingsof late. So it was down substantially yesterday.It has now 14% up completely reversed the 10% drop on Tuesday.And the big story out of Xpeng, it's still losing money, but it's narrowingthat loss. And we'll talk to HSBC and theircoverage team as far as EVs go to talk us through where their take is on LiAuto and some of these models that are taking place there where they seeconsolidation. Given the price war still taking placein that market, they're also getting.

Their sort of views there on Teslaintroducing a cheaper version. How does that mess with the math andcompetition there? Is this more than a price war story?Is it really all about also the just the product lineup of Chinese EVs?Anyway, I'm giving away too much of the secret sauce for later.Steve. Also coming up in the next hour is theRBNZ Fed rate decisions are about 5 minutes away from that.No change expected they're in for Bloomberg clients.Have a look at where we are in the Kiwi dollar.Beautiful shot of Wellington to live.

You go on your terminal.It's an analysis when the news breaks in a couple of minutes.This is Bloomberg. Hmm.Inhale that fresh air. I can almost smell that looking intothis HD screen on my screens here. Live shot of Wellington there where weare waiting for the latest BNZ decision to come out.Kiwi dollar is bid $0.61 in 30 seconds. Here comes nothing.Quite literally, because no change expected there from all economists,although it's really about the guidance really.So the underlying economy obviously.

Hasn't been doing well.Just to contrast that with neighbouring Australia, although inflation has comein slightly harder than expectations recently, So that's complicating themath there. Plus you have this resurgent Kiwi dollarand which might actually a dovish tilt might actually tilt that the other way.Okay, so we're 3 seconds away from that. The cash rate north of 5% as well.We'll get the decision. It has remained at five and a halfpercent to the RBNZ and has left the benchmark rate at five and a halfpercent. We're also looking at.So we're also looking okay, I'm looking.

At the inflation forecast coming throughaverage. Now, again, let's start with the averagecash rate projection here going into as far as the third quarter of next year.And, you know, there's almost barely any change there.So it seems based on the guidance coming through, using the forecast as a guide,that rates will remain at these levels to three Q 2025 at about the same levelrestrictive policy stance is necessary. Forecasts for the cash rate for thefirst quarter of next year is actually oh, it's actually higher now.Okay, there we go. So they've actually bumped that evenhigher.

Does that mean a rate hike is coming?Okay. A couple of more things coming throughhere. Okay.I just got to get my head wrapped around this because this is all newinformation, mostly GDP growth, second quarter 20, 24.1%.That's nothing. Annual inflation through Q 2024 at 3%.That's elevated. The Kiwi dollar is on a rocket, as youcan see on your screens. We should also be showing you soon if weget bonds up, please, to show our viewers can see this melt up I'm seeingon yields on my screens right now.

So the RBNZ Z cash rate, that track nowsuggests that cuts are starting later in 2025.But from the current level, it looks like and I'll correct myself if I'mgetting this guidance wrong, it looks like between now and that point, wemight actually see an increase in the cash rate.Okay. I'm going to have to revisit this on myscreens a bit later on. Anyway, that's a story for now.No change, no change later on in 2025. But the average cash rate of 5.62% isforecasted for next year. Okay, there we go.So slightly higher and then slightly.

Lower from the current level.I mean, if you think about it, the easy path is to just do nothing right.If you're going hike and then cut anyway.More on this, by the way, and perhaps more clarity than I could even give youat this point in time. The man himself, Adrian Orr, in about 60minutes or so, of course, will be the press briefing ends this time tomorrowor thereabouts. There is our interview, of course, withthe RBA NZ governor. You can also tune into your Bloombergfor more on this. To leave you go.I guarantee you more clarity than I just.

Didon the terminal from our expert editors. Okay, let's look ahead to other mistakesI'm about to do later this week. I'm kidding.Of course, central bank decisions coming out.So we're done with we're done with the RBNZ.That bank Indonesia coming in back of QE is going to be interesting, of course,come Thursday. So stay tuned for those.Both are expected to keep rates on hold. Okay, Market wise, speaking of on hold,we are on hold across these markets ahead of video which comes out tomorrow,early morning Asia time.

Asia ex-Japan should be seen eitherslightly lower or slightly flat on the benchmark itself.Dead flat, in fact, 0.02% also with the S&P, also with the dollar, although thatdollar weakness that is coming through slightly might be down to the strengthin the Kiwi dollar that has come off literally in the last few seconds or so.Iron ore is a story in and of itself. We're not trading at 122.They're on the contract in Singapore, which by the way I should note Singaporeshut. So that's a price as of yesterday.Very quickly, let's look at China and Hong Kong, please, if we can.And the message here is the clients.

Well, we're the clients are okay.We're not going the opposite way. Half of 1% on the Hang Seng index.We have resumed some gains after the 2% drop that we saw yesterday.Okay. A lot to digest there.Let's bring in Marcelo Chao, global macro strategist at Jp morgan, AssetManagement's. Nice to see you.Good morning. Good morning.What do I what do I need to think about when it comes to this China rally?30% in right now? I think tactically it is quiteinteresting.

But then, frankly, we still believe thatstructurally for long term, we still remain constructive.But structurally there are still some hurdles to jump start.Particularly with regards to like private investment and also with regardsto the property market. We do see like in terms of the secondarymarket, probably market will look for leading indicators, for example, whetherthe price declines will stabilize or get shallower or in terms of volumes or thatbe stabilization in terms of that. And also the pass through of the cellspass through it, will that become more reasonable?Recent data suggests that secondary.

Transactions in terms of sell to hasimproved. So we're waiting for more concretedetails on that. But for like the property sector as awhole, we'll likely need to see more in terms of like stable dividend earningsgrowth and also price growth and also improvement in profit margins forinvestors to pick up and confidence in that sector.And then private investment as a whole, we'll still needmore confidence in that sense as well. Okay.So we'll need to wait for the fundamental story to eventually follow.So if most of the exposure right now,.

Based on the data is really into largecap tech equity, equity at least, do we broaden out the view now?Do we do we go into other sectors at this point in time?Like what is your advice here in terms of specific China exposure?Right now, we still believe high quality, large cap is still a preferableway to go. And also structural themes continue tobe the way out. For example, the shift away from Chinawill continue to shift away from those commoditized manufacturing to morethematic a cyclical like carbon transition or like the self sufficientin terms of technology and hardware and.

Software.So those tech sectors will be the ones we continue to pay attention to.Michelle, if I can jump in, I understand also you're in the middle of your nextreview of markets and the economy for June.Is there some snippets you can give us about the bullet point?Yes, actually, we are in the midst of writing up our mid-year review, whichwill be released next, next month or so. And actually what is surprising, as wehave been talking about how US economy has been more resilient than expected,but actually within Asia as well, Asian economies have also been more resilient,expected well, one to GDP.

So upside surprises from Hong Kong,China, Korea and also Indonesia. And like PMI wise, we see thatmanufacturing and services, maybe services wise, with the exception ofChina, both also across Asia, have been reaccelerate at recently too.So us with regards to Asian economies, inflation has also actually remainedquite tip it and given slow wage growth. And so actually in terms of inflationwise, monetary policy for Asia, they are actually not in a rush to hike or whatare actually they can cut at their own pace and to save economic growth ifneeded. But then I think they are still waitingfor the Fed action for the next move.

Marcella, as we wait and video earns,I'm just back from Taiwan as well. I did a number of covers not only on theinauguration but on I and companies there.What's your top line take on the momentum in the air here inAsia-Pacific? Because this tonight and I think rightnow market we remain cautious before the earnings but then I think to be frank wewill need more clear for guidance for to surprise the market.But then in terms of its impact or pass through to Asia right now, if there isany surprise on the earnings or any beat and revenue, etc., that was this, justsustain the Japan and provide additional.

Tailwinds for air related industries,particularly that will benefit like Korea and Taiwan.Okay. If I had to pick between the two Koreaand Taiwan, people use that interchangeably.They're different companies, different parts of the ecosystem.Taiwan admittedly air to date has actually increased.17.3% is actually the most well performed market year to date, evenoutperforming MSCI Asia Pacific ex-Japan, which is only up nine, only anup 9.1% year to date. But then our valuation wise, actuallyMSCI Taiwan is a bit expensive right now.

At around 18.3 times versus its averageof around 12.4 times. And right now for Korea, we continue tobelieve that the memory cycle upswing and also does air.Suppose as well as the value up reform will continue to benefit it both on thevalue sectors and also the growth sectors and valuation wise is actuallyquite reasonable at 10.4 times versus a 15 year average of ten times.So it's very reasonable. And as earnings growth last time when Icame it was around 77% for 2024 as been recently revised up again for 2020 forearnings well to 85% from as a comparison compared to last year.And people expecting 2024 earnings.

Growth to be around 51%.So it's still a large jump. What if Nvidia disappoints?Yes, and they might be. But there might be a short term retreatand correction for those are related industries.But then in the long term, those structural drivers will continue tosupport industries and related sectors. I think they're talking about apotential. Our investors are worried about an airpocket, so to speak, between the orders and expectations from companies likeAmazon. They were going to they put on pausesome of their purchases.

The high end in video accelerators likeage 100. They're waiting for the next series,next generation of accelerators coming from a video.So I think most of the market agree that it could be a short term blip downwardsafter their results. Pivoting then again to macro policy inthe U.S., what you call on the Fed is September.Too premature to say a cut or is it more towards the end of the year?Indeed, recently was low weaker than expected CPI, which we see that ViceChair Jefferson was actually saying is encouraging.We do see that a market has revised the.

Right call more to us swing toSeptember, but we do believe that this might be a bit premature becauserecently, for example, GDP is far from weak and then there are still inflationcomponents that remain quite sticky. And also in terms of financial conditioncompared to early 2022 is still relatively easy.So the fact is actually not in an urgency to ease, but frankly, like this,you need to see more data to support this.And for now, we still believe December might be a way to go, but then Septembermight be a close call to do. We at least assume that bonds willoutperform cash, though?.

That's that's the other comparison.So cash strategies versus bond, even if they don't cut you favor bonds over cashor cash over bonds, Those stocks and equities over cash forsure. Okay.For the next 6 to 9 months. I particularly believe that even thoughno matter September or December, the Fed next step will likely still be a cut andit's just probably going to be delayed but not cancelled.So rates are still going to come down and this will continue to benefit.Flexible example. Yes.Today we see that corporate bonds and.

Treasury bonds, given all the rate andalso the inflation uncertainty, we see that corporate bonds actuallyinvestment grade and also Treasury bonds actually underperform.But that high yield surprisingly outperform.And actually we see that in Asia, Asia higher outperformed as was a returning9.1%. Yes, compared to us, high yield around2% year to date, which is decent as well.And and this is because of like the solid credit fundamentals and also thebetter than expected Asian economics. Although as I was my shrink is out andalso resilient last economic outlook as.

All like the whole market perceives andunderstands. And so going forward I think as you werementioning about the midyear and the outlook is that as rates and alsoinflation uncertainty subside, this will suggest that there will be morepotential upside for corporate bonds and Treasury bonds especially.They will continue to provide a downside protection to growth in case we stillbelieve that economic fundamentals might weaken going forward.And and as for spreads will still likely remain tight, but then it will remainquite stable and can remain tight for a bit of time.Marcelo, thank you so much.

It was great to see you.Marcello Chao there, global macro market strategist, rather, at Jp morgan camerasshaking another earthquake, Dante, a Jp morgan Asset Management there.Okay. Just to recap, the breaking news thishour, is our BNZ really causing a bit of friction in these markets?The Kiwi dollar is on an absolute tear. Bonds are effectively on offer rightnow, so we're up four basis points at a three year yield.The Kiwi dollar is up now 9/10 of 1%, which is typically a move you don't seeoutside of central bank decision days as well.So effectively we're looking at rate cut.

Expectations getting pushed back basedon the forecast, although the latest line coming through out of the statementI believe here is that a cut was actually of no.Rather, raising the cash rate at this meeting was actually discussed.There we go. So quite a hawkish tone coming throughout of the RBNZ today. Press briefing top of the next hour,This time tomorrow is our interview with the RBNZ Governor.Right. Just ahead here in shows, investigationsbegin after severe turbulence hits a Singapore Airlines flight, killing onepassenger and injuring dozens more.

An update next.This is Bloomberg. Welcome back to the program.Live pictures out of Singapore right now.Of course, we're on a holiday as far as cash equities go there in the city.No doubt the biggest story in town and you probably heard about this massiveturbulence hitting, of course, the Singapore air flight, the Ministry ofTransport ministry, to be more specific, is investigating after one person waskilled, dozens of others injured when a singer flight from the U.K.hit severe, severe turbulence. April Hong is with us out of Singaporeto get us up to speed on all the latest.

Yeah, April, just get us what do we knowat this point? Yeah, this is a really unfortunateincident and I think traumatic to those that were on board the flight.What we know is that Singapore transport authorities are in touch with their Thaicounterparts. They're sending investigators toBangkok, which is where the flight made an emergency landing.We hear how Thai civil aviation authorities, they are alsoinvestigating. Singapore Air says that it's workingwith authorities. There were about 230 people on board theflight from multiple nationalities the.

UK, Australia, Singapore, India, even.And it was supposed to be a routine flight 13 hour journey from London'sHeathrow to Singapore's Changi Airport. And it was over Myanmar, the IrrawaddyBasin that we actually saw this really severe turbulence hit and that emergencylanding in Bangkok had to be made. Passengers describing about how theywere in their seats one moment and the next they were hitting the overheadcompartments. We saw images of a lot of items strewnon the floor. One British national was confirmedkilled. He is a man in his seventies and it'sbelieved that he suffered a heart.

Attack.There are also six or seven others that are in critical condition.That's what we know so far. Overall, it just goes to the point whereyour seatbelt obviously, you can't necessarily predict the weather or whenyou're going to get that kind of turbulence.I know off eastern Japan is some of the most turbulent air in the world.You always wear your seatbelt there, but flying over the continent and flyingover Myanmar is there are indications in this investigation, first of all, theairplane acted as it should have. It did not obviously crash.And the crew, I'm sure in the pilot in.

The cockpit, acted accordingly.But is there investigations into maybe how climate change and how the weatherpatterns are affecting and making incidents like this more common?Yeah. We don't yet know what sort ofturbulence actually caused this particular severe incident, but ingeneral, turbulence is caused by pockets of rising hot air.Or it could be because of clouds that come with gusts and storms.But the more severe forms include clear air turbulence.And this occurs at higher altitudes. This is something that is practicallyinvisible.

So really hard for pilots to see, muchless to avoid. And note here that the flight wascruising at around 37,000. Altitude is really high when thisincident occurred. To your point about climate change, wedon't quite know yet. It's very difficult to pinpoint climatechange to a specific flight. That's just because the data is not verycomprehensive and it's really reliant on pilots records.But we already hearing from atmospheric scientist who talk about how in theNorth Atlantic, for example, since the 1970s, I think that's a 50% surge inthese clear air turbulence cases.

And they expect it to double, eventriple in the decades ahead. But even without the climate changeimpact on air travel, as it cannot be ascertained just yet, we already see howit's affecting travel on the ground even before takeoff.If you think about how extreme heat affects the ability of these planes totake off, because, as you know, hot air, less dense and cool air with all thesemolecules bouncing around just makes it a lot trickier.So in that sense, we already know how that is affecting air travel, causingmore disruption overall. Guys.Fantastic reporting there.

Everlong in Singapore for us, getting usup to speed on Avril's. Last point, you can read up, by the way,on the effects of climate change and what we know so far effectively andcertainly the science is not on climate change, on turbulence, to bemore specific, before some of you get upset here, is it quite all the way tothere just yet? But what we know so far are quick takeon this specific topic today on the terminal.That's quick go without the K for Bloomberg subscribers.Right. Other stories that we're tracking atthis point in time, PIMCO is increasing.

Its focus on alternative strategies inits Australian business as it courts the country's fast growing two and a halftrillion dollar pension industry. The asset manager says alternatives nowrepresent 77 0% of its Australian institutional business.PIMCO says that reflects a shift in demand from super funds.Now Blackstone plans to share ownership of companies it buys with a broadergroup of workers. According to an internal investor memoseen by Bloomberg, it's launching an equity linked incentive program forabout 18,000 employees at a climate tech firm.COPELAND That a move marks a more direct.

Effort by Blackstone to give workers ashot at equity, of course, in their investments.Now, Disney's Pixar subsidiary is cutting 14%, one 4% of its staff here aspart of its parent's cost cutting drive. The company says about 175 employees hadbeen laid off. Now Pixar will be focused on featurefilms and also move away from producing TV series for the Disney Plus streamingservice. Disney CEO Bob Iger wants to cut annualexpenses by more than $7 billion. Now, the Thai seafood supplier thatactually owns Red Lobster is challenging claims it forced the Dow bankruptrestaurant chain here to take its.

Products while management pushed adisastrous, endless shrimp promotion. Thai Union is disputing a statement fromthe Red Lobster CEO that the supplier exercised an outsized influence overaffairs. Now, the claims, well, this claimsleft Red Lobster with burdensome supply obligations, but plenty more ahead.This is just number. Welcome back to the program here.An update on assets in New Zealand following what eventually became afairly eventful BNZ meeting coming through hawkishall caps to underscore that, all in bold as well.Italics, if you want to be.

A bit more specific here, welleffectively is the cash rate. The track now suggests that cuts arestarting later next year. So not even this year is more than a fewmonths away. The committee also and here's here'shere's the thing, also discussed the possibility of raising the interest rateat this specific meeting. So it's not just hawkish.Right. The move was actually discussed.Now as to to what extent, of course, it was, we'll find out, of course, at thepress briefing at the top of the next hour out of the RBNZ, said for now thatthey left things unchanged at five and a.

Half percent.I mean, there's Garfield Reynolds in the top live blog essentially sayinggovernor or once again burnishing his credentials as a believer in stayingtough as long as necessary. Now we go.So yeah, that's really leading to the soaring Kiwi dollar yields on the wayup. Plenty more ahead here on show.We're talking EVs, China, ABC to be more specific.This is Bloomberg. Right.We're just moving in to the Tokyo lunch break, a fairly uneventful equity marketsession, although in the bond markets.

And certainly the hawkish tone comingout of Fed speakers, this now tone out of the RBA and said sending yieldshigher not just in New Zealand and certainly just expectations of inflationis here to stay. In fact, this is something you don'tnormally see. The ten year break even in Japan isactually now at a record high. So you take the nominal, you adjust forinflation and that's what you get. We're back at the highest level here.And you know, by the way, we're almost at 1% nominal on the one year JGB yielddollar yen has been behaving behaved itself very tight range of late 156thereabouts has been your handle and.

Declines across both major benchmarks inJapan 6/10 of 1%. That dovetails into the rest of theregion here where we are mostly seeing weaknessif not sideways trading. It's also worth noting, though, that alot of markets are shut here in the region today.Singapore, Malaysia and Thailand also shot later today, which will be comingon, of course, in the next hour. Now, all that being said, the Chinesemarkets seem to be doing the lifting today after pulling back yesterday,although upward momentum. You look at some of the technicalindicators do suggest that the upward.

Upward momentum in the Chinese market,particularly in Hong Kong, still remains largely, largely intact.All right. That's all I can store for now,effectively saying nothing is happening there.It was across this markets, 60 seconds of me just talking.Not so much nonsense, but hopefully helpful context.Okay. The China Chamber of Commerce, the EU,and we're talking tariffs here. Well, it says Beijing may considerraising temporary tariffs here on imported cars for large engines to amaximum of 25%.

That a trade lobbying group refers to aninterview published by state newspaper The Global Times, which called for thetariff increase. Chinese EVs are under scrutiny in the EUand in the US, as the West accuses China of overcapacity in new energyindustries. Yep, that's, I guess, newest chapter, apotential newest chapter in this ongoing story here.Exporting Pong BYOB Madam Now into the session NIO and Li auto on your screensright now and explaining reason. Perhaps you're seeing that mostpronounced on your screens is out with earnings.That's a smaller or narrower loss.

It also was down 10% yesterday.So this just makes up thereabouts of the move offsets the declines we hadyesterday to talk us through those earnings, the industry and perhaps whattheir top picks are. HSBC, Shanghai Securities, head ofChina. Also research Eugen Deng joins us out ofBeijing today. Good morning and thanks for coming onthe show. Why don't we start with with x pong?That's certainly the most recent development here.Narrower loss. When do you think the company eventuallyturns a profit?.

Yeah, sure.Good question. So we're still forecasting they're goingto be loss making this year, but the trajectory is the loss making will benarrowed versus last year. And they are running towards improvingtrajectory. They're going to have the new model,Mona Smart budget sedan model launch in the next months and ramping up startingfrom third quarter. They also are going to introduce anotherB-segment, which is a mid-sized sedan, new model in the fourth quarter.And also a company talked about they're going to have ten new models lining upsince the third quarter this year until.

2026.So they are selling into a strong product cycle.And if we do see quarter on quarter improvement underway is still a lossmaking but not much narrowed. And we expect our along with the productcycle and volume and a scale expansion, the company can gradually break, breakeven. You tend Stephen Engle here.I was of course up at the Beijing Auto Show and EVs were everything there,obviously. But again, profitability is a problemacross the entire sector. I mean, BYD has two cars that they'reselling below 11,000 USD.

There's a massive price war going onright now to get consumers to fork over that kind of money.And that's why a lot of those, as you just mentioned, about Xpeng, they'recoming down from the high end to the mid range and even lower.So what's it going to take to get profitability at a time when there's avery fierce price war across the industry?Yeah, sure. We would say the pricing pressureprobably in part of life now during a process of the consolidation where whichis where we are at the moment and the board chairman do talked about 24, 25and 26 going to be a tough consolidation.

Year where we see the the leadersprobably are willing to sacrifice excessive return to accelerate thepricing war or accelerate the consolidation process.So for the near-term, it's going to be a profit profit pool of destruction in thenear term. But hopefully when we consolidate, wehave less survivors. The pricing in my mind could be gettingbetter and the industry pricing environment will be getting better.And generally the profit pool can can reconstruct from there.So we're going through this consolidation process, but pricingpressure will be on and off.

And but we do believe that secondquarter, the pricing movement is better than the first quarter because body isnot cutting. And also the demand dynamic is trackingbetter. And on top of that, government do have atrading subsidy which help to ease and giving more clarification for theconsumers who want to buy. Well, you can I'm not sure if you cananswer this, but I guess investors who are looking at this sector and wonderingwhere to invest in the supply chain or in the automobile makers, if you'retalking about consolidation, who are going to be the winners and who aregoing to be the losers, who's going to.

Be squeezed out?Yeah. So two side of the mitigation.So I'm on the OEM. So we do believe Boyd will be a clearwinner so that taking a close to 40% market share and disproportionally moredominant are in the profit pool considering a longtail of laggards who are still struggling our loss making.So they are the clear winner. They basically have the scale, they havethe leading technology and they also have a very practical pricing tacticsare through this consolidation process. Another and another implication we wantto emphasize would be on the battery.

Leaders, for example, Catl.So we're talking about the last week EV penetration has been breaking 50%.So generally EV is taking more share from the eyes.Therefore, the the midstream battery supplier leaders such as Catl would alsobe able to benefit regardless of who is the OEM winners.Right. Can I just ask you, since you mentionedBYU, your other topic is Lee Auto you as it is, you have a buy recommendation andboth if I could just get it out there as well.The the earnings which came out I think two days back, particularly the whatwe're seeing with the mega model.

So they've you know, as you know, theybrought down the guidance on deliveries didn't the stock could absolutelypunished yesterday. I think we're down still a little bittoday if not a little bit higher, 2.7%. Is this a buying opportunity and I guessyou're not concerned over what they said.I would say yes. They are currently going through a roughpatch. Second quarter still remains a littlebit more challenging, especially given the recent headcount cuts.And also they've just introduced the price cut for the existing portfolio.And they all they also have been ramping.

Up the new model six.So second quarter remain to be a bit more turbulent.But the silver lining is the first quarter gross margin remained quitehealthy and the job cuts are based on my my piece,the OpEx burden into the second half. So and also the price cut, my really isthe more volume elasticity down the road.So we do expect a mostly data point to tracking improvement.It could be the key catalyst of down the road.Eugene, how do you read the impact on these Chinese OEMs from the prospect oftariffs?.

The US market is already pretty muchnonexistent now. They're going to raise tariffs to 100%to pretty much closed the Chinese off from the U.S.So let's look at Europe. They're talking about possibly another20% tariffs on those Chinese EVs to that market.But then BYD and others, they're going to start making them in Hungary, whichis more China friendly. How do you see this all playing out?Yeah, sure. Our players, the OEMs, has beenbasically talking about there being budgeting for potential higher tariffsin Europe.

But instead a more important way tomitigate the mid-term risk is to build the in-market production.So besides opening plants in Hungary, in Europe and also Thailand, Indonesia inAsia, and also Brazil from the South American standpoint, and also thismarket supply could be able to mitigate the risk into the mid-term.That's what they've been focusing. And also in the near term, I just wantto stress that the volume MELI coming from the emerging markets such as ASEAN,ourselves, America, Europe is a strategically important, although westill have a little bit a little bit of uncertainty aboutthe tariff over there, but it's going to.

Be a strategically important but volumeperspective is emerging market at the moment.Hmm. Right.Final question for you. And, you know, Steve was, as wementioned, he was at the auto show. And, you know, one of the I rememberthis, Steve, that you mentioned this during the auto show, that just theproduct lineup that these Chinese EVs are coming out, even makers are comingout with is very, very impressive. So you and my question for you is, wekeep talking about how, you know, lower prices are attracting Chinese consumers.And I'm wondering whether the preference.

For Chinese models simply goes beyondbecause simply things are cheap because a product lineup is just globallycompetitive at this point in time. Yeah, I would say the product is notjust cheaper on the ticket price perspective, but also better because ofthe better software experience. We do see a strong product strengths,affordable price as well as our software experience.Nice touch would make China product of for a good start on the global arena.We are conscious about the increasingly more complicated trading environment,but to imagine supply as we talked could be a meaningful way to mitigate themid-term risks.

So starting from the good product, butbuilding the consumer trust and channel could bea long march, which might take time. So I would say export at the beginning,but eventually localization across the region and to build the consumer and thebranding traction would be a tough job. So of a good it's good to start, butmany execution hurdle to be checked the down the road not without obstacles, butthe product and pricing and the whole strength package looks quite attractiveat the moment. You can take fantastic insights andreally an evolving story here still ahead of China, Ortiz research at HSBCChennai Securities, joining us there out.

Of the mainland.Great. Just ahead, the economic miracle inChina might be ending, leaving the president Xi Jinping, with a challengereally none of his predecessors actually faced.Given where China is in its development cycle, More on our big take just ahead.This is Bloomberg. The Chinese economy has been hit by aseries of blows, including a real estate collapse and a trade war with the US.Now, this is certainly presenting a fairly unique problem to economicofficials and to Chinese President Xi Jinping, who really, unlike hissuccessors or predecessors, cannot bank.

On economic strength to underpinsupport. Now, this chart coming up on your screenshortly shows that real disposable income growth, this is growth, notabsolute numbers from 1978 up until last year as we pan show that incomes arestill rising. But under Xi, gains have actually beenat the slowest since the late 1980s. It's a function of a growing and matureeconomy. Question mark The property crisis isalso hammering household wealth. For more context on our big tech today,our Asia government and economy correspondent Rebecca Chan Wilkins hasbeen looking into this and joins us.

Right now.Rebecca Thank you, David.So for this story, we looked at these two big data sets, the IMF dataset onChinese GDP growth that is across the horizontal line.And we also looked at data metrics, a variety from varieties of democracy onfreedoms. So things like press freedom, academicfreedom, so on, which is the vertical line up here.And essentially we looked at how this changed over time.And when you overlay these two data sets, you see quite a striking pictureof how freedom and growth has evolved in.

China over the past 40 years.So if we come to the Mao Zedong era just before the reform era of opening upbegins, you can see we end up in this place over here where freedom is reallyquite constrained. Growth is really very weak as well.But as we move into reform and opening up under Deng Xiaoping, you can see thatgrowth starts to expand in quite a big way.And as growth expands, we also see here the expansion of freedoms, socialfreedoms. Now, under Jiang Zemin, these levelsstay roughly the same. So you can see this trajectory on theblue line here under Hu Jintao, we then.

Start to see the beginnings of aslowdown in growth and the erosion of some social freedoms.So the line coming down just a little bit here.Now we fast forward to 2023. Under Xi Jinping, we see that China hascome almost full circle as growth slows and Beijing clamps down on socialfreedoms. So this is why we here right in 2023,almost very close to the levels here where Mao Zedong finishes and ends hisera. Now, of course, it's important to saythat the base level of living standards for Chinese people is much higher underPresident Xi.

But this return to constrained freedomsalso tells us something about how Beijing is handling the challenges ofthis post boom era. Yeah, in fact, we also have some numberson this too, Rebecca. You know, speaking of economicconstraints and also social freedoms, right?So we have data here showing that 80% of protests in China last year wereactually linked to economic issues rights, livelihood, unpaid wages,property pressures, two known challenges there as well.These are figures, by the way, from the Freedom House in China.This is the dissent monitor.

As you can see, 80% are because ofeconomic issues. Now, Rebecca, you've spoken to a lot ofpeople for this story, obviously. Who were they first of all, and what didthey say? So we spoke to really people across upand down the income ladder, everyone from mutual fund managers, commoditytraders, entrepreneurs, but also window cleaners, people who are taking on extrawork as Didi drivers on the weekend and so on.And one story that sort of struck me was Mr.Huang. He's a commodity trader who's struck outon his own a few years ago when his.

Province loosened rules around tradingenergy. And he was originally very optimistic.He sort of had these boom years in the lead up to COVID.He bought a Tesla Model X, He bought a really expensive apartment in the trendyNanshan area in Shenzhen. But the last few years, he say, havebeen even tougher than in COVID. He talked about his friends deciding tocancel or postpone changes decisions to have children.For example, he talks about his friends in other business getting trapped inthis cycle of debt and not being able to manage their debt loads as well.And for him, particularly factories that.

He sells energy to are worried aboutlocking in these long term contracts because they don't know the prospects oftheir demand exports. So margins for him are down tonegotiating for 0.001 kilowatt per hour as a sort of grew incredibly thin, razorthin margins when it comes to negotiating these deals.No margin for error. Exactly.Quite literally. Yeah, right.This brings up the big sort of question and the social contract.Right. Deliver growth, deliver prosperity,and things will remain stable, for.

Example.Is is that is that social contract to some extent be questioned at this point?Yeah, I think this has always been the debate.Political scientists sort of sometimes talk about this is performancelegitimacy, essentially this idea that the promise of a better life, theseimproved improvements in wealth and so on, have underpinned the legitimacy ofthe Chinese Communist Party for a long time.Now, that certainly isn't beginning to collapse.It's not we're not seeing a breakdown in that exchange, although we do see moreof these incidents of economic protest.

They are not sort of coordinated ornationwide. It quite limited, sporadic in nature,but we are sort of seeing some of those signs start to fray and we get that alittle bit in some of the some disillusionment from people that wespoke to on the ground and is concerned that they are sort of hedging theirheels in preparing for a tougher era of frugality ahead.Rebecca Chin, Look, it's fantastic reporting there, of course, are Asiangovernments and economy correspondent And that's that's barely the surface ofreally this big take. So just catch it of course, for ourBloomberg clients here and really how.

China is navigating the slowdown in thiseconomy. Subscribers can read all about the bigtake on your terminals. And also we have a podcast on this aswell. So any big take takes you to the actualfunction where you do of course see the actual text.And also you can listen to the big Tech Asia podcast out today, iHeartRadioApple Podcast and also Spotify. New episodes are dropping, of course,every Wednesday, plenty more ahead. Trying to brief to be more specific,this is Bloomberg. And welcome back to the China show.Here's your China brief, a look at.

What's making headlines in nationalnewspapers and online. Well, the Securities Times cites theNational Development Reform Commission, or DRC, saying the government, theChinese government, is preparing to reveal the first batch of projectsfunded by the long term special bonds. China first started selling the noteslast Friday, and Beijing plans to issue those special bonds for severalconsecutive years. Meanwhile, Shanghai security news saysPremier Li Chung has called on the financial sector to serve the realeconomy. Vice Premier Li Fung also askingofficials to prevent and control risks.

In sectors such as property and localgovernment debt. Yeah.Meanwhile then, when you look at the People's Daily, that's the CommunistParty's official mouthpiece here has well devoted quite, quite some realestate here, an entire page to criticizing Taiwan's new leader andsuggestions of the island's independence.Now, one of the articles quotes Foreign Minister Wang Yi describing Taiwan'sindependence activities as being the greatest threat to peace in the TaiwanStrait. Now, speaking of Taiwan, it's also beena very hot topic across Chinese social.

Media this morning.Two days certainly after that inauguration.So let's bring in Min Miller, China correspondent, to bring us full circleand really these conversations. What reactions are you seeing so far?Well, I think the timing is very interesting because on Inauguration Day,we actually didn't see very extensive coverage of the ceremony itself onChinese media. And in fact, Chinese social media waveWill had censored several hashtags mentioning that event.So I have friends living in China. They tell me that their local friends,many of them, were not even aware that.

This was taking place.But then several days later, we now see this deluge of articles criticizinglighting dirt on Chinese state media. One of the most outspoken is, of course,the foreign minister, Wang Yi, calling lighting to scandalous and a disgracefor betraying his nation and his ancestors, saying that thisreunification of the motherland is unstoppable.That's, of course, after Lai had made reference in his speech that he'swilling to engage with China, but on an equal basis, with neither side beingsubordinate to the other. But of course, that is something that isunacceptable to China.

The Chinese State Council have said thatlie is full of lies and deception, that he is trying to pursue independence withthe help of foreign forces. Stephen, I'll bring you in here reallyas a part of the conversation. You literally just got off a flight lastnight to cover this story, of course, in Taiwan as well.Talk to us about context, big picture and of course, the protest proceeding.Well, sure. I think what you're seeing is an attemptby the opposition going down the KMT to use their one seat majority in thelegislative yuan to perhaps, dare I say, undermine the opening days of lightingthe presidency.

Of course, he is more of an advocate ofa de facto independence, and that's where Beijing was picking up on whatthey just said, that his speech. Now they're calling it the May 20thspeech that essentially delineated the lines between independence and nonindependence. And he basically is his tone of hisspeech, according to Beijing, was more in line with past statements from him,which he has moderated, but more along the independence theme.So the in these protests are coming from DPJ members as well, because they seethe KMT, the two opposition parties, the KMT and the TPP kind of teaming up inthe legislative yuan to kind of.

Undermine any mandate that lighting themight have in the opening days of his administration.All right. Great context amendment.Thank you so much, Min Low there, China correspondent.I'll leave you with a brief look at some of these beauty stocks gaining in Chinatoday. On the back of this reports that maybethe Guangdong province provincial health officials might be adding sometreatments to approved cosmetic surgery categories.Yep. There we go.Beauty is sometimes surface deep.

Kidding.This is Bloomberg.

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