Largest Earthquake in 25 Years Rocks Taiwan | Bloomberg: The China Show 4/3/2024

“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
00:04:19 – Massive earthquake hits Taiwan
00:10:03 – Biden, Xi hold first call since November 2023 meeting
00:18:10 – Pressure mounts on yuan
00:28:23 – China market outlook with Fidelity International Investment Director, Catherine Yeung
00:34:14 – Tesla’s sales miss by the most ever, while Chinese peers post strong March sales
00:36:53 – Chinese state-owned developers’ sales slump
00:49:11 – Earthquake shakes Taipei buildings, triggers tsunami warning
00:53:24 – What’s moving Asia markets
00:57:34 – Asia economic outlook with Citigroup Chief APAC Economist Johanna Chua
01:07:24 – Yellen’s China trip to press Beijing on overcapacity
01:14:53 – TSMC halts some chipmaking, evacuates plants after quake
01:23:03 – Bloomberg Intelligence’s top 10 companies to watch in 2Q

Good morning.
We’re half an hour away from the opening
bell.
Hong Kong, Shanghai and shenzhen.
Welcome.
You’re watching the china shum David
Ingles.
Our top stories this morning.
A tsunami warning is issued after a
magnitude 7.4 earthquake shakes.
Taiwan chip maker tsmc evacuating some
staff from production lines.
President biden and president xi
speaking for the first time since
november.
The white house saying the tick tock
sale push was on the agenda and asian
stocks and treasurys under pressure
after solid U.S.
eco data spurs bets that major central
banks will keep rates higher for longer.
Breaking news this morning.
Strong series of earthquakes hitting
Taiwan and also being felt across some
parts of Japan and also the Chinese
mainland Taiwan.
Markets are just coming on line.
We’re down about 7/10 of 1%.
This is based on one official, the
strongest earthquake to have hit Taiwan
in 25 years.
We’re still looking at initial market
reaction.
But certainly when this hit, of course,
if on about, I would say about an hour
back.
The series of headlines coming through
did indicate that this was on the
stronger side of things.
Yeah, and I was I’ve been speaking to
family over there in Taipei and they
felt that first thing this morning.
And the aftershocks are still feeling at
this point here right now.
You mentioned about the strongest quake
we’ve seen in 25 years.
That brings us back to the so-called 9
to 1 earthquake on the island which
killed more than 2000 people.
This is video from my mother in law.
I want to show you just of what we just
saw the last few minutes or so.
And we’ve seen we’ve seen pictures of
even the subway system, the ground where
it’s shaking outside.
Certainly we’re focusing on the damage,
of course, to buildings so far this
year.
Now, this so far today, and also just
the number of casualties.
But we haven’t had those details just
yet.
So for the nuclear power plant,
operations remain normal.
That’s according to Thai power and the
power distribution system has stabilized
it says TSMC.
A spokesperson, spokeswomen from the
firm here, Nina Karl, in a text message
about half an hour back talking about
how well TSMC has.
We evacuated some staff from production
lines at number one.
And number two, Kyodo News is reporting
that nearby Okinawa, which is nearby, of
course, where Taiwan is, the airport in
Naha, has halted arrivals and also
departures.
More headlines coming through here,
another aftershock coming through five
and a half magnitude quake two
kilometers south southwest of quality in
the city, which I believe.
Yvonne, we were looking at some of the
videos early on of some buildings gone.
Yes, there’s been some fixtures that
have collapsed in some ways.
There has been some pictures have been
circling around social media here right
now.
But we’ll bring it to you once we do see
more.
But certainly we are hearing about
tsunami waves Reaching 1 to 3 meters are
possible along not just Taiwan’s coast,
but also in China.
That’s according to the Pacific Tsunami
Warning Center.
And we talked about TSMC.
So certainly we’re watching the impact
it has not just on the city and the
island itself, but also what it means
for stocks as well as the currency here
today.
Yeah, we did see an initial bid come
across the Japanese currency when
headlines started dropping as well.
More details in case you missed it, Just
to recap, about an hour back, 758 local
time in Taiwan, a 7.4 magnitude quake,
that’s according to the USGS, hits 18
kilometers from Holyhead City.
That’s in the island’s east.
It was 7.2 on certain scales in other
certain in certain countries as well.
We showed you market reaction as well in
a moment.
Of course, in case you missed it, we did
show you a map there of Taiwan where
that the sort of center of gravity was.
And of course, along the west coast of
Taiwan is, of course, just sprinkled and
that series of key factories.
We’ll talk more about supply chain
disruptions or potential for supply
chain disruptions in a moment.
Yeah, Let’s go to Adrian Kennedy.
He’s our senior editor for the news
Desk.
So joining us from Taipei here this
morning.
Adrian, first and foremost, I hope
you’re okay.
Just bring us up to speed.
What’s happening in the latest.
Okay.
Good morning.
So in about 2 minutes, 2 a.m.
this morning, we were struck in Taipei
by a fairly strong temblors, the
strongest I’ve had in my ten years in
Taiwan.
And we’ve just been informed by the
government that it was the strongest
quake to hit the island since at least
19, since 1999.
That was an earthquake which killed more
than 2000 people.
Now in Taiwan, I’m working from the
middle of Taipei.
I can’t see any visible signs of damage,
but the actual initial temblor was
fairly long.
It went from the, I guess, 20 to 30
seconds.
And we’ve had several aftershock shocks.
And since we understand that there have
been some evacuations from
some facilities, particularly closer to
the more to the epicenter of the
earthquake, which was in Hualien on the
east of the island, there was a tsunami
warning issued related to some parts of
the east and Okinawa.
My understanding is that the tsunami
waves were not forecast to be
particularly large.
And I do understand that Okinawa has not
been severely affected, but that is
unconfirmed and we’re still getting
information.
So this happened a little over an hour
ago.
Yeah.
Adrian Maybe just to build on that as
well.
We did just get a headline coming
through out of Kyodo News on Okinawa
itself that the airport, the NAHA
Airport, has halted arrivals and
departures, at least to some extent,
affected to that extent.
Adrian, I’m wondering if you could talk
a little bit more about any potential or
current disruptions to any production
supply chains.
We did hear, of course, from a TSMC
spokesperson about 30 minutes back.
One, if you could give us some context
and what we have heard so far along
those lines.
Sure.
So Taiwan is semiconductor manufacturing
hub, as you know, making some of the
world’s most advanced chips.
We do understand some of the facilities
have evacuated personnel.
But I would also underscore that these
are very sophisticated factories.
Taiwan is
habituated to earthquakes.
We often get temblors, and these are
facilities which are built to withstand
severe impacts.
They have their own water supplies.
They often have their own power
generation.
And Taiwan as an island, as a
government, as a community.
It’s really designed to deal with
catastrophes, whether they’re from from
earthquakes or severe typhoons.
So our understanding is that, you know,
there could be there could be some
action by the factories, but there’s no
indication right now that there will
necessarily be any disruption to supply
lines on the east coast of the island,
which is far less populated and also is
less of a production center for
anything.
That’s really where the majority of
industry is on is on the West.
It’s likely that disruptions and damages
and hopefully fatality, probably
fatalities will be will be minimal or
nil, but it’s likely the damage will be
much more severe on that side.
We don’t have confirmed a report or I
haven’t seen confirmed reports of what’s
exactly going on over there.
But there are concerns that there may
have been building collapses.
Adrian, thank you so much.
Adrian Kennedy in Taipei for us.
As Adrian is pointing out, left side of
your screens is Taiwan, where the
earthquake hit on the eastern part, less
populated still under her left side.
We’ve actually have a setting this on a
terminal which actually outlines and
indicates specifically where the
factories are, who’s running those
factories and what type of factories are
actually churning out markets on the
right side, 4/10 of 1%.
For more on this, you can turn to your
Bloomberg TV.
Go to get commentary analysis from our
expert editors here as well.
Now, looking broadly here, what across
markets, as we shift gears and talk a
little more, what’s going on as a
countdown, of course, of the China Open
here this morning.
And certainly we’re seeing what’s been
going on.
The Treasury market is really starting
to impact stocks.
Yeah.
Finally, in some ways.
Right.
And you’re starting to see stocks are in
the back foot here.
U.S.
futures are also slightly to the
downside and the dollar continues to
peak higher here.
In fact, we’re reaching those 2024 highs
for multiple of the, you know, dollar
gauges.
Also, when it comes to the U.S.
ten year yield and parts of the longer
end of the Treasury curve.
So you’re watching very closely the sell
off when it comes to fixed income, the
Golden Dragon index, and do too much
overnight.
But certainly we’re very much watching
what goes on when it comes to the eight
share market, where we did see a 20%
rally from the January lows.
Now, obviously, we’re not calling it a
bull market in some ways because we’re
still going to track a little bit more.
But the state buying that’s involved and
what really is driving this rally and
the other day, and we’re also going
through a lot of earnings to tell you
about as well.
Futures are slightly to the downside
here this morning.
229 for the Chinese ten year yield and
we’re still talking about the offshore
rate at 725 against the dollar.
The onshore rate is at the highest we’ve
seen or the lowest we’ve seen since
November.
Right now, there was some talk from
traders that they actually blocked some
of these swap trades as the U.S.
extends that loss, which maybe is an
indication that maybe even the onshore
rate is trading very weak and very close
to that trading ban.
We had a 2% upper upper end of the
trading ban.
And of course, the offshore rate, as
everyone is pointing out, is already
trading beyond that level as well.
Do keep in mind that China is shut from
tomorrow.
So the holidays might also have
been causing some aberrations into swaps
market as well.
All that being said, it’s a strong
dollar story that takes us to our other
top story.
And in case you missed it overnight, the
two presidents had a phone call.
President Biden and President Xi Jinping
spoke on the phone first time, in fact,
one on one communication here since
November.
Let’s bring in our guest.
Guy Bill will go to talk us through this
managing director, Teneo.
He joins us from Philadelphia today.
Gabriel, thank you so much for for
joining us.
And fairly short notice on this.
Two versions out, if you will.
There’s a White House readout.
This also, of course, the readout out of
Xinhua News Bridge that gap for us.
What does that look like to you?
Well, we know these readouts are pitched
largely to domestic audio.
And says and that means both leaders
have to reference the issues that they
care most about in their publics care
most about.
So it can give the impression that the
two leaders talk past each other or that
the accounts are inconsistent.
But I actually saw quite a bit of
commonality in terms of the tone, which
was cordial, which was friendly, and
continue the spirit I think we saw last
year in San Francisco.
So the kind of fragile rapprochement is
still on track for the moment.
I think that’s the the tone coming from
both of those readouts.
And Gabriel, is is it because both sides
are just dealing with so many other
factors here right now in China,
particularly it’s a weaker economy, but
also what’s going on in the Middle East
is really, you know, taking a lot of
President Biden’s time now.
Yeah.
Both leaders have their own reasons to
try to keep relations relatively stable
this year.
The Biden administration doesn’t need
another foreign policy crisis on top of
Ukraine and the Middle East.
And President Xi is seems more squarely
focused on the economy now than he did
last year when he sometimes seemed
distracted by probably by the internal
political turmoil, the purges in the
military and in the cabinet.
So right now, both leaders have their
domestic problems.
And, you know, in the long term, I think
the direction of the relationship hasn’t
changed.
But for this year, I mean, the other
factor, of course, is that, you know, I
don’t think Beijing sees much, much
point in trying to engage in deep
negotiations with an administration that
might not be in power next year with the
Biden administration.
They may have to totally reset their
strategy when when there’s regime change
in Washington.
Yeah.
So maybe just walk us through I mean, we
see a rapprochement now.
The good vibes may continue till
November.
And then you’re saying once this
election happens, all bets are off.
What happens then?
You think, Gabriel?
Well, look, we look at the situation in
Washington.
I mean, Democratic control of of the
Senate has been a brake on some of the
the more hawkish anti-China proposals
coming out of Congress.
Tick Tock is the latest example of that.
But the backbenchers in the House are
are are are advancing legislation on
China every day, or at least proposing
it.
If Republicans take the Senate in in
next year, which I think is quite
possible, then that could open the
floodgates for more legislation.
And and in China, of course, we have
the response function to Taiwan, where
President William Lee, as he grows more
confident in office, is more likely, I
think, to engage in provocations to
which Beijing would have to respond.
So.
So that’s why next year looks
potentially rockier than this one.
Yeah, to your point, a lot of that will
really depend on who, who, who the next
president, US president, will be post
November election.
Let me take that a step further.
Gabriel In what way do you think
President Xi and China indirectly could
help President Biden win a second term?
Well, I think
staying off the the front pages, I think
if if China ends up being a major issue
in this election, I think that’s
probably negative for President Biden,
because Republicans or especially former
President Trump is probably going to be
seen by voters as the quote unquote,
tougher candidate against China.
So if there’s some kind of unexpected
incident, if we have a repeat of the
balloon incident, for example, or if we
have some incident in the South China
Sea where China jumps back into the
front pages and interrupts the issues
that that that President Biden wants to
focus on in the campaign, you know, that
would hurt him by keeping those things
steady this year.
That’s probably what Beijing could do,
although I don’t think Beijing
necessarily has a strong preference for
one candidate or the other.
And what should we be watching out for,
in particular in terms of where we might
see the tensions rise again?
Mean, obviously, this tick tock law has
been stalled in some ways in the Senate.
And then you have a little bit more
concerns about Chinese EVs as well.
I mean, you know how you see those two
things playing out now?
Well, Secretary Yellen will be traveling
to China this week and or next week, and
she’s going to press this industrial
overcapacity issue.
And EVs are the are the the main case in
point for for what the what Washington
sees as as China’s unfair economic
practices.
And Congress is fired up as well about
the potential flood of EVs coming in
from Mexico.
The administration has to find a way to
finesse that issue.
They have to they want to block the
vehicles coming in from Mexico, Chinese
branded vehicles that may flow in from
Mexico, but they have commitments under
the USMCA that would prevent them from
taking the more obvious steps.
Whatever they do, whether it’s banning,
you know, connected vehicles with
Chinese origin technology, you know,
that could provoke tensions with
Beijing.
And, you know, that’s the biggest issue,
I think, circulating around Washington
right now.
Even if this tick tock thing kind of
takes a break, as I believe the Senate
looks looks like they will not take that
up.
But the EV issue, I think, is the main
focus in Washington right now.
Gabriel, it’s great to have you,
Gabriel, with all their managing
director at now joining us here this
evening.
We’re taking a look at more on what goes
on with that renminbi fixture.
And you once again see a strong support
from the PBOC at 709 49.
Of course, we’ve seen just the spread
between the estimates as well as the
fakes have been so wide,
even when it comes to the spot pricing
and the fixing, it just continues to
show how much depreciation pressure
there is on the currency, Right?
Yeah.
So it’s a third straight day.
We’ve had a fix to your point of on a
spread above 1400 pips.
This one is slightly narrower than
yesterday.
We’re looking at about 1350.
But all that being said, right, the last
week has certainly been very close to a
record spread there from based on
defects.
And and really our estimates are a
little bit more news coming out of
Taiwan.
And in case you missed it, of course,
the big one, which well, the big quake
literally happened 2 minutes before 8
a.m.
local time there, 7.4 and some video
coming through as well here.
And you really literally see that
shaking as we speak.
A 6.4 quake has again hit.
This is an aftershock 11 kilometres
northeast of Hualien City in Taiwan.
That’s based on the USGS data.
TSMC has told us, of course, and has
told us basically it came out and said
it has to be evacuated some of its
production staff.
There we go.
There’s plenty more ahead.
We’ll keep you guys updated on this
story as we also approach the China
market open.
And also here in Hong Kong, 13 minutes
away, you’re watching the China show.
All right.
Get our story when it comes to futures
here, as we count down to this open just
about 10 minutes or so away.
Seven 2588 for your dollar.
Offshore, of course, are watching very
closely what goes on with the onshore
rate as well, just given that we
basically have hit the highs of China
for this year.
And for more, let’s bring in our
executive editor for Asia markets, Paul
Dobson.
Here in the studio with us is also our
effects of rates.
Reporter Tanya Chen.
Tanya, I’ll start with you.
Another day of strong support from the
PBOC.
But, you know, given the better data,
we’re still not seeing any sort of
change in the narrative when it comes to
the renminbi right now.
This seems to be a Fed story still.
Yes, exactly.
So I guess to zero in on the yuan fix
today, as David mentioned, it’s kind of
around 1350 pips.
We’re not seeing it at the strongest
fixing gap since late last year when we
saw the yuan, I think, hit 7.35.
And that was the weakest on record since
we’ve been tracking the data.
I think what we’re now paying attention
to this week is how much the PBOC will
tolerate the yuan hitting that week end
of the trading band rate.
So we have this range today.
The weekend is 7.2368 and as David
mentioned previously, the Offshore has
already been trading weaker than the
weakest part of the onshore.
So you see all of this really
bearishness, sentiment still really
building.
In previous episodes, the PBOC had
squeeze shorts, they had tightened
liquidity offshore to just basically
punish all the bears.
We haven’t seen it as dramatic as it was
last year.
So you have to ask the question, is this
time different?
Because now they know it’s really driven
by this yield differential with the US
and just kind of it out there.
We’re still around 280 pips on the two
year for the CG versus the two year on
the Treasury.
So it’s still very wide.
Paul, I’ll bring you in at that point.
The time you just mentioned, is this a
you know, we were talking about this on
the show yesterday.
The Indonesian rupiah hit lowest since
2020.
Don’t get me started on the Japanese
currency.
Is this a Fed story?
It’s largely it’s largely a Fed story
about those interest rate differentials
that are really driving everything going
on in the currency market.
Strong dollar, not just strong dollar,
strong European currencies as well.
So relative to what we have here in
terms of Asia is where those
outlooks for monetary policy are
changing.
And at the moment we’re looking at
higher interest rates for longer and in
Europe.
How much of Europe and also in the US
and that’s really kind of driving that
difference in the exchange rates.
Also, I think just the growth outlook as
well, particularly the US, which just
remains super strong in terms of the
economy,
which is obviously feeding into the Fed
rate bets as well.
And European growth is starting to look
more attractive as well.
So in terms of where do you want to have
your money right now
in those growth areas, in the places
where manufacturing is really coming
back to life again?
Looks like it looks like a decent
prospect relative to Asia, where we’re
still kind of recovering, but a little
bit of an uneven way still, particularly
China.
And Tanya, it’s interesting, we were
about to get into a four day weekend in
China.
We’re going to have a U.S.
jobs report on Friday.
Powell set to speak here today, later on
today.
I mean, the challenges facing the
renminbi is likely just to keep
intensifying.
Yes, exactly.
So you just kind of brought up the
biggest point, which is liquidity is
already a stressful issue right now for
traders.
You’re seeing it in the four points.
And so going ahead, you know, a lot of
these traders, they’re going to be
wondering how are they going to price in
the US yields?
And you’re seeing this spill over into
Thailand as well.
The story is the same in the yen right
now.
I think.
I think these central banks, they’re
just their hands are really tied.
I mean, with the PBOC, the biggest issue
right now is they have this impossible
trinity framework, right, where you can
technically lean on a weaker yuan to
help them stimulate and revive growth In
previous years.
In previous quarters, this was primarily
an issue because they were facing this
kind of deflationary this deflationary
environment.
And now potentially they were hoping
that the Fed could potentially ease
rates later, therefore giving them more
room to also cut rates themselves.
Given that the expectations around the
Fed are starting to slowly taper, given
the strong, robust economy and in the
US, it’s really kind of altering the
central bank’s theme framework in terms
of tackling the strong dollar.
Paul, just a final word from you.
Other things happening in the world, oil
prices are moving higher.
This Chinese equity market may be might
hit the 20% rally threshold from that
low.
What’s top of mind for your team today?
What else?
Yeah, well, I mean, I think that this is
one of the things we’re trying to
grapple with, the decent looking
equities versus the weak currencies,
particularly in in Asia.
It speaks to the kind of uneven, uneven
growth that I was thinking about,
particularly in China.
You look down on the one column, you’ve
got some good news, you’ve got signs of
manufacturing, better exports, a little
bit of confidence returning now.
And the downside in the second column,
you’ve got property, property, property,
property and all of the the woes that
come with that and the disinflationary
impulses.
And, you know, it’s it’s not like a new
story for us or anything else, but we’re
still waiting for those circuit
breakers.
There’s more and more signs of efforts
to turn things around, but it’s such
slow progress.
And until that happens, you know, for
all the equities can show some strength.
It’s it’s only in some sectors it’s not
an overall recovery in the in the
economy that would give more breadth and
a more more sort of strength to that
kind of a rebound.
Team.
Thank you.
Paul Dobson in Singapore, Tanya Chen
here in our studio for us on all things
markets today.
As we were just pointing out that we are
approaching this 20% threshold on the
rally HCI.
The Hang Seng China index, 19.2%.
We get to that level at six.
It doesn’t seem looking at futures,
though, That’s going to happen.
That’s going to happen today.
But we’ve come a long way, as Paul
mentioned.
You got to wonder, the weakness in the
currency is so different from what we’re
seeing when it comes to the optimism
around stocks.
Right.
This divergence, can it actually last or
at one point will the currency risk
really drag down equities?
In some ways it was anxious to tell you
about here today.
Of course, there’s a lot that are
earnings related.
China Wang Co Asia’s race to accumulate
CLSA Jiangxi copper shares raised to a
by a factor research and we have ZTE a
shares cut to hold at HSBC.
All right Stocks to watch, though,
today.
We’re watching very closely what happens
with Tesla, given their sales were a
disappointment here.
So the EV sector very much in focus.
We’re also watching what happens at
Country Garden.
We’re still hearing that the stock is
suspended, but sales for March plunged
83%.
We’re also watching oil, right, with
Brent getting close to 90 bucks.
WTI breaking 85 oil certainly in play
here this morning.
Yep.
There we go.
The opening bell 3 minutes away.
This is the China show.
Welcome back to watching the China show.
We’re talking down to the open of
markets.
And obviously, what’s been top of mind
is, is this phone call between
Presidents Xi and Biden that happened
yesterday.
And certainly maybe that helps with the
sentiment.
Not quite seen that here today.
We’re seeing a flat Hang Seng the
pre-market.
We’re still watching, of course, those
shares after rallying some 20% or so.
But that weakness of the currency is
still very much the dollar moves in play
here, David.
And of course, we’re still tracking what
is happening with those earthquakes in
Taiwan, in Japan this morning.
Yeah, we’re still seeing some headlines
coming through, really very strong
aftershocks.
The latest one that dropped, of course,
out of Holyhead, I think it was 12
kilometres northeast of the city of 6.4.
And in four of years it missed at 7.4
was the magnitude of the initial strong
one, which had 2 minutes before eight
local time out base in the US.
Just more on that in a moment.
The is looking like this as if one is
pointing out.
And in a moment we’ll show you, of
course, where we are as far as that
specific index is concerned.
The Hang Seng China index were flat to
lower at about Europe.
And Iran was also pointing out the Fed
story of Jay Powell speaking.
And then you had the jobs report coming
through.
And on top of that, to make things more
complicated, China is actually shut from
tomorrow.
So you don’t really have to sort of
limit to to how weak the currency can
get onshore and offshore.
Of course, you’re still going to get
that that movement as well.
725 The Fix today was about a 1350 1350
pips fixed to the estimate offshore.
It has actually been trading.
If you juxtapose that on an actual chart
that’s actually been trading already
above the 2% range on the onshore
onshore, it obviously has to hold below
that specific level.
But all that being said, of course, rate
differentials are really pushing that
aside.
Now, all that being said, I mentioned
the Hang Seng China index.
Have a look at where we are right now.
It’s a Jan 22 this year, if we’re not
mistaken, was actually low.
Thank you so much.
There we go.
From that point up until about
yesterday, 19%, given the weakness we’re
seeing today, maybe we don’t cross 20%.
Now, sometimes we some would refer to
that as a bull market context is how we
key here.
You know, some questions are on state
buying, really pushing sentiment higher
as well.
And of course, broadly speaking, of
course, over the longer term, if you
zoom out on this chart.
But we you know, you barely even see the
60% rally earnings out of Malta
yesterday, beating estimates that should
come out here.
Top of your screens, NIO and xpeng.
There’s also the Tesla story down 4% in
the US of course that pulling down and
of course that and of course of be wide
there we go at 1.3 and two and a half
percent in the open and also the oil
story 85 in West Texas almost 91 Brent
oil related stocks have actually been
the best performer.
And there’s not even a close second
really globally when you look at equity
flows and equity price and equity
performance this year.
Just a look at the open here.
Some of these oil today, the place and
as you can see here in one, it’s really
moving against the grain, against the
grain of this weaker open in greater
China.
And you got to wonder if the Fed’s
watching that right.
These upsize risks to inflation when it
comes to the energy price and whether
that suggests that higher for longer is
going to be the narrative that stays
across these markets for some time.
And you’re certainly seeing on the fixed
income markets, you’re starting to feel
a little bit when it comes to stocks as
well.
Let’s bring in Catherine Young,
investment director at Fidelity
International.
She joins us here in our Hong Kong
studios.
It seems like there is a little bit of a
pivot back to China in some ways.
How real is it?
Well, hopefully it is real.
But what’s been very interesting in this
current earnings season is that the
focus many companies across a number of
sectors, by the way, have on shareholder
returns predominantly through dividends
as well as buybacks, and whether that’s
because of shareholders basically
demanding this share price weakness with
some of the buybacks or even CRB
reforms.
It’s a definite trend that’s coming
through this reporting season.
Is that indicative of where we are or
where we are in this rally or recovery
in the equity market when we get things
like this?
For example, if you think back, I think
it was even on one of your shows back in
2017, we started gauging this whole
dividend story and that Chinese
companies, mainly the state owned
enterprises, were pivoting towards this
focus.
And of course we have the social KPIs,
which are very much coming through not
with every single company in terms of
fulfilling this, but potentially because
you’re seeing not just utility
companies, financials companies in that
sort of mature part of the cycle.
You’re seeing some of the Internet
companies, consumer companies also join
this phase.
And maybe this is why this focus on
returning value to shareholders is
becoming more prominent.
And of course, maybe even the Japanese
influence with the change in corporate
governance.
There could also be underpinning what
we’re seeing in China.
It’s interesting because I think Morgan
Stanley came on the show a few weeks
back and highlighting this exact theme.
You know, actually reform has been
around for several years And has that
been a winning trade?
If you had if one had followed
informed investment strategy around the
theme of as we’ve.
You just let me borrow a career phrase
and value a program of career.
Would you have made money?
Probably not against the growth stocks
initially, but more recently.
But I think that focus, especially for
the domestic investor, is important.
So if capital markets are going to
continue to develop and households
deploy their money into equities or
fixed income, that search for yield is
going to be somewhat of a cushion during
periods of volatility.
And you’re saying that you’re seeing it
across many sectors.
Where is that trend the most prominent
now in this earnings season?
It’s been in financials.
Okay.
So the large so we have either been
supporting or stabilizing demand or
increasing their dividend.
Some of the smaller fintech guys have
also been increasing their payouts,
doing buybacks.
What’s key, though, is the
sustainability of all this, whether
again, you’re a consumer or financial
company.
So, for example, with the banks we like,
we think that this trend is going to
continue in terms of the support for
payouts, given that these companies have
the ability to generate cash flows
without jeopardizing capital adequacy.
It’s a great theme and certainly a great
idea.
I wonder how receptive are investors to
the idea?
I think, you know, given that China has
been out of favor for some years now,
the idea that it’s a cushion or a
different aspect into just looking for
growth, I think could attract some
investors.
But I do think this so we reforms again
across sectors is tangible and
especially over the past year we’re
seeing this and also the shareholder
voice is becoming louder.
I think companies are in fact listening
to that.
You touched on something about RSU.
We don’t talk about this too much in the
show.
Maybe you can clarify they’re switching
stock options to these or how does it
work?
Yeah, restricted share units.
So essentially it’s like a stock option
for employees.
But in terms of the dilution, it can be
controlled.
So as an example, one such consumer
company we spoke to did this transfer to
RSU and the dilution of shares per
annum.
You it went from about 3 to 5% to a very
controlled level.
So a couple of these Internet companies,
consumer companies are sort of
gravitating towards this.
And again, it’s rewarding the
shareholders effectively as well as the
employees themselves.
The general sentiment among your clients
these days is what and not just on
China, like how how are people thinking
about taking on more or less risk as we
move into the second quarter?
I think people are just mindful or
cognizant of what happens rate wise
around the world, especially with the
Fed and it’s all data dependent.
We even get messaging now out of the
Federal Reserve members about just
depending on data whether they actually
pursue these three cuts.
China is obviously very dependent on
data, Japan across the entire region.
And so I think it’s almost a bit of
treading water and looking for the
opportunities.
But definitely for China, it’s about
whether the profitability does come
through with companies.
Catherine, I’m afraid we have to cut
this short, shorter than usual.
Catherine Yang out of Fidelity
Investment director there.
We’ll take it straight now to this live
briefing taking place in Japan on this
big earthquake, of course, that hit not
just Taiwan and also also Japan.
In Okinawa, Naha airport has now halted
arrivals and departures from that as
well.
Okay.
So we’re going pretty old school here in
terms of that, the where we are as far
as the data,
the data on some of these earthquakes
are concerned.
There we go.
Press briefing taking place.
That’s the JMA there, of course, top of
the top right of your screens.
More on this in a moment.
We’ll talk more about TSMC as well.
This is Bloomberg.
It’s been an epic disaster, not just in
terms of the delivery number, but the
strategy.
Are you going to cut prices, whole
margins?
And investors right now feeling
blindfolded, almost like playing darts
blindfolded.
And these were what no one was
expecting.
A good quarter.
But this was pick your heart, chef of
Friday the 13th, Marin Elm Street.
That’s what this quarter was.
We wish security as managing Director
Dan Ives there on Tesla’s disappointing
sales numbers.
Joining us now to talk more about that,
let’s bring in our transport reporter
for Asia, Linda Liu.
It just goes to show, right, these these
price wars that we’re seeing in China is
really weighing on Tesla, too.
Oh, for sure.
I think analysts were already kind of
lowering their estimates for this
quarter, but Tesla came in even below
that.
So it’s just a really ugly picture right
now.
This wasn’t it.
It is.
I think for the past seven years, this
is the biggest margin they’ve missed
analysts estimates.
So really what’s happened to Tesla is
that their production at Berlin has been
affected.
Their second largest market, which is
China, is going through this intense
price war, huge competition, and the
global demand is weak.
So Tesla going forward has a lot of
challenges.
What does it I’m wondering whether it’s
still worth talking about March, the
domestic EV market, because some of the
deliveries were actually quite strong.
I could be away, for example, for sure,
because you look at Tesla’s biggest
rival, BYD, the march sales actually
came in very strong.
They were 46% compared to last year,
taking the first quarter deliveries to
well over 600,000 vehicles.
Now, the interesting thing is why these
EV sales, which is about six, which is
about 300,000 vehicles, is actually
lower now than Tesla’s 386,000.
So it is giving back this crown of the
world’s largest electric vehicle maker
back to Tesla.
And this rivalry between Tesla and
Bhiwadi, it seems like Tesla’s coming
back up on top again, at least for this
quarter.
The last quarter.
Yeah, definitely.
If we just look at the metric of pure
electric vehicles, then Tesla is back on
top.
But looking out into this year, both of
them will have a very hard time trying
to keep this momentum going.
Okay, Linda, thank you so much.
Linda Lee there, our Asia transport
reporter.
That’s pivot.
Now, just to borrow a phrase from
potentially the Fed
to property to country Garden has
revealed to you, look at March sales,
home sales plunging 83% on year $590
million.
It follows an 85% annual slide and said
that as sales drought worsens, the cash
crunch for the company that’s already
facing a wind up petition.
Country Garden also said last week it
would miss.
And by the way, it did miss an annual
reporting deadline.
Yeah, which is why the stock is still
suspended this morning.
Meanwhile, Bloomberg Intelligence has
been crunching the numbers and saying
that falling sales for state owned
developers could be a warning that the
tentacles of China’s property crisis are
starting to engulf some of the stronger
names.
For more, let’s bring in our Bloomberg
Intelligence China property analyst
Kristie Hong.
Tell us more about the issues at play
still.
Right.
So we’ve been seeing weaker sales from
same developers and that is raising the
question on whether the property crisis
is starting to engulf the stronger names
with state owned background.
So in 2023, we see that strong
developers, they consistently their
sales growth would outperform the sector
average.
But in just the fourth first quarter
this year, we see a lot of state owned
names that they are having a steep sales
decline than the sector average.
And I think that draws our attention to
a problem where we used to have a
problem of buyers avoiding private
developers price of homes.
But now that seems to be shifting to a
problem of buyers avoiding buying any
properties in general.
And we have the Yankees prices that’s
escalating.
I think that would be another tipping
point low in confidence on the back
names.
Yeah, and it does underscore maybe that
they might need to do more in terms of,
you know, if this spreads into as so it
back and as again two different things
right.
What does this white paper not tell us
about the potential funding gap that’s
needed or support from the government
that’s actually needed?
Right.
So right now, the weak confidence comes
from buyers worrying about know projects
might not be completed.
And the government is doing more in
terms of, you know, pushing out this
white list, which is local authorities
identifying property projects that are
in need of funding to support that
completion.
And you know, what we know so far is
that there are around 6000 projects that
have been identified by local
authorities.
And, you know, if we assume and around
to ¥30 million funding per project, that
would add up to around ¥1.4 trillion
financing needs that we need to complete
our pre-sale projects in China.
And bear in mind, this is just the first
batch.
A lot of cities are already pushing out
the second batch, so the potential
number would be bigger.
That’s a huge number, right?
Are the banks willing to support that?
Yes.
So what we are seeing so far is banks
have been very selective.
We give you an example that of best a
second.
It’s called Kunming.
It identified 212 projects on the white
list so far.
What we know is only two projects have
been able to secure funding.
So banks have been selective.
They want to find projects with cash
recoverability and projects with ample
collateral.
So what we need now is that, you know,
for low tier cities, we know that south
has been very difficult and banks might
not be willing to support those projects
because we know that even if those
projects complete, buyers might not be
willing to buy them to generate enough
cash flow to repay the debt.
All right, Christine, thank you.
Christine Wong there from Bloomberg
Intelligence, who covers China property
for us.
We’re just getting some numbers crossing
here when it comes to chasing China PMI
services number, which is better than
expected.
So 52.7 came out here as well.
So they we’re seeing starting a trend,
David, in some ways of the data
certainly looking better and actually
beating expectations.
This is it’s rare that you get a
consistent read through across both
Taishan and the official numbers coming
through.
It actually disappoint both improving
both better than estimates, which
actually bodes well I think we were
talking with China show yesterday from
our economics team and they actually
think all the PMI numbers that have come
through are do bode well for the
activity numbers which they think will
come in better than what their initial
thinking was.
Yeah.
For them.
Yeah.
And signs up maybe even the export cycle
is bottoming out and even actually
coming back in a big way which we were
talking to some guest yesterday about
there’s a global cyclical upturn which
we’re seeing across the world, not just
the U.S..
All right.
We’re going to recap a little bit what’s
going on in Taiwan, the situation there.
What we’re hearing from the Japan
authorities now is that there’s a new
tsunami warning for Okinawa that’s been
downgraded to a tsunami advisory.
But we’re still hearing from reports of
aftershocks in Taiwan.
6.4 was the latest one, I believe, to
come through was it was one of the
latest once it comes to 5.2, shortly
after that, all but just about north
northeast of Dalian City.
In case you missed it, Taiwan almost 2
hours back was hit by the strongest
earthquake in 25 years.
We’re just showing you some video
footage, of course, goes coming through
as well as Taipei.
Just a distress, though.
This is the city center right of the
capital.
But where you’re actually seeing the
subway system there, it’s actually kind
of shaking.
So we’re continue to watch very closely
what goes on.
And the damage report, obviously, TSMC,
of course, we’re still tracking that.
Markets, though, I have to say, Dave,
are taking it in stride so far.
Yeah, I mean, we did open lower and
weaker.
We are still weaker about seven, 8/10 of
1%.
I guess in many ways we’re still trying
to figure out what the damage is looking
like as well, because the 7.4 certainly
on the headline does indicate that this
was really on the stronger side of
things.
TSMC down 1.4%, as you can see on your
screens.
Plenty more ahead.
This is Bloomberg.
Welcome back to the China show.
Here’s a look at the CSI 300 just a half
hour into the session here right now.
Not a whole lot of conviction across
these markets.
Of course, it’s a shortened holiday week
for China as they shut down for the next
two days on Thursday and Friday for the
Qingming Festival.
So certainly the weakness of the
currency is certainly one we’re checking
very closely.
And still our top story this morning,
Taiwan and really the impact we’re
talking about on supply chains and chip
makers like TSMC.
Dave Yeah, we’re still getting more
headlines coming through there and in
fact in the form in the last few minutes
of corporates giving us a sense really
of what what precautions they are taking
there on the back of the strongest
earthquake in 25 years to a large
extent.
You’re also looking at some headwinds
across risk assets today.
We did hear, of course, from Algo
Grandmaster overnight, just really
talking about how the Fed will really
need to wait, although June, July has
now been priced back in as far as that
first rate cut is concerned.
We’re starting to talking about three.
I’d even add to that.
Maybe you can talk more about this later
when we hit Mark Cranfield on and really
how inflation just about almost
everywhere I’d say
is starting to really come in Europe was
a very good example of that this week so
far in fact it’s come down as much at
April 11 on the ECB might actually be
might actually be quite live 107 72 here
on Eurodollar dollar.
As you can see, some of your major
benchmarks across the region.
Nikkei costs the ASX more on Taiwan in a
moment are still seeing some downside
might have to do with the fact that the
dollar index at these levels of both the
Bloomberg dollar index and the dollar
index itself are either at or near the
highest levels of the year.
Speaking of highest levels of the year,
change things up and you’re looking at
treasuries right here.
You actually have two, five, ten and 30
long dated yields are actually back to
levels at the highest since the start of
the year, if not going back to about
November.
So your yield curve is actually trading
at 450 and 434.
We’re at the highest levels here.
It’s going back several months, five
year yield, 4.33%.
A couple of things on deck.
You have Jay Powell, of course, coming
coming up as far as a conversation is
concerned and of course, the jobs report
and all of that really complicated by
the fact when you talk about Dollar
China, for example, as an iteration of
that want is pointing this out.
You know, we’re shot tomorrow on
mainland China, shot tomorrow and
Friday, Hong Kong shut tomorrow and then
reopens Friday.
If I were to take a long weekend move,
that that’s a different conversation, I
promise you.
We’ll talk about Taiwan.
Here we go.
We open weaker.
I believe we’re now eight, 9/10 of 1% to
the downside.
And the latest we’ve heard and we’re now
trading closer to 1% session lows.
You, AMC, bottom of your screens, also
session lows and that one as well.
They have halted some of their
operations.
They’re trying to figure out based on
the headline coming to headlines coming
through that they’re still trying to
figure out when they can get in on some
of those headlines, some of some of
those machines to come back online.
Yes.
We also heard from TSMC, among other
things, of course, that this has really
been a story we’ve been tracking these
last 2 hours.
And as we were talking to our analysts,
Robert Lee, you know, given the fact
that most of these factories are located
on the western part of the island,
potentially the disruptions may not have
that big of an impact.
But nevertheless, you are seeing that
these companies are taking precautions
here.
They’re evacuating some of the workers.
You see the latest that came out in the
last couple of minutes, evacuated some
facilities and seemed you as well as
Tynan.
And they’re talking a little bit more
about halting operations of some
chipmaking machines, The live pictures
or at least these pictures that you’re
seeing.
These are from earlier this morning from
Hualien.
This is the eastern part of the island.
And this is where you’re seeing most of
the impact being felt right now where
buildings have collapsed.
We’re hearing a little bit more from the
President Tsai Ing Wen.
She is scheduled to visit the emergency
center shortly around 10 a.m.
local time.
So it could be any minute now and we’re
expecting to get an official update
then.
Dave.
Yeah, and really what they planned here,
it’s not just Taiwan, right?
So this one actually here, it’s been
almost 2 hours, if not just over 2 hours
since the initial quake actually hit and
since then.
And I’ll bring in Japan to the
conversation.
Since then, we’ve had a series of
developments almost as far as Japan is
concerned.
About 20 minutes back, the government
held a press briefing talking about the
details of this quake nearby Okinawa,
which is near to where Taiwan is.
The airport, Naha Airport there has
since halted departures and arrivals
into and out of that airport, but they
also have downgraded the tsunami warning
to an advisory.
Yes, right around Okinawa.
We’re also hearing China has shut down
some railway tracks when it comes to
Fujian and Jiangxi province is according
to CCTV.
So certainly this is being felt all
around the coast there.
For more, let’s bring in our Bloomberg
and my strategist, Mark Cranfield.
Mark, obviously this is our top story
here.
You know, what sort of lasting impact do
you think this could have, not just on
supply chains but overall on market
sentiment to.
In terms of supply chains is way too
early to be discussing that.
But I think in general you can tell why
investors are taking a wait and see
approach.
There’s obviously a lot more information
needs to come through before you can
make big decisions in terms of
investment.
And as you were saying, a number of the
companies are situated on the other side
of the country compared to where the
earthquake struck.
So they may give them some protection,
but you have to step back and see it
within the context that generally we’re
in a very positive environment for
global equities.
So people will be a bit reluctant to
give up all their holdings here,
especially in Taiwan, which has been an
outperformance there, one of the best
Asia markets already this year.
So it would be you be reluctant to to
sell all your holdings of Taiwan until
you’re absolutely sure that this is
going to cause the country a problem
which is going to really impact economic
growth, is going to be a deterrent to
people putting in fresh money.
Until you’ve seen more details from the
government and from the major companies
around the area.
So that’s why you’re having a fairly
modest reaction so far, because if you
do give up now and and it’s really not a
major impact to the economy and the rest
of the world continues to rally, then
you’ve just found yourself losing quite
a bit of exposure to what has been a
very, very good market story this year,
particularly because of companies like
Taiwan Semi.
So that will certainly give people
reason to stand back and wait until they
see all the details coming through on
whether they need to make a reassessment
of the whole situation is obviously very
positive that the Taiwan stock market is
still open, is still trading as normal,
which is a very good sign for investors.
Mark, hold that thought.
Stay with us.
I want to bring in our senior editor,
Adrienne Kennedy, who is joining us from
our Taipei here this morning.
Adrienne, thank you so much for joining
us.
And just bring us up to speed.
What’s the latest now?
Okay.
Good morning.
So right at the moment, we are back to
pretty much normal life in Taipei, which
was shaken very strongly at just 2
minutes before 8 a.m.
this morning.
But rescue workers and authorities are
trying to assess the situation.
And hopefully and our understanding at
the moment is that, you know, there may
have been some house collapses over
there.
It’s possible that some people have been
trapped.
My understanding is that there have been
no fatalities reported, which is
fantastic news, obviously, because this
is an island which regularly gets
earthquakes and has had some fairly
severe ones.
The government assessed the scale of
this temblor, which I think the USGS put
at 7.4 magnitude as being the most
severe since 1999, when the so-called 9
to 1 earthquake claimed more than 2000
lives.
The initial response to the earthquake
was that there were some evacuations
from facilities, including some TSMC
plants where they make high end
semiconductor materials.
These are often precautionary and they
don’t necessarily indicate any
disruption to the supply chain.
The maps of the earthquake plus the
aftershocks, which we’ve been feeling
fairly regularly in the last hour and a
half, have indicated that they’re mainly
on the east of the island, which is
separated from the west of the island,
which is the industrial zone by a large
mountain chain.
So right now, I would assess that
Taiwan, Taipei itself appears to be
fine.
I think schools are being given the
option of closing if they need to.
The industrial sector of the island.
We have seen some evacuations and there
are immediate assessments by the
companies involved to see how much
damage there is.
But we haven’t had any indication that
there will be disruptions to supply.
It’s in the east, which is a little bit
more remote, where we have to try and
wait for more information to see how
much damage there is and hopefully there
will be no fatalities.
The Pacific Tsunami Warning Center has
now issued a statement that the tsunami
threat from Taiwan and the earthquake
has now passed.
Adrian, you mentioned that it’s business
as usual.
Can you just talk us through?
Did you have any trouble getting to work
today?
How does the outside of the office look?
What’s a general sense of is everything?
Pretty much I wouldn’t say back to
normal, but is everything operating
almost at normal as far as Taipei is
concerned?
Adrian.
Okay.
Well, of course, Bloomberg, we get into
office a lot at the office a lot earlier
than the quake struck.
But
there was a little bit of disruption to
the MTA, the mass rapid transit system
here.
There was a man standing as it was a
brief suspension, but then it’s resumed
travel.
People are travelling around the city as
normal
and things are back to normal.
You know, in most of this city that I
can see, the one the one proviso I would
say is that Taiwan has had previous
earthquakes where by there has been a
very minimum damage to most
facilities and most buildings.
But in 2016, for example, there was a
major earthquake in the south and the
overwhelming majority of casualties,
which, you know, there were more than
100 fatalities occurred just because of
a single building collapse.
So I guess the major concern is that
like within Hualien, there are not
there’s not damage which rescuers or
officials have been unable to assess
yet.
Adrian, thank you so much.
Adrian Kennedy there in Taipei for us.
A line just crossing out of the USGS,
another 5.1 quake as at 31 kilometres
east southeast of Hualien City.
Mark, I’ll bring you back in.
We talked about Taiwan.
I just wonder if we could pivot to other
things taking place.
We woke up this morning to oil prices at
five six month highs.
We could be touching 90 on Brent, for
example.
How should we be thinking about this
resurgence in energy prices?
It’s probably overdone already.
I think the
demand for oil probably isn’t quite as
great as what people really think, and
the supply situation is very good,
especially coming out of the United
States.
U.S.
supplies already eroding parts of their
competitors in the rest of the world.
So we’re probably near a peak in oil
prices anyway.
But we we should actually be more
worried about the strength of the US
economy because the numbers just keep on
continuing to be so strong.
It’s putting question marks about
whether the Federal Reserve will be able
to start cutting interest rates by the
middle of the year and that is beginning
to look quite unlikely.
So we might be waiting even until the
fourth quarter before we can even get
any rate, because this is such a change
from where we were at the beginning of
the year when we were even considering
March as being the first time for an
interest rate cut.
So huge change going on in people’s
perception of what the Fed is going to
do.
And that matters a great deal more than
whether oil prices are 85 or $88 a
barrel.
And you’re feeling across the effects
across this region.
And the renminbi certainly is in focus
this morning.
Mark, you take a look at the fixing that
we saw.
You were getting better data across the
board.
It’s not doing much to reverse the story
on Dollar China.
Are we likely to see those depreciation
pressures persist?
It’s going to be hard for them to go
away when you when you consider some of
that is outside China’s control.
They can’t do much about the US dollar
side of the story.
US dollar is extremely strong across the
globe because US interest rates are
staying higher than people expected and
the US economy is doing exceptionally
well.
So you got that on one side.
So it’s not just a yuan story.
The dollar is very strong everywhere.
Then you compare monetary policy.
China would probably still like to ease
policy a bit more this year, which
obviously goes in opposite direction to
what’s happening in the United States as
well.
So that’s a pressure for for China as
well.
And it still to some extent is still
unproven, whether the Chinese economy
really has the traction to get up to the
kind of GDP numbers which Beijing would
like to see.
So there’s a lot of doubts about where
China is going and there are no doubts
about what’s happening in the United
States and some other parts of the
world.
So we look at that diversion.
It’s no wonder that yuan is
underperforming.
But it’s not just the yuan, the Japanese
yen.
Most of Asia is doing the same.
If dollar yen continues up to, say, 155,
we could have a crisis across the
emerging markets because all the
currencies are being pressurized.
We’re already seeing the Indonesian
rupiah.
They had to intervene to stabilize that
currency as well.
They might not be the last.
So it’s really a it’s a global story,
dollar strength.
And the yuan is just one of many
currencies which are feeling the pain.
All right, Mark.
Thank you so much.
Mark Greenfield there, joining us out of
Singapore and from our Ml5 team.
I just want to recap some lines that
we’re crossing here in just the last
couple of minutes from Japan.
This is from the chief cabinet
secretary, Yoshi Masayoshi.
No reports of casualties and damage from
this Taiwan quake.
So that’s some good news on Japan side
of things.
We’re also hearing when it comes to the
tsunami threat from this Taiwan
earthquake has now passed.
That is the latest here.
But we’re still continue to track some
of these aftershocks and the likes of
Hualien City, Juan, with a 5.7 magnitude
earthquake just 24 kilometers east of of
there.
So certainly we’ll continue to watch
this live.
Go for more updates.
This is Bloomberg.
Yeah, that’s certainly it.
Are we going to get any cuts this year?
The jobs report is out on Friday.
So you’re pointing out that a crew from
surveillance will be all on top of that
story.
Big picture, City economic surprise
Index Global has actually hit near a one
year high and that so the question
really remains, are things really that
good?
Is it simply a US exceptionalism story?
Let’s bring in Joanna, chief
Asia-Pacific economist at Citigroup
Global Markets.
Where are we in this cycle?
You know, it’s a very confusing cycle,
right?
So the US slowdown US keeps continuing
to defy expectations in terms of its
prolonged exceptionalism.
Yeah, I mean, I think that’s really a
complicating story for obviously for
Asia for IAM because we were kind of
starting in the year thinking we would
get maybe five or six cuts at that and
then end up like, you know, obviously
the Fed keep signaling three cuts and
the market is even paring back on the
back of that.
So I think it’s obviously a little bit
of a challenging backdrop, but from a
growth perspective, clearly things are
looking better in the US.
Normally that should.
And we had also China manufacturing PMI
come out better than expected.
So normally you would think for Asia the
lift to global manufacturing should be
friendly for the region given that we’re
an open kind of trading region.
I think the challenges the story is a
lot is becoming a lot more uneven than
we expected.
I mean, we have very good performance
from the semiconductor, from the tech
outperformers like export data from
Korea and Taiwan.
And we certainly have some lagging
performance.
Certainly Europe has lagging
performance, but certainly also parts of
ASEAN as well.
We can still at least assume that this
export slump that we’ve seen in the
region.
Is that behind us now?
Well, I think the problem is definitely
global manufacturing PMI, we’re the
highest level since August 2022.
So we were starting the year thinking,
oh, we would have a bit of a lift from
the global goods trade rebound.
But again, I think what has disappointed
us is that aside from the kind of
exceptional kind of semiconductor
stories driving Korea and Taiwan, we
don’t seem to be getting that same beta
lift.
And I think part of the challenge really
is that China’s growth, even though it’s
looking a little bit better than
expected and we’ve actually upgraded our
China growth, it’s a very unbalanced
growth rate.
It’s very much fueling supply production
and above all, focusing on advanced
manufacturing and a lot of
infrastructure.
And China is so competitive and so many
goods, not just on green tech, high end
goods that is challenging Europe, but
it’s so good in other even lower skill
intensive goods.
And I think that’s impacting some of the
performance of exports, The
manufacturing cycle in certainly in
parts of Southeast Asia like Thailand,
even Malaysia has had some
disappointments.
That’s interesting because you guys have
written a lot about that, you know, in
recent years.
China’s actually in some ways move that
capacity to other parts of Southeast
Asia.
What you’re seeing is you’re you’re
seeing that reshore reshoring back.
Well, okay.
So definitely we’ve seen some China
movement.
Definitely you’re seeing that the data
from China investment in Vietnam,
obviously to cater to US market, that
obviously is a way to insulate yourself.
You’re seeing China investment in
Mexico.
But I think the challenges a lot of
ASEAN, a lot of Asia, China is still
your core market, although you’re
trading with the rest of the world.
China is an important destination.
And if China’s growth is very unbalanced
and is overproducing.
It’s one thing if you’re Mexico and
you’re next to us, which is an over
consumer, it’s another thing if you’re a
kind of ASEAN and your core market is an
older producer, it creates a lot of sort
of a risk kind of crosswinds because
there’s also a lot of price competition
both in China’s domestic market and then
also in your in your own market.
So is that the impact really could be
felt mostly in ASEAN?
I mean, what about North Asia?
Well, I think, again, we’re seeing it
like China has been exporting goods,
export goods, deflation since around the
middle of last year.
And in some of the markets, like in
chemicals, it’s very, very dramatic.
So certainly non-tech goods rebound has
been a little bit weaker than what we’ve
seen in the tech.
But I think in Asia, I think you’re
seeing a little bit more negative
headwinds on some parts of ASEAN.
Like I mentioned to Thailand a little
bit Malaysia, because again, if you’re
not tied to the fast growing air supply
chain on tech, you’re a little bit more
disadvantaged.
And if you’re also producing stuff that
China can also produce in scale with a
lot of competition, it’s very, very
challenging.
And despite competition in China, it’s
not just impacting trade.
I think it also has an impact a lot on
the tourism receipts.
I mean, part of the reason why we’re not
even though we’re getting some visitor
arrival travels from China, we’re not
getting the spending power.
It’s not just because we thought, oh,
maybe because Chinese just don’t feel
confident about their financial
well-being.
It’s also because stuff in China is so
much cheaper and that incentivises
spending patterns.
I mean, that’s we’re seeing it in Hong
Kong, but I think it’s impacting
Thailand and other places as well.
Right.
So how does how does everyone so in what
how does that show up?
Trade flows to the trade flows get, you
know, shifted enough that it becomes
South Korea.
Right.
So there’s definitely a shift in trade
flows.
The problem is, as you see, part of the
reason why China is doing a little bit
better than expected is their exports
are doing better than expected.
Normally when China does well, we tend
to think manufacturing exporters and
commodity export benefit from China
doing well.
But I feel that manufacturing exporters
are struggling a little bit more, partly
because part of the reason why China is
doing well is because its manufacturing
is so competitive and there’s a bit of a
substitution effect that’s cannibalizing
and competing.
Some of the other smaller manufacturers
and it’s impact.
That’s why you have very uneven trading
patterns.
It’s interesting that you talk about,
you know, what what we saw on the
manufacturers on the U.S., Right.
I don’t think we’ve ever seen a Fed cut
rates when manufacturing is up.
I think one year highs or
unemployment’s, you know, below 5%.
Do you think that they can actually cut
them this year?
Well, this is the challenge, right?
On the one hand, you can make an
argument or five and a half percent Fed
funds rate is tight.
And to the extent that we’ve had some
disinflation, maybe we’re not yet at the
2% target, but we’ve had some core PC
disinflation.
There’s a there’s there’s an argument to
be made that you want to calibrate your
monetary policy so that antivirale rates
are not that high.
So there is room for cuts.
And certainly it seems like they’re
telling us seven you know, based on the
disinflation pattern we’ve had, there’s
room for a 75 basis points cut.
I think the struggle is where do we go
from there?
So if growth remains very resilient,
depending on where you think it’s
panning out, if us ends up having a
recession, which is currently Citi’s
House view, then you can make an
argument.
Then there’s even more that the Fed
could deliver even more than 75 basis
point rate cut.
But the challenge is here, if the growth
is quite resilient and, you know, we’ve
got elections going into next year, if
we get a new administration that even
has more pro-cyclical fiscal policy, you
could end up with a higher for longer
phenomena.
And that’s going to be a challenge,
obviously, for central banks in Asia in
terms of the ability and timing and
quantum of delivering rate cuts.
Right.
So Thailand comes to mind because a lot
of people talk about how the next
meeting, which is I think in a few days,
if I’m not mistaken, out of the Bank of
Thailand, that it might be like you
think most of these things probably get
pushed back.
So I think in Thailand, so we’re making
a little bit of distinction.
Some markets are very sensitive to Fed
policy, like Indonesia is quite
sensitive.
But in Thailand, based on the data,
because the first couple of months data
was actually quite weak and inflation is
benign and we think they overhyped
because they were thinking this digital
wallet scheme was going to come in.
It’s not going to come this year.
So we actually are expecting a cut in
April.
We’re expecting two cuts this year.
So Thailand as as well as China, are the
only kind of two central banks we’re
expecting will cut ahead of the Fed and
everyone else will probably end up being
restrained by the Fed.
Okay, Johanna, thank you so much.
Johanna Twi there, chief Asia-Pacific
economist at Citigroup Global Markets.
We got plenty more had an update on this
earthquake in Taiwan coming up.
This is Bloomberg.
All right.
We continue to track this earthquake in
Taiwan and, of course, the aftershocks.
We’re still hearing the last couple
minutes at Taipei.
Buildings have been reportedly shaking
once again.
And just a bit of a tally from the
Taiwan government.
So far, this earthquake has caused 26
buildings to collapse.
For our Bloomberg clients, you can keep
on top of this story and it is a
developing story as we speak as the
market in Taiwan, if I’m not mistaken,
Is it session lows?
TSMC is now down 1.3%, as I guess some
of these numbers continue to trickle
through to live.
You go on your Bloomberg terminals.
Plenty more ahead.
This is Bloomberg.
I actually saw quite a bit of
commonality in terms of the tone, which
was cordial.
That kind of fragile rapprochement is
still on track for the moment.
I think that’s the tone coming from both
of those readouts is largely about
stopping things from getting worse,
better in terms of maybe more stable,
more predictable, less volatile, but
better does not mean, you know, more
robust engagement in trade and
cooperation on on commercial issues.
All right.
I’m our guest this morning on the call
between President Biden and his
counterpart, Xi Jinping, and their first
one on one communication since November.
And obviously, we’ve been talking about
just the readouts that come out from the
White House as well as what we’ve been
hearing and reporting from Chinese
media, Shinhwa News.
There’s a bit of nuances, but we’re
talking to Gabriel well now from Teneo
saying, look, look at it.
It seemed to be overall friendly.
Yeah.
In terms of what came out for both
sides.
Yeah.
When you look at it, that’s a good
point.
Right.
So you do have
different versions, if you will, varying
different versions of the same call.
And the point to be made to Gabriel
actually pointing out was that, you
know, these are actually catered to
domestic audiences, right.
So when you have the White House readout
and you have, of course, the statement
coming out of Shinhwa talking about this
as well in terms of the areas of
cooperation and fentanyl came up as
well, we understand from the White House
version is that they did that.
Tik Tok was also brought up.
AIG risks high risk on both cooperation
as far as managing the risks of that
concern.
In fact, this is the Xinhua report, I
believe.
Yes, because she noted that the US side
has adopted a string of measures to
suppress China’s trade in tech.
This is not de-risking but creating
risks.
Of course, I would imagine the spend
would be different When you look at what
the US has to say about this specific
issue.
Yeah, also Taiwan reaffirming that red
line there for the China side as well.
It takes us into this upcoming trip.
Really see Treasury Secretary Janet
Yellen, she’s headed to China this week.
Certainly part of the conversation is on
potential tariffs and trade barriers
coming up.
You know, earlier on, we talked about
the potential, of course, of flows of
EVs from Mexico, for example.
That’s really part and parcel, in fact,
the crux of this specific issue as well.
This would be her second trip in nine
months.
She is due to visit Gwangju, which is a
major manufacturing hub, April 5th.
That’s in two days time.
And then she heads to Beijing.
She is expected to press Chinese
officials on what the US calls into the
earlier point we were just making here
industrial overcapacity that poses
threats to the rest of the world’s
economies.
Now the EU has joined, in fact,
Washington and accusing China of
distorting global markets with that
excess capacity.
But those claims are not always backed
by data, backed up by data.
Let’s let’s bring in James Baker.
He’s with us right now.
I believe I believe it’s James.
James, are you there?
Just to make sure.
There we go.
Just talk us through, of course, the
push back here.
Is there an overcapacity issue in China?
Let’s start there.
There is an overcapacity issue.
It really depends on what sectors you
want to look at and also on whether
those sectors are tradeable or not.
I mean, if you think if you look at the
housing sector, cement has a massive
overcapacity problem.
Earlier this month, which Italy sorry,
early last month of Italy, March is not
a great month for construction, but
cement capacity was running at about
30%.
So only 30% of capacity was being
utilized in the cement industry, which
is, you know, incredibly low.
And that’s probably going to pick up a
little bit as the weather gets warmer
and more construction happens.
But you’re not going to see, you know,
trying to build massive, huge amounts of
some implants over the last ten plus
years as because the housing sector is
booming.
And now with the collapse in housing
construction, that’s obviously for a
long way.
But that’s not an exportable good.
You can’t trade cement.
You know, this is not a thing that’s
going to compete with the US cement
producers.
I think the same is true for steel.
There’s overcapacity in the steel
sector.
There’s overcapacity in the flat glass
sector and homewares, you know, fridges
paint all these kinds of things.
It goes into housing.
Some of that can be exported like steel.
And when you see you are seeing a big
ramp up in steel exports in the first
few months of the year, some of that
can’t be exported.
You know, if you want to look at the car
sector, though, there has been a massive
increase in Chinese car exports.
A lot of that’s actually all the
vehicles, you know, the petrol and
diesel driven cars, which are a lot of
that’s going to Russia, replacing
Japanese and Western cars which are no
longer being exported to Russia because
of the, you know, the sanctions on
Russian companies.
If you look at EVs, though, which is
what everyone talks about when they’re
talking about, I think one of the things
everyone talks about when they talk
about overcapacity, it doesn’t look like
China has massive overcapacity right
now.
Most of the EVs that are being produced
here or are still being sold in China
and the ones that are being exported are
being exported at prices much higher
than they would be in China.
So there doesn’t seem to be a massive
oversupply of EVs that has to be
exported overseas.
And the ones that are being exported
aren’t being dumped at this point.
So it really depends on what kind of
sector you want to talk about.
I think the really good sector, which
does show massive overcapacity being
exported out, is solar panels.
But at this point, China produces almost
all the world’s solar panels and they’re
not really driving other companies out
of business.
There’s almost no foreign solar panel
manufacturers left because over the last
ten years, Chinese subsidies and
capacity have driven them out of
business.
And so now what’s going to happen is
that Chinese solar panel manufacturers
are going to struggle because their
prices have collapsed and they’re
struggling to make a profit.
But the rest of world is getting
cheaper.
Solar panels.
So what can we what do we knowing about
this trip that the Yellen’s going to
make in Beijing, then?
I mean, how can she address this
problem?
I know she has in the past, but what
could really come out of this trip?
You’re going to see her talk, I think
more about these kinds of issues.
He has raised overcapacity questions,
but she hasn’t really been specific on
what sectors we’re talking about or if
there is specific sectors that she
actually raises with the Chinese side.
That may be something they will like to
hear.
You did see in the work report that came
out last month that the Chinese
themselves are talking about
overcapacity in specific in some sectors
without any details.
So she can talk to those specific
things.
And they also have concerns about there
may be some room for negotiation there
or discussion.
But, you know, China hasn’t the
government doesn’t seem to really accept
these claims from the EU or the US that
they are suffering from mass
overcapacity, and that is a threat to
other countries.
So if it just becomes like a parallel
dispute of like of the US saying you
have overcapacity and the Chinese
saying, yeah, we do, but it’s not your
problem.
It’s unclear if they are going to be
ready sort of real resolution or sort of
real solutions put forward from this
meeting.
But obviously that’s one of the issues
that’s going to be discussed.
I think fentanyl will be another issue
that will be discussed.
And obviously, China U.S.
expects China to do more about stopping
the flow of chemicals from fentanyl.
And there is also discussions to be had
on debt relief for other countries, the
IMF for negotiations and other things.
So I think they seem does seem to be a
lot of things are on the table.
Of those overcapacity is just one of
them.
James, thank you.
James Baker, there are China economy
editor joining us out of Beijing.
Some other stories that we’re tracking
for you this morning.
President Biden says Israel has not done
enough to protect civilians in Gaza
after airstrikes killed seven aid
workers.
Among the dead are British, Australian,
Polish and Canadian American volunteers
with the World Central Kitchen charity.
Israeli Prime Minister Benjamin
Netanyahu admitted what he called an
unintended strike on innocent people.
It’s prompted several charities to
suspend food deliveries to Palestinians
who the UN and EU say are on the brink
of starvation.
Iran’s supreme leader has promised to
take revenge on Israel after a deadly
airstrike on its embassy in Syria.
State media quoted Ayatollah Ali
Khamenei saying that Israel will regret
its crime.
Israel has not confirmed it was behind
the strike in Damascus, which Tehran
says destroyed its council IT building
and killed at least 13 people, including
seven Iranian military personnel.
NAITO is said to be proposing a fund of
allied contributions for Ukraine worth
$100 billion over five years.
Sources say it’s part of a package.
Alliance leaders would need to sign off
on when they gather in Washington in
July.
The proposal could also see NATO’s take
charge of weapons deliveries to Ukraine
amid European concern that a second
Trump presidency could change U.S.
policy.
Most of the clients across these equity
markets Hang Seng Tech Index.
In terms of market breadth, a lot of
negativity coming through led by the
pullback we’re seeing in EVs.
Volumes are flat as far as Chinese
markets go.
As far as the rest region goes, is
certainly a page of risk aversion out
there with the exception of utilities.
And I guess for reasons that are fairly
obvious when you look at where the oil
price is, with the exception of energy
prices and the energy sector, most other
sectors are actually pushing lower as
well.
Just about across the region.
I should mention, Taiwan is coming off
low as of today.
We’re down, down only 6/10 of 1%.
We were hovering around that -1% about
20 minutes back or so.
Right.
Plenty more ahead.
This is while this is Bloomberg.
Welcome back.
If you’re watching the The China show,
more on the what we’re seeing as far as
some of the commentary coming through at
a time when for Taiwanese corporates
here what they’ve done so far given the
strongest quake in 25 years, TSMC and
its closest rival UMC, have both said
that they have evacuated factory areas
after that earthquake that rocked
Taiwan, endangering production at the
world’s largest maker of advanced chips.
Let’s get a sense really of the
potential scale or not on this properly
is with us here on set to talk us
through this.
Bloomberg intelligence, senior analyst,
We’re all yours.
Okay.
Thank you very much for that, for the
build up.
This is clearly a large earthquake, both
in historical terms and in absolute
terms.
So 7.3, you know, over seven, I mean,
that’s a big quake.
However, the epicenter is something like
18 kilometres south of a place called
Hualien, which is in a less densely
populated area of the island on the East
Coast.
So whilst obviously the first concern is
for the people who live in that area and
if some of the initial images are
obviously quite concerning with
buildings, you know, tilting to one side
at sharp angles, etc., however sort of
tying into the, you know, potential
impact to TSMC and some of the tech
companies on the island, the majority of
the science parks and industrial parks
are on the other side.
So on the west coast of the island.
Yeah.
So whilst there will still the quakes
will obviously be felt there.
And again, we don’t have the data on
this at the moment, but there will be
some disruption
because the epicenter of this quake is
some geographical distance from Shinjuku
Science Park.
Then at the moment, whilst there may
well be some disruption, the risk of
major issues at TSMC and its peers is
probably less likely.
I would say that is a sensible, logical
initial view.
Well, you know, Taiwan is prone to
quakes.
I mean, these factories are pretty quake
proof too, in some ways.
Robert Yeah, they’re designed to be as
earthquake proof as they can in terms of
putting rubber buffers under them to
reduce any shaking and disruption.
But as you saw, TSMC updated people to
say that production was immediately shut
down, the buildings were evacuated.
So there are very well planned
protocols, etc., and procedures in place
for such an event.
I’m being on the ring of fire.
Earthquakes are, you know, occur quite
regularly in Taiwan, perhaps not to this
magnitude.
So I think the risk is disruption to
TSMC.
It’s hard to say how long that may be,
but because the epicenters
geographically distance, I mean, that’s
mitigated.
We have a few more details coming
through from TSMC.
The company now saying that they have
suspended construction on new sites
across Taiwan and they have halted some
chip making machines as a preventative
measure as and as we’ve been talking
about.
Robert to Robert about this is more
about preventative measures being more
cautious more than anything right now,
more coming through here.
The spokeswoman, Nina Cao, also saying
by phone that all TSMC staff are safe as
well.
We were having this conversation
earlier.
Robert, if you get more context to this
preventative,
it’s hard to imagine, despite the very
low probability this is going to cause
major disruptions, that maybe today is
going to be anything but normal.
Can the system handle one or two days of
disruptions?
I guess, yeah.
I mean, every chip is different, but it
can take between days, two, many weeks
of production steps depending on the
complexity of the chip.
So to lose one or days to two days
production, I mean, is is, is is
troublesome, but you know, it’s not a
game changer.
So we’ll have to wait and see.
But just sort of thinking about the
larger sort of challenge, I mean, I
focus my comments very much on TSMC fab
being state of the art, earthquake
proof, etc..
But then what about the infrastructure
in the areas?
You know, if people can’t physically get
in to work because the roads disrupted,
if the trains are not running, you know,
if the buildings that they live in are
affected, I think there’s potential for
a wider impact there perhaps, and that
will become more clear as the day wears
on, I guess.
Okay,
Robert, thank you so much.
Robert Lee there on TSMC and the
potential fallout here.
We should also just mention as well that
US futures are actually down.
We should be at session lows.
In fact, when that quake initially hit.
That’s going to come up on your screens
right now.
You did see that dip in US futures,
although it’s a seven points.
Right.
We’re also seeing this play out across
other chip stocks across the region.
You mentioned behind you ask you guys,
is that as much as close to 4%?
Samsung in Seoul also down some 1%.
So you’re feeling a little bit more of
that spillover effect when it comes to
some of the chip makers across the
region.
But again, is it just kind of a knee
jerk reaction right now?
That certainly is what it seems like it
could be.
But we’re tracking some other stories
out there in the corporate world as
well.
The U.S.
is said to be asking South Korea to
adopt restrictions on chip technology
exports to China in line with
Washington’s controls.
Our sources are saying that.
Officials want Seoul to tighten the flow
of technology used for making high end
logic and memory chips.
The U.S.
reportedly discussed the topic and
dubbed with Korea’s president in March.
But Seoul is still debating the request
as China is a key trading partner.
Intel says it’s what you you’re
factoring operation losses of deep end
and the business may not reach a break
even point for several years.
Intel Foundry, a new division of the
company responsible for manufacturing,
had sales of nearly $19 billion in 2023.
That’s down from 28 billion the previous
year.
The company’s shares fell in extended
trading after disclosing those numbers
in.
A new poll suggest China has dethroned
the U.S.
to become the top alignment choice for
Southeast Asia.
The survey of just under 2000 people by
Singapore’s ICAC, Yousef Ishak
Institute, saw that China’s popularity
climbing to just over 50%.
The report says waning confidence in the
U.S.
could be attributed in part to insights
about Washington’s strategic and
political influence.
Meanwhile, we’re talking about shares of
Rivian Automotive slipped in New York
despite building and delivering more EVs
last quarter than estimated.
But the firm failed to soothe investor
concerns about the sector after standing
by its 2024 output target of about
57,000 units.
Rivian has had a rocky start to the year
marked by job cuts and a decline in its
market value.
Breaking news concerning Disney breaking
news out of Reuters.
To be more specific here, it looks like
this costly monthslong proxy battle
might be tilting in favor of Disney.
It does.
Just looking at the headline coming
through, the Disney has has gotten
enough votes passed and Disney gets
enough votes to win this proxy fight, of
course, with Trian fund management.
That’s according to Reuters as we speak.
Then we got more details on this story,
plus plenty more ahead, including, of
course, the big market moves.
Big themes crossing these markets as we
sort of make our way into midday on this
midweek session.
There’s just one word.
Welcome back to show an update here
further opted out of Taiwan.
Taiwan says no flights were affected by
the earthquake, which hit nearly 3 hours
back where the stronger strongest one in
25 years.
In case you’re just joining us as well,
just a few more updates coming through
in the last 30 minutes because these
headlines are coming through.
This concerns TSMC.
A spokesperson for the firm says all
staff are safe.
They have halted some chip making
machines as a prevention measure.
At this point in time.
They have suspended all construction and
all new sites across Taiwan at this
point in time, according to CNA.
Separately, Taiwan Metro has resumed
operation this hour as well, but the
latest one coming through.
No flights were affected or are affected
by this earthquake.
Yeah, okay.
So at least we’re hearing that flights
were not affected.
Metro also has resume operation, at
least in the capital of Taipei.
So certainly it is slowly coming back to
business as usual for some parts of the
island.
Let’s switch gears now and talk a bit
more about some of the companies that
we’ve been tracking, in particular when
it comes to our Bloomberg intelligence
team.
So I think back in January, they had a
list of 50 companies to watch.
They’ve narrowed it down now to just ten
this quarter.
Still to make it simple for all of us
here and really looking through some of
the good apples among the bunch there.
Among them is one here in Asia.
That’s the one on the second one on the
top panel there, child type folk.
Let’s bring in our senior analyst for
Bloomberg Intelligence, Kathryn Lim,
joining us now to walk us through let’s
let’s talk about shortfall.
First of all.
Why is that on your radar, Catherine?
Well, Yvonne, David, you know, you guys
are in Hong Kong, so you would have
actually heard over the weekend or maybe
been to Shenzhen yourself over the
weekend that, you know, we are seeing an
exodus of residents and a shift in
spending, you know, to China instead of
Hong Kong.
And if you look at the initial numbers
from the first three days itself, a 76%
year on year increase in exodus of Hong
Kong residents to China and just about a
35% inbound traffic from China into Hong
Kong itself.
So, you know, there’s a very high
likelihood that, you know, it’s not
going to be a pretty much retail sales
in Hong Kong and how this effort foot
really plays into this.
Now, this is one of the most followed
jewelry in Hong Kong itself.
The good news is that, you know, the
company has shifted bulk of its business
to Hong Kong, but there is still a
proportion in Hong Kong, you know,
whereby sorry, they shipped about to
China and a still a good portion in Hong
Kong.
So they may not actually see as great
sales.
Do you know in the Hong Kong retail
market whereby rents are actually still
high.
Okay, well, round up.
So we have nine more to choose from.
Some, of course.
Ah, but ah, I have to say of course,
outside of the Asia Pacific.
But yeah, let’s take, take your pick.
What else you want to talk about here
among the nine.
Sure.
You know what, A bit out of the tent.
We have three coming out of Asia.
One of them would be key financials,
China’s second largest broker.
But perhaps, you know, the last one,
Tencent itself is something that, you
know, everyone still has your eyes don’t
do, you know, on a gaming side of the
market and on a relative basis, we’ve
seen all that, you know, bust and, you
know, chaos that’s going on in Alibaba.
If I can actually put it this way, I
think what my colleague is actually
still positive on the stock up,
particularly on the online gaming
sector.
Catherine, thank you so much.
Catherine Lam joining us.
I can’t keep track of where you are,
really.
I just saw at the office a few days in
Tokyo.
Now you’re in Tokyo.
Are you still based in Singapore?
I think you are.
Okay.
So we can take this conversation off
line.
Yeah.
And following.
Yeah.
Let’s take it offline.
Okay.
Catherine
in Tokyo for us.
The Treasury yield is looking like this,
a reversal of the move we’ve seen in
recent days where that long dated yields
have actually been pushing higher.
It’s the opposite.
Although that being said, long dated
yields are still at the highest level so
far this year might be down to Fed
pricing, which is now back to June, July
three cuts.
So seems appropriate based on the latest
commentary coming out of Fed officials.
Jay Powell, it’s coming up next.
Not on the show, but he’s coming up as
far as markets go, although if he is
listening, he can.
Yeah, come any time.
So we can do a quick phoner with you,
sir, and then it’s the jobs report.
Maybe we can talk about that too, Sir
Paolo There we go.
Pricing is now July 25 basis points is
price cut.
And it’s the first time we’ve actually
seen where the market is pricing in less
cuts than the Fed is.
Yeah, which they’ve been basically more
dovish than the Fed all all year long
last year.
And it seems like now they’re thinking
maybe it’s like less than three, less
than the three.
So that’s interesting, right?
What does this mean for some of these,
you know, curves, deep measures and all
of these kind of darling trades gold so
remains to be in that record high mean
we’re still trading well above that 2200
level watching very closely those gold
miners challenging miners certainly like
him, about 4% as well, trying to AMC
gold also up some 7% as well.
Show me That’s certainly was that sort
of story yesterday that we were talking
about.
And certainly it seems like the market
is very optimistic about this unveiling.
It is also, though, mind you the most
sold stock by trying to China traders
via the stock connect that’s according
to our team that’s been tracking this as
well.
So maybe a little bit of reversal.
That stock here today were down some 3%.
There we go.
Okay.
Well, there’s plenty more ahead.
So lots of big market market themes to
tell you about today.
We briefly touched on this energy story
pushing higher that’s really led to this
equity market, that specific part of the
equity market rally, the best performing
sector by far.
And it’s not even a close second today.
Not even a close second, I believe in
the last month or so.
There’s the Fed story to tell you about
weak inflation coming through in Europe.
It’s playing out across in a strong
dollar story as well.
Strong PMI out of China and, of course,
Taiwan.
And it’s still a big story that we’ll
continue to track in the next hour here.
That’s it for us in the China show.
Plenty more ahead this morning.