“Bloomberg: The China Show” is your definitive source for news and analysis on the world’s second-biggest economy. From politics and policy to tech and trends, Yvonne Man and David Ingles give global investors unique insight, delivering in-depth discussions with the newsmakers who matter.
00:00:00 – Bloomberg: The China Show opens
00:05:30 – Interview with Fortescue CEO Andrew Forrest at the Boao Forum
00:17:31 – Why Alibaba is dropping its logistics arm’s IPO
00:24:21 – Breaking: China’s industrial profits rise
00:25:34 – Baltimore bridge collapse reverberates from cars to coal
00:30:08 – China banks earnings preview
00:34:07 – BYD’s 2023 profit falls short of analyst estimates
00:40:08 – China confuses yuan traders with surprise changes to daily fix
00:47:22 – What’s moving Asian markets today
00:56:28 – Interview with The Cohen Group’s William Zarit at the Boao Forum
01:04:59 – AI boom boosts benchmarks in Japan, Korea, Taiwan
01:09:17 – Metals outlook with BofA’s Matty Zhao
01:23:34 – Breaking: Yen declines to lowest versus the dollar since 1990
01:29:13 – The China Brief: City’s spicy take on hotpot takes Weibo by storm
Right. Welcome and hope you’re all well. Just half an hour away from the opening bell, Hong Kong in Shenzhen and in Shanghai. You’re watching the China show. I’m David Ingles, by the way. Our top stories today, we’re looking at shares of Alibaba towards the open here after the company scrapping the IPO of
Its logistics arm cainiao, citing economic headwinds and also regulatory uncertainty. Now the baltimore bridge collapse is set to disrupt global logistics and supply chains for weeks. Authorities are suspending search and rescue operations with six people presumed dead. And we’re headed to the Boao Forum live
There, of course, Stephen Engle, our chief North Asia correspondent is our man on the ground. And we’re looking at, of course, at the Asian version of the World Economic Forum taking place and a conversation, conversations taking place there. Investors certainly watching for signal
From Chinese officials on the economy and also the investment climate. It’s quiet on the market fronts, at least up until this moment. It’s fairly busy still when you look at the agenda ahead as far as just as various events and metrics and indicators were tracking across Greater
China today. Industrial profits in about 28 minutes from now, in about an hour’s time or 90 minutes time. Of course, there’s a panel taking place which will include the PBOC governor at the Boao Forum. This reported meeting between the Chinese President Xi Jinping and US business leaders.
We’ll talk about China in a moment. No reaction as far as Alibaba shares overnight were concerned. We’ll see what that looks like, of course, going into the session today. Speaking of, earnings ought to be wide record year 2023, although missing estimates there.
You did get margin expansion there. So we’re looking at these we’re looking at Apple related suppliers coming off, of course, what came out to be, again, a weak month for the China business back in February. And of course, in terms of data points, occupancy out of Macau, hotel occupancy
Comes out today. Now, we talked about earnings, the biggest of the biggest coming out with earnings these next couple of days or so. So what do you look at today? For example? You look at AG Bank, Bank of China and
ICBC, three of the big four, if you include the likes of Postal Savings Bank, you pretty much get a fairly good representation of earnings, everything from net interest margins given of course the the incentives to help aid this economic recovery.
And as it pertains to extending credit, if you will, to this next group, as you can see on your screens of companies, that we’re also looking at property earnings coming out today, real estate exposure. We’ll unpack that in a moment with Frances, China for us out of our Bloomberg intelligence team.
And that’s certainly one to watch. Futures are pointing down 4/10 of 1%. So do, of course, keep your eye on that. No, this is coming against the backdrop of really it. I think I alluded to this enough at the very top of the show here. There’s really nothing happening across
These markets today. So we are trading sideways, if not mixed. US futures are still pushing higher in the Asian session, which I guess bodes well going into the US session on Wednesday. Although that being said, a quarter of
1% Nikkei 2 to 5 or 6/10 of 1%. Class B index, as you can see, is coming off quite a good day, ASX 200. So we have a big guest coming up, by the way, out of Belle Isle. Andrew for us is joining us to stay too
For that interview. Taiwan is coming online and we have this really good piece today out of our Bloomberg News team talking about how the A.I. team has really played out across some of these well, some of these markets in the region that have a good air
Representation Taiwan and cost me I’m looking at you there, two and ten year yield right now. Nothing much happening as far as that’s concerned. The Chinese currency story has sort of faded back into the background as far as the sort of dominant theme is concerned.
So we talked about the renminbi, for example, Big then went big day Friday, big day, Monday, flat on Tuesday. Although that being said, we’re still looking at what the fix looks like today. And if there’s any sort of incremental change from what we got yesterday out of
The PBOC four day losing streak on the Nasdaq gold and Dragon index within that, of course. And the big news out of Alibaba on China is pulling that IPO. We’ll talk more about that in terms of early indications we should not be getting any pronounced moves in the
Early goings just simply based on how these traded overnight. Very quickly, if 50 futures are doing this. Also, when you look at China and your big yields, of course, we’re looking at about 2.3% there, 2.32%. And we are trading at about these levels. We’re still trading near the highest of
The year, if not at the highs of the year here for dollar China dollar entrees. What to watch because we have we have been flirting with the top end of that allowed trading by 2% to the upside of that midpoint which at midpoint of course comes out in about just under 10
Minutes from the Bloomberg dollar index. Nothing much happening there. We’ll take you straight back. The Boao Forum, the annual one taking place, of course, there. It’s billed as the Asian version of the World Economic Forum in Davos. Stephen Engle. Our man on the ground is there with our next guest, Steve.
All right, David. Yes, we are back to normal because we have our guest that we used to interview all the time here at Boao. He’s on the ball board. He is none other than the Fortescue Metals Chairman, Andrew Forrest. Thanks so much. Great to be here. Five years long, five years since we
Last saw each other as we last saw each other and can talk about China. Now, obviously you have been very bullish on the China market and as selling iron ore into this market. And we saw obviously the miraculous transformation over the last three or four decades in China.
Things are slowing down right now. There are geopolitical threats. How much of a threat and how much of a competitor is China versus the opportunities that you’ve always seen here? Look, maybe you’re referring to the iron ore price. I see it as a bit of support. Steve goes up, it goes down.
It’s like a like a tennis game. But I don’t see China as a threat and I advise everyone to not see. China is a threat. And I certainly said to everyone in China, don’t ever be a threat. The beauty of Asia, the beauty of the bathroom, is that we can all compete.
We’re all technically very, very capable, very professional. We love that energy of competition. And when we obey human rights, when we look after the environment that lifts the standard of all of us. And this is the bad form for Asia, the Asian community working together,
Different politics, different religions, different ways of doing things, different culture. But we all get on. And when we compete successfully, everyone wins. Okay, it’s a bit of a sport. Let’s get into iron ore. I know you don’t like projecting prices, but it’s been a volatile game, if you
Will. And we are hearing, though, that iron ore inventories are piling up at the ports. We know that steel rebar prices are at a seven month low. Look, they’re not building as much. They are going into new productive forces, into AI and semiconductors and some value add services, less roads,
Railways, bridges to nowhere and the like. What does that mean for you, Steve, that such a quick slip in is that I’m not I’m just playing the devil’s advocate here. I love it. Look, I’ve been part of this country about 35 years. I’ve just seen it change, evolve, Change evolve now.
Yeah, it had a big housing run then, then big infrastructure run. And now it’s got a big technology, green energy run. It’s still doing housing, it’s still doing infrastructure. Don’t don’t think for a second that 5% growth that is like years back with a 5% pretty ho hum coming off a small economy.
This is a monster economy now, Steve. 5% of that volume metrically is massive. I challenge my country, Hey, we’re hardworking, we’re super smart, we’re determined, Why can’t we do 5%? That 5% will translate into huge demand for commodities now. I don’t mind if the iron ore price goes
Up or down set by a free market. Anyone tries to meddle with that free market, they pay for it badly in the long term. But while free markets exist, you will always get supply equalling demand by that great agreement price. So I’m very comfortable.
But do you have more clarity than the layman like me in a property market mess? I mean, we have other bellwethers, Vancouver Country Garden and others who are defaulting and potentially going under. Yeah, this is a big problem. What’s your idea? I want to give you the inside scoop. Inside scoop. Right.
So if you’re building out infrastructure and housing the size of Australia every year, yeah. Then you’re going to overshoot non-issue. I mean, just how it’s going to happen, even if it’s not going to work that out for you. So I’ve seen China over three and half decades go from undershooting and prices
Going through the roof, overshooting, prices go down, but generally they get it right and the long term trend is just kidding upwards. Now, green energy, that is a monster consumer of everything. Right. And such should because we’re not taking
All this rubbish to destroy the world out of the ground where it should never move from. We’re making all the energy, all the metals just from the air, moving from the sun, shining that that’s the future of humanity. Well, how is the to this is taking a
Huge amount of metal. How is that transition going though? Because most of your revenue still comes from iron ore, I mean, the vast majority of it, but green hydrogen and other projects that are dear to you, how is that transition going? And it has been delayed.
Does it potentially get delayed by I know you’re not going to say it’s a slowing Chinese economy, but it’s a slowing pace of growth in China. Oh, look, if you’re talking globally, there’s a whole heap of fish swimming with the tide. Now, very trendy of them just worked
Out. There’s a war in Ukraine. You’re a genius. How’d you figure that? Oh, by the way, oil and gas is incredibly volatile, and Green Energy’s not being supported by politicians as they should be because they’re not being held to account by their populations.
And Chevron say, saying, well, if you’re going into green, you’re a little woke, etc., and wish you just stay practical and say with oil and gas, I can tell you that will be no solution. This will be like Covid where there is pent up demand. We weren’t able to see each other.
You and I missed each other five years, right? But the demand pent up, pent up. And then once we could hey, when travel demand went through the roof, this will be the same shape. There is this. There is this period of time where
Because of volatility in prices, because of uncertainty, thanks to Ukraine, Gaza, etc., everyone’s jumping on the bandwagon of weak character, of not having the courage to see over the horizon. See, actually, we don’t move away from fossil fuels. Then we will be held completely accountable when we’re told, Oh, well,
Hang on. It was it was uncertain time back in 2024, so we didn’t do anything. And people are going to say to us, what, you couldn’t chew gum and walk now you couldn’t breathe. While you walked upstairs. I mean, you should have moved away from
Fossil fuel and gone into energy, which is harmless as quick as you possibly could. And that’s what Fortescue’s doing. Chinese Foreign Minister Wang Yi was obviously in Australia a week ago. You were just in Beijing at the China Development Forum. What’s the key message you got from the Chinese leadership, which has been
Fairly opaque in its policy messaging? They’re not having press conferences. They’re reading from the same script from the top man. Understandably so. But what did you glean? Well, not really. Understandably so. I mean, when we have media coming through our organisations, we’ve got 20 plus thousand people. We don’t have a script.
I mean, Bloomberg walks onto any sort it likes and just speaks to any punter out there wearing the high vis and the proud Fortescue helmet and they are pumped and they said, Well, this is what we’re doing and this is how we’re going. When you all read off the script, then people understand.
We think, Well, hang on. Where’s the naturalness in this? Where’s the spontaneity in this? So I would say, of course, just be natural. This is a fantastic country. You’re doing well. Make sure you state peace with all your neighbours. That is key.
And also know that the best forum for Asia is the boiling pot of great competition, great technology, great business. And when we stick to minimum human rights levels, which protects us all when we do as president, she’s asked of us all, which is to realize that
Humanity is nothing unless we have a great environment. If you don’t protect the environment and see a lot of humanity. He gets that. That’s how he grew up. He saw the environment destroyed and he saw poverty come into his community. So we’ve got to learn from that lesson globally.
And I’m saying this competition and this collaboration and this friendship from the forum, and it’s an example for all of the world, different politically, different religions, yet we all get on. Yeah, it does take two to tango. That’s my devil’s advocate approach. You have to look at both sides, obviously. All sides.
Okay. You’re talking about the environment. You’re also talking metals. Are you glad you got out of nickel? I mean, why little metals? You close down some of those mines. There have been allegations of Chinese and Indonesians kind of flooding the market with lower grade nickel. There’s been environmental damage around
Chinese mines. Are you glad you got out? No. I mean, I’m still in back in. I’m still sell on nickel. It doesn’t matter. I mean, I’m so long and look up. We’ll continue to invest in nickel and renewables everywhere. At Fortescue, it’s corporate lithium. It’s the whole sweet, rare earths,
Obviously iron ore integral to the energy transition. What I say about that particular instance is I’ve watched China start to really protect its human rights and you know, I’m talking the hot buttons like Xinjiang, etc., where more and more audits are being done by companies like
Mine. He just cannot touch anything to do with modern slavery and never will consciously. I’m seeing the attitude coming to the environment led from the top saying, Hey, we have got to lead the world to go green. If we don’t, this planet and every human in it’s cooked.
So I’m saying that now that’s working in China. Now China is to take that additional step. But you’ve if you’re getting your human rights right in your environment, right at home, that’s going to be the same as your supply chains.
And when I look at Indonesia, what I’m saying is very delicate and rare. Tropical ecological systems get destroyed at huge scale. I’m seeing coal mines get switched on, coal fired power stations get switched on, I’m seeing tanks getting dumped in the sea and washing hundreds of
Kilometres up, destroying marine ecosystems, which I happen to be pretty close to. And I’m saying, Well, thank God we didn’t do that. We were offered those opportunities, we didn’t take them. This is where countries got to say, Well, if I’m looking after my country at home, I’ve got to have exactly the same
Standards when I’m overseas. And that’s not happening in Indonesia. And I’m saying to the London Metal Exchange, Hey, you’re getting people who are doing the right thing, competing against people who are destroying the environment you let in middle exchange, have to determine the difference of that. Otherwise, you’re part of the problem,
You’re part of the environmental crime. And I’m saying to those Chinese investors, clean up your act, stop rubbishing the oceans, stop destroying the rainforests. This is where we must all step up as humanity and do what president she’s asked of us. To those China investors, protect the environment.
You don’t protect the environment, you destroy humanity. And I’m saying quickly, come back from where you are. You’ve had a really bad start. You’ve produced really cheap nickel. Congratulations. But you’re destroying other people’s future. And I say to Tesla, I say to the Chinese
Car companies, I said to all those battery makers, buy a nickel from there you to a part of that environmental crime. And let’s just say, okay, let’s get these. Mine’s right. Let’s run them on green energy. Let’s not destroy the marine environment. Let’s work out how to mine. And reforest, but not destroy.
Reforest. Andrew Forrest, thanks so much. Always good to see you. And we’ll have a glass of Penfolds one of these days when those tariffs come down on Australia. One we’re on. All right. All right, Andrew, for us, always colorful, always a good guest here on Bloomberg Television. Back to you guys.
Yeah, well, why wait for the tariffs to come down? Have one right now. That’s a beautiful location, of course, to enjoy. Not just one. Steve, come on, live a little bit. Maybe two. Reference rate for the day is out and this one is actually quite
Newsworthy and substantial. So this is the strongest so far this year as far as support. So the midpoint of the day. And bear with me here, because this is a bit near the midpoint of the day, has been set at the strongest two estimates so far this year.
We’re talking nearly 1300 pips, that difference between the two. So quite a sizeable support measure coming through, counting down to the open up trade futures are pointing down Shanghai, Shenzhen and Hong Kong be open 13 minutes away. This is the China show. Oh, almost down to the second. Just in time.
Shares of Alibaba coming alive in the pre markets were down. We’re trading below 70 bucks. The big news, of course, is the company calling off its planned Hong Kong IPO for China, blaming what it calls a pretty depressed market. It’s the latest change really to this
Planned massive overhaul announced a few months back here of operations that actually included a six way split. Now since then, it’s also cancelled. Spinoffs of its cloud and grocery units change the heads of its e-commerce and grocery business. So I know it’s a bit make your head
Spin, doesn’t it? Let’s bring in sat down, of course, to talk us through, of course, why we’re here, the reasons behind it and risking sounding like the Backstreet Boys. Sarah. Tell me why. Well, basically, we had Alibaba’s chairman, Joe Tsai, come out last night to try to explain their decision.
He described it as basically two main drivers. The first is, like you said, the depressed IPO market. They’re not getting the valuation that they want or that they believe now to be strategically valued at. So it’s just not a good time now or in
The foreseeable future. And the second is that they say that time now is really strategic to their core operations. So that’s the e-commerce side, both domestically and internationally. They need to expand now internationally in order to remain competitive in what’s a very competitive e-commerce market, Right.
Patient capital, I think, is how they phrased it. So they own about 64% of China and they’re buying back the rest of the shares that they don’t already own. What was behind the decision and how they plan to do that? So that’s exactly right.
As part of their motivation to double down on this high now investment as part of their core operations. So that’s why they want to buy back the rest of the shares for minority shareholders and also from employees. They say it’s also a way to return value.
Sure, some of those investors were counting on an IPO to cash in, and that’s another way to just boost morale and return value to those shareholders. Okay. Is the restructuring still happening or is this a restructuring of the restructuring?
I think that’s a few months back. Yeah, that’s a good way to put it. I think there have been several hiccups in the process since they announced this restructuring last year. We saw, like you mentioned, the cancellation of the cloud IPO, also freshippo the grocery on their IPO also
Being put on the back burner and lots of just reshuffling of leadership in all the various units. Their new CEO, Eddie Wu, he’s now personally taken the helm of both cloud and e-commerce, domestic e-commerce. And so they’re really just making strong moves there.
Also on this in terms of focusing on their core operations and selling off non-core assets, they say they’re making good progress and really just focusing in on commerce and cloud. Okay. Thank you so much. Clarity. Clarity. Granted, clarity has arrived here. Sara Jiang, our Bloomberg China Tech reporter.
Shares of Alibaba should be bottom of your screens for down 2%. Free markets are doing this exercise down half of 1%. Maybe that’s the really the majority of the Alibaba effect. Lots of earnings reactions to unpack and lots of earnings to preview. All that is just ahead. The open 7 minutes away.
You’re watching the china show. OC futures and initial pricing on your screens shortly. There we go. Thank you so much. We are poised for a lower open, maybe down to this incremental move we’re getting out of Alibaba. We’re done.
We’ll show you the stock in a moment. I believe 2%, a lot more support coming through 1300 pips was the difference from the mid-point of the day, which came out a few minutes ago to the estimates dollar. China, though, trading at 725, which basically takes you back to November
Levels. We’ll talk about the yuan story in a moment and really the story which we put out earlier on conflicting signals. We’ll talk more about what those signals are and maybe how to read the tea leaves. Speaking of tea leaves, we’ll talk about
Nongfu spring because tea sales actually picked up and known for actually outperforming. Before we get to that, though, some changes in terms of analyst actions here. And certainly within this, when you look at AC Technologies almost did it on purpose. All Apple suppliers are very much in
Focus today given, of course, another week month in terms of China sales raised to buy the HSBC 33 bucks a pop as a price target from the bank here. That takes us into what some of the stocks we’re tracking here. So it’s a very big banks earnings day today.
ICBC, Bill.com, just two of the few more coming out, Don, for spring tea. Still strong profit beats Baba down 1% in your pre markets among other things. Have a look at that on your screens. Oh there we go again. This is Bloomberg. Welcome back. Happy Wednesday morning.
You’re watching the China show. 40 seconds away from the midweek session. If you had to pick your what was that series of books a few years back, choose your own adventure. Remember growing up with that? If you had to choose your own adventure, I’d pick Shanghai over Hong Kong transit.
The weather. In terms of price action, though, I think you’d be pretty much not better off either way. We are looking at weakness going into the session today. The PBOC coming in with a lot more support for the currency.
1300 pips, give or take was the support, the estimates from the fix that’s that spread there. The other thing we want to mention is in about an hour’s time at the Boao Forum, the PBOC governor will be part of this panel. So stay tuned for more perhaps headlines
Coming through. It’s a big earnings day. Weakness, As we were pointing out, Alibaba is down about 1%. Correct. Myself, I thought I was down 2%. We were down 1% on Alibaba. We’re opening lower in the CSI 300.
Hang Seng index, 65 down 7/10 of 1% were led by tech, as you can see on those tiles left more sites at the very top, 1.3% to the downside we should be getting any moment now industrial profits numbers. So these are year to date numbers, right, Jan and Fab, we’re still waiting
On that as well. Just keep in mind, seasonal aberrations, you combine the two months. All of that being said, if you compare what perhaps we will see from these numbers today, we’re down 17 straight months. So possibly, quite possibly we get the first expansionary prints.
If that does come out. Of course, we’re still waiting for that as we speak. So expansion compared to the period before, as it appeared before, because it’s a time of the year, it’s January and fed off last year to January or a fed up this year So far.
Okay, data should be out and we’re looking at okay, yeah, here we go. So we’re up 10%, 10.2% year on year. So this is actually a encouraging set of numbers, although aberration, nuanced, this should be. And if you’re looking to write a headline, maybe this is it.
This should be the first time we’re getting a growth or expansionary print on this specific metric going back to mid 2020 to April 2022. I believe that we got the Boris police. We can Alibaba be it 10 billion profits full year 2023, although that being said missed estimates by a very slight margin
That it SingTel and Haidi Lun actually beat estimates of both these companies. In fact we’ve just organised this. It’s a bit more clear perhaps the next board actually shows you to four companies, among others that have reported and all four companies coming up on your screens actually missed
Estimates. So usually all the way down to China Telecom, Honeywell down 8% on also that earnings Miss. Okay. We’ll leave the China market story there for now. We’ll revisit this a bit later on and get a sense really of some of the other big movers we’re tracking.
In the meantime, though, the other top story we’re continuing to track going into Wednesday in the Asia Pacific. Here is as the Baltimore bridge collapse here, officials say active search and rescue operations have been suspended. Six people unaccounted for, now presumed dead.
The disaster happened when a cargo ship lost power and then rammed into the Francis Scott Key Bridge in the early hours of Tuesday morning, destroying the span in a matter as you just saw there in a matter of seconds. A state governor says a mayday call from the ship allowed authorities to limit
Vehicle traffic on that bridge. I spoke with Governor Moore this morning, as well as the mayor of Baltimore, the county executive. You know, to both the United States senators and the congressmen and my secretary of transportation is on the scene.
I told them we’re going to send all the federal resources they need as we respond to this emergency. I mean, all the federal resources. And we’re going to rebuild that port together. Bruce Einhorn is here with us on set to talk us through the many facets of the
Story. Bruce, I guess I’d start with the ship itself. The ship itself is the dolly, its sails under a Singaporean flag. There’s a Singaporean company that is its operator. It’s manager and operator that’s called Synergy Marine Group. Synergy Marine says that the owner of
The ship is also a Singapore based company, Grace Ocean Private Limited. I’m sure we’ve all seen these pictures of the ship. One thing keep in mind, as big as this ship is, this is not one of the biggest ships out there. This is actually sort of a mid-range
Ship. It has about half the capacity of some of the really larger largest container ships. It was only built back in 2015. So not really that old. There were 22 crew members on board, according to the manager of the ship, all of them Indian. And all of them were fine after the
After the disaster. Ship executives were company executives on their way to Baltimore to address the situation. Right. Talk to us about the other angles to the story that we should be keeping. Well, we just saw President Biden talking about a determination to rebuild the bridge.
There was a bridge collapse of last year in the Philadelphia area. I think it was in Philly itself, which is some people have made comparisons to in that bridge on a major route, I-95 collapse. They were able to rebuild it fairly quickly.
This is a far more complicated task because, of course, it’s over a harbor. It could take billions of dollars. It could lead to it could take a very long time. The port itself is extremely important. It’s the largest port for for handling autos and light trucks in the United
States. It has been for 13 straight years, is also one of the largest, I think the second largest port for export of coal. There are a lot of companies that have warehouses and other cities up river from the bridge, such as Amazon and FedEx, BMW, Volkswagen, Under Armour.
So a potential for supply chain chaos, at least in the short term, is pretty high. Separate from all that, you also have the traffic on the highway. So there’s now going to be a need to have traffic diverted, potentially adding considerable time to
People’s commutes, also making it more difficult for goods to go up and down the eastern seaboard. So lots of potential for supply chain challenges that can go on for quite a while. We’ll keep on top of the story. Bruce, thank you so much.
Bruce Einhorn there with the latest here on that bridge collapse that took place, of course, on Tuesday, early hours of Tuesday local time. Very, very quickly, a recap really is and we’re looking at markets right now. We’re down about 9/10 of 1% an MSCI China, Jan two Fed industrial profits
Coming through. So we have the absolute value. We also have the change, absolute value coming in just over 900 billion renminbi on a percentage basis, year on year. That’s about a 10.2. There we go. Thank you so much. 10.2% increase from the year before. I believe this should be the first
Expansionary print going back nearly two years. Plenty more ahead. This is Bloomberg. We do expect the AOC will provide more support to banks via ads like social responsibility. For example, last year the PBOC expanded their balance sheet by more than 4 trillion and injected liquidity to banks via MF and their lending tools.
So this year we think that like, for example, the structural, the structural tools used up by the PBOC could be could expand in more than last year. That was huge. And Chen Geoffrey’s talking to us just over an hour back, in fact, 2 hours back, actually.
My mistake there on the upcoming bank earnings coming through in that sort of broad theme of PBOC supports encouraging to banks to lend to where it’s needed. Speaking of what’s coming out today, there we go. ICBC, Bank of China, AG Banks are three out of the big four plus other big two
Due out with earnings today. Four what to watch, what to keep an eye on across just as countless metrics that banks can come up with. Let’s bring in Frances Chan to, of course, is our senior banking and fintech analyst. Take take your pick. So give me one indicator that you’re watching most closely.
The most. Yeah. The closest thing for the bank’s earnings prospects in 2024, we like to focus on the interest margins has been they track to their revenue for our 2023 and it remains a big drag to their top line this year.
I think the the key will be about their their funding calls, especially the deposit cost. They didn’t fall fast enough to cover up what Beijing is asking the banks to do, which is to lower the borrowing raise for the overall economy, to stimulate the economy.
So this may still cap the top line growth to maybe low single digits growth this year. Otherwise, everyone is watching or scrutinizing the numbers about asset quality. So far as we have seen for two major banks which have released the results, it has been surprisingly good, with improvement in non-performing loans
Ratios, special mention loan ratio and overdue ratios in particular for we as they are loans, right? They have less exposure and low NPA ratio for that sector. The $1 meaning question is like where has those bad loans gone? Oh, it has been in the economy.
Yeah, but it’s not with the banks. So where is it? Yeah, in fact, well, we’ll talk about real estate in a moment, because I want to ask you your thoughts on exposure there. But can you talk to us a little bit more about asset quality, in other words,
From the two that have reported? Are we does that then mean less provisioning? Yeah. Okay. For the for the other ones coming through today, can we make that conclusion this early likely on a year on year basis. That could be the last provisioning
Compare of last year. They do have enough buffer like IPO coverage. They have enough to lower provisions for 2020 free in 2024. They may still have some room to to contain credit cards in order to boost their earnings. So this is earnings at the very least, it would be like positive growth right
Now. I think it was late last year on real estate exposure. Late last year, we’ve started to see less extension of, I think, credit in terms of the overall loan book based on PBOC data. As and I’m wondering as far as the
Exposure to real estate is concerned, what are you watching closely here now? I think that the Beijing government is asking the lenders to help out to finance the white whiting this property projects. Yep, as I agree with the regional officials and those will be the priorities. But for the developers, like the parent
Or especially for those of us which are in a distressed situation, they are far harder to to get funding. Francis, thank you so much. Great stuff. You can find Francis work by go for a couple more clients. Senior banking and fintech analyst from one part of the earnings spectrum to another.
Certainly yesterday BYU was a big one to report record profit, though slightly missing estimates came in in line with the company’s own forecast. I think that’s to qualify their shares are down 2.2% in the first 12 minutes of trade here in Hong Kong. Linda Liu, our Asia transport reporter,
Is with us to take us through so many ways to look at this record profit, although they missed so but just to help us understand what’s important here, yeah, I think the profit machine really shows that this intense price war going on in China’s EV market is eating into its bottom line.
And considering that they themselves kicked off this latest round slashing prices on so many of the car models, it really just shows they are probably intent on sacrificing some of these profits for volumes to really maintain their market lead in China. Well, what’s in store this year, then?
For this year, we’re really watching for what’s the volume guidance they’re going to set. So last year they managed to just achieve 3 million vehicle deliveries in line with what they set. And that’s an over about a 50% rise from the goal they set the year before.
And this year, we’re definitely not going to see another kind of massive increase in the deliveries goal. And so the indication that they give from how much they expect to sell can really show us what they think the Chinese EV market is going to develop. Okay.
The other theme here is sort of overseas sales of Chinese makers. And I want to get your what’s the latest here? So China, we understand China’s filed this complaint at the WTO over I think it’s the inflation act, if I’m not mistaken, out of President Biden.
What do we know about that latest complaint? So, obviously, you know, China alleges that these rules set up by the IRA, which has this restriction on foreign entities of control, of which China is one, essentially kind of limiting the amount of input that the supply chain
And the US can have from these Chinese companies. And I think with the WTO rules, it’s an interesting case given that the US will say, well, China, you’ve also, you know, used protectionist measures in the early days of your auto industry and that when foreign automakers wanted to enter the
China market, they couldn’t do so alone. They needed to enter into a joint venture with a local partner, essentially sharing profits and technology know how. So I think it’s going to be interesting how the WTO will deliberate this complaint. Okay. So it’s been filed out of our hands now.
I guess it’s up to us for report. Linda, thank you so much. Linda Liu there with all things invited. Stay slightly on theme here still. So Ford actually says it remains confident on taking on growing competition. To Linda’s point just now here on the
The market, a CFO, John Lawler, told us where the US giant is actually focused in terms of matching its Chinese rivals. Have a look. It’s affordability. They have a low cost structure. That’s where our small EV comes in. As well as that skunk groups, groups
That that skunk group that is working on that low cost, very advanced architecture for EVs, where we think we will be able to compete with the Chinese and other low cost manufacturers. Well, it’s going to be definitely interesting to follow the developments there. But let’s get back to hybrids.
I’m super interested in this space. And it was interesting, actually, you had Morgan Stanley’s Adam Jonas out with a note this months that he sees the, quote, hybrid renaissance is really a direct competitor for that incremental EV buyer. Do you see that within your own lineup?
Do you see hybrids taking share from EVs? We see hybrids as a duty cycle alternative for customers, electric vehicles. Duty cycle doesn’t work for some. And those that don’t want just pure gas vehicles or diesel vehicles, they can go for a hybrid. That’s why we’ve continued to invest in
Hybrids. We continue to offer hybrids. So you can see it as a bridge to full electric. And we think it’s something that consumers are really leaning into because of all of those factors I cited. Do you have plans to roll out more hybrids? Yes, we do.
Well, we’re launching a new escape. We’ve just launched a new escape hybrid. We’re launching a cougar hybrid in Europe. And so we have the number one selling truck hybrid in the Maverick and the number two selling truck hybrid in the Ford F-150. So we’re number three in the US in hybrids.
And we continue to plan on offering more solutions to our customers. And that was John Lawler with Katie Greifeld really on all the things and how they really plan to position against the Chinese EV rivals their for one. Coming up in the next hour, in fact,
We’ll be speaking with Matty Zhao at a BofA Securities. So they actually specialize. Well, well, well, well, well, well. We’ll look under the hood. We’ll even unpack the battery itself. So they actually put out quite an interesting report on what they like
Across not just the e v supply chain, but when you unpack the batteries, which bit that goes into those batteries they think makes a good investment proposal at this point in time. So stay tuned for that interview. Coming up in the next hour of the China show. Plenty more ahead. This is Bloomberg.
Right. Both yuan’s offshore and onshore, as you can see, are trading weaker onshore, just coming on line about what’s 20 minutes back here, 722 and the spread between it’s something certainly one other metric to watch here. The other metric that we’ve been
Tracking is really the spread between the estimate and the midpoint of the day. And certainly our producers are watching this very closely. We’re given a treat when the PBOC came in with the strongest fixed yet relative to estimates, 1276, that’s the number of pips here relative to estimates.
And you could really see that on this chart, the biggest spread so far this year. In fact, the biggest support, if you want to measure it by that standards, going back to about October of last year. Tanya Chen is with us here to talk us
Through the significance of this fix today and how this fits into everything else. So what’s with what’s going on? Let’s start with today. Yeah, I love that chart because actually I feel like it kind of shows you that even late last year they were doing even
More to boost the yuan strength, right? So we’re not even at those levels yet. A couple of things. I think the past couple of days, they’ve obviously done the rebuttal and it’s been kind of stronger fixes again. Right. But one thing you’ve noticed is that
They’ve kind of allowed the yuan to weaken past the 7.2 line, which that was a line that they had previously held for the last six months. Right. So that’s one interesting aspect of it. We have seen some state banks kind of selling dollars again to kind of defend
Around 7.2. But clearly right now the yuan on the onshore, 7.22. And then I think the other question is, you know, what is the next line in the sand? Right. And 7.3 was kind of an area that they
Were kind of capping it at late last year, which is where you saw in that chart how much of a fix was kind of being held at that level. And I think one one way to look at it is actually implied volatility.
We we haven’t actually seen implied volatility spike to the levels that we saw when the yuan was actually pushing 7.3. And that also hasn’t really spoke to the same level that we saw in the 2018 kind of trade war episode or when the yuan was devalued in 2015.
So actually in terms of the volatility gauge, this actually doesn’t seem too bad. Well, okay, speaking about line in the sand here, so what are what are the numbers now that people are talking about? Yeah, the new numbers, it’s actually quite funny. So our team did a story today on kind of
Like the conflicting messages around what the PBOC is saying. Right. And it’s actually led kind of to a divergence in what Wall Street is saying about the yuan. We have some people who are still very bearish on the yuan 7.4, and that’s partially due to the deflationary concerns, the economic considerations
Around the economy, and also not to mention just the Fed and the interest rate differential which has dragged out other Asian currency as well, including the yen. And I wanted to actually kind of go back to another spread that you were kind of that I want to bring or go for in
Between the offshore and onshore. And one way to also look at kind of where the market is testing that direction of the currency right now, or at least in the previous sessions, we saw the offshore and onshore spread around 300 pips. And usually when that happens, you can
See that means the onshore sentiment is actually quite bearish. Yeah, you know what? We’re exactly at 300 pips, right? That’s amazing. Tanya, thank you so much. You can check out, of course, a story that they put out today, the headline in Case You Need a Search Clue.
China Confuses yuan Traders with surprise changes to the fixing stone Over the comment here. Ambiguous messaging may help the PBOC achieve its goals. Strategic ambiguity. There we go. Anyway, a look at markets 23 minutes into the session. There’s a very big earnings steam coming
Through today in terms of earnings reaction and why quite a substantial move here in GDS, of course. There we go. GDS Holdings traded here in Hong Kong, down 27%. That’s the biggest drop since 2022, wider than expected loss coming through here at the company as well. Citi out with some commentary here that
Overall the Chinese market does not see a noticeable recovery just yet. While it is expecting more air demand in 2025 when the chip supply does move to catch back up, it just keep in mind 80 hours overnight were down 27% as well.
So no big surprise. I guess in some ways we are seeing a substantial drop in that stock here. Here in Hong Kong, Hang Seng index, there seems to be it is, I want to say, an imaginary line into said, speaking of 17,000, still seems to be a distant dream.
Every time we get very close to that, that seems to pull back deep ever so slightly. So we’re pulling back about 9/10 of 1% from the cut off yesterday, 9/10 of 1% as well. When you look at that today, the rally, ten year yield, the 30 year yield
Pushing lower as well. As far as Asia goes, though, and speaking of government bonds, the big event coming up, at least as far as Bonds is concerned, is a 40 year bond auction in Japan. So we’ll look at things like. Biddeford’s majority, for example, paid
To cover. Just to get a sense of what appetite is like post BOJ for longer dated Japanese Japanese debt coming up in two shows here we’ll talk all things China. Williams will be joining us of course he’s a former MGM chairman. Sentiment on the ground and we’re
Talking to all things ABC TV materials with matija. This is Bloomberg. Welcome back to the China Show. Just an hour, half an hour into the session on shore, CSI 300 on your right. It’s a beautiful morning in Shanghai on your left. 4/10 of 1%. And the broader MSCI gauge, we’re coming of lows.
And most of these benchmarks going into the thick of the morning of the morning session. As you can see, this bounce off lows. We’re down about 11 points on the CSI 300, as we’ve been talking about so far in the show. There’s a very big earnings theme really
Permeating across these markets today. So everything from a lot of these sort of consumer facing names, Nongfu Spring. Tsingtao Brewery was out. Heidi Lao also came out with earnings as well. AIG is very much a theme. And when you look at GDS Holdings, for example, 27% down overnight, 27% down.
Right now. Mengniu dairy maker is 7.4%. Speaking of beverages, Nongfu spring not on your screens. That was actually a beat down to tea sales coming through as well. Be it, I guess this is the the bane of every successful public company record record year in 2023.
But they missed forecasts or miss from analysts they’ll buy ever so ever so slight margin there 1.7% we’re trading below again 70 HKD a pop in Alibaba on the back of news that a company was scrapping its plan to take one of its units China public. Okay.
The broader read across not just equity markets in the region across assets dollar everything from commodity markets given of course what took place in Baltimore overnight the Nikkei 2 to 5 9/10 of 1% to the upside. S&P futures really, if you had to pick the big winner so far this this
Wednesday morning is really still US assets I guess to highlight that very view simply on the currency front right weakness across most of the Asian affects euro is trading lower as well which I guess in some ways gives you an indication of risk appetite.
In fact, in terms of on the data front today, we just flashed on your screens the print out of Australia. Let’s start with that. In fact, in fact on this very now let’s bring in Darcy Reynolds is with us right now. He’s what I am live.
Chief Garfield, let’s start with why don’t we talk about Aussie inflation so we’re steady for a third month. Any read through as far as the RBA might be concerned here? Well, I think it’s going to leave the RBA, David, very much sticking with that neutral setting that they that they
Moved to in the most recent in this month’s RBA meeting. Because on the one hand it’s encouraging that there was some expectation it might rebound a bit further a bit in February. It did and it stayed where to come in for January. And on the sort of core readings, the
News was also, you know, kind of good, but only kind of good in the background that there have been concerns that inflation was going to prove not sticky from the point of view. It would take back up noticeably. It hasn’t picked up noticeably. But that rapid deceleration that had
Been in train, that’s not being seen. So the RBA is going to look at this and say, hey, you know, we don’t really see the case for fresh hikes. We certainly don’t see the case for any rapid pivot to cuts. So you had the Aussie dollar down, but only a bit.
Aussie bond yields also subsided, but rates traders stuck with August as their base case for when the RBA will move. That might even prove aggressive again, depending on how the data develops. And in a lot of ways the RBA is amongst those central banks. It’s very much saying waiting until the
Fed makes the first move. Right. Well, let me let me bring into P, B or C to that part of the conversation, because certainly the pressure on the PBOC to continue keeping rates low and perhaps even to ease further is somewhat Garfield contingent on what
The Fed does, particularly when you look at the exchange rate and signals that they do want to keep their rates steady. But monetary policy and that gap between where rates are in China and the US certainly is counter to anything that might be even mildly yuan positive. We have the PBOC governor.
He’s I believe he’s set to speak this hour at a panel at the Boao Forum. What are markets looking at there as far as he’s concerned? Well, I mean, the most immediate question for markets is, okay, what is the new line in the sand? Seven ¥7.20 per US dollar was seen as
Where the the PBOC was willing to defend the currency. They let that go. It was a big washing sound. End of last week when the yuan really tumbled in the wake of that line being removed. So then China stepped in to stop it
Going from too much further. You had Mary Nicola on our blog saying, you know, she sees that 7.24 as about as weak as the yuan should go based on the interest rate for interest rate differential differentials. The bigger picture is that the yuan, like a lot of currencies, especially in
Currencies, you know, is laboring under the burden of continued dollar strength. And that dollar strength wasn’t something the market was really looking for. To the extent that we’ve had it, because the Fed was saying we expect to cut rates this year, we expect to cut them
Three times. So I was like, okay, game over. The dollar should fall. However, the strong push back from the Fed and the data backing that earlier this year have meant that the dollar the clients people were looking for have not come.
They may yet come, but as long as the Fed is in a not yet mode when it comes to rate cuts, you’re going to have the dollar being in not yet mode when it comes to, you know, sustained US dollar weakness.
That puts pressure on a lot of economies around the globe, a lot of especially emerging market central banks for whom the currency channel is such a vital part of their policy economic asset mix. So the PBOC just stands out more than
Most as facing that difficulty. And a lot of ways, you know, they probably have the thought that we if we defend the yuan strongly enough around where it is now, we don’t let it run away. Later on in the year we will get that relief.
And that balancing act for the BBC is they want to ease policy, they need to ease policy, but they also don’t want the yuan to run away to the downside. You know, there are many ways to say it, but many of the central banks, to your
Point, Garfield, are simply buying time until the Fed starts to take rates sideways becomes clear when when they’ll do so. It’s similar, but the DOJ is perhaps the perfect example of that. In the last two years they had to buy time.
Well, rates were the opposite way. In the US, there’s a 40 year bond option. I think results are coming out in about 90 minutes from now. There’s a 40 year bond auction. I think it says ¥700 billion. We’re looking at I think the.
The last one had a yield of about 1.92. I’m just scrapping my brain for numbers there. How good of an indication would this auction be in terms of demand for longer term Japanese debt today post BOJ, of course. Yeah, well, it will be very interesting
Because of that. The one concern is that we’ve got Tokyo CPI numbers coming out tomorrow that casts a bit of a shadow on the, you know, like the long term bond yields. I mean, the other thing that casts a shadow on long term bond yields is precisely that you wait
And his board, when they eliminated negative rates, they pushed this very strong line that we’re not about to start making a series of hikes. The immediate that immediate pushback was seen as being quite dovish. However, there is a growing constituency that says the BOJ is likely to either be
Forced or choose to carry out more rate hikes at some stage, especially depending on how their current policy shift is absorbed. So amid all of that, I’d be surprised. Wouldn’t be the first time. If there’s a very strong 40 year auction, it might turn out to be weak.
Given those concerns, I raised a bat raised about where DOJ policy might go, and in particular that looming Tokyo CPI rating. GARFIELD Thank you so much, Carlos Reynolds there on all things rates out of Sydney for us. Almost right on cue, as we were talking
About the BOJ there, the BOJ boss is at parliament talking about really how well for one at the March meeting that they did judge that a price target was was in sight. Other things, of course, too, I guess to
Note as you look at this tomorrow and this is more really the piping and the mechanics of the specific market is that there’s a massive expiry coming through in dollar in options level 150 spot five nearly $3 billion of dollar yen options expiring there. So perhaps the risk there is crushing
Traders as perhaps intervention looms. And you know what, speaking of intervention, 152 very close to that as we speak. Okay. We’ll leave the Japanese story there for now. Coming up, head here on the China show and get the market outlook for producers and suppliers in the China EV space.
BofA securities tells us how China will continue to be a dominant or if not the dominant player across this specific market. So this year. And just ahead, the Cohen Group senior counselor William Zara joins us from to Bill. A forum in Asia will, of course they provide consulting services for
Multinationals operating in China. We’ll dig into their business strategies, what they’re hearing from their clients as well. That’s coming up shortly. This is Bloomberg. I don’t see China as a threat. I advise everyone to not see China as a threat. And I certainly said everyone in China
Don’t have to be a threat. In the last number of years, we have brought our medicines to China to help patients. For the last four or five years, innovation has boomed in China and it has given many opportunities for us, but also other global pharma companies to
Partner with Chinese biotech companies. To some of our guests so far today at the Boao Forum there in China. In fact, let’s take it straight back. Stephen Engle is our man on the ground there, our chief North Asia correspondent. And what’s looking like, Steve, a
Beautiful day, although I would imagine the camera does not do the humid justice humidity just to stay where you are. Well, after covering the DOJ in Tokyo and then the embassy in Beijing, I welcome the heat and the humidity. Obviously not so much for our next guest.
Williams there, his senior counselor at the Cohen Group. Also the what the chairman emeritus at the American Chamber of Commerce of China and former chairman of that. You’re not speaking on behalf of the board. You’re here as a Cohen group. You advise multinational companies on doing business in China.
Yeah, it is sweaty here, isn’t it? A bit a bit hot and it’s warm. It’s a it’s a nice change, though, from Beijing. Yeah. The political temperature temperament also is a little bit hot right now. Obviously, it is something that the American businesses have to navigate quite delicately.
FDI is down, you know, in 2023 to levels we have not seen since 1993. There’s a bit of a caution. What’s the biggest piece of advice you give to companies wanting advice and what advice do you give me? Sure. Yes.
The relationship has gone through a bad period and we’re still, I think, just coming out of that valley since San Francisco summit meeting between President Biden and Chairman Xi, we’ve confirmed that we’re going to start talking in a number of different areas commercial, cultural, military, all very
Important. We haven’t really seen those dialogues get up and running in a strong way, but I’m optimistic we will, and I’m optimistic that they will be helpful. Having said that, I don’t see any dramatic improvement in the relationship in the near future.
If we can just get it on a steady basis, a balanced basis, I think that businesses will be able to make better decisions about investment. Well, how do we get better business to business ties when the geopolitical temperature is so chilly right now? Obviously, the rhetoric geopolitically
Is quite strong still, even though there’s a bit of a thaw after San Francisco, as you said. Now, look, we might be getting a meeting between us business leaders and Xi Jinping today. That’s what we’re hearing reading. We have to read the tea leaves that will
Go take another step in helping improve the commercial climate, don’t you think? I hope so. And I think part of it depends on what he says. But I think what he’s going to be saying is maybe quite similar to what the Premier said at the opening of the China
Development Forum, which was, you know, the Chinese economy basically. Yes. And uncharacteristically, he admitted there are some problems in the real estate and government debt, especially in the provinces, but that the Chinese economy plan is on track. And I think we’ll probably be hearing similar things.
Also, there’s a charm offensive going on because the Chinese do understand that foreign investment over the last 30, 40 years has been instrumental in their growth and they understand they need that. And right now, as you mentioned, it’s falling off because folks don’t know what future Chinese policy is going to be.
Folks are also watching what Washington policy is going to be. And so they’re keeping their powder dry and waiting to see what happens geopolitically. Do you feel that those in the United States are getting the accurate story about China? That’s I’m not necessarily pointing the spotlight on my industry, but that has
Been the allegations leveled by Lee Chang and others who essentially say, you know, again, Lee Chong said the property market is not as bad as it’s being reported. We have data that suggests otherwise. Obviously, it is. There is a problem.
But do you think there is an issue of essentially the narrative coming from China is not representing a true situation? In a word, I agree with you. And it’s complicated. And I think the press is doing its best. The Western press is doing its best to
Represent what they’re seeing. Part of the problem is there is not a lot of Western press in China. If we could get more press folks in China, I think we would be seeing a broader picture rather than focusing on
Areas that are kind of controversial or where China is put in a negative light. I think folks in in Washington, especially on the Hill and maybe even somewhat in the executive branch, are being very sensitive right now To what? Is being done in China.
Chinese policies So much China policy is based on China domestic consumption. Now, just like in America, domestic consumption and you know, there can be misunderstandings about where China is going and so forth. Having said that, I think there is some basis on both sides for lack of trust.
Yeah, and it’s an election year. So some of that suspicion obviously gets amped up on both sides. Recently, I did talk to Ambassador Nicholas Burns. He talked about the biggest concerns that American businesses have. He hears them directly.
And it’s the issues that don’t get a lot of press because there are not a lot of details, the opacity, whether it’s policy, but also the arrests and the raids of consultancy firms. There is a concern that the geopolitics could lead to retribution against U.S. businesses.
How much of a concern is that and how do you advise companies about that? Well, I think that the fear coming from companies and individual persons in America about coming to China is overblown a bit, that if you’re not involved in anything nefarious, you have nothing to worry
About. However, like you say, there have been some raids on companies, consulting companies, companies doing due diligence, Western companies, and we haven’t really heard clearly why. And folks that have been apprehended, some are still in jail in China. So you don’t need too many of those anecdotes for people to, you know, the
Risk assessment to go up. So it’s really almost like the right hand and the left hand. Don’t know what each is doing with this charm offensive coming out, wanting more Western involvement in the economy and some of these cases where, no, that can’t be right.
So can the charm offensive work. I guess that’s my last question to you, because, again, the Biden administration is stacking up the export controls on advanced technologies. China is very much. Every time I listen to them, they mention these kinds of things as far as trying to essentially contain China’s rise.
I mean, this seems like irreconcilable differences. Well, it’s interesting because I think our Chinese friends forget sometimes or conveniently when they talk about protectionism. A wait a minute. Who started protectionism? National security. Who started broadening national security to almost every aspect of life. And so I’m not saying that what the US,
The US, I think is responding. And, you know, some of the work that the committee on what is it, the House committee on security in on China. Yeah. You know they’re very aggressive. But there are some reasons for that. I’m not saying everything they do is spot on. So that’s our situation.
I think the Chinese leadership is full of very reasonable people, very smart people. And I think in the US there are some smart people in charge as well. And what I’m hoping is that we will come to a balance. While the rhetoric sometimes in an
Election year in particular kind of rises above the reason. Yes, sir. So, Eric, thanks so much. Cohen Group senior counselor. Enjoy the rest of the time. Okay. Back to you guys. All right, Steve, jump to a room and some AC, Then we’ll maybe drag you back
Out into humidity in a couple of minutes. A market roundup coming up. And by the way, we’re talking about how do you play in Asia? That’s coming up next. This is Bloomberg. All right. Welcome back. We’re looking now at this AIG frenzy and certainly some specific equities have just really
Outperformed the benchmark so far year to date. What’s driving this? Let’s bring in our Asia stocks reporter Yuki, only to maybe take us through chapter two of where this goes next. So, yeah. Talk to us about the what’s driving the outperformers, this side of the world here.
Yeah. So if you look at some of the nation’s benchmarks in Asia this month, the noticeable patterns in some of the outperformers, which are Japan, Taiwan and South Korea, the common theme among these markets are the eye trades. And what’s interesting this month is
That we’re not we’re not seeing the usual winners so far this year, but also those outside the usual winners driving the gains in the market during the month of March, for example, the usual winner in Asia has been TSMC, SK, Hynix and Tokyo Electron. But we’re seeing gains outside of these
Stocks such as Samsung Electronics or Hon Hai, Precision Maker and other stocks also rallying this month after they after they gave strong forecasts on AI, for example. Is it too late to to join in? Yeah. So investors and analysts seem to think
That it’s probably not too late to join the trades in Asia, even though some of the benchmarks are trading above the ten year average in terms of their price to earnings ratio, because Asia seems to be the key beneficiary for this ongoing and growing infrastructure investment. You can’t really talk about eight eight
Without some of the supply chain companies that are existing in Asia. So a lot of people seem to believe that there’s still a lot of room to run for a lot of these stocks that are seen as beneficiary and crucial for the supply
Chain in the global world. Well, speaking of stocks that are moving just today and I’m sorry to crowbar this in, but since we’re talking to you anyway, one stock that’s really moving there in Seoul is Hybe. Can you tell us why? What’s behind this move today?
Sure. This K-Pop star hype has been rising almost 10% this morning just after to develop interesting developments from the company overnight. One is that the company signed a distribution deal with Universal Music to distribute music labels such as the Beats and New Jeans and Under Development was one of its major girl
Group new Jeans has and that made announcement of a new album and is holding its first ever fan meeting in Tokyo tome which would be the first ever debut by a non Japanese artist. So which is very significant. So that has been driving the hive stock price gain.
Yeah. New jeans also announcing a new album overnight. Sink your teeth into that ukulele. And so for us, the Tokyo lunch break is just ahead. This is Bloomberg. And gold is. Just in case you don’t have a watch like myself or have given up watches
Altogether. 1129 is at the local time in Tokyo, where certainly markets are headed into the lunch break. And by the way, really outperforming so far today might have to do with the fact that dollar yen actually saw a slight leg up these last, what I think 45
Minutes or so. Just coming up, maybe some of the commentary coming through out of the BOJ. The governor is speaking at parliament or was speaking at parliament there over in Tokyo. There’s a 40 year bond auction and we should get the details of that bond auction in about an hour’s time.
So demand for long dated Japanese debt post BOJ would be the narrative there. Flip the page. We’re looking at commodity markets. So on your screens, iron ore in Dalian, copper in Shanghai, Shanghai, crude gold futures bottom of the screens copper LME price 9000 and coming up should be iron
Ore in Singapore. We did bounce off what I think it was 100 bucks. 1 to 4 is where we are currently right now. A lot of themes to unpack as you look at these individual commodities. Let’s bring in Matty Zhao. No better person really to talk us through these key themes.
The co-head of China Equity research, head of APAC, basic materials, oil and gas research, many hats at BofA Securities. Should we Cyberdyne or. Yeah, why not? Okay. We were talking during the during the break and you told us you were actually in China last week. You were visiting some of these steel mills.
What did you find? Yeah. So we we bought around ten U.S. clients to Tangshan. So first of all, like I said, us flying all the way to Tangshan is already a lot of efforts. Well, what we find is construction demand still remain weak. It is not only on the property front,
But also infrastructure. A lot of the traditional infrastructure, especially those 12 provinces, are also considered quite weak as well. So on the steel demand from the order books still not that good in a way. And then also the steel mills are saying that there is no government mandatory
Production cut at this moment. And given the iron ore and also the coking coal prices decline largely recently, the steel mills are making good profits compared to last time I come here like last time, I think they’re making about 300 to 500 losses currently.
They are already making one to 100 to 200 profits, so they are not thinking of more voluntary production cuts. You may see more production coming back as well. So on one thing, we may see that the that the iron ore has a little bit rebound with the production coming back.
But on the other hand, the steel mills are also the profits may be temporary with the production coming back as well. Most of the steel mills are expecting iron ore range bounding between 95 to 110 in a near term given on the one
Hand, demand is weak and on the other hand because they are making profit, they may be resuming as well. So probably need a little bit more restocking on the iron ore fronts as well. Yes. Okay. Just to pivot, and I know there’s a lot to talk about on this, but before we get
To that, can you talk about going a little bit further? Yeah, of course. Gold is one of the areas together with copper that we are pushing. We’re more positive from BofA. One reason, of course, we are expecting rate cut us still. Oh goodness. But on the other hand, we are also
Seeing investments and also physical pouches, very strong in in in both China and India as well. Physical purchases has been quite strong. They even talking about, you know, the Chinese New Year wrap packages instead of giving money, we actually giving gold beans instead as well in China last week.
And then also so it’s interesting finding also that is that look at the government’s purchase investment has been quite strong because of obviously this year is the election year globally. And also we are seeing a lot of political issues this year as well. So central government purchases another
Lag. They’re pushing the gold prices to be higher. Okay, let’s pivot to, if you don’t mind, because I know you guys have done extensive research, not just any of these, but the value chains, I think that start off with. And this week we had BYU reporting earnings.
We also spoke with Seattle to quite timely. How large is the the value chain the global globally. Yes. So currently we are expecting first of all, the penetration rate, we are expecting global penetration rate to go to 40% by 2030 and for China to go to 70% by 2030 as well.
So we are expecting the value chain to currently about 400 billion us to grow to about 1 to 1.2 trillion by 2030 as well. So it’s a is a very big value chain and China is basically a dominant role now in this value chain. Right. So that’s. Up three, three times, if you’re
Correct, market cap, anything. Market cap gross by 3×2. Not necessarily depends. It really, of course, depends on, you know, your competitive advantages and and also technology improvement as well whether we can go to the prices lower, etc.. Yeah. Okay. So let’s talk let’s break down the value chain because it’s very complicated and
I would battery Seattle. That’s one of your picks, if I’m not mistaken as well. How much visibility do you have over revenue the next, let’s say the next three year window. Yeah. So our house is a positive on on Seattle and we are actually expecting volume growth to continue.
So currently China is accounting for about 68% of the global battery cells and 13 out of the 20 top batteries from China as well. I know that CTO and also Chinese battery is facing a lot of the hurdles on the on the trade barriers as well. But currently we are still expecting our
Battery growth, export growth to be about 25 to 30% per annum this year and next year as well. In Seattle, of course within it gaining market share. Also that we are seeing with some of the raw material prices declining, it’s also helping to what for this China value
Chain to be more competitive as well. Okay. Battery pack so cathode, anodes, electrolytes, I know that sounds like great to some people but what among that in that bit do you do you prefer for example. Well we are actually cautious amount for all of the battery materials. So cathode, cathode, electrolyte
Separators and anode, we are all cautious. So we we prefer battery and also we prefer we are selective in DV, but for battery mature, we are cautious. Overall, China accounts for 80 to 95% of the global share in this ENDESA battery materials already.
Again, some of them are also facing the trade barriers and also a lot of the capacity addition. That’s the main reason that we are relatively cautious compared to the battery. For example, I take cathode as an example. Capacity growth is more than two times in the next two years as well.
So it’s basically not giving them enough bargaining power on the prices. And at the same time you are also having the exports more, more export thresholds and barriers. And within CATHODES, is it a consistent story or is it a preference? Copper Oh, lithium, for example. Sorry to get down to that.
Yeah, yeah, yeah. In terms of the models, we, we are positive on copper, we are more neutral on the lithium. So for the copper front we believe on the one go it is a green energy transition angle you have to create on one side you have these give you growth
And at the same time also the solar growth to support it, the volume as well as what we are expecting copper demand growth to be about 2.5 to 3% per annum this year and next year. And at the same time the mines are very
Tight. So far globally we are seeing 6 to 7% global mine disruption. So we saw for the first quantum, we saw Angle America that resources a lot of them announcing mine disruptions. Yeah. So so you have demand driver and supply tightness so that’s very different versus lithium lithium.
We have great demand growth however supply growth as a lot as well. So we are kind of neutral after the big decline of lithium prices. Currently, we do expect that lithium prices are more range bounding at the cost of around 100 to 120000. So it’s still still too early, I
Believe, for lithium. Now, something that’s come up consistently in your answers just now, I think every single answer you almost gave is the regulatory risk. Yes. And the trade barriers that are coming up across almost the entire supply chain. Right. How do you model something like that? So what assumptions are you making?
Does it to things get worse? And also, since China is such an important part of almost every bit of this supply chain. Yes. Are some of the trade partners almost shooting themselves in the foot because they also have their own easy targets to to hit themselves? Yeah.
Yeah. Yes, that’s a great question and a lot of debate on that as well. So so to give you a sense, China accounts for 64% of global. It accounts for 68% of the U.S. battery. We account for 80 to 95% of the battery materials like cathode, anode, electrolytes and separators.
We also account for about 50 to 70% of the metals like copper, cobalt, lithium, etc.. So we are very, very important now, or you can even say dominant in some areas. So you can’t grow the global Yili without China in our base cases that we are expecting, so that the heavy growth,
We expect growth to be about 20 per. Per annum. Currently, China is already the biggest exporter. We account for 15%. We overtake Japan and Germany last year as well. So. So we are expecting a 20% growth per annum this year and next year.
However, we do know that there may be potential of higher tariff from from Europe and also more than from the US as well. So we do provide a better case scenario, just assuming a lot higher tariff from the EU and also Exactly. Ben from the US.
So that’s not our base cases but our base cases. And in that front we are expecting maybe the export growth will drop from currently 20% to probably around 5 to 10% per annum and also for us probably
By a04 to the US export by 2025 as well. But of course we don’t hope that to happen as well. It is just depending on how serious U.S. and Europe getting to to own their own value chain. And are they close to that at all? No, no, no, we don’t think so.
We are just saying they are more conflict or they are more risk. But in our base cases, we still don’t see that’s coming. Given that, like I said, China is very important and it takes time to build the whole value chain. And also China have a more advanced in
Some technology. We also have cost saving and a lot of the cost advantages and labor advantages as well. Fantastic. Matti, it’s always great to see you. I’m amazed how you just pull things out of your head, just just like that. Patti Zhao, Co-Head China Equity Research, head of AFAC Basic Materials
Oil and Gas Research at B of A securities Right. Have a look at some of the other stories we’re tracking across China. China this morning or today, at least, China is taking its dispute with the US over TV subsidies to a World Trade Organization here.
Beijing says the elements of President Biden’s signature climate law passed in 2022 are discriminatory and seriously distorts global supply chain. Now Washington’s top trade official, Katherine Tai, hit back, saying China continues to unfairly undermine competition and dominate global markets. Now, Bloomberg has learned some U.S. executives in Beijing for a business
Summit are actually extending their visit after receiving an invitation to meet a top Chinese leader. Sources say the meeting on Wednesday is widely expected to be with Chinese President Xi Jinping. Chief executives of firms including Pfizer, FedEx and Amway are in the Chinese capital for the China Development Forum, which, by the way,
Ended on Monday. Now turning to the US and certainly the search and rescue efforts in Baltimore have now been suspended. That’s after a massive bridge collapsed when it was hit by a container ship and that’s actually forced the closure of a major US port.
It’s trapped about a dozen large vessels in the Baltimore Harbor. S&P Global Insights Commodity Insights. Rahul Kapoor told us that the disaster is likely to have a big impact on coal exports specifically. For us at this moment, I think it’s very difficult to put a timeline to it.
Right. It could be out for months at a time. And the waterways, as all of the ports, what should be what could be shut down for that period of time. Right. We’re just coming back to the impact. I think if you look at the coal exports,
Particularly right at the port of Baltimore last year, sent around 25 million tons of US coal exports. That’s the biggest market in our view, which is going to be impacted. That’s probably going to have an impact on the coal prices in the global markets.
On the supply chain. Like I said, it’s something which can be doubted as a lot. The containers and other segments for sale, Right. But not a not a big impact. It’s an unfortunate incident, but the bigger impact in our view is on the coal
Exports out of the US East Coast. And what about what we see for cars and light trucks? Because it also is important for European carmakers, for instance, how easy is it for them to also make adjustments? Oh, certainly it will have an impact. But like I said, the supply chains are
Agile, right? So they will be able to divert ships. They will look at the port of Savannah, New York, New Jersey, and so on. Right. So in the medium term, there’s an impact. But if you look at a slightly longer
Term time frame, I think they will be able to basically basically able to absorb the impact of what we are seeing right now in the port of Baltimore. In terms of other supply chain disruptions that we’re monitoring. What are you most focused on at the moment?
Is it still what we see in the Red Sea? Yeah, I think that for us is still a pretty big one, right? What we’re calling it is essentially what we call it as weaponization of the global shipping choke point. Right. We have to understand that, two, these
Have disrupted close to on 50% of the trade through the Suez Canal Red Sea. The container shipping traffic has been out there. You’re looking at what’s happening with the tanker markets with the bulk of the flows as well. Right.
So for us, it’s a it’s a concern that this could be a template for the future conflicts. It could be Strait of Hormuz, China Sea and whatnot. Right. Would this have essentially succeeded in raising their political voice and showing it to the world that this can be done?
Rahul Kapoor there. On the potential impact we’re seeing across will see across commodity and logistics after that Baltimore bridge collapse. Apologies if I’m not looking into the camera right now. We have some breaking news coming to dollar yen. It’s not gone red on your Bloomberg
Terminal has now hit the lowest or weakest level here in 24 years. It’s taken out the previous high and dollar yen. And we’re now currently trading, of course, at the levels last seen back in 1990. On your screens right now. There we go, 151, not 92 against the US dollar euro yen.
Just in case you’re curious, we are trading in about the one 6436 levels as we speak. All that being said, immediately my mind goes to intervention and intervention. Watch. And almost right on cue, implied vol overnight spiking 4.2 points. It’s double where we were yesterday. So certainly this is one part to watch
In terms of this options market. And by the way, we were talking about this too, right? There’s a massive option expiry at one 5150. We have an entire story on that on the Bloomberg for you guys nearly ¥3 billion. The expiry is on Thursday. So watch out for some of these key
Levels. But the headline for you is written bottom of your screens. The Japanese currency has now weakened to the US dollar to the lowest level since 1990. Plenty more ahead. This is Bloomberg. Welcome back to watching the China show. The CEO of AstraZeneca says the
Pharmaceutical giant will continue to support China’s biotech industry. That’s even as the US pushes for decoupling of global supply chains. Speaking to us at the Boao Forum, Pascal Soriot actually told us that while he sees innovation actually growing in China, Have a look.
In the last number of years, we have brought our medicines to China to help patients. But the last four or five years, innovation has boomed in China and it has given many opportunities for us, but also other global pharma companies to partner with Chinese biotech companies,
Take these products and bring them to patients around the world, in Europe, in the US, in Japan, everywhere. So, you know, we really focus on making sure we bring patient patients, new medicines. Before we get into some of the geopolitical issues. How fundamental has China become in the global pharmaceutical industry?
Well, actually, it’s not yet tremendously fundamental, if you want to say that way. But it is becoming rapidly very important. Certainly, the US will continue to dominate innovation in our sector, there’s no question, for quite some time. But I think in the world the second
Biggest provider or innovator in pharmaceuticals will be China, especially with new technologies. Cell therapy, gene therapy, what we call an antibody drug, conjugates oligonucleotides. In the old days, we were bringing small molecules, antibodies, and that’s what we did for many, many years.
In the last few years, a large number of new technologies have emerged. And that’s where the biotech companies here in China have focused on what is going to be the ramification, the biggest ramification of the bio secure act in the United States if it does become law.
And essentially this legislation that’s going through Congress would essentially ban Chinese pharmaceuticals from getting federal contracts if they are deemed to be of concern on national security grounds. Does this benefit you or does this is this bad for the global pharmaceutical industry? Because it essentially, at the end of
The day, will limit access for patients who need particular drugs? Well, you know, I think it is always important to try and facilitate collaboration in science and the exchange of information and and the sharing of new data and the sharing of, you know, new inventions.
So I don’t think it will necessarily affect us because we are sourcing those products. We are basically developing them. We’re going to manufacture them. And so we will manufacture them in China for China and some countries, but we also manufacture them in the US or in
Europe for the Western world. So those will be very, very segmented activities. The fact that the product was invented here doesn’t mean the product is necessarily sourced from China for for the entire. So that’s an important delineation, essentially, because this law could prevent Chinese pharmaceuticals that are
Developed here from going into the world’s largest markets, and that is the United States. Yeah, we have a very large supply chains and we are organizing ourselves so that we can actually supply the United States and Europe independently. And that’s what we do. And we also are building our presence
Here in China so we can actually supply Chinese patients independently. So I think I think the fact that again, the fact that a product is invented here doesn’t mean it won’t be manufactured and supplied out of China. There was Stephen Engle and also the Boss ad, Astra Zeneca executive director
As well, and CEO Pascal Soriot there at the Boao Forum that’s taking place. In fact, we’ll have more from the forum a bit later on in the show. Right. Just ahead, we’ve got a spicy story that’s perhaps why two secret teeth ensue here. Mala Yeah. How one Chinese city is looking to
Capitalize on hungry tourists and how one firm is actually benefiting from that. The China brief is just ahead. This is Bloomberg. It’s time for today’s China brief for a check really on making headlines in papers and also trending online. We’ll start things off with a look at
The People’s Daily and focusing there, at least the People’s Daily, focusing on the Boao Forum taking place in Hainan. And certainly after the conference released its report for 2024, it says the momentum for Asia’s growth remains relatively strong and cites expressing confidence in the resilience of the
Chinese economy. Meanwhile, you have an editorial in the Economic Daily calling on authorities to crack down on false reports and inappropriate comments that damage private enterprises. Now, this does come in context. Here is after Chinese beverage giant Nongfu Spring and its founder actually faced boycotts this month.
Now let’s turn to a Chinese city that’s actually gone viral over its dry hotpot dish. We’re talking with the CEO of Chen Shui. That’s in northern west northwestern province of Gansu. Gained traction and stable after its Mala town. A spicy soup and a dish like a soup list version of hot pot.
Cantonese variety features a sauce made of dried pepper that only grows actually in Gansu, which is one of China’s poorest provinces. Some users note that the irony of a historical city like Chen Shui becoming famous for Mala Tang, the city is an ancient Silk Road hub, home to just
Under 3 million people. Others, of course, think it’s just another PR move, which much like the barbecue craze that gripped the city of Seville last year. Either way, a taste for this has sent the shares of a local producer of mushrooms. Jumping mushrooms are, of course, a very popular multi-ton ingredient, also jumping.
11 Comments
this guy is payed off by china
The discussion will be, concerning the ocean mining for mineral in Asian seas. The gating of ocean materials and what means regionally, etc?
Where the concepts ideas came about to proceeding, ect?
IPOs and Ma,? capital earns that came from Ma discouraged thus by China's leader!
Statistical moves?
What aspects eco- energies? Ocean minerals?
Fisheries regionally gating
What platform internet accessibility vs US?
what a commie shill… nothing like a commie/fascist who pushes Ch!n@ script… Meanwhile China builds a new coal fired power plant every week with the saving they have built the worlds largest navy..
TOTAL ABSOLUTE PERPETUAL DECOUPLING OF THE CHINESE ECONOMY IS A PATRIOTIC DUTY, ONLY IDIOTS AND STUPID WILL BELIEVE AND CONFORM WITH THE COMMUNIST CHINESE IDIOTS AND STUPID ONLY
Yen intervention and then weakness to continue but that was a sweet drop. I've been hearing complaints about the weak yen and they'd be wise to fix it before it becomes an even bigger headache.