Xi, Macron Focus on Trade, Ukraine war | Bloomberg: The China Advise 5/7/2024

But good morning.Half an hour away from the opening bell here in Hong Kong, in Shanghai and inShenzhen. Welcome.You're watching the China show. I'm David Ingles with Yvonne Man.Our top story this morning, Asian stocks are gaining led by Japan's post holidaybounce. Traders betting that a Fed rate cut thisyear is still on the cards. And we got the RBA looking set for ahawkish hole when it makes US policy decision later on.Also, had President Xi Jinping meets Emmanuel Macron in Paris calling on hisFrench counterpart to help fend off a.

New Cold War and China's property andconsumer sectors in focus with tech hub Shenzhen easing home buying rules andLabor Day holiday tourists keeping a tight grip on their wallets. All right.We'll get to all of the holiday data on the like in just a minute.But you take a look at what the risk action and risk appetite here thismorning. You are seeing a slight bit acrossequities here. In fact, we're actually still higharound those two year highs when it comes to Asia Pacific.Stocks here and we are on track, I think.

About one and a half percent away fromhitting the highs that we saw in 2023 as well.So certainly one to watch here today. You take a look at how Nikkei is doingwith Japan, really driving that charge here today, coming back from thatholiday strong. It seems we're up about 1% in Tokyo.Big earnings coming up this week, the likes of Toyota Tokyo Electron.So key to watch here. Nintendo also reports a little bit lateron today, Cosby is doing a fiery bit here, are seeing close to 2% gains.Taiwan just coming online, also doing quite well as well.So certainly the appetite for equities.

Is still there relative to what we'reseeing across bonds here this morning. I really study what it comes to theTreasury market here. We did hear from some Fed speakersovernight, didn't really move the needle too much.The RBA could be potentially next because they are set to hold.But there is one in the loan group there that maybe thinks a rate hike could bein the picture here today. I believe it's capital economics justgiven how inflation has picked up. And are we going to see the RBA lean alittle bit more hawkish here? You're seeing the Aussie hold its gainsof late here at $0.66.

Aussie yields not doing a whole lothere. Pretty steady leading up to a decisionin just about an hour or two. We're watching also dollar yen.So we did hear some comments from Qantas on here saying that, look, thegovernment need not intervene if markets are orderly.Is that sort of a test for some of these traders here to really kind of, I don'tknow, bring this trade a little bit higher?Again, I'm not sure, but you'll see still seeing that strength of arehovering around that one 53.54 level here right now.We're also watching Brent markets and.

Crude in general.So it looks like these truce talks in the Middle East have basically faltered.And so we are seeing a little bit of risk premium coming back into these oilmarkets. Iron ore at one continues to be a strongtrade despite seeing a bit of weakness here today in Singapore, where basicallywe briefly touched around 120 and then also dollar and futures are watchingvery closely as well. I think we've reached pretty much the20% gain since the April lows of late rather than do a whole lot.Maybe we're just tracking some of the gains that we saw in Hong Kongyesterday, just given really the.

Momentum and the buying was back on theonshore markets. We'll see if we see a second day ofthis. But right now, futures are heading alittle bit lower here. This morning.We talked about some of those travel data.So, yes, spending was up, number of bookings and travel was also up.But Stockton had interesting note, Dave, you break it down, too, per visitorspending still not quite to those 2019 levels just yet.Yeah, I think people are too busy taking pictures and spending, which is reallyyou know, that sounds like banter, of.

Course, which it partly is, but itcertainly just underscores the changing of habits and this longing forexperience more than that extra handbag, if you will.We're up ten straight days now. The Hang Seng index could do day 11.We'll see what happens with that foreign exchange reserves.Data comes out today, both Hong Kong and China.We'll talk more about the third bid in a moment.There's a turnover actually in a mainland actually top four 1 trillionrenminbi for a fourth straight day. Might that be an indication of increasedparticipation in this market?.

Yvonne talked about where you are andiron ore prices are down exceptionally well amidst these last ten days or so.We're watching that. And of course, all the things that comethrough out of President Xi Jinping's trip.Of course, over in Europe, Italian automakers keen to 900 bucks their firsttime, I believe, going back to early February.Yep. This talk, all things markets,especially when it comes to China, when you take a look at, you know, reallywhat's behind this rally and want to talk to should we run our opinion columnas well about this fierce rotation that.

We're seeing.Let's bring Lilian Leung China Income Fund Portfolio Manager at JPMorgan Asset Management. How real do you think this bull marketis right now? Well, I think sentiment definitely hasimproved because I think investors are getting more slightly more confidenceabout the policy direction, especially on property market, because I think inthe past people are still very skeptical aboutwhether the policy will be effective. And now we've got a little bit clearerkind of picture about the overall policy direction and with the, I would say,stronger hope that.

Some of the ultimate problem can besolved. Not sure within like 1 to 2 months, butthen the direction is that you're on the way.So I think that's the key change over the last month or so where when, youknow, investors start to feel like we finally get to the right direction tosolve the problem, in particular for property markets, I think that's the keyturning point. You're right, there is some a lot moreclarity beyond the short term that investors see.We'll talk more about income strategies in in a moment, but just generallyspeaking, to take us into that, do you.

Think this rally supported by earningsand what we've seen so far, because at some point investors will also start tolook for a fundamental story here? Well, I think ultimately, as you said,you have to be supported by the earnings revision.We haven't seen debt up across the board, but actually within certainsector, this has been actually very slim.And I mean, it just we have been suffering loss of the rating a littlebit. You can you can argue part of it is likenon fundamental related. And now we are basically reversing thatkind of trend.

And next step up, we need to besupported by earnings ratio. And and when would when we were going tosee that. It depends on how effective the policiesis going to stabilise the fundamental of theeconomy. I think that's the key.What are some of the sectors that you think are a little bit more resilientgiven this earnings season we've seen so far?Oh, definitely. The upstream like the energy, some ofthe major, some of the leaders, even within the consumer discretionarysectors, they have been holding up.

Very well, in particular on the costefficiency side. Even though revenue may not be that kindof super, but the operating efficiency improvement have basically to keep themargins on the upward trend and beat kind of market expectation.Right. And that takes a straight into, youknow, dividends, you know, margins and dividends.And from an income perspective, does it make more money?Are you getting the proper dividend yield right now?Yes, because in the bond market, there doesn't seem to be anything there.Well, I think one of the things we have.

Been arguing is that we are actuallyseeing our income or dividend kind of source coming from a wide spectrum ofsectors. I think in the past it's mostly fromlike banks. Some of the utilities is still the coreparts of the kind of yield sources, but now we are able to diversify to likeconsumer electronics, information technology,industrial wide spectrum of financial space.I think this sector, this kind of change has been very supportive to drive overon the only positive to China income strategy, but I think it will be a keypillar to support the sustainability of.

The rating of the overturning market,because it probably showed us a return. A more stable kind of total returnprofile should be like one of the key support to the drive that we had wererating. Yeah.Yeah, we were just talking yesterday with our, our strategists about thatequity risk premium that China has, which might be better than most marketsin Asia here right now. So does that mean that you're tiltingmore to the equity side versus the stock side?As of right now, I might say, yes. We have been taking our equity to over aposition like two or three months ago.

On the relative level, I try to get avaluation versus like fixed income. And we are still overweighting thatequity at the moment because as measured, either we are potentiallyseeing potential earnings revision upgrade and also from a shareholderskind of return perspective, we are seeing lots of companies improving toshow this return which basically will be supportive to to our overall trainingcomes. Right, Right.And what changes what changes have you seen in the SGB space that have made youoverweight? Push yourselves over weight to equitymarkets.

And I'm getting to, you know, one of theother stories which hasn't really gotten a lot of attention, this pushback fromofficials in the SGB market, that maybe things are getting more divorce orfundamentals. Well, I think is it's more aboutrelative valuation at present. It's because like for equities, we haveseen to potential upside not only from like the earnings revision but also theway they provide to show this return because there's still lots of company toable to increase dividend payout and make a more sustainable kind of payoutmore explicit kind of, you know, dividend payout policy, which basicallywill have invested to navigate the.

Potential total return profile forinvesting in China's equity. Or is this in the past we only bet onlike valuation kind of changes. Right now we are able to see potentiallymore long term as again, basically navigate your, you know, expect toreturn much better or less volatile go away.Yeah. We've seen in this rebound what's reallybeen driving it is well you mentioned property tech is certainly one factor aswell. I mean are you are you looking into morethe growth sector here right now as well?Yes, I think in particular, after kind.

Of like share price, kind of, you know,collapsing in the US to like, you know, 6 to 9 months ago, we see a lot more itnames with more I would say attractive valuation right now.So in particular to hot work they're more exposed potentially.They're also part of the beneficiary of the API kind of food and beverages toquite attractive from our perspective. So we are basically to be more, I wouldsay, position into this base. What, what are you seeing in terms ofjust what strategies are more in favor now because you run income strategies,for example, and increasingly you are being able to add tech into yourportfolio.

I'm wondering with the rally recently,there's chatter into market that these are people are buying index funds.It's the best companies, it's a growth companies.And I'm wondering, do you think that comes at the expense of incomestrategies, given the current nature of this rally?I think we seem a bit more balanced, kind of flowed recently and I would say.The income stretch. I think one of the core advantages thatbecause we have like mixed asset kind of asset class, we grew as a location andalso our stock picking, which supposedly would be less volatile than the overallmarket.

So basically our I would say returnprofile would be less volatile than the over just buying into like equityinvestment. So it depends on, you know, what kind ofinvestor who like some investor who might not want to be at that kind ofhigh volatility within the pure equity market, then it would be this kind oflike the strategy they would go for. Yeah, we all need less drama in ourlives, right? There we go.Lillian, thank you so much. Let's draw more income portfoliomanager, China Income Fund at JPMorgan Asset Management.Right.

Just ahead, your shows will get you guysup to date here on the president's trip in Europe as trade and security talks,of course, persist and progress there with the French president and also theEU chief. Details of those discussions coming upnext. We're also going on the opens of tradein Shanghai, Shenzhen and Hong Kong. It looks like futures are pointingslightly to the negative side of things. We're down about a half of 1%.This is the China show. Happy Tuesday. We discussed how to make real progresson market access.

I remain confident that more progresscan be achieved. At the same time, we stand ready to makefull use of our trade defence instruments if this is necessary.And that was the European Commission president, Ursula von der Leyen's,speaking during Chinese President Xi Jinping's visit to Paris.For more on that trip, let's bring in Stephen Engle, our chief North Asiacorrespondent. There's tensions between the two.And how did how did the Chinese president address that?Well, obviously, he's trying to fend off some of the consensus that is buildingacross the Atlantic with the United.

States, issues about overcapacity.We had Olaf Schulz, the German chancellor, go to Germany, go to Beijinga few weeks ago, and also brought up those issues of overcapacity.And again, these are the issues that are key to domestic politics as well inEurope. I mean, autos is Germany's biggestexport product, right? So they feel under threat by EVs in theovercapacity of EVs. And the allegations, at least, ofsubsidies to these companies and dumping allegations as well.So, again, you know, there's mounting differences between China and the EU,not only over Ukraine, which we'll talk.

About in just a minute, but these tradeissues. Trade has become a major issue,obviously, and we've heard it just there from the U.S.president, Ursula von der Leyen. And again, there's a tightrope beingwalked with Macron as well as with the other EU leaders on this trip with XiJinping. And this is what Macron I think we havea full screen quote of what he had to say.He said, Nobody dictates our trade, economic and technology policy.We wish it to be a sovereign, which means independent.So again, there's that fine line that.

These European leaders have to walk.They are there is a rising chorus about issues of of subsidies to these Chineseexporters of green products, which we've been talking about quite a bit.But at the same time, people like Emmanuel Macron and other Europeanleaders still want to do business with the Chinese.So that's that fine line that they have to walk and not necessarily and this iswhat Xi Jinping wants to make sure on this trip, and it's a very calculatedtrip to these three countries Paris, France, obviously Serbia and thenHungary. They're not going to necessarily get aparroting of the U.S.

Views on trade as well as perhaps youagree. And it seems like trade, there's maybe abit more leeway on Russia's war in Ukraine.That's where you're starting to see more, I guess, of a divide.Yeah, And the people that were in these this trilateral meeting between XiJinping, Macron and Ursula von der Leyen say that Xi Jinping sort of bristledwhen some of these allegations, not necessarily allegations, butassumptions that perhaps the relationship between Beijing and Moscowhas aided the war in Ukraine. You know, the whole issue about dual useproducts that end up potentially on the.

Battlefield.So this is something that the European leaders have brought up.Ursula von der Leyen essentially bringing this up not only in the matterof trade, but on the issue of security threats to the European Union.This is what Xi Jinping had to say about that.First of all, he said, Beijing is not the origin of this crisis, meaningUkraine, nor a party to it, nor a participant.He says we oppose this crisis being used to place responsibility on a thirdcountry. Obviously, he's referring to China andtarnish its image and invite a new Cold.

War.And that, I would say, is probably Xi Jinping's biggest aim of this trip toEurope, his first to Europe in five years, and that is to make sure and tofend off the concern that America's geopolitical stance.And also on the trade front, on overcapacity is not necessarily cementedin the EU. All right, Steve, thank you for thatupdate there, Bloomberg's chief North Asia correspondent.Stephen Engle we're taking a look at that fix here this morning and it lookslike we're back above that 710 handle for today.So right now we're seeing a seven 2175.

When it comes to your offshore rate aswell. We definitely saw that catch up from theonshore markets yesterday coming back from that holiday.But there you go. Seven 1002 for today, right?Yeah, a little bit of dollar strength, in fact, coming through in the last 6hours or so. That takes us into futures going intothe open 10 minutes away, give or take. And we're looking at futures doing thisten year gives at 230 right now do we get a day two on the mainland?Do we get a day 11 here in Hong Kong? We'll find out in a couple of minutes.A preview the trading day ahead in a.

Couple of minutes.This is Bloomberg. Right.Going into the Hong Kong and mainland China open, Hong Kong looking slightlyunderwhelming, maybe more unconvinced. We'll see.It's early. We'll see what happens here.Of course, in terms of data today, we're getting the reserves numbers comingthrough. But apart from that, we're looking atall things markets given this rally. And we'll see if that pauses todaythat's been taking place over the last, what, ten weeks or so.Here are some stories that we're.

Tracking for you today.Citigroup has shifted the work hours of some of its staff in Kuala Lumpur toalign with those in the U.S. The move is part of efforts to ensure asmooth transition to a one day settlement cycle.Said he has also created a task force that will solely focus on the process,also known as T Plus one, and it joins dozens of other financial institutionspreparing for the shift. It comes into effect on May 28th.Nomura is targeting 20% revenue gains for its global markets unit over thenext few years. Units Head told Bloomberg they expect 25to 30% growth in macro credit products.

With equities with the rest coming fromwealth management. The business has returned to profitafter three years of losses. That included a $3 billion hit from theArchegos scandal loose. Its shares fell sharply in extendedtrading after the EV maker reported a worse than expected results in the firstquarter. The adjusted loss of $0.30 a share wasworse than analysts expectations for a 25 cent loss.The company is contending with production challenges and uneven demandfor high end EVs. Palantir's shares also falling afterhours as its annual sales forecast.

Failed to impress the AI software andanalysis firm nudged its revenue forecast slightly higher and raisesoutlook for adjusted operating income to over $868 million.Palantir has been one of the outstanding stocks amid this current AI frenzy.Right, right. Going into the open today, the TuesdayOpen. So we're looking at some weaknesstrading sideways here across these markets in Hong Kong.In fact, yesterday for the better part of the session, things did look iffy andthen we just managed to close higher for the day.So that's day number ten.

Doubtful.We'll see. What if we get a day 11?You BP out with the notes? I think it was out late yesterdaytalking about how the rally not yet backed up by earnings expectations.And certainly when you look at 12 month projections in MSCI China, just to bemore specific, we're still seeing that somewhat rolling.I want to see rolling over, but it hasn't reversed higher on an index leveljust yet. Right.PBOC draining some money out of the markets today.Foreign 40 billion in renminbi, open.

Market operations.That takes us into the money story. The chart you're looking at is turnovermeasured in renminbi on the mainland. Obviously, we're looking at five yearshere. That yellow line is at 1 trillion mark.So yesterday, a fourth straight session of about a trillion turnover on short.That's a daily amount. Now, the reason this is important isbecause this has been a feature, maybe an insufficient but adequate and anunnecessary at least feature in previous rallies.So we've seen this spike above 1 trillion back in 2020, 20, 21, 2022, andof course back in five.

So I think a good indication ofsentiment here. Yeah, And you got to wonder, I mean,after north of 20% gains on MSCI China, what's next?Is this really something that is sustainable?There's a spark, a rerating, or are we still just talking about tacticalrebounds here right now? Yeah, well, the fundamentals storieshave yet to really come together, right as far as that.In fact, on that very note, almost the news gods are dropping this on theproperty story. S&P excuse me, talking about how theproperty market is still searching for a.

Bottom.So I'm looking at this press release that's just dropping in our inboxesright now. In fact, we'll talk more about theproperty story. And if you got those new home salesright, didn't look good either. Not the big cities, 37, 30, 39% drop inApril. Yeah, those actions were watch a littlemore in the renewable energy space along agreeing to add CITIC securities.CG and mining also rated do outperform the high tech international.Morgan Stanley had a interesting note when it comes to the liquor maker's aswell so raising its price targets for.

Two of them So we are here and Ludo Joeother factoring in what we saw in the earnings were 2023 and of course thefirst quarter results as well. And what they're seeing in volumegrowth, the price target for young air raised to 182 still maintain thatoverweight, but certainly that could maybe continue with this bull case whenit comes to these liquor makers here today.The pre market is looking like this year right now.So property continues to catch this bid here today, watching very closely someof these names. Syfy Holdings is up one and a halfpercent or so so far.

Travel stocks as well.You dig under the hood. I mean, the numbers are strong, right?Travelers made 28% more trips. Spending only rose about 13 and a halfpercent from 2019 levels. But maybe per capita spending still notquite there yet. So we're watching very closely.But Trump was talking a lot about the data about outbound and inbound travelwas pretty strong this holiday. Yep.And there's. Shares their record highs, I believe, onTrip.com going into the open today, 3 minutes away.You're watching the China show.

Good morning. Welcome back.Your watching the China show. We're kind on the open of markets.A CSI 300 was able to rise to those October highs yesterday.Coming back from that holiday. It looks like right now momentumstalling a little bit, especially what we're seeing in these Hong Kong marketsafter the stellar 20% more gains as well that we've seen in offshore markets.So we're unchanged in the Hang Seng here right now, a 721 handle.So some weakness coming through back into the Chinese currency here thismorning.

And Dave, really, we're still trackingwhat's been going on. Everything from property data, from thetravel data, still maybe showing some signs of weakness still yet.We were getting a lot of pockets of information coming through which we'lltry and put together. So, you know, on the property side ofthings. And there's still a Shenzhen story whichwe haven't really gotten into a lot and then relax in some rules in certainparts of Shenzhen. And also when you look at some of themonthly revenue and sales numbers from developers, certainly not well, I guessin many ways underscoring the point out.

Of S&P just earlier on that the propertymarket has yet to find a bottom in China.More on that in a moment. You're open is looking flat right nowafter really coming back strong from the holidays.Right now, a glance at some of your big movers and the biggest stocks onshoreright now. Flip the boards, please.Let's have a look. And by the way, while we're flipping theboards, I encourage just to mention that two were trading closer to 900 now forthe first time since early February. Weakness coming to in Hong Kong.I guess just to give you an indication.

Of how far this rally has come onshore,CSI or Shanghai Composite, it's about 15% from the bottom.This is about 20%. This is about 30%.This is about 25% from the lows. So we've actually come quite a bit.Let's take a look at property, hunting property very, very closely.Look at that. And of course, some of the otherbenchmarks on the property counters, CSI 300 Real estate index, Shanghai Prop,China real estate. Our big gauge, of course, on the back ofnews that Shenzhen is actually loosening some of these restrictions.Now, what is the underlying reality.

Here?A couple of things that we mentioned, right?So we're putting some data together. New home sales.This is based on data out of wind and also Macquarie, and they put that inthat specific report. So what we're looking at here is you'relooking at three years, right? 20, 24, 2023 and 20 2019.And effectively, as you can see, we're at the moment as of April and May, we'reactually below trend. So year on year, still looking atdeclines here on sales of the 30 largest cities right now.What are we seeing in the biggest of the.

Biggest right, Beijing, Shanghai,Gwangju and Shenzhen, your tier one cities.We're looking at weekly numbers. And based on the weekly numbers, it'sstill showing some weakness coming through here.And yet we have the terminal chart. I think we can get that up for viewersto see that. And yeah, here we go.There we go. This is the yearly 2017.You do see the trend lower. So we're looking at weekly numbers to32. You compare that to the same week lastyear.

All four major cities even are stillseeing declines with the biggest declines in Shanghai, the least declinesout of Beijing. Yeah, maybe why We're seeing some morehome relaxation, you know, necessarily home buying relaxation.I to say in some of these Tier one cities, S&P, we just talked about thatnote that came through here talking about, look, this property market isstill searching for a bottom. We're getting a little more detailsabout this. They're saying a double squeeze loomsfor China's property market. Structural factors, which Dave has beentalking about, are still squeezing rate.

Of developers strains that are unfoldingalongside a continued sale slide. That's after what we heard fromShenzhen, the tech hub in China, joining other major cities in easing home buyingrules that authorities try to revive this real estate market for.Well, let's bring in our Bloomberg Intelligence China property analystKristy Hung. So first was Beijing last week,Shenzhen. Now how significant are these measuresnow? Right.So we expecting Shanghai could be next to relax its home purchase restrictionsin the suburbs after you mentioned.

Beijing and Shenzhen?And then we're also expecting in the near term, 42 cities in China couldremove their home purchase restrictions altogether.But as we have sat here before, it doesn't matter how much easier thegovernment's making it for people to buy a home that won't overcome a lack ofconfidence. And this that's a lack of confidence onhome price, home prices. You know, if people are not expectinghome prices to rise, investments are not coming in.And that's also a lack of confidence about a job.You know, a survey in March is showing.

That 57% of white collar workers inChina are worried about losing their jobs in 2024, 57%.So, you know, these are telling you how, you know, sentiments really weak on theground. And also, if people are buying a home,considering to buy a home at the moment, you know, they would very likely thinkabout second hand homes instead of going for developers pre-sales.Yeah, because they can see that the building exists already.Right. It's felt already.What did the dynamics tell you then between the prices we're seeing in thesecondary market and how does that then.

Educate us in terms of.Where we go with the primary market. You've done some research on this.Yes. So based on official data from Angus,we're seeing since the peak there's been a 10% decline in home prices in thesecondary market fastest 3% decline in new homes.While we think that reality we're seeing on from projects on the ground, we'reseeing steep declines in the official data.But that's nonetheless telling you that, you know, in the secondary market, homeowners, they have bigger flexibility to cut prices and that is really where thetrue picture is showing.

But whereas in the new home market,because prices are heavily regulated by the local governments, some cities havebefore stopped developers from taking too steep a price cut.So that is not showing you the true picture.And that's also hampering developers ability to slap price and slash pricesto boost their sell through, to boost and shore up the liquidity.The Politburo meetings, people seem to think that that was maybe a turningpoint, that maybe policymakers are finally in the right direction intackling the supply issues and really trying to potentially reduce inventoriesfrom these developers.

Do you see it that way?I think the concerns we have right now is there's a lot of secondary supply inthe market. You know, we have the housing boom in2016 to 2020. A lot of people bought new homes, butwith a home price expectation changing that, looking for the exit, they'reoffloading their new homes that they bought into thesecondary market. You know, in Chengdu, Chongqing, talkingabout over 300,000 units listed in the market at the moment for each city.That's also the case for Shanghai. You know, that's an ocean of new homescoming in.

And on top of that, there's new homeinventory from developers. So, you know, at the same time, demandis dwindling. You know, how do we handle that?And that structural imbalance is the very reason why we're still veryconservative on the sector. Kristy, thank you.Kristy Hung there at Bloomberg Intelligence, China property analyst forus this morning. And from the property to the consumersector, we've got travel data. So we talked a little bit more aboutthis. Finally, we got some official numbersfrom the culture and tourism industry.

For what we saw in that five day LaborDay holiday. And it sort of paints a mixed picture,right. Trips dropped 28%.Spending was up 13 one half percent from 2019 levels.Outbound trips and inbound trips both saw about 1.9 1.8 million.So you're seeing not just outbound, but also inbound travel as well.They didn't give us last year's figures for those to mind you, but also you gotsome from, you know, data from trip. Some of these agencies talking about lowpeople are just opting for maybe cheaper places, maybe not so much Tier one alsojust going from maybe just best value.

For money sort of trips as well.So Jen did more of the crunching of the numbers.The concern is that per visitor spending is still below 2019 levels, which meansin general people are only keen on traveling, but not so much on spendingmoney. Yeah, well, let's get a better sense ofhow this affects sort of. So that's the macro.How does this affect the micro at a corporate level?We're joined right now by Angela Han Lee. Of course, she's an intelligence orsenior impact gaming and hospitality analyst today joining us.She's been traveling herself out of.

Singapore.Angela, what do you think? And Yvonne laid out this sort ofdiscrepancy in in in the data. Right.More trips, but less spending. What do you think is behind thatphenomenon? Yeah, we are seeing that like people arespending money to go out from China. So the urban tourism is very strongduring the holiday season. I think the major improvement this yearmight be mainly because of the increase of flight frequencies.I guess you guys may have noticed that the minimum annual leave requirement inChinese five days is actually very.

Short.And even when I talk to people of my peers, they still only have five daysafter working more than ten years. So I think that means that the holidaysare very important for them to travel, and the flexibility to travel like aplane along show is very, very low. So for that reason, I think the flightincrease in fly frequencies has been a key factor why people actually decide togo out from China this year. Also, given that like of some currencieslike a Japanese yen is weaker, so they want to spend more money like outside.But on the other hand I think go I agree that like some sentiment is not good inChina.

That's why people might be like gowilling to go to a county level cities or say even villages to explore like anatural adventures or maybe just going for like a music festival despite thoseyoung people. Yeah.I mean, you only got five days. You got to make the most of it.The housing market, though, as we're just talking to Kristi.Angela is still weak. You know, does this imply that consumerswill keep being cautious when it comes to spending?Yeah, I think I have an idea that, like, if people already bought both ofproperties of flats or maybe they are.

Suffering because because the rate isgoing up and also the even they cannot sell the properties.But if you talk about those people who have just started working or even likeor who are still at twenties, then they haven't bought the house yet.So maybe given that the price is that volatile, they might feel like maybe Idon't even have to buy the flat. And you also noticed that the marriagerate and both rates are going down. So they kind of feel like maybe I justenjoy my solo life. They in that case, I feel like theymight be willing to allocate more more like a budget or spending forthemselves, like an experience driven.

Ones.That's why I think I in China you are still seeing that the the concert ticketprices is going up and people still travel to different places to go to theto like to join the concerts. So I think there are some discrepancies.Is there like the people who are having more than 30 years old might besuffering something from property issues, but like a less than that, maybeyou still have more willingness to spend just their like.They are not they are not like overtly enough because they adjust to theworking. Okay.So spending really just about a little.

More on the concert tickets.We're not so much on buying and shopping.Angela, great stuff. Thank you so much.Angela Han Lee of Bloomberg Intelligence, senior gaming andhospitality analyst, joining us out of Singapore this morning.We got plenty more ahead. This is Bloomberg. Okay.So about 12 minutes into the session and, you know, things have started tostir up. Is that the right verb grind?Yeah.

Oh, still grind.Yeah. But yeah, I mean, it's green, so we'llwe'll take it. We'll see.We'll see how we end the day. But that said, this is day 11 too, onHang Seng index, right? Yeah.Day two for CSR 300, at least for now. But yeah, we're getting closer to atleast we reached those EUR today highs for for the onshore market there.We're focusing on some of the geopolitics as well.Oil's catching a slight bit here this morning.The Asia session.

Israel rejecting that cease fire planbacked by Hamas, saying that as far as the falls far short and that'soperations in Rafah will continue as of the latest now from a Bloombergreporter, Bill Faries. Bill, how do these talks break down whathappened? You know, from the Israeli side ofthings, what do you think fell short in this deal?Well, you know, we've known for weeks really kind of the broad outlines of thedeal that's been discussed. It would involve the release ofpotentially dozens of hostages by Hamas, perhaps hundreds of prisoners fromIsraeli jails.

It would involve a six week cease fire.That's been one of the common themes running through these talks.We don't know specifically what led to this latest breakdown.There are The New York Times, for instance, is reporting that there wereminor changes to the Israeli US draft proposal.And the big the big hold up has largely been centered around whether this ceasefire would become more of a permanent end to the war.Israel has pushed back on that. They say their goals are still to goafter the Hamas leadership and those thousands of Hamas militants, they say,are holed up in Rafah.

They do not want a cease fire to be seenas the end of the conflict. Hamas, on the other hand, is hoping theycan win this down and have Israeli troops out.So that seems to be where the where the disagreements remain.But where it leaves us now is really in a bit of a limbo.We don't know if they can have a breakthrough in the next few hours or ifwe're going to see some of the fighting drag on for weeks again.Yeah. And Bill, so in the meantime, should theassumption be and we know the US has been opposed to this, I think France andChina put out a statement, their.

Statement or it was reported earlier onout of Xinhua that both China and France also oppose this.Can we assume that the operation still continues there, of course, in Rafah?I think so at this point. Israel warned residents of parts ofRafah to leave that area, head north to Khan Yunis and get out of the waybecause they were planning to do more bombardments.We've seen them strike some targets. We haven't seen the full groundinvasion. But Israel says it plans to go forwardwith this. Whether that's a negotiating tactic totry to get Hamas to back down at the.

Last minute.We don't know. But they do have their troops ready andthey do say that going in as part of their objective.Bill, thank you. Bill Faries there, a reporter with thelatest on what's going on in the middle east here.Some other major stories that we're following from around the world.U.S. and Philippine marines have conductedrare military drills on the southeast asian nations, northernmost inhabitedisland. Immediate island sits just about 160kilometers south of Taiwan.

And the inclusion of that is this year'sdrills highlights the role the Philippines could play in any potentialChina U.S. conflict over Taiwan.The U.S. is adding a tank destroying drone to anasylum in an effort to prepare for a possible conflict with China.The switch Flight 600 is the first of a new wave of lower cost autonomousweapons. The Pentagon is publicly acknowledgingits funding through its replicator program.The weapon is known for helping Ukraine push back on Russian advances.The Canadian government will now require.

People lobbying or acting on behalf of aforeign government to register that activity publicly.The move comes after allegations that China attempted to meddle in the lasttwo Canadian elections. Other amendments will also make iteasier to prosecute activity related to illegal foreign influence.We got three more. This is Bloomberg. Welcome back.Shares of ANZ. There we go.Bottom of your screens. So the conversation is a buyback and aprofit, miss.

We're down over 1% or just under 1% overthere in Sydney. The bank has also just announced, as wewere just talking about its 2 billion Aussie dollar buyback after first halfearnings missing estimates. Group CEO Shayne Elliott told us wherethey are actually seeing pockets of strength in their businesses.We came off a record 2023 and what really delivered here, you know, revenuewas flat at a really, really strong level, expenses well managed andimportantly, it really shone through, I think, the value of having a diversifiedportfolio. As you know, the Australian retail andsmall business banking market has been.

Subdued and we experienced that like ourpeers. But we had really strong offsettingperformance in our institutional and international business.So I actually saw a lot of strength in the result and I think we're very wellpositioned for the environment. You joining us on our big day, ofcourse, after four and a quarter points of hikes.How are you kind of seeing the mood when it comes to clients, customers and thebroader economy and how that's impacting your business?Yeah, sure. So clearly, there is some stress on theeconomy.

I mean, that's you know, that's to beexpected given the interest rate rises, cost of living pressures, etc..So the market is subdued, particularly here in Australia and New Zealand.And we see that and we see that with customers, more customers struggling,although the number of customers struggling is still, you know, from anhistoric point of view, relatively low. So then we have these hardship programslike all the banks, so people are finding it tough, call up the bank andthat's the hardship. The number of people in our hardshipprogram is point 3% of all our customers.Now, it's devastating for those point.

3%, but it's 0.3%, 79% of our customersand home loans are still ahead on their repayments.They have paid more than they are required to do and 50% are ahead by morethan three months. So there's a remarkable resilience stillsitting in the economy, although things are subdued with competition prettyfierce within Australia. How vindicated by your internationalstrategy? And I'm wondering if you can give us anupdate. Given there were discussions withpension funds to bring in to India investment in the special economic zoneand also maybe an update on how.

Procurement of licences is going in theChinese market for ANZ. Yeah, great.So look, the point of difference ANZ is way the most diversified of the majorbanks in Australia. We have four great businesses, NewZealand, our retail business here in Australia, our small business bankinghere in Australia and of course institutional.And probably the piece that we really shine and change that point ofdifference is it is institutional, which services some of the world's bestcompanies, biggest companies around the region of Asia Pacific.And we operate in 29 markets around the.

World and that business really camethrough very strongly. So I do think now it's been hard work.Now you can't just turn up in Singapore or India or China and expect to get afair go. You've got to work really hard.And we've worked really hard building a strong foundation with the rightcustomers, knowing and investing in things that we think we do better thanothers, which is facilitating the movement of goods and capital around theregion. So we are in all the right places weneed to be. We've got all the licences we need tohave and more importantly, we have the.

Customers that we need.That was the ANZ group CEO Shayne Elliott speaking to us just a short timeago. Of course, you can turn to yourBloomberg for more on this to live. Go to get commentary and analysis fromour expert editors. And of course, we're tracking everythingfrom the Milken Institute, the RBA decision coming up in just a few hoursas well. Yeah, lots of events taking placeconcurrently. There we go.That's the word I was looking for. RB is coming up, so we're looking at theAussie dollar.

And by the way, so the level you'reabout to see on your screens is actually quite near this high.We hit back in March, and certainly the assumption that any hawkish pivot orstatement out of the RBA might actually push that beyond that peak.We also did get Philippine inflation earlier on towards the lower end offorecasts at 3.8%, although the Bangko Sentral came out with a statement toothat the risks to the inflation outlook continue in their view to lean towardthe upside. Right.That's a brief look at currency markets and of course the Bank of England is ofcourse on deck as well.

This week.Cable is doing one 2557 Chinese markets doing this.And we're now just coming off highs a little bit on the Hang Seng index is at$300, is still seeing some upside right now.Yeah, and interesting enough, HS tech is actually selling off a bit here today.Usually they're the bigger, bigger driver of profit taking.Maybe maybe there's a bit of profit taking going on in the tech space heretoday. Coming up really in the next hour,watching very closely our top of the Fed.A lot of Fed speak this week.

I think it's nearly 12 speakers thathave been going to be well, I think nearly I think I think 11.They're set to be talking this week alone.So T.Rowe Price, Thomas Poullaouec joining us why they continue toexpect two rate cuts this year. So I think we've gone from whether we'regoing to get these rate cuts to when are we going to get them.I think that jobs report at least shifted the narrative just a little bitto maybe September, September, November, November, December 12 speakers.That's one for every day of Christmas. And by the time we get to that, we mightactually get a rate cut.

So, you know, we were talking about theMilken Summit earlier on. Right.So Jenny Johnson, head of Franklin Templeton, actually said we probably getone, but the probability of us getting two is a lot less than us actuallygetting no cuts at all. Okay.So one at best is what she had to say anyway.And we'll see what the 12 say. So or zero or two.More than two. Yeah.Yeah, that's interesting. Okay, we'll see what happens.We'll get to digest some of the latest.

Fed speak as well.Williams Barkin to speak. All right.Well, want more on the way in the next hour?You're watching the China show. Welcome back to the China show.Here's a look at the site of the half hour of the session here.And looks like we're back in negative territory here when once more.But yes, we talked about. Right.This rally has been gone for some time now.We were thinking it could get to an 11th day, but certainly things might belooking a little bit overstretched to.

Take the MSCI China, though we're stillslightly flat here right now, but we'll see how this all plays out.But CSI 300 at least, I think we're doing a little bit better there.DO Yeah. I mean, this market, as you can see, ismoving quicker than our you know, we can type headlines out, but it was actuallya few seconds ago to defend ourselves. Of course, we were on track for an 11day of of gains. We'll see.We'll see. Right.We've been bobbing between gains and losses and to Yvonne point.Right.

Overextended.You know, you're getting a lot of momentum coming through.I mean, ten straight days that that's what that does, right.So, you know, measures of momentum. Good example before I talk about thishour, as I you know, your Bollinger bands do indicate maybe it might be timethere to maybe take some of that froth off the table.More on that in a moment. And again, bottom of your screens, we'relooking at, of course, some of the property names listed in Hong Kong.You're getting some news out of Shenzhen and then relaxing some of the propertyrestrictions and home buying.

Restrictions following what we got outof Beijing. And our analysts, Kristie Hong out ofBloomberg Intelligence, actually thinks Shanghai could be next.Right. Broader read across these markets Rightnow we're looking at Asia-Pacific. Japan is coming back online today, shutFriday and Monday, and that's pushing the benchmark now at quarter 1% to thehighest level in about two years or so. So I guess this is really on a lot ofthings here, the China story and of course, of one you also have these hopesagain are back that the Fed could cut at some point this year.It may be boosting what we're see ing as.

Far as equity markets go.Yeah, even if it's as far away as November or December or even September,when we get very close to that U.S. election.Yeah, we did hear from some Fed speak overnight.The Bank of New York president John Williams saying that rate cuts will bebased on the totality of the data. He did speak at a panel at the MilkenInstitute Global Conference in Beverly Hills.For me, it's really looking at the totality of the data and not justlooking at an employment report or a CPI or other piece of information.You really want to make sure we're.

Looking at the broad picture.We have the maximum employment and price stability goal.So we want to, from my perspective, see all the data and information speaks toall of that. And really, you know, as the data comein, hopefully we'll be moving in the direction we want to see both oninflation and in terms of restoring balance to the economy.And then we'll make our decisions based on on that,we're joined here in sets, Thomas Poullaouec, Head of Multi-Asset Solutionsfor APAC at T.Rowe Price, normally based in Singapore.But we see him enough of course, and.

Quite regularly here in the city.I want to talk to you about the Chinese markets in a moment.That's been one of the main stories. But you know, why don't we start withthe macro backdrop and the Fed and can we still trade on the assumption that atsome point this year easing begins? Look, if you look at the probability,what we see is that on average it's about 1 to 2 rate cut, but you have awide range of probability around that and even 20% of probability is stillbetting on a rate hike by the end of the year.So I think that's the kind of things that you need to take into account, isthat you have an average which is still.

Pointing to some kind of easing by theend of the year for us. Our US economist is still betting on twocuts for this year, but what we see is that there are still a wide range ofassumptions and as it was said just before, the data will be key and wedon't think that we will get perhaps enough data by the summer to get thefirst rate cut in July so that can be postponed to the second half.And in that case, you might be left with only one cut for this year.Okay. So and the narrative seems to be lastyear was we're going to head into a recession.We still haven't seen that.

Now it's more about inflation.How does that change the overall playbook for you, especially when itcomes to multi-asset allocation? So, look, a little bit of inflation isnot too bad for equities because equities and things are in nominalterms. And you can see that, for example, thein the US, the earnings growth for this quarter was about 6% compared to a lowbars that that was at about three or 3%. So definitely earnings outpacedexpectation. And part of the story is some of theprice hikes that came at the beginning of the year.So there is a bit of inflation that can.

Help equity and we can see that the datais also now signaling that, yes, the economic growth is still quite weak butgetting better. And we can see that PMI are movinghigher. That's true in the US, That's trueglobally. When you look at global PMI, you can seethat we are. 50 right now.So it's something that points to a reacceleration in the short term of theglobal economy and that supports equity of our bonds in our portfolio, whereasspecifically in equity markets. So the largest overweight that we haveremains Japan.

That's a long term story aroundcopyright governance. But of course the weak yen is alsohelping the export sector. I feel that when you look at somepockets of Asia, you also see some strength, according to us, that willcome from, for example, South Korea on the back of this uptick in globalgrowth. So the export sector also can do well.But you have also the story that is really benefiting that market.And then if you are more adventurous in Asia, you have Vietnam.Vietnam is also 80% export driven. You have a very cheap market after someissues last last year and you have the.

Possibility of you are a long terminvestor of inclusion in the yen. So you have a broad range of markets.There's still a lot of interest enough to get back into China right now.Thomas No, I think China is structurally challenged by the property deleveraging.Yes, you have a tactical bounce, but that was coming.Remember, we were talking about the price earnings of Chinese stocks beinglower than the price to books of NASDAQ. So of course the valuation was so cheapthat people get back in. You have a lot of short coverage comingon right now, so that is helping the market as well.But look, you have a property sector.

That is still impacting consumerconfidence and we see weak prospects given that the year the growth is stillhelped by exports. Yeah.So stimulus is not there to to be big enough to really be a catalyst forconsumer spending. And some of the markets that youmentioned, you're overweight. And so Japan, Korea, Vietnam, maybe to alesser extent, you mentioned the currencies is a boost to Japan.But I'm wondering how you're hedging currency risk right now.If you're a dollar investor, you know, you look at some of these markets andyou probably worried where the one is,.

Where the yen is, for example, where thedollar is trading, where the yuan is trading, if you long onshore markets inChina and wondering how you're looking at that.So we are hedged on the Japanese yen, for example.And we we we started a year on north a view of a weak US dollar, but we changedthat view right now so we we can see that the US dollar is really supportedby the interest rate differentials that is quite large and still expected to bemeaningful. So growth is also quite reasonablyresilient in, in the US. So you have interest rate differentialwhich is on the positive U.S.

Dollar into a gross differential,positive U.S. dollar.So that's why we are hedging excellent currency from the US based investor.You're still favoring value overgrowth, though, right?Yes. So so because we are looking at abroadening of market leadership, of course, the story last year was beginswith the max seven. But we can see that value sector canbenefit from the uptick in economic growth.And we are modestly overweight.That is.

What about the fixed income part of yourportfolios? I know you're mostly overweight equitymarkets, but sort of within fixed income.You know, even if the Fed cuts in December, it doesn't mean inflationcan't hit your bond returns before December.Should I look at inflation protection? Should I go long duration?The opposite. What's what's the call?So we agree with your point about inflation protection.That's something that we need to own in our portfolio.But we do that through the short part of.

The curve.So as that would be more short term tips.And then we are underweight duration still in the portfolio.We we see the risk of yields moving higher and with that we are left withcredit. We still see value in in debt and alsoin high yield where you can capture the carry and in the low volatilityenvironment, that's what you want to be and duration.How are you looking at that right now? So duration we are underweight.To be fair, that's perhaps in some of our portfolio, our largest riskallocation to be underweight bonds where.

We see yields moving higher.But until the end of the year. Right.For investors and I guess it depends on what type of investor profile you'respeaking with. You know, people talk about fine, wherelet's say six months from the Fed cutting rates at best, how do I look atall in yields right now? Is it time to lock those in?If I'm in this for the longer term? I think if you are an investor that islooking at 2 to 3 years and you want to, you're happy with five, 6% that you canget in credit markets, you can you can build a buy and hold with very safecredit analysis.

So that's definitely something that wesee. Quite a number of investors doing inChina and in Asia, where they are happy to just lock in the yields for now.And that's definitely something that I would recommend.I saw more short term duration credit to pick up an extra spread and you can getabout 5 to 6% depending on how aggressive you want to be.So modest. Overweight on equities over bonds.Now, should I be looking at other asset classes, commodities, even cash rightnow? So Bitcoin, Bitcoincash remains still and an asset class.

That you can own given, as we said, 5%,you have an inverted yield curve. So it doesn't make sense to take toomuch duration down. On commodities, I think it's a bit of amixed picture. We would be quite positive on on sectorslike copper, which is definitely benefiting from this infrastructurerebuild and new energy. But on the other hand, I think oil hadquite a good run and we might see some oversupply.We can see a build up in inventories. So in the short term, maybe oil could bea bit more challenged near-term. All right, Thomas, great to have youhere in Hong Kong.

The Thomas Poullaouec there, head ofMulti-Asset Solutions, APAC at T. Rowe Price.I'll take some live pictures here right now.Take a look. First of all, let's talk a bit more onwhat's driving this bull market in China.We have a big discussion with our team as well from Bloomberg Opinion as wellas buy. But they take a look that these are livepictures that we're seeing when it comes to Modi's home state of Gujarat, wherewe're seeing he's headed to vote in this very heated Indian election campaign aswell.

Bring in an update next.This is Bloomberg. All right.Watching some of the biggest decliners in the Olympics.First, I'm sorry, but grainy, though. Yeah, there you go.There you see Prime Minister Modi there voting in hishome state of Gujarat. As we get ever closer to this veryheated Indian election campaign. So certainly there he is just about tocast his vote. I wonder who he's voting for, David?Yeah, I no line two went straight to the front.Of course, it's early in the day.

Yeah.This is home state, of course. Okay, I guess.And he gets dibs on everything. Yeah.I'm guessing people know who he is. Yeah, right.Of course. There we go.If they don't, he's in trouble with the elections, but.Okay, that's a bit of conversation. Let's have a look at what's happeningacross these markets. 45 minutes into the session here in HongKong. And some of the big decliners have beenreally some of the big winners of late.

Right.So Meituan was actually up 80% almost before today.And really, how far has its rally gone? So when you look at it from the bottom,which was late January, early for that, we put together a chart that tracksbasically not all but all the major benchmarks here.It's really a favour in favor of growth, in favor of Hong Kong listings.So we're up about 30% on the Hang Seng tech index.We're up by half on the CSI 300 and on the Shanghai Composite.But as you can see, it's been it's been very, very well for many of thesebenchmarks from that bottom, of course,.

Back in February.All right. So where do we go from here?She'll be with us here on set. Our Bloomberg Opinion column is.And also joining the conversation is Marvin Chen, our Bloomberg intelligenceequity strategist. Marvin, let's start with you.There's a lot of momentum in this market.Can it continue? Yeah, we think some of the comments fromthe Politburo and the timing of the third Plenum can kind of sustain thismomentum going into the summer. And I think this structure, this focuson structural reform is something this.

Rally has been missing so far.So we think back to that February, we've been reallyrebounding off short term measures such as a know short sale banning marketintervention. But the underlying economic problemssuch as the property sector still exist. So now markets have kind of stabilizedand we're seeing more focus on the structural medium to long term reforms.And I think the timing of the plan fits into this narrative of stabilizingmarkets and then buying time for leadership to kind of focus on morestructural reforms is something that markets are looking for.Shuli, your column today talks about the.

Mood that's shifting here in Hong Kong.What do you think is driving it? There are two fears that are drivinginvestors repositioning. One is the fear of getting caught.Another fear is the fear of missing out, getting caught in the sense that we allknow coming through 2024, everyone loves Japan, hates China, and everyone ispiling on to semiconductor stocks because of the rally, etc..Right. And then like just two weeks ago, tsmc'searnings disappointed and we realized the chip upcycle is not may not be asstrong as investors had hoped and the yen sliding past 160 means that thedollar based investors, they are just.

Not making as good returns.On the other hand, just like what mom was saying, China finally has the datefor the for the platinum, which means that they seem to have a plan for itseconomic future. And the people seem to think that thethe economic policy paralysis is over. And we all know China is very, verycheap. So people are just rebalancing andtrying not to be so lopsided, basically. Right.And Marvin, that takes us into I want to bring you back in because you're lookingat the earnings season as well. And at some point, investors will lookfor earnings because the market's so.

Cheap, I believe they're probably notthere yet. What are you seeing as far as theearnings season goes? You know, so far, first quarter earningshave been tracking a slight contraction year over year.We do think this is somewhat of a base effect because, you know, consumersentiment was still pretty positive in the first quarter due to reopening.But overall, we do think we also are seeing some downward revisions, butwe're less concerned about the downward revision because we see that asconsensus, which is still at 15% growth for this year, kind of moving towardsour estimate of 10% this year.

But overall, we do think GDP growth isgoing to kind of features the earnings growth later this year.And we do see a potential for a Goldilocks scenario where improvingChina inflation helps drive margins in earnings this year, while easinginflation in the US allows for the Fed to cut once or twice.Okay, so how's university position right now?What are you looking at? Well, you know, the regulators have beenhighlighting shareholder returns, so we think that's exactly where investorsshould be focusing on high dividend yield.So these sectors, such as energy and.

Utilities, the other form of shareholderreturn is buybacks. Right?So here will be the China tech sector, Alibaba, Tencent come to mind even afterthe April rally. If we look at HS tech versus like theNasdaq 100 or the next seven, we're still trading at a 30 to 40% discount.And you know, there has been signs that. China Tech is back to business.So we do see some room for valuation convergence here.Yeah, that story has actually not gotten a lot of attention.Tension's actually led to some of the buybacks here that have taken place.Yeah.

So Alibaba, Alibaba buybacks haveactually been larger over the past couple of years.You know, they've recently announced the expansion up until 2027, I believe.But yeah, both have been buying back very strong.And some of the newer e-commerce platforms are alsoannouncing buybacks this year. Surely when you look at let's take itback, say 18 months, two years, the market in Hong Kong, sharp rallies, thensharp declines. What does it tell you about where weare? I just think Hong Kong is a very funnyplace in that there are no like a.

Dominant investor bases, right?Like the Americans, the Europeans, mainland Chinese and local investors.There's no single dominant force. And as a result, a lot of factors canaffect the Hong Kong stock market like a feather rate hike.US trying to draw political attention to China's economy, even local investors,random rumors. And I just think it's amazing that thatpositioning has been so light and there is hardly any good news.I mean, we are also we all hope for good news, right?And then there's not much it doesn't take much for Hong Kong to comingthrough a bull market.

It just shows that the people reallyhave fled this market. Right.Shuli. Great stuff.Evolving opinion columnist also Marvin Chen of Olympic intelligence joining ushere for that roundtable. We got plenty more ahead.This is Bloomberg. Right now.The IBM CEO says its air unit has booked more than billion worth of businessalready. In fact, this year, a rebellion to me.Arvind Krishna spoke to us at the Milken Institute Global Conference taking placein Beverly Hills about the regulatory.

Landscape for A.I.and also the broader tech space. I think every regulator is worried aboutthree topics, not just safety and regulation.They're worried about innovation. They're worried about competition andthey're worried about safety and regulation.So when you take those three together, the airlines have opened really cometogether to help you foment innovation. So I think that that actually helps theregulators to think about what is going on here.Well, of course, there will be some guardrails that are always put.But in my experience, open technologies.

Have always been safer and more securethan closed technologies. Is one of the risks that maybe you'reobviating with your emphasis on open architecture, that some of the I'll callthe big guys get an advantage and really have an entrenched position.But I use the concept of a walled garden.When you have a walled garden, how those areas and technology has been moreinnovative or less innovative outside of walled garden has always been lessinnovative. And so I think that it actually helpsyou create more competition. Does it avoid regulatory locking of acertain one or two players?.

Likely.But isn't that good for all of us? Are you pro regulation?I am pro regulation as long as it is light touch and allows innovation tohappen. I absolutely would be pro regulation ifregulation tries to reduce innovation. I think that's a problem.What about the distinction between regulating the technology as opposed toregulating the uses? We had Sam Parmesan or somebody you knowwell on who said he thinks regulate the uses, don't regulate the technologybecause that will impair innovation always.How can you regulate the technology when.

You don't even know where the technologycan go? Two years ago, we heard of a largelanguage model. If we come out with our technicalinstruc lab. Six months ago, nobody had heard ofthat. There will be another one.And another one and another one. So I think trying to regulate thetechnology implies that the regulator and the and the policy folks believeknow more innovation can happen. I think that's a bad bet to make.That was the IBM CEO, Arvind Krishna, speaking with Bloomberg's David Westinthere at Milken.

Some of the other stories that we'retracking for you today, Citigroup has shifted the work hours of some of itsstaff in Kuala Lumpur to align with those in the U.S..The move is part of efforts to ensure a smooth transition to a one daysettlement cycle. He has also created a task force thatwill solely focus on the process, also known as T Plus one.It joins dozens of other financial institutions preparing for that shiftthat comes into effect on May 28th. Nomura is targeting 20% revenue gainsfor its global markets unit over the next few years.A unit's head told Bloomberg they expect.

25 to 30% growth in macro creditproducts and equities or the rest coming from wealth management.The business has returned to profit after three years of losses Thatincluded a $3 billion hit from the Archegos scandal.Right. We're looking at a couple of movershere. Some rare earths are actually and thisis there we go to my right. We're looking at some gains.There are two two, two, two, one, two, two, eight and a half percent.Really, a price hike in the industry might be boosting the earnings outlookfor some of these.

So just watch it very closely.Today. We're looking also at some of the moversacross the region. And speaking of an earnings outlook,fast retailing over in Japan is actually seeing substantial gains going into thelunch break, three and a half percent April sales.I do have the company statement here coming out and talking about that andunique Uniqlo, Uniqlo, Japan. Sorry, just looking at where we gobecause we're coming off a unique look at rare earth.Uniqlo, Japan is very strong. That's according to SBC.Nico and their products are also selling.

Well.Is it already some? It is quite warm in Tokyo.Yeah, I heard plenty of the weekend. They're not sure to me.Any surprise there? Yeah.Unicharm 1.4%. Nintendo is also seen 2.6 and of courseANZ with earnings losing to buy back missing earnings.Plenty more ahead. This is Bloomberg. 11:29 a.m.in Tokyo. Japanese markets are having their lunchbreak in just a minute or so and looks.

Like we're still seeing other day ofgains here, a north of 1% when it comes to the Nikkei, 2 to 5.And we're watching very closely that weakness coming back around 154 levelshere right now. So certainly watching very closely.We had condos saying, look, we're not going to intervene if markets areorderly. So is that testing the resolve of someof these traders here this morning? You those are taking up just one basispoints and your job market here right now in the Asia dashboard, What we'relooking at, we're talking about two year highs when it comes to Asia Pacific.Stocks here, if you take a look at the.

Asia extra span, we're about one and ahalf percent or so away from any of those 2023 highs.U.S. futures are flat here.The dollar is catching a slight, slight bid here.But if you look at sector by sector, it looks like tech.It looks like energy. Real estate is doing decently well heretoday, where you're seeing a bit of more of a sell off is the consumption space,the health care space as well. So certainly, you know, there's a lot ontap. There's an RBA decision coming out andsome earnings to Yeah, it's it's on RBA.

Right so yields have been pushing lowerof late might be down to the fact that treasuries have been doing well.We were looking at the Aussie dollar in fact earlier on because it might be achance that if they do strike a hawkish tone the Aussie might actually be taughtthat high were bad back in March. I think we have a chart of that which wecan show you later on, but it's a weird split because hold mostly there's one ortwo economies that actually think that they might actually sneak in a higher.I believe if you look across the G10, with the exception of BOJ, they probablymight be the most hawkish. Yes, the RBA won't be a pack region hereright now.

So are they going to still be able tosqueeze one in is the big question here? Of course.But, you know, it really shows the inflation picture, what we saw in thefirst quarter that really kind of delayed the prospect of these rate cutsfor Australia. So, yeah, there's that kind of trendlines that we're seeing and how we break basically broke below back above, Ishould say, that trend line when it comes to the currency here right now.So let's get a bit more about what is expected.Of course, seems like most economists still think we could see those ratesholding at a 12 year high when it.

Announces that policy decision just alittle bit later on from now. Our very own Swati Pandey economicsreporter joins us for more. Swati, what else are you looking out fortoday? One of the key things that we will bewatching out is the tone of the statement, especially the lastparagraph, which has a little bit of guidance, which they had tweaked in theMarch statement to say we are not ruling anything in or out from furtherincreases in interest rates cannot be ruled out.So they dropped any reference to further increases in interest rates in the Marchstatement.

So whether they bring that back or notis going to be really critical, especially because we had an increase ininflation. It was a stronger number for the firstthree months of 2024, and that really took markets off guard because it wasworrying that the disinflation trend that we had seen over most of 2023 washad kind of stalled. Right.And you know, that's it. So I guess my question is, has the RBA,I guess in many ways the narrative in Australia, has that gone almostindependent because we've seen global, you know, these rate cut backs gettingpushed back to the Fed every day.

We talk about that and I'm wondering howthe conversation is ongoing in Australia or might that depend actually what on onthat last paragraph that you mentioned, part of that statement that's due inabout an hour or so from now? Yes, that is right.And in fact, after the March meeting, we have not heard from the RBA officials atall. So it's been a long hiatus.The RBA will also release its economic forecasts, which which comes out everyquarter. So that will also give an indication ofwhere they expect inflation to be. Current forecast implies inflation willnot come back to the 2 to 3% target.

Until the end of 2025.So if they are able to keep that, I think interest rates will have to remainaround the current levels. However, if it looks like they will needto increase interest rates to ensure inflation is in the path of inflation isintact, they will probably talk tough and may signal further increases.So market pricing is for 25 to 40% chance of a rate hike by August.Economists are not predicting a rate hike the first rate cut from November.But markets markets see the risk of a rate increase.So that is a possibility. Yeah.Tell us a little more about what we're.

Seeing in terms of the inflationpressures. I mean, there's still some stickinessand some components like rents, insurance, for example.Do you think that's enough, Swati to worry the RBA?Look, if when we saw the February forecasts inflation forecast, it showedinflation around 3% in December, by December 2024 and around 3% by December2025. And we've read we thought why is ittaking a year for inflation to remain around that 3% level?And now when we look at the stickiness and rents and insurance, education andsome of these services component, it.

Looks like the RBA knew what it wasdoing when it drew that longer path for inflation to return to the 2 to 3%target. And I think if it looks like that isgoing to be the case, if inflation if inflation continues to be high butwithin sight of the target and around that 3% mark by 2025, the RBA will notbe too worried. Whereas if it looks like it's going togo up, three and a half percent remains around where it is now, it's going toreally worry them. Right.That Swati Pandey there, of course, in Sydney for us, giving us a preview in 2hours time, of course, is the RBA.

And if you are on the Bloomberg, ofcourse you can turn to your terminal for more on this.This actually comes on line, I would guess a bit later on.Gets busy. Of course, as we approach that decisionto leave you go on your Bloomberg terminal.Yeah. We also heard from the ANZ group CEOShayne Elliott. Talk a little bit more about now hisview on the strength of the Australian economy.Take a listen. Clearly, there is some stress on theeconomy.

I mean, that's you know, that's to beexpected given the interest rate rises, cost of living pressures, etc..So the market is subdued, particularly here in Australia and New Zealand.And we see that and we see that with customers, more customers struggling,although the number of customers struggling is still, you know, from anhistoric point of view, relatively low. All right.Shayne Elliott there, ANZ Group CEO, giving us his assessment of where we areon the economy. They just released, of course, earningsfew hours back by back. But I guess as far as the bottom line isconcerned, Right.

Plenty more ahead.This is. Right.Welcome back. So just over an hour into the cashmarket session here, at least as far as now is concerned here.So we were up ten straight days and Hang Seng looks like we are taking a muchneeded break. In fact, we'll see.Okay. We have a few hours left, of course, inthe session. It's been an hour still only on share.Markets have been just coming off highs a little bit, as you can see, weretrading flat right now.

Now, speaking of Hong Kong, let's getmore on this criminal proceedings taking place here in the city against Saigon toCapital Management. The hedge funds founder, of course,Simon Saddler and a former trader. Now, the firm has long played a vitalrole in helping Wall Street banks unload chunks of stock dominating one of thecertainly market's last old school businesses.Our hedge fund reporter Bei Hu, is with us here to talk us through this.Well, let's I guess for our viewers who might not be as familiar, who is Segantii, let's start with that background. Segantii was a is a firm that was founded in.

2007 by atrader to call Simon Sadler before founding them firm.He worked for firms including Dresdner, HSBC and Deutsche Bank.Unlike other Asia hedge funds who typically buy stocks and hold them forfundamental reasons. So he is more trading oriented firms,particularly known for its willingness to participate on a large scale inequity capital markets. Deals at the peak managed about justabout $6 billion in 2000. 21 now oversees about 4.8 billion.Okay. He was known as sort of the the blocktrade king in this region.

Can you just explain a little bit moreabout these block trades? BLOCK trades are actually it's a vaguelya loosely defined idea involving somebody unlocking a large block ofshares in listed companies. But in private transactions, it could bethe companies selling new shares. It could be a shareholder insiders,corporate insider selling shares or could be a large institution.So the tricky thing about block trace is often times, you know, like the pricesensitive information that's involved A how to safeguard that information.Yeah. And usually it's obviously not a goodthing.

But how is information shared before ablock trade? It's obviously problematic.And what is the CFTC? What are regulators doing about it, too?Sure. Oftentimes, the banks involved or eventhe banks anticipating a deal, would go to a certain group of investors andtrying to gauge their interest in the pending deal.And it could be a hypothetical deal at that point of time.So usually they are not allowed to share detailed information until that investoris taken across the war, which means signing an official pledge now to act onthat insider information.

But oftentimes, even before you get tothat point, they have to share something of a location with hedge funds or otherinvestors to entice them to participate in the deal and be takenacross the wall. And that's where the danger lies,because oftentimes the regular participants in this market, like thebanks, have a calendar of the lockups that are ending and who are thepotential sellers. So the little information that the banksshare can help them. Guesswho is the selling shareholder, how much, how many shares are going to beshared.

And you know that word when they canactually act on that information. And the ICAC is trying to tighten theso-called rules on market selling by bringing this kind of informationsharing on recorded channels and demanding that investment banks keeprecords of such information sharing. We've talked about how this is quite ahigh profile case here in Hong Kong. What do we know about the process of allthis? It's going to be quite drawn out.Yes. So the only other case that I canremember involving a non-corporate insider was the criminal conviction of amorgan Stanley former Morgan Stanley.

Managing director many years ago.He was initially the initial SBC announcement was in 2007.He was initially sentenced in 2000. As far as I remember, he finally.SPC won on appeal in 2012. So it's going to take a while.Yes. All right.Thank you so much. Great to from you and your team on justwhat's been going on and the overall culture of surrounding society as well.Bloomberg hedge fund reporter Bei Hu, there of course, you get more on theinsider's guide to the money and people shaking up the finance hub in our newHong Kong edition newsletter that's out.

Every Thursday.You can sign up through our website, bloomberg.com slash newsletters.We have plenty more ahead. This is Bloomberg. All right.You want to do this for me? Okay, I'll do it.Okay. You're going to get more TV than you.State Street. See, Ron O'hanley here says the capitalmarkets have been showing strong resilience, really, in weatheringserious challenges in recent years, from worries to the actual pandemic.O'hanley spoke to us at the Milken.

Institute Global Conference taking placein Beverly Hills. Before I talk to you about the future,let's just talk about the recent past. I mean, if you think about the what theworld has been through in terms of the challenges it's faced and any kind ofchallenge in the real economy translates to the financial economy.So we've had a pandemic, you know, a once in a century kind of pandemic.And we saw we've also had drought, war break out in Europe.And if you think about how capital markets have actually adapted to that,how you've seen underlying economies repair themselves, and again, thecapital markets is very much a function.

Of what goes on in the real economy.And you've seen, I think, extraordinary resilience in the real economy relativeto what any of us would have expected. What do you think was behind thatresilience? Not to sound jingoistic, but I think alot of it was the US led the way in terms of certainly in the repair ofsupply chains. I mean, what we were talking about inthe middle of 2020 was the potential for this going on for four or five, sixyears and the rebalancing would take that long and in fact, really led by theUS corporations, but also just large corporations around the world.It was really led by large companies.

Figuring this out and saying, What do weneed to do here? You know, it's interesting that youbring that up, Ron, because if you think about the pandemic, companies, globalcompanies are rethinking their supply chains.And that has led to a new kind of investable idea.Walk us through kind of the new investable ideas coming off of thepandemic and just a lot of things being different.Well, let's just stick with supply chains for a moment.I think that maybe with globalization we went alittle bit too far because supply chains.

Became highly, highly optimized withvery little built in, if you will, slack or for that matter, capacity for theunexpected. So what you're seeing now is really amuch more resiliency being built in supply chains, that of having singlesource that might be double source, triple source.You're seeing some activities being brought back to countries reshoring.And it's not so much a those aren't political statements as much as theyare. Now, what we really ought to have alittle capacity in whatever country here in the U.S., here in Germany, here inthe UK.

And then finally, we're seeingopportunities being created by other for other countries where it may be that acountry like China had it all or had a large portion of it.And China is not going to lose everything.But you're starting to see other countries in Southeast Asia.All of these represent investment ideas. We're seeing a lot of more things shiftinto like South America, Latin America. One thing I want to ask you, we were allfocused this weekend over the annual meeting out at Berkshire Hathaway andWarren Buffett, Warren saying Wall Street creating kind of a casino likeatmosphere.

He's talked about this before forinvestors. Do you agree with that assessment or howdo you see it? So I think there's there's a concernabout market valuations and it's really a concern about a relatively smallnumber of companies that are seeing lots of valuation expansion driven by thingslike A.I. and the belief of AI.So a couple of things I'd say about that.If you if you take the S&P 500 index, right, which is cap weighted and it'sjust equal weighted, you actually say it's actually not that overvalued.And by the way, there's opportunities in.

Lots of other companies.Right? You were talking about seven companiesin the S&P 500. So that would be point number one.Point number two, which I do think we do need to think about.I'm old enough to remember the advent of the Internet.And if you think about the midst of that, all of actually if you think aboutthe mid to the late nineties, there was that same kind of excitement, same kindof exuberance around a few companies. The Internet was going to changeeverything and it was going to change everything right away.And then 1999 and 2000 came and we could.

Find ourselves in a situation like thatagain, because the the hype of a technologyoftentimes isn't met by the actual implementation of it.So if you ask me, what do I believe? I think that artificial intelligence inall of its forms will be a fundamental, a fundamental game changer for manyindustries. Is it going to happen overnight and isit going to kind of reflect the valuations that you're seeing in a fewcompanies? Probably not.Yup. And that was State's CEO Ron O'hanley,speaking with her colleagues Carol.

Massar and Romaine Bostick there at theMilken Conference as well. Some big news to tell you about.That's really we're getting a little more updates here when it comes toAmazon. So this is about us.And they're spending a $9 billion investment expanding US cloud computinginfrastructure in Singapore. So the outlay, it's going to be doneover the next four years as we're hearing, doubles Amazon Web servicesinvestment in Singapore. And it's really how they can try toaccelerate the adoption of A.I. as well.We've seen us expand beyond just us, a.

Lot of tech companies as well.Microsoft, Apple included, have been growing their presence in Southeast Asiaas well. So there you go.Big investment heading into the Lion city.They did. They had made that announcement justnow. In fact, they're at their ASEAN summitin Singapore, where, by the way, they actually established the first datacenter in the region as a region in the Asia Pacific.So there we go. Doubling down on the capital reallyunderscores the growth potential here of.

The sort of Asia narrative, particularlyin Southeast Asia. Yeah.All right. Let's turn to your China brief rightnow. A look at what's making headlines innational newspapers and trending on social media.Chinese state media are still focused on President Xi's visit to France, thoughShenhua quoting him saying that China does not have an overcapacity problem.He made those remarks at a trilateral meeting with French President EmmanuelMacron and European Commission President Ursula von der Leyen.She later said that the EU is prepared.

To deploy all tools to defend itseconomies if China fails to offer fair access to its markets elsewhere.An editorial in the Global Times is focused on the strategic significance ofties with France. It says they're at the forefront ofChina's relations with Western countries have always focused on the long terminterests of both nations. The China Daily reports on the May Dayholiday numbers, as well as saying the travel boom highlights the country'seconomic vitality, with tourists flocking to popular domesticdestinations such as Chongqing, now that province.So get this, 5 million plus visitors.

Over the holiday, an increase of 50%from last year. Smaller cities, including YangzhouLuoyang, also saw a rise in tourism. The Global Times quotes.Experts say that this trend reflects increasing diversity of tourismdestinations and structural changes in the travel market.So you get a lot of people going to these Tier one cities still.But I think Trump said this as well. They're opting for maybe cheaperoptions, maybe tier 2 to 3, maybe little bit more, you know, out of the off thebeaten path being experience. You know, you know, there's so much toexplore in China.

I saw a couple of my friends postingthat fantastic travels in Yunnan, for example.Right. It's really more great weathernature, I guess, deeper to your point. Right?So we did have some data coming through here on the trends.So we are getting anecdotal opinions on what the trends are lookinglike. Now we have the numbers to actually backthat up, official numbers coming out of the Ministry of Culture and Tourism,talking about how total trips are actually up 30% this year compared to2019 levels, I believe.

Yes, spending is up 14 outbound inboundtrips. But as you can see, right, thediscrepancy between you are getting a lot more growth in volume and not toomuch spending. Yeah, so they're going there, butthey're just not spending. Yeah, as much.Yeah, but outbound and inbound seems to be strong.I think Trump was saying, you know, you look at these long haul destinationslike us, Australia, UK, we're popular, Hong Kong, Macao, Southeast Asia, Japan,South Korea, most popular when it comes to these short distance trips as well.Middle East countries somewhere the 300%.

Surge in bookings.So that was going to trip. Yeah.Jane Sun mentioned that talks about a lot.Yeah. I think the dropping of the the visarestrictions really made that made that happen and also like just the increasedconnectivity between the businesses. Yeah, business community and markets dospeak of markets. There we go.MSCI China on your screens. This is really a look across sectorperformance today, consumer discretionary and communicationsservices down about one and a half.

Percent, which we should mention.Those two sectors have actually led this rally on the way up.So maybe some profit taking today. This is Bloomberg.

Sharing is caring!