China Open: Bloomberg Markets | 10/26/2022
DAVID: GOOD MORNING. IT IS NINE :00 A.M. HERE IN HONG KONG, BEIJING AND SHANGHAI. YVONNE: OUR TOP STORIES, GAINS IN ASIAN STOCKS BUT U.S. FUTURES IN THE RED ON DISAPPOINTING EARNINGS. MICROSOFT, ALPHABET AND THE LIKE. CHINESE ADR RALLIES BUT GLOBAL INVESTORS SAY THEY ARE FRUSTRATED AND ANGRY WITH PRESIDENT XI'S TIGHTER GRIP ON POWER. SK HYNIX CUTS BY HALF AFTER
REPORTING A 60% PLUNGE IN THIRD PROFIT SPEED WE ARE WATCHING THE CHIP PLAYERS AND DETECT SPACE UNDER PRESSURE. THEN AGAIN WE HAD THE PANIC SELLING IN CHINA ON MONDAY. THINGS WERE A LITTLE LESS BAD YESTERDAY BUT NOW YOU HAVE THIS LINE WE HEARD FROM THE PBOC. THE FX REGULATOR TALKING ABOUT THE RENMINBI STAPLE AND MAYBE TALKING ABOUT HEALTHY STOCK AND BOND MARKETS AS WELL. HOPEFULLY THAT HELPS THINGS. DAVID: LONGER-TERM FUNDAMENTALS IS WHAT THEY ARE TALKING -- POINTING TO. WHEN YOU LOOK AT THE GROWTH RATE AND POTENTIAL GROWTH, THAT IS STILL VERY MUCH INTACT AS IT PERTAINS TO THE ECONOMY.
THAT TAKES US INTO THE EARNINGS STORY. WHEN YOU LOOK AT NASDAQ FUTURES, THAT IS ALSO AN ALPHABET AND MICROMET -- AND MICROSOFT STORY. THE MISSES WE GOT YESTERDAY, A LOT OF CONSUMER NAMES ARE COMING OUT WITH EARNINGS TODAY. UP FOR A SECOND DAY ON THE ASIAN BENCHMARK AS YOU CAN SEE. TALKED ABOUT SK HYNIX, ONE .6%
TO THE UPSIDE. BIG DROP IN WHAT THEY PLAN TO SPEND. LET'S FLIP THE BOARDS, PLEASE HAVE A LOOK AT FX MARKET. ON THE SLOWDOWN STORY JUST
IMAGINE, HONG KONG EXPORTS ARE DOWN FOR A FIFTH STRAIGHT MONTH. DOLLAR CHINA UP .3%, 734. WE GET THE FIX AND ABOUT 12 MINUTES FROM NOW. STERLING, WE ARE COMING OFF ON EURO AFTER WE CLIMBED TO A THREE B KAI ON THAT ONE. TREASURIES DOWN FOR A SECOND DAY. ROUGHLY AT THIS TIME NEXT WEEK
IT IS THE FED MEETING THAT THAN. YVONNE: SOMEHOW IT MAKES ITS WAY EVERY INTO THE CONVERSATION. LET'S BRING IN MARK CRANFIELD AND ALSO SOFIA HORTA E COSTA TO WALK US THROUGH THE PRICE SESSION AND THESE MARKETS. MARK, LET'S START WITH DOLLAR RENMINBI. HAS THE PLAYBOOK CHANGED FOR THE PBOC THIS WEEK? MARK: I THINK IT PROBABLY HAS IN A SUBTLE WAY. I THINK THEY ARE MORE OR LESS SAYING THAT THEY DO NOT REALLY WANT TO FIGHT THE MARKET TOO MUCH. THEY FEAR THE U.S.
DOLLAR IS EXTREMELY STRONG. THEY ARE WILLING TO ALLOW THE DOLLAR RENMINBI RATE TO MOVE MORE IN LINE WITH THE GENERAL TREND. THEY STILL HAVE THEIR DAILY PERIMETER 2% MOVE ABOVE THE FIXING, BUT BEYOND THAT THEY ARE GOING TO LET THE MARKETS MOVE THE CURRENCY ROUND A BIT MORE. THEY MIGHT HAVE A GEL -- GET OUT OF JAIL FREE CARD BECAUSE U.S. TREASURIES HAVE STARTED TO COME DOWN A BIT AND THAT IS TAKING THE EDGE OFF THE U.S. DOLLAR. IF THE U.S.
DOLLAR IS SOFTENING A BIT ANYWAY, THAT WILL TAKE A LOT OF PRESSURE OFF THE DOLLAR YUAN EXCHANGE RATE. WHAT YOU WILL SEE IN OTHER WAYS IS THE YUAN BASKET WILL WEAKEN BECAUSE THE EURO AND THE POUND WILL GET STRONGER AND OTHER CURRENCIES WILL IMPROVE WITHIN THE G10 COMPLEX. SO MAYBE CHINA IS GOING TO GET ITS CAKE AND EAT IT.
IT'S GOING TO ALLOW MORE FREEDOM FOR DOLLAR YUAN, BUT AT THE SAME TIME THE YUAN BASKET SOFTENS. SO IN THE END YOU DO NOT GET THE SUPER HIGH LEVELS, DOLLAR YUAN MIGHT NOT GO TO 7.50, YET THEY GET THE BENEFIT AGAINST OTHER CURRENCIES AS WELL. DAVID: WHICH ARE SOME OF THEIR BIGGEST TRADING PARTNERS. SODIA, -- SOFIA, YOUR THOUGHTS ON THE YUAN? SOFIA: I THINK CITIGROUP IS NOW RECOMMENDING THAT TRADE.
THEY ARE SAYING BASICALLY GO OUT RIGHT SHORT THE YUAN RIGHT NOW BECAUSE THE PAST TWO FURTHER WEAKNESSES ARE WIDE OPEN. WE ARE PAST THE PARTY CONGRESS, IT IS NO LONGER ABOUT MAINTAINING STABILITY, BUT ALLOWING MARKETS TO DO THEIR THING. CHINA MAY GET A REPRIEVE FROM THE U.S.
IF THE DOLLAR STARTS REVERSING. THAT'S KIND OF WHAT HAPPENED IN 2020 WHEN WE DID HAVE THE WEAK YUAN. IMMEDIATELY AFTER THE WUHAN LOCKDOWN.
THEN IT REVERSED BECAUSE OF THE DOLLAR. CHINA TENDS TO HAVE MORE BREATHING SPACE WHEN THE DOLLAR MOVES. YVONNE: THE STATEMENTS WE HEARD FROM THE PBOC, THE FX REGULATORS ABOUT HEALTHY DEVELOPMENT OF STOCK AND BOND MARKETS. I KNOW THAT WAS NOT IN REACTION TO THE MARKET SELLOFF, BUT IT DID COME AFTER THE PARTY CONGRESS AS WELL. WHAT CAN WE GLEAN FROM THOSE MESSAGES? SOFIA: IT REALLY SETS THE SCENE FOR HOW CAPITAL MARKETS WILL BE IN THIS KIND OF NEW CHINA. THESE FIVE WORDS. REGULATED, TRANSPARENT, OPEN, ROBUST, AND RESILIENT.
FOR ME, IT'S QUITE TELLING THAT THE FIRST WORD IS REGULATED. MAKE SURE IT IS NOT DISORDERLY CAPITAL ACCUMULATION, THE ACCUMULATION OF WEALTH. THAT IS VERY MUCH UNDER XI'S COMMON PROSPERITY UMBRELLA. TRANSPARENT IS THE KEY THING, THAT HAS BEEN A VERY IMPORTANT ISSUE IN THE PAST TWO YEARS AND A VERY DIFFICULT BRCA 2 NAVIGATOR FOREIGN INVESTORS BECAUSE THE COMMUNICATION TRANSPARENCY IS NOT THERE. AND OPEN. A BIG QUESTION THIS WEEK HAS BEEN IS CHINA STILL LOOKING TO OPEN UP CAPITAL MARKETS, ARE FOREIGN INVESTORS TO WELCOME, THOUGH XI JINPING CARE ABOUT FOREIGN INVESTORS? THERE WAS A GREAT COLUMN THIS WEEK ABOUT THAT. IS CHINA STILL PART OF THE
MOBILE FINANCIAL SYSTEM? THAT WORD SUGGEST OF PRIORITY IS STILL VERY MUCH THERE. DAVID: THE NEED FOR EVEN THE MOST GENTLE OF GESTURES MIGHT TURN MARKET SENTIMENT. WHEN YOU TALK ABOUT THE EQUITY MARKET, I THINK BANK OF AMERICA CAME OUT WITH A NOTE YESTERDAY TALKING ABOUT HOW THEIR ROUTE MONDAY FLESHED OUT A LOT OF PUT OPTIONS AND THAT EXACERBATED THE VOLATILITY. BUT THEY ARE SAYING MOST OF THAT IS BEHIND US. CAN WE EXPECT SMOOTH OVER THE
NEXT FEW DAYS IN CHINESE EQUITY MARKETS? MARK: THE GREAT THING ABOUT EQUITY TRADERS IS THEY ARE ETERNALLY OPTIMISTIC. SOMEONE IS ALWAYS LOOKING FOR A BIG REBOUND. IF YOU LOOK AT WHAT HAPPENED THIS YEAR, WE SAW THE H-SHARE MARKET MADE ABOUT A 28% REBOUND WHEN IT GOT CLOSE TO THE 6000 LINE. A-SHARES GOT PRETTY CLOSE TO 5000 THIS WEEK.
MAYBE IT IS TIME FOR A DECENT REBOUND AGAIN. EVEN WITHIN THE CONTEXT OF A VERY BIG BEAR MARKET, YOU CAN HAVE VERY SUBSTANTIAL REBOUNDS, WHICH IS A CHANCE FOR PEOPLE TO MAKE SOME PRETTY FAST MONEY. THE 28% RISE, IT TOOK LESS THAN THREE WEEKS. IF PEOPLE SUDDENLY THINK THAT
THE WORST FOR THE SHORT TERM IS OVER IN CHINA MARKETS AND THEY STOP BUYING, THEY MIGHT SEE QUITE A DECENT REBOUND OVER THE NEXT FEW DAYS OR COUPLE OF WEEKS. YVONNE: WE ARE TAKING A LOOK OUT U.S. FUTURES ARE DEEP IN THE RED RIGHT NOW AFTER WE SAW EARNINGS THAT CAME OUT.
YOU ARE REALLY STARTING TO SEE THAT STRONG DOLLAR BITE INTO EARNINGS. DOES THIS BODE WELL FOR THE EARNINGS SEASON ANYWAY? MARK: I MEAN, OBVIOUSLY THE BIG TECH STOCKS IN THE U.S., THEY CARRY SO MUCH WEIGHT, NOT JUST IN ABSOLUTE MARKET CAP TERMS BUT PSYCHOLOGICALLY AS WELL. SO MUCH OF WHAT HAPPENS IN THE U.S. MARKET IS DRIVEN BY HOW PEOPLE FEEL ABOUT BIG NAMES LIKE APPLE, MICROSOFT, ALPHABET. IF THESE PEOPLE FEEL GOOD ABOUT THEM IT IS POSITIVE FOR THE MARKET AND IF THEY CHANGE IT IS ALSO A BIG DAMPENER AS WELL.
SO CERTAINLY IT WILL TAKE A LOT OF THE STEAM OUT OF IT. WE WILL ONLY GET THE FULL PICTURE WHEN THE U.S. CASH MARKETS OPEN LATER ON WEDNESDAY. BUT CERTAINLY IF YOU HAVE THESE MAJOR COMPANIES ALREADY COMPLAINING ABOUT THE STRENGTH OF THE U.S.
DOLLAR, THAT MEANS OTHER PEOPLE ARE GOING TO SUFFER AS WELL. IN THE PAST SOMETIMES THESE COMPANIES HAVE GONE FOR THE WHITE HOUSE AND THEY SAY WE CANNOT HANDLE THIS ANY FURTHER, WE NEED YOU TO HELP US OUT. MAYBE THAT WILL PUSH JANET YELLEN INTO FINALLY SAYING THAT THE U.S. DOLLAR HAS RISEN ENOUGH. JANET YELLEN HAS BEEN VERY QUIET SO FAR. SHE HAS NOT SAID ANYTHING ON BEHALF OF THE U.S. TREASURY ABOUT THE STRONG
DOLLAR. IF AMERICAN COMPANIES PERSUADE HER THAT THE DOLLAR IS TOO STRONG, THAT IS A SIGNIFICANT TURNING POINT FOR FINANCIAL MARKETS ACROSS THE BOARD, NOT JUST FOR THE CURRENCY MARKET. WE HAVE NOT GOTTEN THERE YET, BUT CLEARLY THE DOLLAR HAS BECOME A PROBLEM FOR A LOT OF PEOPLE. DAVID: SPEAKING OF EARNINGS, THERE IS A LOT OF EARNINGS COMING THROUGH THIS WEEK OUT OF RAIDER CHINESE MARKETS AND CERTAINLY WITH A SLOWING ECONOMY, VALUATIONS ARE NO LONGER FROTHY, AS THEY LIKE TO SAY. WOULD THAT BE ENOUGH TO PUT A FLOOR UNDERNEATH THESE MARKETS? SOFIA: VALUATIONS HAVE NOT BEEN FROTHY FOR A VERY LONG TIME. I JUST WANTED TO SAY THE WORD FROTHY. HSCEI IS TRADING AT 6.6 FORWARD
EARNINGS. THAT IS INCREDIBLY CHEAP. IN A NORMAL FUNCTIONING MARKET WHERE PEOPLE ACTUALLY TRADE ON FUNDAMENTALS THEN YES, A BETTER PICTURE ON THE EARNINGS FRONT WOULD BE SOMETHING, AT LEAST SOME KIND OF DATA TO SHOW US OUT CHINA IS DOING. THE GDP PRINT IN THE MIDDLE OF ALL THAT NOISE, A VERY CONFUSING MONDAY, WAS ACTUALLY BETTER THAN EXPECTED. SO WE DO HAVE SOME GROWTH ON
THE GROUND AND WE DO HAVE SOME RECOVERY AND A BETTER PICTURE FOR CHINESE EARNINGS WOULD KIND OF REINFORCE THAT. THE KEY QUESTION IS WILL THE MARKETS TRADE ON THAT, BECAUSE RIGHT NOW THEY ARE TRADING ON FEELING. DAVID: AND THE FACT WE ARE AT 6.6 TIMES EARNINGS TELLS ME WE ARE
NOT TRADING ON FUNDAMENTALS. SOFIA DAND MARK JOINING US. LET'S GET OVER TO VONNIE QUINN NEW YORK WITH THE FIRST WORD NEWS. VONNIE: CHINA'S CENTRAL BANK AND FOREIGN-EXCHANGE REGULATOR HAS VOWED TO MAINTAIN THE HEALTHY DEVELOPMENT OF THE COUNTRY'S STOCK AND BOND MARKETS AND REITERATED U.N. WOULD BE BASICALLY STABLE.
THE COMMENTS THE WERE MADE IN MEETINGS HELD RIGHT AFTER THE COMMUNIST PARTY CONGRESS. U.K. PRIME MINISTER RISHI SUNAK HAS REAPPOINTED JEREMY HUNT AS CHANCELLOR AS HE ASSEMBLES A MINISTERIAL TEAM TO TACKLE WHAT HE CALLS THE PROFOUND ECONOMIC CRISIS FACING THE U.K. SUNAK HAS TO STRIKE A BALANCE BETWEEN REALIGNING -- BLOOMBERG HAS BEEN TOLD ELON MUSK HAS PLEDGED TO CLOSE THE ACQUISITION OF TWITTER BY FRIDAY IN A VIDEO CONFERENCE CALL WITH BANKERS. SOURCES SAY THE LENDERS PROVIDING $13 BILLION IN DEBT FINANCING HAVE FINISHED PUTTING TOGETHER THE FINAL CREDIT AGREEMENT AND ARE IN THE PROCESS OF SIGNING DOCUMENTATION. IT MARKS ONE OF THE LAST STEPS BEFORE ACTUALLY STANDING THE CASH -- SENDING THE CASH TO MUSK .
GLOBAL NEWS 24 HOURS A DAY ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M VONNIE QUINN. THIS IS BLOOMBERG. YVONNE: STILL AHEAD, THE CEO SHARES WITHOUT -- WITH US HIS FIRST PLANS TO REACH ZERO EMISSIONS BY 2050. DAVID:
WE WILL TALK TO HIM BEFORE THAT. COMING UP, CATHERINE YEUNG COMES ON EXPLAINING WHY SHE SEES A BIT OF A BUYERS A STRIKE IN THE CHINESE MARKETS AND WHERE THE OPPORTUNITIES MIGHT LAND AT THIS POINT IN TIME. 19, 18 BUT IT'S FROM THE OPENING BELL. STAY TUNED FOR EVERYTHING
COMING UP ON THE SHOW. THIS IS BLOOMBERG. ♪ DAVID: WELCOME BACK TO THE CHINA SHOW. WE ARE TALKING JAPAN NOW. THE BOJ IS BUYING MORE BONDS
THAN PLANNED AT THE REGULAR OPERATION TODAY. THIS THICKENS THE PLOT AHEAD OF THE BOJ MEETING IN TWO DAYS. YIELDS ARE DOWN A LITTLE BIT ON THE 10 YEAR. YVONNE: CERTAINLY GOING TO MAKE A VERY INTERESTING MEETING. IS IT REALLY GOING TO BE LEANING MORE HAWKISH OR LESS DOVISH? TAKE A LOOK AT WHEN IT COMES TO THE RENMINBI EFFECTS. IT IS GOING TO BE TELLING WHERE
THIS LEADS GIVEN WHAT WE SEE WITH THE DOLLAR CHINA TRADE. 7.1638. THIS IS YET A STRONGER FIX BUT YES, ANOTHER ONE THAT I GUESS YOU COULD SAY WAS WEAKER AND WAY ABOVE WHAT WE HAVE BEEN SEEING WHICH WAS PROVEN AT 7.11. NOW WE ARE 7.1638. THEY HAVE BEEN TALKING ABOUT A REMEDY THAT IS STABLE. WE ARE STARTING TO SEE A BIT OF PRESSURE NOT JUST AGAINST THE DOLLAR BUT ALSO THE BASKET. DAVID:
IT HAS BEEN WEAKENING AGAINST THE LATTER. AS MARK CRANFIELD WAS POINTING OUT, WITH YIELDS FALLING, IT MIGHT TAKE SOME STING OUT. THEY MIGHT ALLOW THE DOLLAR EXCHANGE RATE TO MOVE HIGHER. ANYWAY, WE WILL LEAVE THAT THERE. 7.1638 IS VERY CLOSE TO YESTERDAY, JUST 30 PIPS. WE COULD BE FROZEN AT THAT. LET'S TALK MARKETS NOW.
CHINESE MARKETS. YVONNE: LET'S BRING IT CATHERINE YEUNG, FIDELITY INTERNATIONAL'S INVESTMENT DIRECTOR. HOW HAS THIS WEEK BEEN? HOW ARE YOU? IT LOOKS LIKE WE SAW THE CAPITULATION ON MONDAY. DO YOU SEE A TURNING POINT FROM HERE? CATHERINE: FEELS LIKE IT. IT WAS SOMEWHAT OF A BUYERS STRIKE ON MONDAY. A LOT OF CONCERNS. THEN WHEN YOU LOOK AT JUST THE
ECONOMIC SIDE OF CHINA AND THE VALUATION ARGUMENT IT IS STILL VERY ATTRACTIVE IN TERMS OF OPPORTUNITIES. THE INTERNET SECTOR ITSELF AND SOME OF THOSE LARGE INTERNET NAMES COULD BE CLASSIFIED AS VALUES. IT GOES UNNOTICED WHEN IT COMES TO WHAT COMPANIES ARE DOING IN TERMS OF THE PAYOUTS AND REWARDING MINORITY SHAREHOLDERS. DAVID: IS IT TIME TO BUY, IS IT SAFE TO BUY? DO GET THAT QUESTION? CATHERINE: THE RISK PREMIUM IS MORE THAN LIKELY TO CONTINUE TO RISE, OR HAS RISEN. BUT IF WE LOOK AT JUST THE ECONOMICS OF CHINA,
GIVEN THE WORLD WE LIVE IN TODAY AND ALL THE POLICY MOVEMENTS WE ARE SEEING ELSEWHERE AROUND THE WORLD, CHINA IS ON THE OTHER END OF THE SPECTRUM SO THEY HAVE THE FLEXIBILITY, EASE AND TOOLSET. YOU WILL PROBABLY SEE FURTHER MEASURES BEING ANNOUNCED IN 2023. MORE ECONOMIC POLICY BEING ANNOUNCED, THE PARTY MEETING. THAT WILL PROBABLY PROVIDE FURTHER CLARITY. AGAIN, IT IS TREADING WATER. WE MIGHT SEE MORE OF THE FOREIGN INVESTMENT COMMITTEE SAY GIVEN EVERYTHING THAT HAS HAPPENED AND THE UNCERTAINTY AND OPAQUENESS WE ARE GOING TO BAILOUT FOR THE TIME BEING.
YVONNE: HOW DO YOU LOOK AT THEMES LIKE COMMON PROSPERITY AND DUAL CIRCULATION? THE KIND OF NARRATIVE COMING OUT OF THE PARTY CONGRESS IS THOSE THINGS ARE STAYING PUT AND SO IS COVID ZERO. CAN YOU STILL MAKE LOGICAL INVESTMENT STRATEGIES AROUND THESE THEMES? CATHERINE: YOU CAN. THE POLICIES ARE NOT NEW. WE HAVE BEEN HEARING ABOUT THESE POLICIES FOR QUITE SOME TIME.
THE MARKET SOMEWHAT IGNORED THOSE. SOME OF THE ECONOMIC PROGROWTH POLICIES, THIS CONTINUATION OF HIGH-END MANUFACTURING, THE PUSH TOWARDS R&D AND TERMS OF THE HEALTH CARE PROVIDING. ALSO JUST PART OF COMMON PROSPERITY. IT SEEMS THE MARKET MOVEMENTS
WE DID SEE ON MONDAY WERE A LITTLE BIT PANIC SELLING. THAT BUYERS STRIKE, LITTLE OVERDONE. INTERESTINGLY, THE DOMESTIC FLOWS WERE STILL OK. DAVID:
HOW ARE YOU APPROACHING JUST THE FUNDAMENTAL STORY SINCE WE ARE TALKING ABOUT VALUATIONS? WE ARE GETTING INTO THE THICK OF EARNINGS SEASON IN THE U.S. AND GETTING NUMBERS COMING OUT OF SK HYNIX, A CHIP STORY. SOME NUMBERS OUT OF CHINA. MOST SEEM TO BE POINTING TO FURTHER REVISIONS FORWARD BECAUSE WE ARE GETTING THIS SHOWING UP IN EARNINGS.
CATHERINE: CHINA AGAIN IS PROBABLY ONE CYCLE AHEAD EVEN WHEN WE LOOK AT THE EARNINGS STORY. SO WE HAVE SEEN A NUMBER OF THE RATINGS OVER THE PAST -- I'M NOT SAYING ALL EARNINGS ARE ROSY IN CHINA, BUT THERE ARE SO MANY POCKETS OF OPPORTUNITIES. AND ONE SIDE OF THE CHINA STORY IS TAKEN PRESIDENTS OVER THE OTHER IN TERMS OF THE IGNORING OF OTHERS. YVONNE: DO YOU THINK THIS IS INDISCRIMINATE SELLING WE ARE SEEING? YOU TALK ABOUT TECH, PROPERTY, BUT BANKS ACTUALLY DID BETTER. WHY IS THAT? CATHERINE: IF YOU ARE REALLY CONCERNED ABOUT WHAT IS GOING ON IN CHINA YOU WOULD HAVE SEEN THE BANKS REALLY SELLOFF. IT WAS THOSE WELL LOVED NAMES.
MONDAY 80% OF THE OUTFLOWS WERE FOR INVESTORS. THOSE NAMES THAT WERE HELD, THE BIG PROXIES OF CHINA WERE THE ONE THAT SOLD OFF. WHEN YOU LOOK AT SOME OF THOSE NAMES LIKE SOME OF THE INTERNET NAMES, THEY LOOK CHEAPER THAN BIG ENERGY RELATED NAMES. AGAIN, IT IS ABOUT WHETHER YOU CAN SEE THE EARNINGS VISIBILITY, WHETHER YOU CAN SEE MARKET SHARE OF THE VARIOUS COMPANIES CONTINUE TO GROW OR REMAIN RELATIVELY ROBUST. AND THOSE RECOVERY PLAYS, WE COULD
SEE TWEAKS TO THE COVERED POLICY. IT WILL NOT BE A 180 DEGREE TURN. YESTERDAY THERE WAS COMMENTARY ABOUT BUSINESS TRAVEL INTO CHINA. SO PROBABLY TWEAKS AROUND THE
MARGIN. THEN AGAIN, RECOVERY NAMES COULD REWARD SHAREHOLDERS GOING INTO 2023. DAVID: SO STILL DEFENSIVE, STILL INCOME-BASED STRATEGIES MAKE THE MOST SENSE IS WHAT I'M GETTING? CATHERINE: ALSO THE DOMESTIC INVESTOR BASED. WE TALK ABOUT THE RISE OF THE
CONSUMER. THE SAVING RATES ARE OVER 30%. IT IS NOT THAT CHINESE HOUSEHOLDS DON'T HAVE THE MONEY TO SPEND, THEY ARE JUST CAUTIOUS GIVEN SENTIMENT. BUT THE DOMESTIC INVESTOR STORY IS KEY BECAUSE THE DEVELOPMENT OF CAPITAL MARKETS, ESPECIALLY WITH THE PROPERTY SITUATION, WILL BE KEY FOR GROWTH GOING FORWARD. ALSO VERY IMPORTANT FOR DOMESTIC INVESTORS. YVONNE: SOME STOCKS TO WATCH AT THE
OPEN, BIG TECH VERY MUCH IN FOCUS GIVEN WHAT WE SAW IN EARNINGS AFTER HOURS FOR MICROSOFT, ALPHABET, THEN ALSO SK HYNIX DROPPING THAT BOMB, TALKING ABOUT CUTTING CAPITAL SPENDING IN HALF. IT DOES NOT BODE WELL FOR ALIBABA, DOWN CLOSE TO 3%. ALSO WATCHING CHIPMAKERS LIKE SMIC. HUA HONG SEMI.
WATCHING ALL THINGS EARNINGS. HSBC YESTERDAY, THE BIG NEWS ABOUT THE CFO STEPPING DOWN. A WHOLE LIST, WE WILL RUN YOU THROUGH IT NEXT. THIS IS BLOOMBERG. ♪ YVONNE: A50 FUTURES SLIGHTLY LOWER THIS MORNING. SK HYNIX WILL CUT ITS CAPITAL EXPENDITURE BY NEXT YEAR -- FOR NEXT YEAR BY HALF. THE INDUSTRY IS FACING AN UNPRECEDENTED DETERIORATION OF MARKET CONDITIONS. THEY REPORTED A 60% DECLINE IN
THIRD CODER PROFIT, AS SHIPMENTS OF PC'S AND -- DECREASED. MICROSOFT SHARES SLUMPED IN LATE TRADE AFTER ITS WEAKEST QUARTERLY REVENUE GROWTH IN FIVE YEARS. SALES THROTTLED WITH A SURGING DOLLAR AND A DROP IN SALES OF WINDOWS SOFTWARE. SALES FOR ITS AZURE CLOUD SERVICES ROSE 42%, ALSO BELOW EXPECTATIONS.
ALPHABET FELL SHORT TOO, AS GOOGLE'S SEARCH BUSINESS SHOWED SIGNS OF WEAKNESS. THIRD QUARTER SALES OF $57 BILLION, MISSING PROJECTIONS OF $58 BILLION. NET INCOME WAS $1.06 A SHARE, LESS THAN ESTIMATES OF $1.25. DAVID: MINUTES AWAY FROM THE OPEN OF TRADE. WE HAVE A LOT OF BIG EARNINGS
COMING THROUGH. HERE IS READING INTO THE MICRO STORY. WHITE BAR IS THE FORECAST ON THE ECONOMY. YELLOW LINE IS THE FORECAST ON EPS. OR, THE OTHER WAY AROUND. YVONNE:
WE HAVE THE COUNTDOWN CLOCK, WE CANNOT SEE WHERE IT IS GOING. DAVID: THERE WE GO. THIS TAKES US INTO THIS WHOLE LIST OF EARNINGS COMING TODAY. YVONNE: IT IS A LOT. WE HAVE TO DO MULTIPLE FULL-SCREEN GRAPHICS FOR THIS. BUDWEISER, SO MANY AUTOMAKERS, WE TALKED ABOUT STANCHART AFTER HSBC. VERY, VERY BUSY FEW DAYS.
IN TERMS OF ANALYST ACTIONS, WE ARE LOOKING AT SOME BANKS AS WELL. THAT WAS AN INTERESTING CALL WE GOT THIS MORNING. IF YOU CAN FLIP THE BOARDS AND SHOW US. BASICALLY SLASHING A LOT OF THESE PRICE TARGET. CHINA TOURISM GROUP, NEW BUY AS WELL. CHINA COAL RAISED TO OUTPERFORM AND CREDIT SUISSE.
WE ARE WATCHING A LOT OF RESOURCE STOCKS TODAY. DAVID: RESOURCES WILL BE VERY MUCH IN FOCUS. THE ONES THAT REPORTED EARNINGS, AND THE OTHER NAMES. SK HYNIX, WE CAN TALK MORE ABOUT THIS LATER. THAT NOTE OUT OF BANK OF AMERICA YESTERDAY TALKING ABOUT HOW THE FLUSH ON MONDAY MIGHT BE OVER IN TERMS OF SHORT-TERM VOLATILE. VOLUMES HAVE BEEN EXTREMELY HEAVY THESE LAST TWO DAYS.
THERE'S AN AVIATION SECTOR BRIEFING TOP OF THE NEXT HOUR, SO, WHAT ARE THEY GOING TO CITE? WELL, I DON'T KNOW. WE WILL WAIT FOR THAT TO COME UP IN ABOUT 30 MINUTES. ALSO COMING UP IS THE OPEN. TAKING PLACE AGAINST THE BACKDROP OF ASIAN EQUITIES UP FOR A SECOND DAY. DO WE GET THAT FILTER THROUGH TO THESE EQUITY MARKETS? DAVID: GOOD WEDNESDAY MORNING. JUST A COUPLE OF THINGS TO GET
THROUGH AS WE APPROACH THE OPEN. THE BOJ OUT ABOUT 15 MINUTES AGO. THEY ARE BUYING MORE BONDS THAN PLANNED. POINT NUMBER ONE. NUMBER TWO, THE PBOC INJECTING A NET 280 MILLION RENMINBI.
40TH STRAIGHT DAY OF STRONGER-THAN-EXPECTED YUAN FIX AS FAR AS THE CURRENCY IS CONCERNED. YVONNE: STRONGER FOR THE 40TH DAY, BUT THEN YOU HAVE SEEN IT, 7.16, FOR TWO STRAIGHT DAYS. MORE SIGNS LETTING IT GO A LITTLE FURTHER. WE HAVE BEEN TALKING ABOUT WITH MARK CRANFIELD, WE MIGHT NOT HIT THAT 7.509 LEVEL. SO CERTAINLY THERE IS A LOT OF MARKET SENTIMENT THERE IN TERMS OF THE NEGATIVITY. IT SEEMS LIKE IT CONTINUES,
ALBEIT NOT AS BAD AS MONDAY. SHANGHAI LOOKING A LITTLE BETTER. UP ABOUT .5% FOR THE CSI 300. SHANGHAI COMP PRETTY MUCH FLAT. MSCI CHINA STILL DOWN ABOUT .8%. WE TALKED ABOUT THE EARNINGS PICTURE A LOT. WHETHER IT IS FROM THE RESOURCES SIDE, THE BANKS, AUTOMAKERS, THEY ARE ALL REPORTING LATER TODAY. OFFSHORE RENMINBI, 7.32, ONSHORE AT 7.2686.
WE DID PUNCH 7.30 YESTERDAY. TAKE A LOOK AT THE EURO YEN, 1% POP HERE. YOU ARE SEEING IT WEAKEN NOT JUST AGAINST THE DOLLAR, BUT ALSO AGAINST THE BASKET AS WELL. WHEN IT COMES TO YEN, ALSO SEEING A SIMILAR PICTURE AS WELL. WE'RE SEEING MORE OF THAT RED AGAINST THE EURO OVER THE RENMINBI. HERE IS HOW THE HANG SENG IS FARING. H-SHARES SLIGHTLY LOWER, BUT
STILL HOVERING AROUND 5000. VOLATILITY IS COMING DOWN A BIT. HSTECH STILL IN THE RED. WE HAVE BEEN TALKING ABOUT THE TECH SIDE OF THINGS AFTER WE SAW WITH MICROSOFT, ALPHABET, TEXAS INSTRUMENTS NOT GIVING GOOD OUTLOOK, SK HYNIX AS WELL. BIG, BIG MISSES ON EARNINGS FOR THE THIRD QUARTER.
WE ARE WATCHING CHIPMAKERS WITH THE SK HYNIX STORY, A MIXED PICTURE SO FAR. WE'RE WATCHING THE BANKS VERY CLOSELY. SLASHING OF PRICE TARGETS WHEN IT COMES TO SEE IGS. HSBC, WE SAW THAT 5% DROP YESTERDAY WITH THE CFO STEPPING DOWN. A LOT OF QUESTIONS ABOUT THE U.K. AS WELL AS HONG KONG.
STANCHART'S UP NEXT. 3% POP AT THE OPEN. DAVID: STANCHART SHOULD BE OUT. HSBC SHOULD BE OUT AND ABOUT 2.5 HOURS. SK HYNIX, NOT SO MUCH THE RESULTS BUT THE GUIDANCE ON THEIR PLANS ON-CHIP SPENDING. I THINK IT IS CUT BY OVER HALF ON THE BACK OF WHAT THEY SEE AS THE COLLAPSE IN DEMAND. SK HYNIX, 1% UP. AND YOU HAVE THESE TWO MARKETS, TAIWAN AND KOREA ALSO COMING UP.
ABOUT 30 MINUTES INTO THE TAIWAN SESSION. STILL WITH US IS CATHERINE YEUNG . LET'S TALK ABOUT TAIWAN AND KOREA. CATHERINE: THEY ARE INTERESTING MARKETS. IF YOU LOOK AT EPS IN TAIWAN, OVER THE PAST TWO YEARS, YOU HAVE SEEN IT DOUBLE. THE PREVIOUS DECADE YOU SAW NO GROWTH.
THAT WAS REALLY DRIVEN BY -- DAVID: ONE COMPANY. CATHERINE: WE SUPPLY DEMAND SITUATION AS A RESULT OF THE PANDEMIC. BUT NOW THAT HAS CHANGED SO YOU SHOULD SEE A REVERSAL.
EVALUATIONS ARE VERY CHEAP. POTENTIALLY SOME NIBBLING IN THAT AREA. KOREA HAS ECONOMICALLY DONE INCREDIBLY WELL. IF WE LOOK AT THE KOSPI IN TERMS OF THE PAST 33 YEARS, IT IS NOT REALLY RETURNED ANYTHING TO SHAREHOLDERS DESPITE ECONOMIC DEVELOPMENTS.
PROBABLY A RESULT OF CAPITAL MISALLOCATION, CONCERNS AROUND GOVERNANCE. BUT NOW WHEN YOU LOOK AT WHERE KOREAN VALUATIONS ARE, HISTORICALLY IN THESE KIND OF POST CRISIS LEVELS OR MOMENTS, KOREA DOES INCREDIBLY WELL OVER THE NEXT ONE TO TWO YEARS. AGAIN, SOME INTERESTING OPPORTUNITIES VERY MINDFUL ABOUT THE FUNDAMENTALS.
IN KOREA THE GOVERNANCE, AND WHETHER HOW LOW CAN THAT E GO FROM A TAIWANESE PERSPECTIVE. YVONNE: WHEN CAN I EXPECT THE TECH CYCLE TO BOTTOM? THE U.S. IS SLASHING CURBS ON CHIPS AND ROILING THE WHOLE SUPPLY CHAIN. DOES THAT PUSH BACK THAT STORY OF WHEN THE TECH CYCLE BOTTOMS? CATHERINE: TECH WILL BE INTERESTING.
IT IS NOT JUST SEMIS, IT'S ALL KINDS OF HARDWARE, INTERNET NAMES AS WELL. AGAIN, EVEN IF YOU LOOK AT CHINA AND THE RAMPING UP OF THEIR SEMIS INDUSTRY, IT HAS BEEN REALLY QUICK, THE PACE THEY HAVE COME TO MARKET IN TERMS OF MANUFACTURING. THERE ARE CERTAIN KOREAN AND TAIWANESE NAMES THAT STILL HAVE THE PRICING POWER IN THIS KIND OF MARKET SO THEY ARE LIKELY TO BENEFIT DESPITE WHERE WE ARE IN THE CYCLE. DAVID: I WAS ABOUT TO ASK ON KOREA AND TAIWAN, THOSE ARE CYCLICAL MARKETS, AND WE ARE HEADED INTO A SLOWDOWN. CATHERINE: WHEN YOU LOOK AT VALUATIONS, THEY ARE INCREDIBLY ATTRACTIVE. BEING CONTRARIAN IN THESE
MARKETS MAKES SENSE. INDIA IS SO EXPENSIVE AT THE MOMENT, TRADING 30 TIMES. YOU'RE PROBABLY GOING TO SEE ROTATION OUT OF INDIA. MAYBE INTO NORTH ASIAN MARKETS. YVONNE: AND JAPAN HAS BEEN KIND OF OVERLOOK FOR A DECADE. LOOKING MORE INTERESTING NOW TO YOU? CATHERINE: IT HAS BEEN KIND OF IGNORED. IT'S NEARLY ON PAR WITH THE U.S., BUT NO ONE HAS BEEN
LOOKING AT IT BECAUSE IT IS JUST SORT OF FORGOTTEN ABOUT. THE AGING DEMOGRAPHICS HAVE NOT BEEN AS MUCH OF AN ISSUE AS WHAT A LOT OF COMMENTATORS WERE EXPECTING. WHEN YOU LOOK AT THE TURNAROUND IN CORPORATE GOVERNANCE, CHINESE CORPORATE GOVERNANCE IS REALLY IMPROVING IN TERMS OF REWARDING MONEY ALREADY SHAREHOLDERS. FOR EXAMPLE WHEN WE LOOK AT TECH PENETRATION IT IS SO LOW.
SO ITS TRAJECTORY IS REALLY ATTRACTIVE. IN GENERAL, JAPAN FROM A NORTH ASIAN PERSPECTIVE LOOKS VERY ATTRACTIVE, ESPECIALLY SOME OF THE SMALLER COMPANIES. DAVID: HOW MUCH OF THE COLLAPSE IN THE JAPANESE YEN HAS MADE JAPAN MORE ATTRACTIVE, OR THE OPPOSITE? CATHERINE: PEOPLE ALWAYS LOOK AT THE YEN AND THE CURRENCY IN JAPAN.
IT GOES BACK TO THE FUNDAMENTALS OF THE COMPANIES, OR THE COMPANIES EXPOSED TO ANY EXTREME MOVEMENTS. BUT THAT DOMESTIC DEMAND STORY AND JAPAN IS RECOVERING. I THINK THAT WILL BE VERY POSITIVE FOR GROWTH GOING FORWARD. YVONNE: GREAT TO HAVE YOU. CATHERINE YEUNG JOINING US IN OUR STUDIO. DAVID: ALL RIGHT.
LET'S TAKE IT BACK TO HONG KONG. THE CHIEF EXECUTIVE OF THE HONG KONG EXCHANGE SAYS INVESTORS SHOULD FOCUS ON THE LONGER-TERM OUTLOOK FOR THE MAINLAND AFTER PRESIDENT XI JINPING'S CONSOLIDATION OF POWER CAUSED WILD SWINGS IN MARKETS. WE SPOKE ABOUT SAUDI ARABIA'S FUTURE INVESTMENTS. >> WE HAVE SEEN PARTICULARLY SOME OF THE TECH NAMES TO BE IMPACTED THE MOST. AND THAT WAS A REACTION OF ALL THE INVESTOR'S QUESTION TURNS -- QUESTIONS ABOUT THE FUTURE AND VOLATILITY AROUND THE WORLD. AT THE SAME TIME IT IS IMPORTANT TO SEE THE LONG-TERM FROM THE GDP NUMBERS THAT CAME OUT, 3.9% GROWTH WAS BETTER THAN EXPECTED.
WHICH IS PRECISELY THE POINT WE WANT TO FOCUS ON, THE LONG-TERM OPPORTUNITY AND EVERYTHING GOING ON. THE COMPANIES THAT ARE BEING CREATED. SO THEY ARE CLEARLY DIFFERENT VIEWS IN TERMS OF WHICH WAY TO GO AND INVESTORS ARE TRYING TO UNDERSTAND WHAT POSITIONS TO TAKE AROUND THAT.
>> HONG KONG IS STARTING TO TAKE THE FIRST STEPS TO REOPENING. I AM LOOKING AT THE CURRENT BREAKDOWN. YOU WONDER IF THAT IS ENOUGH TO GET THE ECONOMY BACK ON AN INVIGORATING LEVEL OF PATH FOR GROWTH. >> THE COVID LIMITATIONS, DESTRUCTIONS, AT SOME POINT THEY WILL GO AWAY. WHEN IS THE RIGHT TIME? RIGHT NOW THE LIMITATIONS ARE SET TO A MINIMUM. THERE IS A REALLY LARGE EVENT NEXT WEEK THAT IS GOING TO TAKE PLACE WITH ALL FINANCIAL LEADERS FROM AROUND THE WORLD GOING TO HONG KONG. SO I AM ACTUALLY QUITE EXCITED
ABOUT THIS OPENING PHASE WE ARE SEEING IN HONG KONG, BECAUSE WE DO SEE THAT PEOPLE HAVE AN INTEREST IN BEING THERE. INVESTORS SEE THIS AS THEIR BRIDGE INTO CHINA. >> MAYBE A WINDOW IS OPENING UP FOR IPO'S. IS THAT WHAT YOU ARE HEARING FROM CLIENTS IN TERMS OF A SHIFT IN SENTIMENT, MAYBE ACCELERATE SOME PLANS? HEY, LET'S GO NOW. >> THIRD QUARTER WE HAD TWICE THE IPO'S WE HAD IN THE FIRST HALF. WHEN WE LOOK AT THE WHOLE YEAR, 60 IPO'S RAISED OVER $10 BILLION U.S. YES, FOR HONG KONG IT IS A
TOUGH YEAR. HOWEVER, WE CAN FEEL GOOD ABOUT 140 COMPANIES THAT HAVE APPLIED AND ARE WAITING FOR MARKETS TO GET OTHER MORE STABLE, MORE CONSOLIDATED. SO IT LOOKS GOOD IN TERMS OF THE PIPELINE AND I AGREE WITH THE COMMENT THAT THIS MAY BE A GOOD OPPORTUNITY TO START THINKING ABOUT WHAT IS NEXT WE HAD TO DEATH -- WHAT IS NEXT. >> WE HAD SOME DRAMATIC EVENTS ON THE LME THIS YEAR.
THE SPECULATION IS STILL NOT ENOUGH HAS BEEN DONE TO REGAIN INVESTOR CONFIDENCE. VOLUMES ARE STILL VERY MUCH LOW. WHAT NEEDS TO BE DONE HERE TO WIN BACK SOME INVESTOR APPETITE TO GET THIS BACK INTO THE HEALTH AND SHAPE THAT IT IS FAMOUS FOR OVER THE YEARS? >> YOU ARE RIGHT. LME HAS 145 YEARS OF HISTORY. I WAS ACTUALLY THERE YESTERDAY AND WE LAUNCHED LME WEEK, WHICH IS A WEEK WERE ALL METAL CONSUMERS AND PRODUCERS GET TOGETHER AS PART OF A TRADITION AS TO HOW TO TRADE. AND WE HAVE SEEN A LOT OF VIBRANCY. IT IS INTERESTING THAT COMING FROM THE VIBRANCY OF ALL THOSE MIDDLE PRODUCERS THAT ALL OF A SUDDEN COMING HERE TO SAUDI ARABIA WHERE YOU SEE ALL THIS VIBRANCY IN THE MARKET AND EVERYTHING.
WE HAVE AN INDEPENDENT REVIEW LOOKING AT WHAT HAPPENED EARLIER THIS YEAR. AND BASED ON THAT WE WILL ASSESS WHAT ARE THE BEST MEASURES TO TAKE AND WE WILL GO FORWARD. THERE WAS AN ANNOUNCEMENT YESTERDAY ABOUT SOME ADJUSTMENT TO WHAT WE CALL LME PASSPORT THAT GIVES A LOT OF SUSTAINABILITY DATA TO THE METALS BEING TREATED IN OUR EXCHANGE -- TRADED IN OUR EXCHANGE. >> WOULD YOU CONSIDER SELLING? ARE YOU IN ANY ACTIVE DISCUSSIONS? >> A LOT OF THE MANUFACTURERS AND PRODUCERS OF SOME OF THESE BASE METALS, THEY ARE IN CHINA. THERE IS A NATURAL FIT IN TERMS
OF THE CONNECTIVITY. THE KEY THING IS HOW DO WE GET THE MOST OUT OF THAT ADVANTAGE OF BEING IN A UNIQUE A POSITION AS HKEX AS PART OF CHINA. I THINK THAT IS WHAT WE HAVE TO FOCUS ON. HOW DO WE GET THAT ADVANTAGE INTO LME? YVONNE: THE HONG KONG EXCHANGE CEO NICOLAS AGUZIN SPEAKING WITH OUR COLLEAGUE THERE.
LET'S GET TO VONNIE QUINN IN NEW YORK WITH YOUR FIRST WORD NEWS. VONNIE: AUSTRALIA WARNING OF MOUNTING DEBT AND DEFICIT IN THE YEARS AHEAD EVEN AS THE TREASURER HELD DOWN SPENDING TO AVOID FURTHER FUELING INFLATION. TREASURY FIGURES SHOW THE DEFICIT WILL WIDEN FROM 1.5% OF GDP THIS YEAR TO 2% IN 2025. THAT INCREASE WILL BE LARGELY DRIVEN BY HIGHER SPENDING ON THE NATION'S DISABILITY INSURANCE PROGRAM AND RISING BORROWING COSTS. A STUDY FOUND NEW BIVALENT BOOSTER SHOTS FROM MODERNA AND PFIZER DO NOT DO ANY BETTER THAN CURRENT VACCINES IN RAISING ANTIBODY LEVELS AGAINST DOMINANT COVID STRAINS.
THE RESEARCH CONTRASTS SHARPLY WITH PFIZER AND BIONTECH'S CLAIM EARLIER THIS MONTH OF POSITIVE EARLY DATA. THE RESULTS STILL NEED TO BE CONFIRMED IN MUCH LARGER STUDIES. FORMER PAKISTAN PRIME MINISTER IMRAN KHAN SAYS HE PLANS TO START A PROTEST MARCH TO ISLAMABAD FRIDAY, DEMANDING EARLY ELECTIONS. HE WAS OUSTED BY A NO-CONFIDENCE VOTE IN APRIL, BUT IS MAKING A MAJOR PUSH TO RETURN TO POWER. THE PRIME MINISTER'S GOVERNMENT SAYS ELECTIONS WILL NOT HAPPEN UNTIL LATE NEXT YEAR. GLOBAL NEWS 24 HOURS A DAY ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES.
I'M VONNIE QUINN. THIS IS BLOOMBERG. YVONNE: COMING UP, THEY WANT TO BECOME SOUTHEAST ASIA'S LARGEST RENEWABLE PLATFORM BY 2025. THE CEO JOINS US NEXT TO DISCUSS THEIR STRATEGY. THIS IS BLOOMBERG. DAVID: WELCOME BACK TO THE SHOW. LET'S TALK ABOUT ENERGY, SHALL
WE? AS THE WORLD GRAPPLES WITH THIS CRISIS, ELEVATED FUEL PRICES COMPOUND IN THE SUPPLY SITUATION IN MANY COUNTRIES, REALLY AGAINST THIS BACKDROP OF WHAT YOU WOULD IMAGINE TO BE COUNTER TO THAT TRANSITION. YOU HAVE ACEN LOOKING TO HASTEN AND ACCELERATE ITS TRANSITION TO RENEWABLES. LET'S DISCUSS THIS AND MORE WITH THE COMPANY'S PRESIDENT AND CEO JOINING US OUT OF SINGAPORE, ERIC FRANCIA. THANK YOU FOR COMING ON THE
SHOW. HOPING TO GET STRAIGHT TO IT. YOUR ATTRIBUTABLE CAPACITY IN TERMS OF OVERALL ASSETS AND PORTFOLIO, HOW LARGE IS THAT, IS THAT 4000 MEGAWATTS? HOW MUCH OF THAT IS OPERATIONAL AND HOW MUCH OF THAT IS RENEWABLE? ERIC: THAT IS CORRECT. WE'RE NOW CURRENTLY AT 4000 MEGAWATTS IN OUR PORTFOLIO, OF WHICH 87% OR 3500 MEGAWATTS IS FROM A NUBILE SOURCES -- FROM RENEWABLE SOURCES. AND WE ARE CURRENTLY OPERATING 2000 MEGAWATTS AND BUILDING 1500 MEGAWATTS, MOST OF WHICH WILL BE OPERATIONAL WITHIN THE NEXT 12 OR SO MONTHS. WE'RE PRESENT IN THE PHILIPPINES, VIETNAM, INDONESIA, AND AUSTRALIA. YVONNE:
I'M WONDERING WHEN IT COMES TO THIS ENERGY CRISIS WE ARE SEEING GLOBALLY, DOES THAT IN ANY WAY SPEED UP THE TRANSITION FOR YOU OR DOES IT HURT THE PROGRESS? ERIC: ABSOLUTELY. THERE IS A SILVER LINING IN THIS CURRENT GLOBAL ENERGY CRISIS GIVEN THE ELEVATED PRICES OF FOSSIL FUEL, GAS, OIL AND COAL. IT PRESENTS A SILVER LINING AND AN OPPORTUNITY TO SCALE UP THE TRANSITION INTO RENEWABLES.
RENEWABLES HAVE COMPOUND -- HAVE BECOME SO COMPETITIVE THESE DAYS. I WISH WE COULD SEE THE SAME -- SAY THE SAME OF BATTERY STORAGE. UNFORTUNATELY SUPPLY CHAIN BOTTLENECKS HAVE IMPACTED ENERGY STORAGE BUT WE BELIEVE IT WILL COME BACK IN TERMS OF PRICING. SO OVER TIME, WE STILL BELIEVE ENERGY STORAGE CAN STILL BE SCALED UP TO REALLY UNLOCK THE POTENTIAL OF RENEWABLES. SO THERE IS A LOT OF WORK TO DO AND THAT IS WHY WE WERE BOLD AND AUDACIOUS IN TERMS OF MENTIONING, COMMUNICATING OUR RECENT 2023 ASPIRATION OF 20 GIGAWATTS OF RENEWABLES. DAVID: SORRY TO BE A VERY SPECIFIC QUESTION, THAT TAKES ME TO YOUR CALL PLANT. YOU ARE BRINGING FOR THE
TIMETABLE OF WHEN YOU HOPEFULLY GET THAT OUT OF THAT PORTFOLIO. IS THERE A REVENUE HIT, AND WHAT IS THAT TIMETABLE? ERIC: YEAH, THE TIMETABLE IS, COAL PLANTS USUALLY OPERATE 40 TO 50 YEARS OF TECHNICAL LIFE. WE JUST CLOSED OUR FIRST TRENCH. WE DISCLOSED THAT IN THE LAST 24 HOURS. THE FIRST 45% OF THAT EQUITY DRAWN DOWN HAS BEEN 3.2 BILLION PESOS. WE COMMITTED TO OPERATE OUR
COAL PLANT ONLY UNTIL 2040, 25 YEARS OF OPERATING LIFE. IT AVOIDS 15 TO 25 YEARS WORTH OF EMISSIONS, WHICH IS APPROXIMATELY 50 MILLION TONS OF AVOIDED CARBON EMISSIONS OVER 25 YEARS. SO IT IIS INSPIRED BY THIS INNOVATIVE CONCEPT TO BE INITIATED BY THE ASIAN DEVELOPMENT BANK. IT WILL BE THE FIRST ON THE WORLD. WE'RE EXCITED ABOUT THIS. BASICALLY THE PROCEEDS FROM THIS TRANSACTION, 100% WILL GO INTO THE RENEWABLE INVESTMENTS WE ARE MAKING TO SUPPORT OUR 2030 VISION OF 20 GIGAWATTS OF RENEWABLES. YVONNE: WHICH RENEWABLES DO YOU PREFER TO MEET THE GOALS YOU JUST LAID OUT? WHAT IS THE RIGHT MIX IN TERMS OF THE POWER PORTFOLIO? ERIC: RIGHT NOW WE ARE HEAVILY FOCUSED ON SOLAR AND WIND, BOTH GROUND MOUNTED SOLAR AND ONSHORE WIND. BUT OVER TIME, WE'RE CURRENTLY
BEEFING UP OUR PIPELINE IN TERMS OF THE DERIVATIVES OF THIS TECHNOLOGY. SO WE ARE BUILDING A PORTFOLIO OF FLOATING SOLAR, AS WELL AS OFFSHORE WIND. THAT WILL BE THE FUTURE, BECAUSE AT SOME POINT WE WILL HEAD INTO LAND ISSUES. WE ARE NOT FACING THAT YET, BUT WE DO EXPECT THAT OVER THE LONGER-TERM WE WILL HAVE TO USE THE WATER SURFACE AS WELL FOR BOTH TECHNOLOGIES. ONE OF COURSE WE NEED TO COMPLEMENT THIS WITH ENERGY STORAGE, BE IT BATTERY STORAGE OR PUMPED HYDRO. ONE OF THE KEY LIMITATIONS IN ROLLING OUT RENEWABLES IS TRANSMISSION CONSTRAINTS AND ENERGY STORAGE IS A CRITICAL WAY TO ADDRESS THE SITUATION OF CONSTRAINTS. DAVID:
THAT IS GOING TO TAKE MONEY. I KNOW YOU RECENTLY SOLD THE GREED BOND. SO FIRST, CONGRATS ON NAILING THE TIMING ON THAT. YOU DID THAT WHILE RATES WERE
AT A WINDOW OF AN OPPORTUNE TIME, LET'S PUT IT THAT WAY. DO YOU HAVE ANY OTHER PLANS TO RAISE MONEY, WHETHER IT IS JUST PLAIN OLD CORPORATE BONDS? ERIC: ABSOLUTELY. WE CURRENTLY HAVE A $3.5 MILLION BALANCE SHEET. AND TO FULFILL OUR 20 GIGAWATTS RENEWABLE VISION BY 2030, WE WILL HAVE TO GROW THAT BALANCE SHEET AROUND 5X TO $50 BILLION AND THAT WILL NEED A LOT OF FUNDING.
THE GOOD NEWS IS WE STILL HAVE QUITE A LOW LEVERAGE RATIO OF ONLY ABOUT .4 TO ONE. A LOT OF THE NEAR TO MEDIUM TERM GROWTH WILL BE FUELED BY INCREASING OUR LEVERAGE, INCLUDING GREEN BONDS. THERE IS TREMENDOUS DEMAND DESPITE THE TIGHTENING LIQUIDITY IN THE MARKET. THERE IS STILL VERY STRONG DEMAND, ESPECIALLY AMONG THE ESG ORIENTED INVESTORS. OUR RECENT BOND, AS YOU ALLUDED TO, ARE MADE IN PHILIPPINES, WAS 8.7 TIMES OVERSUBSCRIBED JUST TO SHOW YOU THE STRONG DEMAND FOR ESG-ORIENTED INVESTMENTS. WE ARE ALSO ONE OF THE LARGEST
ISSUERS OF GREEN BONDS, U.S. DOLLAR GREEN BONDS IN THE REGION. WE HAVE ISSUED $1.6 BILLION OF GREEN BOND OVER THE LAST THREE OR SO YEARS. WE WILL CONTINUE TO TAP BOTH OF THE U.S. DOLLAR AND PHILIPPINE PESO OF THE GREEN BOND MARKET, AMONG OTHER SOURCES OF FUNDING. DAVID: ALL RIGHT. THANK YOU SO MUCH FOR YOUR TIME. ERIC FRANCIA THERE, PRESIDENT
AND CEO OF ACEN. YVONNE: STICKING ON THE TOPIC, OUR BIG TAKE TODAY, HOW CLIMATE CHANGE HEAT WAVES AND THE DROUGHTS, THEY HAVE DRIED UP THE RIVERS THAT FEED HYDRO PLANTS AND THAT IS SHRINKING THE WORLD'S BIGGEST SOURCE OF CLEAN ENERGY. PLENTY MORE TO COME. THIS IS BLOOMBERG. ♪
YVONNE: EARNINGS IN FOCUS. THAT DIRE WARNING FROM SK HYNIX IS WHAT WE ARE WATCHING OUT FOR. LET'S BRING IN STEPHEN ENGLE TO WALK US THROUGH WHAT WE HEARD SO FAR. STEPHEN: A LOT OF THESE CHIPMAKERS ARE POSTING EITHER PRODUCTION CUTS AND WARNINGS ABOUT DEMAND GOING FORWARD, WHETHER IT IS MICRON, TSMC, SAMSUNG, THEY HAVE ALL GIVEN WARNINGS BECAUSE DEMAND IS REALLY WANING FOR CHIPS THAT GO INTO SMARTPHONES AND ALSO OF COURSE PERSONAL COMPUTERS, AND OTHER PRODUCTS ACROSS THE MANUFACTURING SUPPLY CHAIN. ALSO, THERE'S THE HEADWINDS FOR HYNEK'S. IN SOME OF THE STATEMENTS
COMING FROM SK HYNIX, THEY ARE MENTIONING THE U.S. CURBS ON SELLING AND DOING BUSINESS WITH CHINESE FABS. SK HYNIX HAS A BIG FAB IN CHINA. THEY COMMENTED ON IT, SAYING THEY ARE THANKFUL FOR A ONE-YEAR MORATORIUM ON RESTRICTIONS FOR KOREAN MAKERS BUT AFTER ONE YEAR IT LEAVES A LOT OF UNCERTAINTY FOR A COMPANY LIKE SK HYNIX WHICH RELIES ON THE CHINESE MARKET CONSIDERABLY.
SO THEY ARE HAVING THEIR CAPEX FOR 2023, THEIR PROFIT WAS DOWN SOME 60% AS WELL. REVENUE AND PROFIT MISSING ESTIMATES. DAVID: ARE THESE THE SAME REASONS FACING TEXAS INSTRUMENTS, WHY THEY ARE SEEING A SIMILAR WARNING? STEPHEN: TEXAS INSTRUMENTS STOCK WAS DOWN CONSIDERABLY AS WELL. THEY HAVE A LONG LIST OF SEMICONDUCTOR -- I THINK THEY HAVE THE LONGEST LIST OF SEMICONDUCTOR CLIENTS. 60% OF THEIR REVENUE COMES FROM
THE AUTOMOBILE INDUSTRY AND CHIPS THAT GO INTO INDUSTRIAL EQUIPMENT. SO THAT INDICATES THAT THIS SLOWDOWN IS ACROSS MANY DIFFERENT PRODUCTS. DAVID: ALL RIGHT. YVONNE: YOUR GLOBAL MACRO MOVERS SEEING A BIT OF RALLY WHEN IT COMES TO STOCKS. HONG KONG UP SOMEONE .3%. DOLLAR STILL STRUGGLING AGAINST RENMINBI. PLENTY MORE TO COME. THIS IS BLOOMBERG.
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2022-10-27 18:06
