This is the Asia trade.I'm here, Brianna, in Tokyo. I'm Heidi Strode.What's in Sydney? The top stories this hour.Bonds rallying as a cooling US labor market bolsters bets on Fed rate cutsthis year. Asian stocks are set for a lower open.Also ahead, the yen gains with the BOJ set to discuss cutting bond purchases.We'll get Japan's economic outlook from the executives at monarch's Komatsu andSuntory. And I'm Haslinda Amin in New Delhi.Narendra modi vowing to stay on as prime minister even as his party loses itsparliamentary majority.
Indian stocks suffering one of theirworst days on record. On the shock result.We are getting just that South Korea GDP numbers just crossing the Bloombergfirst thing this morning. This is a picture as we see 1.3% of arise quarter on quarter. That was the same as the previousestimate. This is a revised first quarter GDP to astatement from the Bank of Korea. First quarter GDP expanding 3.3% year onyear versus the 3.4% in the previous estimate.If you want to break that down when it comes to some of the subsectors.First quarter manufacturing seeing a.
Growth of almost 1%, the 6.5% year onyear construction growth seen at five and a half percent quarter on quarter, a3% year on year. And services that component there up by1.9% year on year there as well. So we continue to watch, given that wehad some data yesterday that sort of more or less came in line withestimates, do it's likely that the Bank of Korea is going to want to see a lotmore in terms of potentially where we go from here.There's been some concerns that the April rebound in industrial outputwasn't quite strong enough to offset some of that sharp retreat thatpotentially, Gerri, portends a second.
Quarter GDP slowdown for Korea.Heidi. We've had stronger than expected data,though, recently from South Korea, as you mentioned.Right. Especially given that exports are doingpretty well with the semiconductor sector.But when it came to the cost in the previous session, we really had thatdownside pressure across the board in Asia because of the volatility stemmingfrom the India elections. Right now we're focusing on the ASX 200futures. Of course, we do have those PMI numberscrossing the Bloomberg terminal, so.
Watch out for that.Not to mention that we have the RBA governor also speaking in Parliament,but we're paying attention to Nikkei futures really not doing much at themoment. But this of course, after the Japaneseyen strengthened a little bit, were trading around those 155 levels really afunction of what happened in the overnight market.We had U.S. futures looking like this, given that wesaw a little bit of gains for the S&P 500.This really to do with the treasury yield plunge continuing.We had weaker than expected job.
Openings, numbers really falling themost in over three years, Heidi. And of course, front and center isreally today's agenda when it comes to India.And what a shocker it's been. And obviously we saw that marketreaction, but we are getting sort of more confirmation in terms of thedirection of this vote count, that there is some degree of continuity that we canstill expect. Modi's coalition, that narrow win,though, putting that 8% India growth plan now at risk, the BJP will need torely on coalition partners to enact that policy.Obviously, Modi's goal was to make is to.
Sort of fast track the way to adeveloped nation. And he thought that he was going to dothat with a much stronger result in these elections.But this race to form government, the opposition really delivering a shockhere to markets. And the question for investors is aboutthat continuity that you mentioned, especially when it comes to challengesin implementing some of those tough political reforms and labor forces andland and property rules. But given that uncertainty, we saw thatplunge $386 billion wiped out of the Indian markets.And you can see there the Nifty really.
Seen the worst day since the globalpandemic and some of those more the stocks that could benefit also fromModi's election really taking a hit. Adani's wealth being wiped out, $25billion in one day. So sure as we've been talking about,Narendra modi vowing to stay on as Indian prime minister, even as theopposition delivered that election surprise Punia gets up.Today's victory is the victory of the world's largest democracy.This is the victory of unbreakable allegiance put into the Constitution ofIndia. And this target?In our third term.
This country will see a new chapter ofbig decisions long gone, and they are highly capable.This is Modi's guarantee, the gig guarantee.Let's get to our Bloomberg Markets Asia anchor has been covering the vote countfrom New Delhi. Haslinda Amin joins us now this morningand has this is quite a blow to Narendra modi given what polling was suggesting,just how strong the results were supposed to be.After all. You're right.It is a huge blow for Modi. In fact, one political analyst said thatthis is not an election.
It is a political earthquake.I mean, no one saw this coming. And the fact that the Indian stocksdumped about 8% at one time says just about everything.Now, after the vote count, this is where it stands when it comes to Modi's BJPparty. They secured 241 seats.Yes, it is. You know, they want the most seats outthere, but well short of the 272 that was needed for a single party majority,something they've managed to do in the last two elections.Essentially what that means is that Modi will have to tap its allies, the twoparties in its alliance.
The problem is this Yes, they could gothe Modi way, but they could also decide to join forces with the opposition.This is where it stands. The two leaders are the two allies havea history of flip flopping in terms of its allegiance.In fact, the two parties join Modi's alliance just several months ago,putting in question whether or not Modi will secure that trust, that vote andthat seats. So, in fact, the wholeposition for the BJP is in question, along with Modi's position himself.Remember that BJP is as strong as Modi. Modi came to power ten years ago andthat brought along the power of the BJP.
That is now in question.Modi took to act late yesterday when it was quite clear what the situation was.He claimed victory. He said this is an India that he wantsto lead and wants to continue to lead. But it's not the same Modi and it is notthe same. India democracy has spoken.Remember, this is a country of 1.4 billion people and they have voted for acountry that they want. So I seen that during theseextraordinary six weeks of voting, what were the toughest battles fought?Well, for India, the election is won and lost in the Hindu heartland.We are preoccupied with the Adani's and.
The Ambani's health of India, but it isnot where the elections are won. Case in point is Uttar Pradesh.This is the most populous state in the country.80 seats were at stake in the last election in 2019.The BJP garnered 62 of the 80 seats available.This branch, they manage only 40. Now, remember that this is a state whereit is populated by the rural poor. Most of them are farmers.Most of them are poor. And Modi's promise of growth has nottranslated to jobs, has not translated to food on the table.And they voted for the basic necessities.
Of food that Modi has promised hope,promise, wealth, promise growth. But they.They are struggling on a daily basis. The cost of living is hurting them.This is also a country where 800 million people benefit from free grain from thegovernment. So it gives you a sense of what thestruggles are for the people, which are Pradesh voted against.The policies that Modi has adopted, which are Pradesh, is where it is clearthat Modi has not worked for them. Marcus Cohen, current chiefinternational correspondent for Southeast Asia Haslinda Amin there inNew Delhi for us.
We'll be getting more from herthroughout the course of the day as this result continues to percolate through.Marcus, Let's bring in Julius Baer, head of Asia Research, Mark MATTHEWS now.So, Mark, when you take a look at the outsized market reaction and maybe youdon't think it was an outsized reaction, given the magnitude of how much thisresult really shocked expectations. Do you think that this was anoverreaction? Do you think that this really does putinto question the longer term growth path for the country?I don't think it was an overreaction, Heidi, because it's a shocker of aresult.
And there's no doubt I can't put anumber on it, but there's no doubt a major part of the bull market in Indiaover the last few years has been the results of the reforms that thisgovernment did in the previous two administrations.And so the question is, without a majority in a third administration, willit be able to enact even better reforms which had been to some extent priced inthe market, and as has Linda said, things like land and labour reform.So I can't put a number on it. But if I if I had to, I'd say maybe 20%of the bull market was it was sort of attributable to that future promise,which arguably is in doubt because the.
Two parties that Modi will need to havea majority are fiscal friends and they will be more concerned about their ownstates of Bihar and Andhra Pradesh respectively, than they will, you know,building infrastructure and creating a manufacturing base across the entirenation. That being said, you know, there'sstill, as is 80% of the story, which is intact, in my opinion, which is all thegood news that remains in place, which is the great demographics of thecountry, are truly unique in the world. No other country has the kind ofpopulation growth in front of it in the prime moneymaking age cohort of 30 to 60years old that India does, 150 million.
New people will join the ranks of thatage cohort over the next 20 years. There's no other country like that.China is going to lose about 120 million in that age cohort over the same period.You have 7.8% GDP that they registered in the January to March quarter, whichmakes it one of the fastest growing economies in the world.And and that momentum, I believe, will continue regardless of whether the bigreforms we had hoped for get passed or not.And maybe I'll just add one final thing is that the Jp morganEmerging Market Bond Index will include India as of the 28th of this month.You have the Bloomberg Barclays Global.
Aggregate Index and the Footsie Bondindex, which may follow, and that could result in a lot of money coming intoIndia to invest in its bond market over the next year, year and a half.I put it all together and I don't want to get bearish on this market.That would be the wrong thing to do. So maybe we call that 20%, that sort ofModi premium that gets shaved off the top of, you know, still these very wellperforming markets. I do wonder, though, because obviouslythis was not just Modi as a very effective economic administrator.It was also his political personality that was on the ballot this time.Right.
So is there a sense that investors kindof need to contend with either a weakened leader or potentially in thefuture a different sort of leader for India?And does that create more uncertainty or are the structural strengths of theeconomy going to still propel it through?Well, as Linda said, it proves this is a democracy.And as Prime Minister Modi himself said yesterday, this is a democracy, and Ithink we should celebrate that. Right.I mean, goodness knows there's enough problems in the world with countriesthat aren't democracies.
We could we could use a few.So I'm very happy that this proves that India is a democracy.And as to his charisma, his leadership, I doubt that will change.But there's no doubt and to us, Lindor's point in those big populous northernstates like Uttar Pradesh and Maharashtra's Strong and Rajasthan, itis clear that the rural people have expressed that they they they want moreand that they've got to take the money from somewhere.I suspect that it means less invested in infrastructure, which is importanttoward developing a manufacturing base. You need the infrastructure and more,you know, kind of welfare for those poor.
People in the rural north of thecountry. And I can't really say that's a goodthing, but it's reality. And I just want to reiterate, doesn'tchange the fact that it's a it's a great economy.And I think we'll still be a great stock market.Mike, we've been talking about the attractiveness of Indian stocks for avery long time. So what are valuations looking like now?Well, if memory serves me right, it's often around 20 times this year'searnings. But if they do get, let's say, six,seven, 8% GDP growth per year, this is.
The only emerging market that I knowwhere the GDP growth actually gets translated into earnings growth for somereason. In all the others, what happens at thetop line, it doesn't go down to the bottom line.And I guess that's because in many of these other emerging markets, they justdon't have the scale that India does. So the owners of companies are much morepreoccupied with maximizing their own, you know, sort of personal gain and lesspreoccupied with trying to grow their whole company.And in India, I think because the growth is so big in front of them, 1.4 billionpeople, most of whom are young, the.
Owners of companies are saying, well,I'll grow my whole company. That's how I can become wealthy.Instead of trying to figure out ways to maximize my personal gain.And that translated to good earnings. So if the earnings are, I think theyshould be about, let's say, 12 to 15% per year over the next three years, it'snot an expensive market. Okay.So how about when it comes to the connectedness of Indian markets andbusinesses? And I ask that question to just gauge ifthere will be implications for other Asian markets if, in fact, PrimeMinister Modi does have a harder time in.
Enacting policies this time around, thelike. I don't know really how to link it withthe other Asian countries. I think everybody's in their own kind oforbit. So I can't really make a link there.I apologize, you know. Julie is very head of research.Mark MATTHEWS there with his insights on the broader Asian markets and India inparticular. But first, A to a capital says Rio Tintoshould abandon its primary listing in London and unify its corporate structurein Australia. The activist investor tells us why next.This is Bloomberg.
This is the age of training.Take a look at how we're setting up for the Japan session.We are seeing the Nikkei holding steady at that 154 level below 155.A little bit of strength, but mostly to do with what's happening in the US withthose Treasury yields continuing its downside, we're seeing Nikkei futuresdown 8/10 of 1%. We had lost ground in the previoussession, but when it comes to activist investors and activism in the Japanesemarkets, well, this year is expected to be another busy one.They want to shake up corporate Japan's, followed by the government andinstitutional pressure to improve.
Corporate governance and boostvaluations. Activist investors are pursuing morehigh profile investments. Joining us in the studio is James Smith,founder and CEO of Hedge Fund Capital. Great to have you with us.So it's June already. What are you seeing so far?Are we going to keep up this momentum? I think that's right, Cheri.And thanks for having me on. I think the momentum is really strong,led by institutions like Tokyo Stock Exchange.And I think it's going to be an interesting AGM season.You've been very busy here in Japan as.
Well.I believe you took a stake in KC Electric Railway as well.How busy are you in Japan? Looking at a lot of opportunities in theJapanese market. Case has been a large project for us.As you may be aware, we have around 2% of the company and we've put proposalsinto the AGM, which is happening in a few weeks.So it's a busy time. They've pushed back saying that some ofthe changes that you've proposed are very near sighted and I think a lot ofthe corporations here in Japan, when they see foreign investors come in, isthe first thing they tell you is long.
Term.That's not good for us. How do you counter that sort ofcorporate culture? Look, in the Kazakh case, I'm aware theyhave suggested that we're perhaps short term.We've been in discussions with them for three years now, almost since welaunched our fund in August 2021. I think it's a bit of a stretch to gothree year short term, and we take a different view that what we're puttingforward is got long term benefits. People might push back on that,especially given that is Japan and all of these changes happen very slowly.But I wonder if we're going to see more.
Bolder measures when it comes to pushingthese Japanese corporations for change, because that's really led to a lot ofoptimism in the broader markets, especially foreign investors looking atJapanese assets. Look, I think it's definitely the casewith the pressure from Turkey's stock exchange that the bar has raised andcompanies do need to do better. Picking the companies you invest in isobviously important. And I do think we're going to see a waveof more comprehensive change from a lot of issues.So we're excited about that. James, what are the sort of thematicsand pop sectors that you're looking at.
When you're taking up positions inJapan? A variety of things.We're looking for companies where there's a consistent, solid return oncapital employed or potential for that, and where there's latent value that canbe unlocked from progressive steps but taken by management.So a real variety of sectors, i.e.. And, you know, we've obviously talkedabout the sort of final success story after a decade in terms of makingprogress on governance. And we've seen that optimism in othermarkets like South Korea as well. I do wonder, is it becoming easier totalk to boards, to talk to Japan Inc, a.
Members thereof, about making thesechanges? Do you think there's more receptivenessin these conversations now? Yeah, definitely been a positive changeon that side of things. And if we take the case a case as anexample, we've been pleased to meet with the CEO several times and I thinkthere's an environment where C-suite level conversations are easier and whenyou have those thoughts to put forward the received in a more constructive,positive way by companies. James, are you able to give us anexample, some examples of some of the more interesting positions that you haveright now in the Japanese market?.
Yeah.So I think I'd mention the case investment we have.So this is a company where it's it's intrinsic value is derived 80% from asingle stake in a passive investment they have in a company that runs TokyoDisneyland. When you, when you rectify theaccounting and you sort of pick away at that, you realize it's trading at a adeep discount to book value and an even deeper discount appears.So that's one way we've put a proposal into the AGM.We think there's a really exciting upside opportunity.So that's I think, a good example.
They want straight things.Are there others that you are also excited about other than case like?It would a variety of other companies in the portfolio.None that we're public on. We're talking in depth on at the currenttime. But I think a lot of of situationswhere, you know, there's a good chance you're going to hear more. I wanted to get some comments from youon Rio in terms of sort of the, you know, obviously the stake that Pelosihas taken and the kind of desire to unify this listing.Are you able to tell us a little bit.
More about that in terms of what youwant to see? Yeah, So, Heidi, this is one that wepresented around ten days ago at the Sony conference in Hong Kong.Not too much to add at the present time on that, other than to reiterate thecomments that we made, that by unifying those two listings of that dual companystructure, there's an awful lot of upside and it'll unlock a lot ofpositive optionality for the company, which we think is very exciting.And talking about company structures, we have seen reallya lot of difficult corporate structures across Asia.And one market that comes to mind is.
South Korea as well.You talked about the Tokyo Stock Exchange actually doing pretty goodthings that could really encourage more transparency.But what about the South Korean market, especially that the government wantsthat corporate value up program, but it's really disappointed investors.Yeah, that's right. Sure.Yeah. It's there's definitely an initiative inan effort in Korea to mimic some of the improvements that we've seen in Japanand are ongoing. I think it's early days.I think there is an intent to improve.
Things, but the devil is in the detail.I think they're still working through exactly how they're going to bringcompanies to to really perform from that perspective.In particular, given, as you mentioned, the oftentimes very complicatedcorporate structures and organizational charts.Do you have positions in South Korea? But a number of positions in SouthKorea. We made public thoughts on Samsung sinceat the end of last year, which have been picked up in the public domain.And that's one of a number of companies with those complex structures whereyou're seeing discounts to easily.
Calculable intrinsic value of 60% plus,which is obviously a very, very attractive entry point for peoplelooking at that market. Do you feel that there's any differencein the reaction that you're getting from Korean businesses as opposed toJapanese? It's probably too early to do a completecompare contrast. We're encouraged by a greater awarenessin Korea of more senior executives to engage with shareholders.But it's another market where, like Japan, I think it patience is key andsort of respectfully listening and thinking through the position that thecompany is explaining to you and their.
Views is a really important part of theprocess and just taking your time. When it comes to government momentum,where are you seeing that the most across Asia?Look, I think definitely in Japan, I think the momentum is so strong here asas we've mentioned, places like Korea are trying to do a similar thing.But, you know, it's a little bit more complicated for them and earlier in theprocess. But definitely Japan is a bright spotfrom our perspective. You talked about some of the measuresthat the Tokyo Stock Exchange is taking. Are there any that could be mimickedacross other markets that you think.
Would help?Yeah. So I think there's this focus the TokyoStock Exchange has put forward on looking at your companies returns,examining why if they're not more than the cost of capital they can be andreally attempting to to take a path that allows you to achieve a valuation abovebook is a really sort of thoughtful and well expressed concept and there's a lotof scope for that to be rolled out in other jurisdictions like Korea andperhaps other markets in Asia. Jim Smith, great to have you here inTokyo in our studio, founder and CEO of Palliser Capital.Thanks so much for your time.
Coming up on the Asia trade will try theBOJ's rate path and its impact on the yen with more next group later thishour. Plus, catch our exclusive conversationswith the executives of Suntory and Komatsu in the next hour.And India also in focus with the Center for Strategic and International Studies.Coming up next, we'll speak exclusively with Tokyo based financial servicescompany Monex Group on their outlook for the Voges policy path and the yen.This is Bloomberg. On how the Japanese yen is trading atthe moment. We are seeing it at that near 155 levelagainst the dollar.
We saw it really gain ground againstmajor currencies are more a function of what the U.S.is doing, lower treasury yields. Following that, U.S.jobs data are falling to the lowest level since 2021.When it comes to job openings, of course, we have seen currencyintervention in Japan. The finance minister really having hisfirst acknowledgement of the action. But let's discuss all of the Japanesemarkets and bring in our next guest. Okay, Maxim motto, who's the executivechairman at next group, who joins me here in the Tokyo studio.It's great to see you.
Thank you.So let's talk a little bit about the Japanese yen and the broader Japanesemarkets. We have seen a lot of optimism overJapanese assets, but at the same time, perhaps a little bit more cautionbecause of what the weakness in the Japanese yen could signify in terms ofwhere the economy is going. Well, the currency is really a kind ofdifferent animal. So I can't I can't comment on it more.But it is really true. Japanese society is now changing, drivenmainly by generational change from the older generation, from the nowgeneration, it's the older generation.
They had a huge success experiencingafter World War Two. So couldn't really change the way theywere doing when they started seeing some problems.But the older generation never saw the success experience of a big of Japan.So we are more open minded. So that is a kind of main driver ofJapanese society or economy. It's now changing.So compared to that, the we can just the one kind of temporal move is thefunction of the interest rates and the others.So I'm not so worried about it. But others might argue that it's also todo with a function of where inflation.
Could go from here.And really there's a whole generation that's never seen inflation and pricepressures being in Japan. I hear from a lot of people thatcompanies don't know how to raise wages or how to raise prices for consumers aswell. Do you think it'll take more time forpeople to adjust to actual sustainable inflation?No, but the last two years, Japanese companies did raise wages two years in arow, like 4%, 5%. And also they started raising priceslike two years ago. So it's and people get accustomed tothings very quickly.
So just up until like two years ago,yes, Japanese management couldn't really raise wages or prices, but now peoplefeel more comfortable doing it. So it's really changing.We're just talking to a policy of capital and James Smith was telling usabout the change in that mentality, especially when it comes to improvingcorporate governance. Will that be sustainable enough toreally boost assets further when we have seen already a rally in Japanese stocks?Well, if you think about Japan, you know, if it'show to allocate the human resource or how to allocate theproduction factors, how to allocate.
Capital, all of those three things.Japan's been really, really bad. You know that right there is age.Age, seniority, system and everything. So we didn't really allocate thoseresources. But yet Japan's been producing like aworld number three or number four, the GDP, which is amazing.Which is amazing. It's like running with the iron shoes,but still managing to get some get get number three, right.So if we start changing those, you know, resource allocation, we can do muchbetter. So that kind of thing is now happeningin Japan.
So it's not so it's not very visiblebecause it's happening all over the place, but it's very reversible.Strong change happening. So I am so I am very optimistic,constructive to Japan, making strides despite wearing ironshoes. I really like that analogy in terms ofsome of the things that can change and have been changing investor attitudes,attitudes of of corporate boardrooms, for example.Do you think these things have been improving to a level where that ishelping Japan's competitiveness more globally?But it's not the to the perfect delivery.
Yet, but it is for sure changing, youknow, the accumulation of the corporate governance reforms in Japan, theaccumulation of the ISIS or the release of those people kind of coming up, thenew stricter standards and also the PSC and the activists andeverybody, you know, kind of providing what.Pressure to the Japanese corporate management.So a combination of all of those are now making them change.And I think, as I said, the biggest issue is not only all of those outsidepressures inside of corporates, the managements are my generation or youngerwho are more open minded to the global.
Standards or best practices over theworld because we didn't see that the huge success of Japan in Sure.So we are more open minded. So that is I think, a big factor.We've heard from some corporate leaders, including Morgan Stanley's age of CEOs,saying that he could actually see Japan catching up to the likes of Hong Kongand Singapore in terms of being a global financial hub.Do you think this is a realistic goal for Tokyo?Well, you know what?Japan, as you know, the beautiful place, safe, clean kids can walk around atnight.
So many reasons for people to come.But for those, you know, for Tokyo to become the hub of the asset managementbusiness, I do strongly believe that we do need to change the taxtreatment for individual to people. You know, the at the end of the day,this asset management division is a financial business, a people business.We do need to be able to get the high paid strong boss to reside in Tokyo.So we have to we have to think about the how.I mean, currently the tax is too high for them being in Tokyo, being in Japan,so we should change that. But as long as we change that, I thinkwe can be very much better off than Hong.
Kong or Singapore. Yeah.I don't hear anything. Well, let me take it from here then,because we are trying to figure out the label cash earnings numbers coming out.And I think Heidi and I were just looking at it and you can see that yearon year has been growth of 2.1% for the month of April.And it's really beating expectations. As you said, we are seeing that wagegrowth come through. And as we're getting those numbers, weare also seeing the yen edging lower, given that the numbers really surpriseto the upside.
Butdespite the fact that we are seeing these changes in Japan, it seems thatwhen it comes to Japanese investors are still sending their money overseas.Are you going to see a change in that sort of trend with more domesticinvestors being more confident about the Japanese markets as well?That is really a good point. With that, the neasa that the new NipponInvestment Saving Program or whatever, as you know, the mini money went to theabroad. Ironically, last year, the bestperforming asset over the world was the Japanese Japan.They agreed even in a dollar down.
This year in a local currency term.Still, Japan is a best performer in that item.No because of the iron, but still in a good performing.So it takes a little bit of time for people to realize because peoplebehave based upon the experience in the past.So we did see that the Japanese equity didn't do well so that we kind ofprogram to invest abroad. But now two years in a row, Japaneseequity doing good. So that will start making an impact tothe people's mindset. So I believe sooner rather than later, amoney a real Japanese investor's Monday.
We had more put into Japanese, I think,and gradual change. Thank you so much for joining us.He's the Monarch Group Executive Chairman.Okay. Matsumoto With his views on where theJapanese markets are headed and a lot of optimism over assets here.Still ahead, South Korea's president approving a plan to develop a largefossil fuel deposit discovered off the country's coast.We'll discuss the implications for the energy transition next.This is Bloomberg. All right.Take a look at energy commodities at the.
Moment.This is a picture when it comes to oil new occurred as well as what we'reseeing across natural gas futures as well.Oil there extending those losses still. We saw that industry report reporting toan increase in US stockpiles adding to just already existing bearish sentimentthat's really been consolidating over the past couple of months.That API report really just seeing more expansion by 4.1 million barrels lastweek. We're down, what, about 5% this week forcrude following that decision over the weekend by opec+ to start unwindingsupply cuts in the fourth quarter.
Natural gas so headed in the otherdirection. We're seeing upside of about one and ahalf percent. This after we did see earlier declinesus not gas falls a little bit earlier in the session that Norway outageregardless expected to be brief and that had been really driving a lot of thesupply worries along with, of course, heightened demand amid hot weatheracross many countries. All of this has been pushing gas priceshigher over the past three months, but fresh supply might be on the horizonafter South Korea said that a study suggests a large deposit of oil and gasin the waters off its coast.
Let's get to Thor now, our energyreporter there. He's through the as well as theBloomberg any of a pack head of research, Ali zaidi to talk through theimplications. He's let me start off with you.Tell us what we know about this gas discovery.Who would benefit and how quickly can this come to fruition?Yeah, right. The South Korean president has announcedon Monday that the country has discovered a deposit in the waters offthe southeastern coast that may hold as much as 14 billion barrels of oil andgas.
Now, the plan to develop this projectwell has been approved and drilling will start at the end of this year toevaluate the actual level of reserves. And we'll get to know the result in thefirst half of 2025. Now, the energy ministry said thedrilling will take place about 7 to 10 years.And once the exploration is complete and once they confirm the economicviability, then South Korean can actually start commercial production.How will it impact Korea's broader energy policy?So the fact that we're so excited about this new discovery is because Koreaimports all of its fossil fuel needs.
From overseas.And the plan to develop this project is actually a part of Korea's effort toreduce its reliance on energy imports. And it also comes only a few days afterthe country has announced the long term electricity supply and demand policyplan, where it's planning to increase the share of nuclear power andrenewables from the power supply power mix, which is also going to ultimatelyhelp the country reduce its dependence on energy imports.Now, does this a trend that we are seeing more across the globe after theenergy crisis in 2022, where countries are looking to increase their ability toreduce their dependence on expensive.
Imported fossil fuels?So, Ali, let me turn to you. What's the long term demand picturelooking like globally? So when we look at natural gas,specifically globally right now, we actually see under our economictransition scenario between now and the early 2030s, a moderate decline indemand, primarily driven by lower consumption in the power sector asregions such as Europe accelerate away from reliance on burning natural gas forpower generation while in emerging markets still do relatively pooreconomics of natural gas compared to coal omeprazole uptake after the sort ofearly 2030.
Again, if you look at it under aneconomic transition scenario which excludes any of our climate goals, thenwe can see actually demand rebounding, particularly driven by industrialsectors such as use of natural gas as feedstocks for chemicals for 2050.So in that scenario by 2050, we are looking at a world wherewe are consuming 12% more natural gas compared to 2020 to a baseline.How does this potentially impact energy transition efforts?Is gas really when it comes to being a transition fuel at this point?Yes, we are. Proponents of natural gas often refer toit as a transition fuel and certainly.
Better efficient use of existing gasinfrastructure can help with the transition.If you look at our markets such as the U.S., where the advent of abundant cheapshale gas ushered in a lowering of dependence on coal in favor of gascertainly had an emission impact in terms of improving emission reduction.Open cycle gas turbines are also good technology in terms of supporting uptakeof renewables. But when we look at it globally from theperspective of investment in new infrastructure for gas, particularlyaround a new upstream production such as the shield that's been discussed here inKorea, the problem is that the emission.
Math doesn't add up if you look hard inthe short term. One of the challenges with natural gas,with its main component being methane, is that methane is actually a powerfulgreenhouse gas, particularly when you look at it on a shortertime span. While methane does decompose and overlong term, long term as a lower emission impact in the shorter term actuallycauses more global warming. So handling unabated methane emissionsis actually a big challenge that already the industry faces over the long term.The additional challenge with investing in new upstream production is thatyou're looking at recovery periods where.
You run into the remaining carbon budgetnot being available. So, for example, in the case of Korea,Korea has a net zero by 2050 target. Even if this new field is capable ofproducing economically. If you look at coal production fromearly 2030s, then essentially we don't have enough time to meet that 2050 netzero goal to make sure top investment is financially viable.Ali Zaidi or Bloomberg ETF IQ Park, head of research, as well as energy reporterHazel Lee with their insights on the broader energy market.But another story that we're following in the industry, Tellurian sharesrallied in New York with Saudi Aramco.
And Woodside said to be in talks toinvest in one of its LNG plants. Sources say the U.S.firm is reviewing various offerings from the energy companies related to itsproposed driftwood plant. They also say a potential deal mayinclude Made Ocean Energy, a subsidiary in which Aramco holds a stake.We have more ahead on the Asia trains. This is Bloomberg. Take a look at how we're tracking whenit comes to trading in Aussie assets. Futures looking pretty flat at themoment and the Aussie dollar also coming under a bit of pressure.We lost about half a percent after first.
Quarter GDP numbers as well as some ofthe moves that we saw in trading in the yuan.At the moment we're hearing from the RBA Governor Michelle Bullock in hertestimony to the Australian Senate this morning.Among other things, she's been talking about the consciousness of the RBA whenit comes to the cost to the economy of higher inflation, saying that some ofthe releases around the budget when it comes to the energy rebate is notmaterial for CPI forecasts and unlikely to impact core inflation.Also saying that the willingness of the RBA to take more action is there.If CPI is not headed back to that target.
Band, they will take action, but thatthe board currently considers monetary policy settings at the moment to berestrictive. Commenting on the labour market as well,saying that it's easing on a number of different measures there and thatinflation, if it continues to be sticky, they won't hesitate to hike again.If the economy is much weaker. There will be ready though also to easeas well. So data driven is still how the plan isplaying out, but really also talking about the fact that demand is stillabove the economy's capacity to supply and the fact thatin Australia, as we've seen in a number.
Of other economies, that inflation, shesays, is only coming down quite slowly. Again, Heidi, we're headed towards theSouth Korea market opens and after revised Central Bank data showed thatthe economy grew 3.3% on an annual basis in the fourth quarter.That's slightly lower than the previous estimate of 3.4%.For more, let's bring in our Asia economy and government senior editorBrian Fallon. Brian, so a lot of technical details inthis data said what's the bottom line? So on the surface, the box revisionslook a little bit bland. They left the first quarter GDP growthrate at 1.3%, which we also saw in the.
Earlier data.But what they also did is they changed the base year on which they theyestimate the size of the economy. And based on those changes, the docbelieves that the economy grew on average 4.9% faster over every yearsince 2020, 2012, 2020. Excuse me.And as a result of that, the size of the overall economy is about 7% bigger thanwe thought it was. So it's it's a it's a bullish case forSouth Korea's economy. Ryan, does this sort of move the needlewhen it comes to expectations from the back?Yeah, it really could.
As a result of the larger economy, thiswe would expect to push down debt ratios for the national government.It would also push down debt ratios for households that have borrowed a lot ofmoney, making those look a little bit less worrisome.That could give the bloc the confidence it needs to go ahead and pivot to apolicy easing. Keep in mind that the book was at thefront of the curve as we exited the pandemic with rate hikes.So it wouldn't be that shocking to see the BOC get ahead of the Fed in startingto ease. Bloomberg Economics thinks a rate cutcould come as early as August.
Now as your economy and governments andyour editor, Brian Fowler, the let's take a look at some of the othercorporate stories that we're following. A group of current and former employeesof Open Air and Google DeepMind are calling for protection and speaking outon the risks of A.I.. In an open letter, they say as long asthere's no government oversight, employees are among the few who can holdfirms accountable. Open has faced controversy about itsapproach after dissolving one of its most high profile safety teams.Intel is selling a stake in a plant in Ireland to Apollo Global Management for$11 billion, boosting funding for a.
Massive expansion of its factorynetwork. Meanwhile, CEO Pat Gelsinger has takenaim at rival Nvidia in the fight for chip dominance.He used the Computex trade show to hit back at Jensen Huang, who earlier hadsaid that traditional processors like Intel's were running out of steam.We look now to have a billion transistors on a single chip and evenlooking to a trillion transistors in a single package by the end of the decade.And unlike what Jensen might have you believe, Moore's Law is alive and well. And these are some of the stuff thatwe'll be watching when trade opens in.
Korea, Japan and Australia.BHP heading into mediation with union leaders in Chile in a bid to avoid astrike after failing to reach an agreement in regular negotiations.We're also watching Santos, Australia's Federal Court imposing a penalty ofnearly $3 billion dollars on the subsidiary for breach of recordkeepingrules Japan.The airline says its fourth quarter was weaker than expected as a carriergrapples with a weekend that's continuing to depress outbound travel.And keep an eye on Japan's item. It's, of course, on after an enteringinto a ten year supply agreement with.
Qatar energy market opens in Sydney.Seoul in Tokyo are next. This is Bloomberg. This is the Asia trade we're countingdown to. Asia's major market opens and Heidi willbe watching if we continue to see the downside pressure that was on theprevious session. Given all of the volatility aroundIndia, the elections we saw really the biggest loss in the Indian stock marketsin about four years, Really a seismic result.Right. Given the expectations the Narendra modiwould be coming away with a much, much.
Stronger outcome and certainly that hewould have been hoping for that as well. But does it really kind of resetexpectations when it comes to India's growth and its future will be trying toget some more analysis on that this hour.But of course, in the meantime, it has huge, huge implications across the restof the emerging markets complex as well. You and of course, we'll be watching howthe Japanese yen is also trading at the moment, because when you're talkingabout implications for the Bank of Japan, we've got those base pay numbersreally rising by the most since 1994. So does that mean that we're seeing avirtuous cycle here in Japan?.
Demand driven economic growth is a bigquestion. Take a look at how assets are comingonline. The Nikkei down half a percent while theJapanese yen is holding at that 155 level.A little bit more downside pressure we saw strengthen against the US dollar.But after those bsp's numbers and really the results of the Shinto wagenegotiations, we're seeing a little bit more downside pressure.The ten year yield holding steady at the moment.Let's take a look at how the cost is coming online as well, because we hadKorea keeping as first quarter GDP.
Growth estimate intact, but because ofsome changes to how they're calculating the size of the economy, we're actuallyseeing it that it was bigger than was previously thought.Now, that has really benign implications for the Bok when it comes to financialrisks and the actual size of household debt.You can see the cost of gaining 8/10 of 1% as we see a little bit more upsidefor the Korean one at that 1374 level against the US dollar.Take a look at how we are seeing just that staggered start to trading.Of course, always a little bit tricky to get a read in the first couple ofminutes, but we're looking a little bit.
Negative when it comes to that lead thatwe've gotten for Aussie stocks at the moment.We are still hearing in terms of the commentary from the RBA GovernorMichelle Bullock in her testimony to the Senate to this morning and reallyacknowledging the weaknesses that the very, very weak state when it comes tohousehold spending, household confidence in Australia and really on the balanceof things, saying that if inflation continues to be sticky, it continues totake time to come down and really there are concerns about it potentially beingrevived that the RBA would take action. At the same time, she also says that ifweakness in the broader economy.
Continues to play out and they wouldalso not hesitate to ease through. So really trying to kind of speak tothat balance of risks. Michelle Bullock They're reallyconscious when it comes to what it is costing the broader economy to have thathigher inflation. So a little bit of weakness in theequity session. The Aussie dollar also off 6644 is wherewe're trading. Of course, we did have that weaknessafter the GDP numbers as well as the moves in trading against the yuan aswell. Some of those concerns over Chinacontinue to play out when it comes to.
Proxy assets in Australia and we arewatching treasuries and really bond yields across the region.Given that we've seen that big rebound. We also heard from the likes ofLarry Summers, the former US Treasury secretary, saying that long termTreasury yields are seen to be higher by him.For more, let's bring in our executive editor for Asia markets, Paul Dobson.So, Paul, this kind of resetting of expectations on the Fed, does the datanow support a stronger view? So.Well, I mean, you know, there's a few pretty difficult looking data points ina row for the US, and there are signs.
Suddenly emerging that the economy isstarting to cool. First of all, we had the revisions tothe GDP numbers. We had some discontent in the housingmarket. We had some wobbles in consumer spendingas well. And now the jobs data are starting tolook a little bit weaker as well. So that has been lending that support tothe Treasury market. We've seen a pretty big rally.Okay. So we haven't, you know, taken out anymajor sizes and shapes in terms of how low we are just at this moment in time.But we are starting to get that pricing.
For a cup coming back up through thethrough the months. Now, November's seen as a as a certaintyin the market. September looking like a possibility aswell. And we get a couple more of the numbersbefore we get to the Fed's mid-summer decision.So there's possibilities there. The rate calls could continue to berevised. That is lending some strength into localand global markets as well as far as bonds are concerned.But what I think is interesting is that this time we're not seeing so much ofthat feed across into equities as we had.
Beforehand.So bonds are rallying, the equities are kind of flatlining or not looking.All of that well supported despite the lower yields.And that does tell you that there's a little bit more concern about exactlywhere the economy is going from here. And Paul, we saw a roller coaster ridewhen it came to Indian stock markets losing the most ground in about fouryears. What are you watching out for today?Yeah, I'm not sure about roller coaster ride or straight down plummet, butparachute jump maybe, or something like that.It was record highs the previous.
Session.Yeah. Okay, I'll give you that this week.Yes. I mean, I think that yeah, there'sthere's a lot of risk out there still. First of all, the coalitionkind of make up what the demands are in order to in order to bring that togetherand get that done are going to be important.It's not guaranteed that there won't be some some requests that sort of weakensome of the economic reforms that the market had expected the Moodies be ableto push through in the coming years. So that may weigh on equities further inthe short term, that uncertainty and.
Then the longer term outlook, even ifthere is a coalition done, is that progress will be slower.And therefore, even if the the the bull market for Indian equities over thelonger term can continue is not going to be roaring at the same pace that it wasbeforehand. I think what's interesting as well isthe fixed income story where previously the expectation had been thata large majority in the election would allow a modi government to curb back hisborrowing and be very good news and supportive for the bonds market.Now, there's concerns that that's not going to happen either.And so some pressure are put on India's.
Bond yields.And finally, the currency market as well is going to be really interesting tosee. You know, we had some pretty bigweakness in the past couple of days. The expectation is that the RBI kind ofabsorbed some of that. But we're close to those record lowlevels. So something to watch out for there tosee just how much market uncertainty and doubt and outflow there is.Maybe the currency will be a pretty good sort of way to wait and monitor that.Bloomberg's Paul Dobson. They agreed to get your views.As I actually hear directly from Prime.
Minister Modi, his vowing to stay on asprime minister even as the opposition delivers an election surprise,Punia gets up. Today's victory is the victory of theworld's largest democracy. This is the victory of unbreakableallegiance put into the constitution of India and this targetin our third term. This country will see a new chapter ofbig decisions past the longer take, and they are highly capable.This is Modi's guarantee, the gig guarantee.Let's get to Bloomberg Markets and Frank Haslinda Amin, who joins us from NewDelhi.
I mean, has we know that it's difficultto predict the world's biggest elections, but what happened?You know, Sherry, it feels like we're waking up to a new India, a democraticIndia. Yes, we know that India is the largestdemocracy in the world, but over the last ten years, it's been governed by anincreasingly autocratic leader in the form of Modi.And it's different now. The results show that now, as far aswhere it landed, Modi's BJP party secured 241 seats.Yes, it got the most number of seats in terms of parties, but not enough to forma single party majority.
It needed 272.Essentially, what it means is that Modi will have to tap its allies in itsalliance, the two parties in its alliance.The thing is, the two parties are unreliable.The leaders have known to flip flop, so it remains to be seen if they will gothe Modi way or in fact tilt over to the opposition.Fair to say the opposition themselves have done way better.They've secured about 240 seats and what they need to do is perhaps lure Modi'sallies. And you may get a situation where wecould have a hung parliament.
No clear majority either way.That is the biggest concern in the market right now.Now, in terms of policies, we we had four Modi.They'll be continuity. He will ensure growth.But the question really is whether Modi will remain the prime minister, whetherthe BJP will be the leading party out there.So lots of questions that are being asked right nowand really fascinating to see where the main battles are fought in thiselection. Well, when it comes to India, thebattlegrounds are, in fact in the Hindu.
Heartland.We talked about the Ambani. As we talk about the Adani, as we talkabout the billionaires in India. But this is a country of 1.3, 1.4billion people. It is about the rural poor.900 million people still live below the poverty line.So Uttar Pradesh is key. This is the most populous state in thecountry at the last election in 2019. The BJP secured 62 seats out of the 80up for grabs this time round. The secured only 40.Therein lies the weakness for the BJP. And what is interesting is Uttar Pradeshis home to where Temple Run is now.
Temple Run was inaugurated by Modiearlier this year. It's controversial.It is a temple that replaced the mosque that's been there since the 1850s.It is a controversial move, but people had thought this would work in his favorbecause, after all, 80% of the population is Hindus.But it has worked against Modi. People are saying they're not interestedin Modi's religious politics. They're interested in the bread andbutter issues, their employment, their food on the table.They've voted really clearly. And when it comes to the broader macroeconomic fundamentals, though, I mean,.
You mentioned those challenges, but atthe same time, this is the fastest growing major economy in the world.S&P just recently hinted that potentially they might upgrade theircredit rating. So when you have a more divided India,what are the implications for the economic outlook?Sure. You can't take away from the fact thatthe stars are aligned for India's economy.You talk about possible upgrade by S&P. It's growing at 8%, which is the fastestgrowing major economy in the world. It has a demographic that is enviable byany country, 80% of the population below.
The age of 35.It is amazing the potential that India has.We have the likes of Goldman, the likes of Morgan Stanley, saying you got to buythe India story. That growth story remains intact.But for India to be a middle income country by 2047, which is the targetright now set by Modi, it needs to grow by nine or 10% in the next 20 years.And for that to happen, we need to see reforms in the economy.We need to see land reforms, labour reforms.These are the choke points for the economy.And unless those reforms are.
Implemented, it is very difficult forIndia to grow at nine or 10% that it needs to reach that middle incomestatus. Markets co-anchor and chiefinternational correspondent for Southeast Asia Haslinda Amin there inNew Delhi. Take a look at some of the companiesthat we're watching very closely. We're just about 12 minutes in to startthe trading here across major Asian markets.Samsung, of course, light heavyweight we're seeing a jump of had been as muchas 3.6% earlier were off those session highs so far.But the investors immediacy or denying a.
Report of Samsung's HBM chips failing topast qualification test. So Nvidia working to certify its HBM.We did hear from Jensen Huang on Tuesday that the company still working on thecertification process. They're also watching BHP as well interms of one of the big players in Australia.Turning to mediation now, Chilean miners are seeking their share of the copperboom with these talks kind of casting light on the tensions that we're seeingfrom this recent rally we've seen across the runaway prices of copper as well.So this will potentially clues on how the Escondida issue will pan out aswell.
Also watching the likes of some of theseJapanese airlines, Japan Airlines, they're in focus.The first quarter through June was weaker than expected.The golden Week holiday was underwhelming when it comes to travelvolumes, according to one executive. So that softness there being reflectedin the share price. Cherry.Heidi. Still ahead, our exclusive conversationwith Suntory CEO Takashi NAMI with discuss the business outlook next.Amid weakness and, of course, weaker growth across the economy, but a lot ofoptimism about a potential virtuous.
Cycle coming from BOJ policies.This is Bloomberg. Welcome back to The Age, Your trade.This is a picture when it comes to Japanese assets, we're seeing a downsideof about 1% on the Nikkei, industrials, energy and financial companies leadingthose declines. The Japanese yen reversing some of thoseearlier gains. And really a lot to do with what's anexpected virtuous cycle potentially coming from biology and governmentpolicy as Japan's base pace rising the most since 1994, we are now seeing thebiggest wage increase in three decades starting to take effect.If you switch the board and you see the.
Labor cash earnings, you can see thatterminal chart showing you the big pop in recent years.But let's discuss the outlook for the Japanese economy with our next guest whoruns one of the country's largest beverage companies.Joining us here in the studio is Takashi Minami, president and CEO of SuntoryHoldings, is also chairperson of the Japan Association of CorporateExecutives. Great to see you in person.So what do you make of these wage increases?Are they sustainable enough and are they happening across Japan or mostly acrosslarger companies?.
I'm pretty much optimistic about thewage increases. The reason behind is a huge shortage oflabour. So business has to keepraising wages, otherwise we can't secure labour.So this is the really thrilling situation for the Japanese economy goingforward. Do you think the Japanese householdfeels that way as well, in a way that they're confident enough to actually goout and spend and actually turn it into a real demand driven sort ofinflationary outlook? I don't think the confidence is there.The reason behind is I think it's been.
Almost a 24 to 25 months of the negativereal wage. So the news of the lots of news that thebig corporations decided to increase wages, but the inflation is more nowsurpassing the increase of the wages at this moment.So households are so concerned about the inflation which comes out of theweekend. Plus a possible crisis in Middle Easternand the Ukraine. Lots of uncertainties around.It doesn't help. Energy prices are not really going upbecause of the Middle East crisis, but really the mentality and mindset theJapanese households do not feel are.
Richer because of these wage increases.Is there sort of a level that's best suited for the broader Japanese economy?I mean, we're approaching 160 right now. Well, I think of the currentI think a disconnect between the stock market and the real economy is an issue.And we business don't think that the current stock price means very muchoptimistic to the Japanese economy. So we have to increase wages.We have to put the deal lots of impetus to the workers.For example, we have the huge investment opportunities now in Japan, for example,accumulated the investment amount. Yes, surprisingly $600 billion.But it's a plan and the how to let it.
Invest, you know.Now, the reason why we can't do it is first, the material cost is increasing.That's out of the plan. Second is we can't secure labourers.So a silver lining is there. We won't invest.I mean, Japanese corporates want to invest.However, we can't as skilled laborers. So the disconnect exists because of thehuge lack of labour. And you talk about a disconnect when itcomes to the weakening yen. You say that currency weakness is notjust about rate differentials, it's about a differential when it comes tobusiness investment interest in Japan.
When we've seen so much more enthusiasmacross financial market assets in Japan, how do you transfer that or how do youkind of get a bit more enthusiasm when it comes to foreign investment?Well, I think Japanese government and the business have to work together toattract the foreign investments. Japan has been saying we needinvestments from the world, but that situation is not enough to appeal, suchas education of the children, siblings and the language.But we will be better. But we have to be serious about thisopportunity, which is the one we can't miss this time.So I think the government and the.
Business are working very hard to bringthe FDI to the to the Japanese economy. I think it's a lot better than before.But we have to learn from Singapore. For example, they have the EDB, which isa one stop shopping for the investor from abroad.And now investors from abroad have have to go to the METI, have to go to theMofa, a lot of government offices. So we Japan have to be serious about tobring money from the world at this time. At the same time, you're also outwardlooking, too. Right.I want to ask about Boston Beer. I know that Suntory has denied these M&Atalks, but I do wonder if the sort of.
Uncertainty in wheat consumptionpatterns at home is making you want to look for more growth opportunitiesabroad? What sort of assets are you potentiallyeyeing at this point? Two points I'd like to address.One Oh, Japanese corporates are very keen to go abroad in terms of capturingthe global growth and the declining population of Japan is reallydemotivating us to stay here. So that's a fact.But apart from that, there is a huge opportunity of investment such as asustainability, such as ADX and the by the way, our second point is we have nonegotiation at all with the Boston beer,.
So there is no fact.So I was so surprised to to know the the the piece went out to the world and Igot a lot of, you know, questions about that.Okay. What about other companies, though,Because we just heard that you sold a $500 million bond, which usuallyJapanese companies tend to do when you're investing overseas?Well, I think two things. One, you know, aging population doesn'tmean, you know, any any, you know, demand.And so we have such as a health care, we have such a division here and the US,we have the still interest investing.
So both and but one key thing is thelandscape has changed even for those companies who've got the assets overseasfrom Japan. They are thinking to come back with therepatriation. So you were raising cash, $500 millionbond. That's right.You're looking at other investments, obviously, maybe not Boston beer, butsomething else. But we will keep investing to Japan,such as distillery capacity and so forth and beverages.But one thing aging population needs are lots of need of new products and thatthey have money.
So Japan's consumption is weak at thismoment. But the key thing is they need newproducts. And around the 30 years of time,deflation doesn't didn't, you know, push us to bring the new products withinnovation. Deflation is a big stumbling block ofthe innovation. But now we have to produce somethinginnovative to aging population who has a lot of money.Are you doing that right now? Sodivision is a is now so much a threat, but it's not just Japan, ratheroverseas.
Is that aging demographics?Exactly. We are in Thailand.We are in Taiwan. We are in China.You need that.Me. Great to see you in person here in ourTokyo studio. Take us.You need them. Be president and CEO, Suntory Holdings.We have more ahead on the Asia trade. This is Bloomberg. Take a look.And I was heading up when it comes to.
The future session opening up in Europe.At the moment we're just seeing a little bit of positivity.The euro Stoxx 50 futures as well as yemen.Dow futures seeing a little bit of muted upside.This after a softer session where stocks really fell with oil and energy namesreally leading those declines. Traders are of course perhaps a littlebit sidelined. Looking ahead to key US data that ECBrate decision as well. In focus coming up, we'll be speaking tothe world's second largest construction equipment maker on the global demandoutlook, as well as impact of that.
Weekend.The CFO is joining us exclusively in Tokyo next. Take a look at Singapore and Hong Kong.Pam is just crossing the Bloomberg now. We've had sort of a string of prettymixed pictures across Asia, some of it really performing better than others.We are getting the payment numbers coming through for Japanas well. When it comes to Singapore.This is the picture for the lion city as we continue to see really that mixedoutlook in terms of external demand. We are seeing the S&P global SingaporePMI for May coming in at 54.2.
That is actually quite a significantimprovement from 52.6. So continuing to extend more growth,we're at a time that we're seeing a lot of these other economies falling deeperinto contraction territory. Taking a look at Hong Kong there aswell. We're seeing that though, falling in thethe wrong direction really for the month of May.We're seeing that reading 49 point to falling into contraction territory fromjust above 50 in the prior reading. And Heidi we do have the final numbersfor the main PMI composite here out of Japan as well.52.6 is the number slightly revised.
Higher when it comes to services, number53.8 as well, slightly higher revision there.Japan's factory PMI also returning to growth in May, turning positive for thefirst time in 11 months. As discussed, the health of the Japaneseeconomy and the global demand for heavy equipment with our next guest, Komatsu,CFO Takashi ahead. Of course you joining us exclusivelyhere in the Tokyo studios. Really great to see you very soon.So you're the second largest construction and mining equipment makerin the world. So you have a really good view of thedemand outlook there for your products.
That could potentially mean what'shappening in the global economy. What are you seeing?Okay. Well, I can talk about only yourconstruction equipment demand and well, for this fiscal year, which startedApril this year, actually the we forecast the construction equipmentdemand decrease by 5 to 10% over two years, continue to decrease.And on the other hand, mining equipment, which is a super symbology, excavatorsupplies, bulldozers, a dump truck. We can we can see your well quite therobust demand. This is because of the, you know, thehigh price of the minerals such as the.
Copper.Now I run like a gold and a nickel, and only the summer coal price is expectedto decrease a little bit more territory, which is to our our weak forecast forthe mining in Indonesia. In fact,most of your revenue actually comes from the Americas, right, about 45% or so.Is that correct? And does that help that you're seeingmore of a recovery in demand in those markets?Yeah, well, actually that the demand, while our revenue came from NorthAmerica, this represents 30%. And if we add the South America, it willgo well more than that, of course, we do.
Have a 50% or so.And the recovery, while not that robust, the economy in the U.S., help us a lotto, in fact, you know, the but our concern as well for this fiscal yearbecause, you know, if the slowdown that they're calling the US started, thatwill lead to like in a very difficult situation for us.So how are you preparing for that? Well, actually, the we've been living ina very volatile market for a long time. Actually all the time.Our market is very volatile. So I can say that we are very much usedit so we can adjust the unit, our capacity or the inventory leveldepending on the trend of the year.
The market quite well, not easy, butdoing quite easily. And by doing that we can minimize thedecrease of profit as much as possible. The Japanese yen, being as weak as it isnow against the US dollar, has helped you, right?How do you manage those currency fluctuations?Well, I'm sure that we don't take drastic action depending upon, you know,as a countermeasure for the unification, the exchange rate we have planned to allover the world. And because we have, you know, thecommon well, what we call butyl material and also our common productionprocedure, we can change the production.
Location from one place to another quiteeasily. So not only by looking at the grossmargin level, but also with the, you know, the level of the production ofeach country. We can change in the production placefrom one place to another. Yeah.So, so that you know, the buy, you know, maximum the gross profit, we canminimize the investment as well. I will help you there.Your exposure to China isn't that big, is it, around 22% of revenue or so?It used to be at well, almost a ten. What.Well, to some extent our exposure to.
China was almost a 20%, and now it wentdown to almost 1%, which is very small. But the the there is a direct indirect.From China, because, you know, if fathers roll down their economy, Chinahappened, it will decrease the mineral place that leads to, you know, thedecrease of our mining that can continue to demand the influx to go.Takeshi, what are the thoughts around shareholder return strategy here?Okay. Well, not not only a financial not onlya financial result, you are focusing upon the improvement of PVR price bookratio and the way we compare our PBR against our peers and our PBR as well.I have to say that there very small and.
The only thing is that our shareholder,the investor look at our capital growth ratio, Laura, than our peers too.We need to improve that to do so that, you know, we need to, we have achanging, you know, the judgment of other, the performance of our groupcompany to Kestrel instead of Ryk because to solve them in absolute numberinstead of the ratio whether it's good or not and the we need to improve in theinvestor relations activity as well, we will improve the quality of the investorrelations and also the number of talks with shareholders and the investors.I'm listening to the interview now. This one was a, you know, IRR activityas well.
And also that we need to improve theROIC and of course we need to keep following the activity to improve theprofitability, but also that the we think that the we need we should not betoo conservative about, you know, the financial leverage, i.e.our debt to equity ratio, the fact that we have started the purchase of our ownshare ops through a ¥100 billion starting the end of April this year.Can you give us some more details on the partnership with F1 and what you hope toget out of this? Actually you know very well actually, weextended the sponsorship for the Williams this year because we used tohave well, we used to provide the prize.
To the F1 team in 1990s.And because well not only that but also that too, you know.And how is our brand of a Komatsu?We started using the F1 because we because we think of that they why it'svery popular especially in America and South America and Australia and SouthAfrica where our major customer exist. Actually,when you take a look at the broader corporate landscape for Japan, obviouslywe're hitting sort of a moment of of quite a bit of enthusiasm fromforeign investors in particular. What changes would you like to furthersee in terms of government efforts or.
Reforms, particularly when it comes toperhaps bringing foreign business investor investors back to Japan?Okay. What?Well, as you may know, that the you know that the the the Japanese well, theJapanese market, I mean, the stock market has been improvingin terms of governance. And because of that, the request fromthe owners of the stock market that we've been, you know, increasing startedto increase the PBR. And so in that way, I think that theattracting, you know, foreign investors helped by, you know, cheap Japanese yenas well, cheap or weak Japanese yen they.
Sent.Takeshi, really great to have you with us.We appreciate your time. Takashi heard Akashi there.He's a CFO at Komatsu joining us in Tokyo.Still ahead, we'll be talking about what comes next for India, these electionresults humbling. Prime Minister Narendra modi, the Centerfor Strategic and International Studies, joins us next.This is Bloomberg. More now on the Indian election andformer Reserve Bank governor Raghuram Rajan saying that the results are avictory for democracy.
He told us it's a clear signal thatIndia wants a new direction. We have an election.The results have been coming out and I think it's a splendid result because ittells the government it needs to change course.The old course was unviable and we can talk about that.Of course, markets seem to be disappointed.We can talk about that also why markets are reacting negatively.But I think what is happening today is really, in the long run, really good forIndia because it forces India to choose a different course from the one it hasbeen on, of course, which has led to.
Much wider unemployment and distressthan needed in the country. Is this an election result that you seewill bring the technocratic and elite South together with a more emotional andhistoric north? Does it bring the polarity of Indiatogether or do we have a more separate India in 2026?No, it's actually a win for democracy. And that's good for India, because whatdemocracy does is it allows the different parts to essentially expressthemselves and to negotiate. The problem earlier was India wastrending towards a more autocratic country, a country with one leader whowas who had a larger than life image.
And that unfortunately, meant that theBJP leadership wasn't listening, wasn't listening to the economic news on theground, that people were actually suffering hardship, wasn't listening tothe broader sense that, you know, the weaponization of business instruments ofthe government to put, you know, opposition party leaders in jail wassimply not gelling. And it would have taken India down acourse which was ruinous in the longer run, maybe in the short term, beneficialfor the big, big business groups. And that's why the market is reactingadversely. Well, the Reserve Bank of India GovernorRaghuram Rajan there speaking to.
Bloomberg's Tom Keene.Let's get more insight on how these election results will affect globalforeign policies and the geopolitical outlay.Bloomberg Markets Asia anchor Haslinda Amin joins us from New Delhi.And let's bring in Rick Ross who is a senior adviser and chair in US Indiapolicy studies at the CSIS and has why don't you kick it off given that you'reon the ground and you've been sort of watching this extraordinary situationreally play out? Well, we've had one commentator callingthis a political earthquake totally unexpected.And the reaction of the market.
We're at 1.8 and equities slumped about8%. That in itself says everything about theunexpected results from this election. Unless that further insights delvedeeper with Rick Ross, senior adviser and chair in the US India Policy Studiesat the CCS. Rick, good to have you with us.We heard earlier from our guru on Russia and how the results is good for India.Do you agree? Well, it depends on what the coalitionmakeup looks like and what kind of policies they're going to support.Some areas the United States cares about in terms of India's economicliberalization and a deepening security.
Partnership.That happened really well when we had a single party government.Now, when I think about two of the most likely large coalition partners thatModi will have to bring on, they've been relatively agnostic on reform, which isa good thing and very supportive in a deeper partnership with the UnitedStates. So I suspect that the things the UnitedStates is looking at and the economy and security that have largely remainunchanged. The thing is, it may be more complicatedthan people think right now. I mean, there is a possibility of a hungparliament.
What are the prospects of that?What's the risk of that happening? Well, you know, there's a there's a termthat you're very familiar with horse trading now that you've got one largeparty that didn't quite clear a majority and a resurgent Congress party.There's a number of regional parties that everybody is trying to vie for.And you put on the table personal emoluments.There might be money on the table that parties would be interested in.There could be ministerial cabinet positions.So, yeah, there still is have been fighting going on.You know, I think we can't quite say.
With complete certainty that thatNarendra modi will be prime minister a week from now.But it looks, you know, the signs look pretty good.I've had a lot of engagement with the two parties that are likely to make upthe coalition. And it seems so far, you know, they'rerelatively solid in their support for Modi as the prime minister.And again, you know, looking at the to a good, decent party in Andhra Pradesh,looking at the General United, I don't suspect they're going to pull the partyin dangerous directions in terms of, you know, eroding some of the work we'vedone on security and commercial types.
You know, Modi has been such a forcefulpersonality. Right.Personally, politically, you know, in terms of how he's managed the economy.Does this sort of play into what foreign partners are dealing with when theypotentially see this dynamic changing? Well, you know, as we mentioned earlier,a humbling of perhaps a more damaged, diminished leader at the end of this.Yeah. You know, there's a number of thingsthat he himself can personally manage. They've liberalized foreign investmentrestrictions, but they've actually been a little bit more restrictive on tradeto try to balance India's trade.
Partnerships.The one area that we saw Modi working on actively in his first term, but less soin the second term, was actually trying to push more state governments intomaking the kind of reforms that will actually improve their local economiesas well. And that's where really at the end ofthe day, a lot of action has got to take place.States have primary control over so many factors of production, whether it'selectricity and water and sanitation. There's very little that you canactually do from the national government level to enact those kind of reforms ata state level.
And sometimes people believe that statesthat are run by the BJP, by Mr. Modi's party, are most likely to kind offall in line when he announces big programs.But if you look at the data on renewable energy adoption and things like that,actually states that are politically aligned sometimes are the biggestoutliers in matching some of the programs that he announces when you'rein government. So there's a lot of good things oneconomic reforms at the national level, but they need to get back to challengingstates to do better because ultimately then there's going to be that next bigmanufacturing powerhouse that they want.
To be.More states have got to start pulling at the RS and that both.A lot of the investor focus has been consistency when it comes to economicpolicy abroad and whether this means India can still fulfill its its, youknow, economic potential. But I do wonder on the geostrategic,geopolitical side, what do you envision in terms of how India, you know, perhapsunder a different type of government or a different vision of government, dealswith partners like the US and also with China?Well, I think the threat that China poses is, of course, across manydomains.
You've got the border area where todayChina actually occupies hundreds of square miles of Indian territory.You've got the maritime domain where the PLA navy is an increasing presence inthe Indian Ocean, trade imbalance, cybersecurity threats and even TibetanBuddhism, where everybody's wondering what the future is going to like whenthe Dalai Lama passes. So the threats that China poses are kindof across multiple domains, and that means India, knowing they're outmatchedby China on most of those fronts, needs strong partnerships.It's not just the United States, but Japan, Australia, other key partnerslike that.
So I suspect that because some of thedrivers for India's new kind of way, they've been stepping out of thesecurity and tightening partnerships with the United States and others, thedrivers for that aren't going to change. So I suspect that it may slow thedirection may change a little bit. But the main drivers are going to beunchanged. So I think security ties will continueto grow. Eric, we've heard again and again thatIndia has earned its place on the global stage, and it became quite clear lastyear at the G-20 how global leaders went out to him, give him the kind of respectlike any other leaders of the world.
I'm just wondering, does the resultchange Modi's standing on the global stage at all?Yeah, it's tough to believe that a rural farmer in Uttar Pradesh wakes up everyday happy that, you know, all this time and money and energy was spent reallycontributing to issues on the global stage.There's very little that India got in return.You haven't seen a big spike in foreign direct investment.India's trade flows are mostly increasing the same way they were beforeIndia tried to take these leadership roles.And a lot of the countries with which.
India has tried to build partnershipthrough the G20 and other forums. You know, ultimately these countrieswant they want investment coming from India, they want aid.They want access to advanced technologies, particularly defensetechnologies. And India just doesn't have a lot on thetable in those areas. So I think India's splash at the globalstage, it look great, certainly brought some small bits of developments indifferent parts of the country that hadn't seen it.But I have a strong hunch that that's not really what drives voter interest.The day you go for elections.
They want jobs.They want economic development. And, you know, we've all seen the jobsnumbers aren't quite as strong as we'd all like to see.We keep talking about India and its relationship with the major powers.But what's really important is India's relationship with its immediateneighbours. We're talking about Pakistan withMaldives, and there have been a lot of tension.How might this play out for their relationship?Yeah. You know, it's wavered back and forthsince the Modi government took office.
Where you began to see a real reset ontrying to engage the region. And that meant that, you know, some ofthe areas of cooperation the United States had in Africa and Southeast Asiawith India really kind of fell off the radar screen.But that's because, you know, from India vantage point, looking back ten yearsago, Beijing had actually build up stronger relations with most of India'sneighbors at that point. India has done pretty well.They have a relatively supportive government in Sri Lanka, although that'swent back and forth. Same with Maldives, relatively antiIndia government right now, but it.
Succeeds a government that was very proIndia, Nepal. They're taking small steps to boostrelations. Bangladesh has been a relative successstory. So it's a mixed bag.But I think India does very much realize that its own its own neighbourhood isbeing contested by Beijing. And to have direct neighbors moresupportive of China's interest than India's, which despite the fact theyfeel that there's a strong cultural heritage, that's that's very striking.The question is, can the United States find ways to actually boost and supportIndia's own role in the region?.
We've oftentimes approached the regionwith our own interest and vantage points.So that's been a I'd say, a little bit of an area of frustration and frictionbetween the United States and India. Rick, really great to have you with us.Rick Ross, who is a senior adviser and chair in U.S.India Policy studies at CSIS. Of course, Bloomberg Markets Asia anchorhas Linda Almond, who's with us in New Delhi today.Well, today's Big Take Asia podcast also digs deeper into India's elections.You can hear what the Carnegie Endowment for International Peace thinks theresult will mean for the country and for.
The rest of the world.You can listen to that on iHeartRadio, Apple Podcasts and Spotify.New episodes of that podcast dropping every Wednesday and Bloomberg's medicalDoshi also dissects what led Prime Minister Modi's near-miss.In the latest India Edition newsletter should also be participating in awebinar with Axis Bank chief economist Nikhil Mishra.That's at 8 p.m. India Time.More ahead on the Asia trade. This is Bloomberg. You're watching the Asia train.Here are the latest corporate stories.
That we're following.A group of current and former employees of Openai Open, A.I.and Google DeepMind are calling for protection for speaking out on the risksof A.I.. In an open letter, they say as long asthere is no government oversight, employees are among the few who can holdfirms accountable. Open A.I.has faced controversy about its approach after dissolving one of its most highprofile safety teams. Intel is selling a stake in a plant inIreland to Apollo Global Management for $11 billion, boosting funding for amassive expansion of its factory.
Network.Meanwhile, CEO Pat Gelsinger has taken aim at rival and video in the fight forAI chip dominance. He used the Computex trade show to hitback at Jensen Huang, who earlier said traditional processors like Intel's wererunning out of steam. We look now to have a billiontransistors on a single chip and even looking to a trillion transistors in asingle package by the end of the decade. And unlike what Jensen might have youbelieve, Moore's Law is alive and well. Take a look at our setting.When it comes to us. Futures and futures.With markets across Taiwan and China set.
To open in the next hour.We are seeing broad optimism there when it comes to the US trade, despite, ofcourse, the last few sessions really being dominated by that resumption ofthe Treasury trade. On the bets on faster pacing when itcomes to Fed cuts. That is it for the Asia trade.The China show is next.
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