Tech Lifts Hong Kong Stocks to Three-Month High | Bloomberg: The China Show 2/7/2025
>> GOOD MORNING. JUST HALF AN HOUR AWAY FROM THE OPENING BELL. YOU ARE WATCHING THE CHINA SHOW. >> ASIAN STOCKS ARE UNDER PRESSURE AS TRADERS SIFT THROUGH MIXED EARNING REPORTS. THE DOLLAR IS STEADY AS THE TREASURY SECRETARY SAYS HE FAVORS A STRONG CURRENCY. >> HE ALSO DEFENDED PRESIDENT TRUMP'S TARIFF PLAN, TELLING BLOOMBERG CHINA'S ECONOMY IS THE MOST UNBALANCED IN THE HISTORY OF THE WORLD.
>> I THINK CHINA NOW, GIVEN THEIR EXCESS CAPACITY WILL NO MATTER THE LEVEL OF THE TARIFFS AND UP EATING QUITE A BIT. >> AND WE HAVE MORE ON THE TRADE WAR JUST AHEAD WITH CHINESE RETAILERS NOW GETTING HIT BY DUTIES AND HONG KONG'S STATUS AS A GLOBAL FINANCIAL HUB FACING FRESH THREATS. >> GOOD MORNING. HOPE YOU ARE ALL WELL.
THE FINAL TRADING SESSION IS JUST A COUPLE MINUTES AWAY AND IN TERMS OF A LONGER-TERM CHANGE IN MOMENTUM. , FOUR WEEKS OF GAINS ALTHOUGH THE PRICE ACTION FOR TODAY GOING INTO THE OPEN, WE EXPECT THIS TO PERMEATE FOR THE FIRST FEW MINUTES AND ASIA-PACIFIC IS DOWN . LET'S WAIT FOR THIS TO GET WARMED UP BECAUSE THIS MIGHT HAVE SOME BEARING ON WHAT HAPPENS IN HONG KONG DEPENDING ON WHICH WAY WE OPEN. IT'S WORTH POINTING OUT WE ARE IN THE THICK OF EARNINGS SEASON. EUROPE HAD A SUBSTANTIALLY GOOD DAY YESTERDAY, UP 1% TO 3%, SO WE ARE DOWN ABOUT A THIRD OF A PERCENT. WE DID HIT A RECORD ON THE
BENCHMARK OVERNIGHT. QUICKLY, FX MARKETS. THE DOLLAR IS SOFTER, ALL THINGS EQUAL, FOR ABOUT A FOURTH STRAIGHT DAY. MARKETS MORE DOVISH. ALSO LOOKING AT DOLLAR-YEN. 151.28. WE ARE AT ABOUT THE STRONGEST LEVEL IN CLOSE TO TWO MONTHS ON DOLLAR-YEN. NOT MUCH TO TELL ABOUT AS FAR AS THE CHINESE CURRENCY.
IN COMMODITY MARKETS, THE RENIMBI LEVEL HAS BEEN LIKE WATCHING PAINT DRY. BRENT, A THIRD WEEK OF LOSSES. CERTAINLY A STOCK CONVERSATION AND CERTAINLY WILL BE THE TARIFF WEIGHING ON THE GROWTH OUTLOOK. THIS IS ONE COMMODITY WE DON'T TYPICALLY LOOK AT, MANGANESE. WE ARE UP 2.5% A MASSIVE DAY
YESTERDAY. A LOT OF THAT MIGHT HAVE TO DO WITH THE FACT WITH THE TARIFFS. WHEAT IS AT A HIGH AND RUBBER FUTURES ALSO SEEING A SUBSTANTIAL UPSIDE OF LATE. A LOT OF IDIOSYNCRATIC STORIES. IT'S REALLY ALL ABOUT TARIFFS, WHAT IT MEANS FOR THE GROWTH OUTLOOK. PARTICULAR WITH THE NEWS WE WERE TALKING ABOUT, SHIPMENTS FROM HONG KONG, KUMA LIMITING SOME OF THE SNEAKERS THEY ARE EXPORTING -- PUMA LIMITING SOME OF THE SNEAKERS THEY ARE EXPORTING.
>> THAT'S RIGHT. AND WE ARE STICKING WITH THIS THEME OF TARIFFS. SCOTT BESSENT HAS DEFENDED PRESIDENT TRUMP'S NEW TARIFFS ON CHINA. HE ALSO DISMISSED CONCERNS THAT THE LEVEES WILL BE INFLATIONARY FOR THE U.S., TELLING BLOOMBERG THAT CHINA WILL PAY THE HIGHER
PRICE. >> TAKE A LISTEN. >>>> CHINA IS THE MOST IMBALANCED, UNBALANCED ECONOMY IN THE HISTORY OF THE WORLD AND THEY ARE IN A DEEP RECESSION. THEY ARE EXPERIENCING DEFLATION AND THEY ARE TRYING TO EXPORT THEIR WAY OUT OF IT. AND WE CANNOT ALLOW THAT. WE WANT FAIR TRADE. AND PART OF THAT IS TAKING A
STRONG POSITION ON THE CURRENCY IN TERMS OF TRADE. >> WHAT ABOUT THE INFLATION CONCERNS STEMMING FROM THE TARIFFS AND TARIFF THREATS? >> I AM NOT SURE THAT -- WHERE THIS NARRATIVE THAT TARIFFS FOR THE COUNTRY PUTTING ON THE TARIFFS IS INFLATIONARY, THAT WE COULD HAVE A SMALL, ONE-TIME PRICE ADJUSTMENT THAT, AS WE SAW IN TRUMP 1.0, THAT THE D AND OTHER POLICIES -- THE DEREGULATION AND OTHER POLICIES, WE STAYED AROUND THE TARGET LEVEL, SO I'M UNCONCERNED ABOUT THAT. CHINA NOW, GIVEN ALL THEIR EXCESS CAPACITY, WILL, NO MATTER THE LEVEL OF THE TARIFFS, AND OF EATING QUITE A BIT -- END UP EATING QUITE A BIT. >> THERE'S UNCERTAINTY AROUND TARIFFS.
WE HAVE SEEN THEM THREATENED OR SIGNALED. IT APPEARS AS IF THIS ADMINISTRATION MIGHT BE UNFRIENDLY TO BUSINESSES. IS THAT RIGHT? >> I THINK IT IS THE OPPOSITE. I THINK THIS IS THE MOST
PRO-BUSINESS ADMINISTRATION IN HISTORY AND EVERYTHING WE ARE DOING IS GOING TO INCREASE THE AFTER-TAX RETURN ON CAPITAL AND, AS A RESULT, WORKING AMERICANS WILL HAVE HIGH REAL WAGE GROWTH, THAT WHAT WE HAVE SEEN OVER THE PAST FOUR YEARS IS THE GOVERNMENT AND GOVERNMENT ADJACENT SECTORS PROVIDING THE EMPLOYMENT GROWTH. AND WHY HAVE WE EXPERIENCED THIS AFFORDABILITY CRISIS? THERE WAS MASSIVE SPENDING MET WITH INCREASED REGULATION, WHICH CAUSED INFLATION, AND GOVERNMENT AND GOVERNMENT ADJACENT JOBS DO NOT CAUSE REAL WAGE GROWTH BECAUSE THEY ARE PEGGED TO CPI, SO IT WILL NOT ONLY BE BUSINESS FRIENDLY BUT FRIENDLY TO WORKING AMERICANS. DAVID: THAT WAS SCOTT BESSENT SPEAKING WITH OUR COLLEAGUE. REALLY ON THE BACK OF THE TARIFF CONVERSATION, IT'S ALSO MARKETS WERE ATTUNED TO HIS COMMENTS ON THE RELATIONSHIP THAT WE WILL LIKELY SEE. THAT'S AN OPEN QUESTION. YOU SEE THE TREASURY CURVE. I CAN TELL YOU THAT THE BREAKEVENS ARE STILL ABOUT 3% SO THAT MAYBE GOES INTO THE CONVERSATION ON HOW THE FED AND WE ALSO ASKED THE TREASURY SECRETARY ABOUT THEIR RELATIONS WITH THE FED. TAKE A LOOK.
>> WE ARE NOT FOCUSED ON WHETHER THE FED WILL CUT OR NOT CUT. WE ARE FOCUSED ON LOWERING RATES SO WE ARE LEFT FOCUS -- WE ARE LESS FOCUSED ON THAT. I MENTIONED THE 10 YEAR, I BELIEVE, IS AN IMPORTANT PRICE TO FOCUS ON. AND, LOOK, WITH THE PRESIDENT'S POLICIES OF ENERGY DOMINANCE, DEREGULATION AND NOT INFLATIONARY GROWTH, I THINK THAT THE 10 YEAR IS GOING TO NATURALLY COME DOWN.
>> HE'S THINKING OF THE IMPACT THAT THE FIVE AND 10 YEAR TREASURIES HAVE ON CONSUMER MARKETS, HOUSING MARKET AND IF YOU WERE ABLE TO BRING THOSE RATES DOWN, THEN CERTAINLY THAT WOULD PROVIDE FUEL TO THE ECONOMY. OF COURSE, THE FED HAS BEEN LOWERING INTEREST RATES. IT HAS NOT BEEN FEEDING THROUGH UNTIL THE PAST COUPLE OF WEEKS TO THE LONG END OF THE CURVE. BUT MY REACTION IN THE END IS, IN TERMS OF THE ADMINISTRATION SEEKING TO BRING, YOU KNOW, THE MID AND LONGER END OF THE CURVE DOWN, THAT'S EASIER SAID THAN DONE. IS NOT AN EASY PRESCRIPTION TO FOLLOW -- IT'S NOT AN EASY PRESCRIPTION TO FOLLOW. REBECCA: TELL US ALSO WHAT BESSENT SAID ABOUT THE TREASURY EMPLOYEES WORKING ON ELON MUSK'S GOVERNMENT EFFICIENCY TEAM AND WHETHER HE'S DONE ENOUGH TO ASSUAGE CONCERNS ABOUT THAT. MR. YOSHIDA: -- CHRISTOPHER:
THERE'S A LOT OF CONTROVERSY ABOUT THAT. HE STARTED BY SAYING THESE PEOPLE THAT ARE INVOLVED ARE NOW TREASURY EMPLOYEES AND THEY ARE INVOLVED IN WHAT HE CALLED SORT OF A PROCEDURAL OR OPERATIONAL REVIEW, NOT AN IDEOLOGICAL REVIEW. THEY STRESSED THEY HAD READ ONLY ACCESS TO THE SYSTEMS, MEANING THEY CANNOT CHANGE OR TINKER WITH IT AND HE INTERESTINGLY GOT HIMSELF INTO TROUBLE. HE PERSONALLY VOUCHED FOR THESE FOLKS. HE SAID THEY ARE HIGHLY TRAINED
PROFESSIONALS, NOT A ROVING BAND MESSING AROUND WITH GOVERNMENT SYSTEMS AND HE HAD PERSONALLY BEEN PART OF VETTING THESE PEOPLE. WITHIN HOURS, ONE OF THEM HAS RESIGNED. THE WALL STREET JOURNAL HAS REPORTED THAT ONE OF THESE INDIVIDUALS WHO WAS AT TREASURY HAS LINKS TO SOCIAL MEDIA ACCOUNTS THAT HAVE BEEN POSTING BLATANTLY RACIST AND HATEFUL THINGS AND THAT PERSON HAS NOW RESIGNED AT LEAST FROM D.O.G.E. SO THAT'S A BIT OF A SELF-INFLICTED EMBARRASSMENT FOR THE TREASURY SECRETARY. AND OF COURSE THERE IS NO SUGGESTED -- NO SUGGESTION HE KNEW ABOUT IT BUT IT IS AN IN VARIOUS MEANT. REBECCA:
BLOOMBERG'S CHRISTOPHER CONDO. STILL AHEAD, SOCIETY GENERALE JOINS US TO TALK ABOUT TARIFFS AND WHAT TRUMP AIMS TO ACHIEVE FROM THE TRADE WAR. AND WE ARE COUNTING DOWN TO THE OPEN OF TRADE AND SHANGHAI. THIS IS THE CHINA SHOW. ♪ REBECCA: A BUSY END TO THE WEEK. IT STARTED AS WE CAME BACK FROM ONSHORE TRADING MORE MUTED AND DOWNBEAT, BUT WE ARE NOW SEEING A RALLY COME BACK INTO THE HONG KONG STOCK MARKETS.
THERE WAS WHIPLASH THROUGH THE WEEK BUT IT LOOKS LIKE WE MAY BE HEADING FOR OUR FOURTH WEEK HIGHER. ON THE HSI, WE ARE NEARING THE 2100 LEVEL -- 21,000, EXCUSE ME -- YOU CAN WATCH. VERY HIGH MAINLAND TURNOVER IN STOCKS. ELSEWHERE, CORPORATE NEWS.
WE HAD YOUNG CHINA GAINING AS MUCH IS 10% IN U.S. TRADING OVERNIGHT ON THE BACK OF SOME STRONG EARNINGS RESULTS, STRONGER-THAN-EXPECTED COMPARABLE SALES, STRONGER RESTAURANT MARGINS, AND CHINA RENAISSANCE. CITING SOURCES HERE ABOUT THE FOUNDER AND CHAIRMAN OF CHINA RENAISSANCE. HE MAY FACE PROSECUTION FOR SUSPECTED BRIBERY. A LOT OF FOLKS WATCHING THAT.
WE HAVE NOT HEARD MUC ABOUT HIMH OR HAD CLARITY ABOUT HIS WHEREABOUTS THE LAST COUPLE YEARS. WE ARE NOW ALSO ENTERING THE WINDOW FOR QUITE A BIT OF DATA. THAT INCLUDES FOREIGN RESERVES DATA AND WE MIGHT SEE CPI NUMBERS COMING THROUGH ON SUNDAY AS WELL. DAVID:
SO DON'T CALL IT A WEEKEND UNLESS YOU COVER THIS ECONOMY. CGB, 137. THERE'S A 30 YEAR BOND SALE. 30 BILLION YUAN. IT'S FRIDAY. WE WILL GET THERE. THERE'S ALSO TARIFFS, WHICH WE HAVEN'T TALKED ABOUT YET.
THE HEAD OF RESEARCH AND CHIEF ECONOMIST OF AN ORGANIZATION IS HERE. NICE TO SEE YOU. WE WILL START WITH DONALD TRUMP'S FAVORITE WORD IN THE DICTIONARY. WHAT SCENARIOS HAVE YOU GAMED OUT ON TARIFFS AND HOW DOES THAT IMPACT THE SCENARIOS ON GROWTH IN CHINA? >> THIS WEEK SHOWED THERE'S A WIDER RANGE OF POSSIBLE SCENARIOS. BUT TO US THE SCENARIO REMAINS WE WILL HAVE A 20% TARIFF ON CHINA. IF CHINA IS WILLING TO
COOPERATE ON FENTANYL BUT EVENTUALLY THERE WILL BE A FOCUS ON THE RELATIONSHIP SO IT WILL BE HARD TO SEE THE U.S. WOULD NOT PUT ANY EXTRA TARIFFS ON CHINA. BUT IT'S NOT GOING TO BE THE 60% THREATENED BECAUSE THEY WOULD BE TOO MUCH OF A SHOCK. REBECCA: HOW IS THE PBOC GOING TO BALANCE DEFENDING THE CURRENCY VERSUS PROVIDING SUPPORT? >> WHAT HAS HAPPENED THIS WEEK IS GOOD NEWS FOR THE PBOC AS AN, YES, -- AS IN, YES, WE HAVE THE 10%. IT DOESN'T SHOW MAYBE IT'S NOT TOO DIFFICULT FOR THE PBOC TO MANAGE THEIR CURRENCY. IN EXTREME CASES, MAYBE MORE CHALLENGING BUT I THINK THE PBOC MAY STILL HAVE THE SCOPE BUT THE MORE IMPORTANT THING IS THE FISCAL SIDE. THE PBOC HAS DONE A LOT OF THE
JOB BUT WE ARE STILL WAITING FOR MARCH 5 TO SEE HOW BIG THE FISCAL BUDGET WILL BE AND I THINK BEIJING WILL DELIVER TO AN EXTENT. >> ONE MORE ON THE VOLUNTARY -- ON THE MONETARY POLICY. DO YOU THINK PBOC MONETARY POLICY IS BEING HIJACKED OR IS AT RISK OF BEING HIJACKED BY U.S. TARIFFS?
>> IT'S POSSIBLE. IF WE HAVE SERIOUS TARIFFS IT WOULD BE DIFFICULT FOR THE PBOC TO EASE. GIVEN THE DOLLAR IS SO STRONG ALREADY, YOU LOOK AT THE PATTERN IN THE REST OF THE REGION, MORE CENTRAL BANKS ARE GOING WE WILL JUST EASE. I THICK THE PBOC WILL HAVE SOME SCOPE -- I THINK THE PBOC WILL HAVE SOME SCOPE THIS YEAR. DAVID: ON THE FISCAL FRONT, BEING HIJACKED, TYPICALLY THEY COME OUT WITH A BUDGET DEFICIT TARGET AND THAT IS IT. DO YOU THINK THERE MIGHT BE SCOPE TO COME UP WITH A HIGHER NUMBER JUST IN CASE? >> I THINK IT'S QUITE POSSIBLE. OUR VIEW IS THAT, YES, THE
DEFICIT WILL BE BIGGER. THE COULD BE CLOSE TO 4% OR EVEN HIGHER -- IT COULD BE CLOSE TO 4% OR EVEN HIGHER. AND WHAT WILL BE THE QUOTA FOR THE SPECIAL CGB? LAST YEAR THIS STARTED TO BECOME A NEW TOOL ON TOPPING UP THE FISCAL PUNCH. THIS YEAR I THINK IT WILL BE
EVEN MORE. WE ARE LOOKING FOR 2 TRILLION RENIMBI IN CGB THIS YEAR. HOW ARE THEY GOING TO EASE -- THEY ANNOUNCED HOW THEY ARE GOING TO HELP LOCAL GOVERNMENTS EASE THEIR DEBT BURDEN. THIS WILL BE MORE MEANINGFUL, MORE MATERIAL, BECAUSE LOCAL GOVERNMENTS CAN WORRY LESS ABOUT DELEVERAGING. REBECCA:
I WANT TO ASK ABOUT THE DEFLATION STORY. HOW WORRIED ARE YOU ABOUT DEFLATION AND IS YOUR BASE CASE ENOUGH TO START COMBATING, CHANGING THE NARRATIVE HERE? >> WE THINK SO. WE DO EXPECT CHINA'S INFLATION TO GRADUALLY PICK UP. WE THINK NOMINAL GROWTH WILL BE BETTER THIS YEAR DESPITE THE TARIFFS. RIGHT NOW, WE ARE FOCUSING ON THE UNPLEASANT SIDE OF THE CURVE, BUT TO ME, THERE'S A SILVER LINING, WHICH AS YOU FINALLY PUSH THE CHINESE GOVERNMENT TO DO THE RIGHT THING, WHICH IS SUPPORTED DOMESTIC MARKET. THERE'S NO COUNTRY IN THE WORLD THAT CAN ABSORB CHINA'S SUPPLY BETTER THAN CHINA ITSELF. DAVID: THAT TAKES US TO POTENTIAL
GREEN SHOOTS. ARE YOU SEEING ANY, WHETHER THAT'S IN FIRST-TIER CITIES ON THE PROPERTY SIDE, OR ANY HIGH-FREQUENCY DATA WE MANAGED TO GET A GLIMPSE OF FROM THE LUNAR KNEW YOUR HOLIDAY? >> IT IS OK TO DECENT. IT SEEMS THAT THE HOUSING SALES MOMENTUM AND TOP-TIER CITIES HAS SUSTAINED SO THAT WILL BE VERY GOOD FOR CONSUMPTION IF IT CONTINUES THIS WAY. I THINK THERE ARE SMALL THINGS COMPARED TO THE MAC ROAD, BUT -- THE MACRO, BUT DEEPSEEK, YOU CAN SEE SOME MARKETS WERE RESPONDING THAT WAY. THIS WILL ALL PLAY OUT. CHINA CAN DO BETTER THIS YEAR. DAVID: REBECCA:
QUICKLY -- REBECCA: QUICKLY, JUST TO END, DURING THE FIRST TRAY BORE, MANY ASIAN COUNTRIES WERE BENEFICIARIES -- FIRST TRADE WAR, MANY ASIAN COUNTRIES WERE BENEFICIARIES. WHAT ARE YOU EXPECTING AND TO WHAT EXTENT CAN WE GAME THIS OUT? I KNOW PART OF WHAT YOUR NOTE IS AND WHAT MANY HAVE TALKED ABOUT IS THE UNCERTAINTY ELEMENT. >> THIS TO ME IS A MORE IMPORTANT QUESTION THIS TIME AROUND. NOT JUST THE NARROW SCOPE AROUND WHAT WILL HAPPEN TO CHINA. THE MORE IMPORTANT QUESTION IS WHAT'S GOING TO HAPPEN IT SOUTHEAST ASIAN ECONOMIES IN TERMS OF THEIR RELIANCE ON THE U.S. DEMAND AND CHINA SUPPLY. IT GOES DOWN TO THIS QUESTION THAT INCREASINGLY PEOPLE ARE LOOKING AT, WHAT DOES THE U.S.
GOVERNMENT REALLY WANT, OR WHAT DOES THE TRUMP ADMINISTRATION REALLY WANT? DO THEY REALLY WANT TO NARROW THE DEFICIT AND THEY NEED TO LEVY TARIFFS ON EVERYBODY OR PUSH FOR FURTHER DECOUPLING WITH CHINA? THEN THEY NEED TO FOCUS ON COMPANIES THAT RELY ON CHINA. WHATEVER GOAL, IT SEEMS OTHER COUNTRIES WILL GET TARIFFS TOO. DAVID: THOSE ARE IMPORTANT QUESTIONS. YOU CANNOT HAVE YOUR CAKE AND EAT IT TOO AT SOME POINT. HAVE A GOOD WEEKEND. THANK YOU.
GOING INTO THE OPEN, NOT AS BAD AS FUTURES HAD SUGGESTED. STILL SOME DOWNSIDE ACROSS YOUR SCREENS ALTHOUGH WE ARE STILL ON TRACK, BROADLY SPEAKING, TO END THE WEEK I A FOURTH WEEK. PLENTY MORE AHEAD. THIS IS BLOOMBERG. REBECCA: A HANDFUL OF NAMES THAT WE ARE WATCHING FOR MOVEMENT TODAY. WE WILL KICKOFF WITH CHINA RENAISSANCE. THAT'S OFF THE BACK OF A TYSON
REPORT CITING SOURCES SAYING THE CEO COULD BE FACING PROSECUTION FOR BRIBERY. A VERY HIGH PROFILE BANKER IN MAINLAND CHINA. YUM CHINA ALSO IN FOCUS, UP 4.45%, CATCHING UP WITH THE GAINS WE SAW IN THE U.S. ON THE BACK OF THIS ROBUST
EARNINGS BEATS COMING IN, PARTICULARLY ON EXPECTED COMPARABLE SALES. LI AUTO HAD AN UPGRADE. DAVID: UPGRADED TO OUTPERFORM IN HONG KONG. PUT TOGETHER, A MARKET THAT'S DONE WELL. THE HANG SENG TECH INDEX IS ON
THE OF A BULL MARKET. AND OTHERS HAVE COME BACK IN A BIG WAY FOR THE FIRST TIME IN SEVERAL WEEKS. 1.5 TRILLION IN TRADED VALUE.
REBECCA: WELCOME BACK. YOU ARE WATCHING THE CHINA SHOW. GOOD MORNING. HAPPY FRIDAY. WE ARE COUNTING DOWN TO THE OPEN OF MARKETS. WE HAD A BIT OF WHIPLASH. IT DOES LOOK IN HONG KONG WE'RE TURNING MORE TO THE UPSIDE. DAVID: THE MARKETS GOT A SCARE GOING INTO FROM THE YOU HAVE TO LOOK FURTHER BACK TO THE U.S.
ELECTION AND YOU HAD THE DOWNDRAFT INTO THE NEW YEAR AND THIS RECENT MOMENTUM WE'VE SEEN OVER THE LAST FOUR WEEKS HAS NOW TAKEN -- THE HANG SENG TECH INDEXES ON THE VERGE OF A BULL MARKET. VERY CLOSE TO THAT AS WELL. THERE IS AN A.I. THEME THAT HAS EMERGED AS AN OFFSET TO THE WEAKNESS OUT THERE. JUST IN CASE YOU ARE JUST LEARNING ABOUT THE RALLY, IN CASE YOU MISSED THAT, SORRY. A LOT OF PEOPLE MISSED IT.
THE STOCK HAS EFFECTIVELY TRIPLED I THINK SINCE THE LOW OF LAST YEAR. GOING INTO THE OPENING TODAY, FLIP THE BOARDS, PLEASE. WE ARE LOOKING AT SOME WEAKNESS. ALTHOUGH, WHEN YOU LOOK UNDERNEATH THE HOOD ON THE CSI 300, TURNOVER TOPPING 1.5 TRILLION RENMINBI ON THURSDAY WHICH WAS EFFECTIVELY THE HIGHEST GOING BACK TO ABOUT EARLY DECEMBER IF NOT MID-NOVEMBER.
THAT BEING SAID, OF COURSE THE MARKET HAS BEEN SHOT. SO MAYBE THERE IS PENT-UP BUYING TAKING PLACE. BOND ACTIONS TODAY, ONE AND 20 YEAR -- 30 YEAR BONDS ON DECK TODAY. THE LEVEL 5066 ON THE AT THESE LEVELS, FLIRTING WITH THAT EXACT LEVEL RIGHT NOW SHOULD PUT IS VERY MUCH ON TRACK, ASSUMING THE MARKET CLOSES RIGHT NOW TO ENTER A BULL MARKET BY THE CLOSE TODAY. WE ARE GETTING A WEAKNESS COMING THROUGH ACROSS HONG KONG MARKETS, ACROSS A BIG TECH NAMES, BOTTOM OF YOUR SCREENS. CHANGE THE PAGE, PLEASE.
SO, COUPLE THINGS REBECCA WAS TELLING ABOUT, CHINA RENAISSANCE, TWO STORIES. ONE IS BASED ON REPORTS OUT OF TATIAN CONCERNING -- MIGHT , BRIBERY CHARGES MIGHT BE ON DECK. THAT'S NUMBER ONE. NUMBER TWO IS WE DO UNDERSTAND THAT THERE ARE SOME POTENTIAL BUYERS HERE FOR THE BUSINESS. YOUNG CHINA IS AN EARLY START. SALES BEATING ESTIMATE.
BOOSTED THE DIVIDEND BY 50%. THE STOCK IS UP AS MUCH IS 10% OVERNIGHT. LI AUTO IT IS AN UPGRADE STORY FROM A CORY -- FROM MCCORD. ROBOTICS TIDE STOCKS PARING SOME OF THE GAINS. SPEAKING OF MOMENTUM, THE HONG KONG BENCHMARKS, LET'S LOOK AT THAT IF WE CAN, WITH THE HANG SENG TECH INDEX UP 20% FROM THE JANUARY 14 LOW.
SO, MOMENTUM HAS RETURNED TO HONG KONG MARKETS. THREE BENCHMARKS AND THE 14 RSI FOR ALL THREE AT ABOUT THE 7.2 LEVEL. WHICH IS A GOOD LINE IN THE SAND. REBECCA: WE GOT SOMEWHERE PERFECT. LET'S BRING IN WENT TO LOU, THE CHIEF CHINA EQUITY STRATEGIST AT JP MORGAN. JUST WANT TO STAY IN THAT TEAM OF TECH. LET'S TALK ABOUT A.I.
FIRST. HOW MUCH OF THIS IS TRULY A FUNDAMENTAL SORT OF OFFSET TO SOME OF THE TARIFF WEAKNESS THAT WE ARE SEEING, NOT NECESSARILY JUST OF A.I. BUT ALL OF THE A.I.-ADJACENT INDUSTRIES AND SECTORS. >> SOME OF THE A.I.-ADJACENT SECTORS ARE ALSO MORE IN SCOPE FOR POTENTIAL SANCTIONS. I THINK AT THIS POINT, PEOPLE
ARE JUST QUITE EXCITED ABOUT THE DEVELOPMENT THAT THERE ARE MORE SECTORS THAT COULD BE INVESTED BEYOND COMPUTING. YOU ARE SEEING THESE INNOVATIONS AND VERTICAL APPLICATIONS IN HUMANOID ROBOTS AND ACCORDING TO ANALYSTS, THIS WILL HELP BIOTECH IN TERMS OF DIAGNOSIS AND DRUG DISCOVERY. I THINK YOU WILL SEE A BROADER RANGE OF COMPANIES IN THE SEMI CONDUCTOR AND ELECTRONICS AND THEN ALSO -- I THINK THIS IS SORT OF CHEAP VALUATION VIS-À-VIS WHAT'S AVAILABLE ELSEWHERE. AND THEN A NEW SORT OF GROWTH. DAVID: DO WE KNOW ENOUGH ABOUT THE A.I. STORY TO FIGURE OUT WHICH SPECIFIC SECTORS OR GROUP OF NAMES MIGHT BENEFIT? BECAUSE PEOPLE SEEM TO BE BUYING FIRST AND ASKING QUESTIONS LATER. WENDY: YEAH, I THINK IT WAS COMPUTING.
YOU KNOW, THE COMPUTING SORT OF ECOSYSTEM, COOLING, OPTICAL COMPONENTS BECAUSE THE INITIAL DRIVE IS ABOUT BUILDING INFRA, BECAUSE YOU HAVE APPS COMING HERE MAKING IT EASIER FOR PEOPLE TO USE. THE LIKE OF YOU KNOW BETTER APPS ARE REALLY THE DATA INFRASTRUCTURE THAT ENABLE BROADER ADOPTION. AND SO, ON TOP OF THAT, YOU WILL HAVE RETAIL, YOU HAVE ENTERPRISES, INCREASING USAGE, SO THAT IS GOOD FOR CLOUD, THAT IS GOOD FOR SOFTWARE APPLICATION.
THAT IS GOOD FOR EDGE. REPLACEMENT CYCLES ARE PROBABLY GOING TO GET BETTER AND YOU WILL HAVE MORE WORK. THE INTERNET OF THINGS, NETWORK OF THINGS, HAVING TO DEPLOY MORE SEMI CONDUCTORS. AND THEN VERTICAL CATEGORY KILLERS. SO, JUST LIKE THE INTERNET,
BROADBAND, OVERTIME, MOVED INTO MOBILE, INTERNET. THERE IS A LOT MORE COMPANIES TO INVEST IN. REBECCA: THERE MAY BE AN ARC MEANT TO BE MADE PARTLY FROM WHAT WE HAVE SEEN THIS WEEK WITH UNEVEN TRADING AND THE WHIPLASH AROUND FOR EXAMPLE THE USPS SUSPENSION, BAN, WILL THEY, WON'T THEY? SOME OF THE A.I. NEWS OFFSETTING THE TARIFFS, BACK AND FORTH ON CANADA. I WANT TO ASK ABOUT WHETHER OR NOT IT IS STILL POSSIBLE TO SORT OF TRADE INDICES. DO YOU ACTUALLY HAVE TO BE A
STOCK PICKER TO DO WELL IN 2025? WENDY: I WOULD AGREE. I THINK THE MEDICAL -- THEMATIC WILL-- BECAUSE THERE IS SO MUCH NOISE. PEOPLE HAD A RELIEF RALLY AFTER THE ELECTION. NOW I THINK THE MARKET IS
TRYING TO ASSESS, IS THIS A RE-ESCALATION WHICH A LOT OF PEOPLE THINK IT IS? IS THIS A STANDOFF, STANDIFORD BEEN CONSOLIDATION. BUT THEN THE SAFER GROUND APPEARS TO BE A.I. WHERE THERE IS STRUCTURAL GROWTH. REBECCA:
AND EVEN WITHIN INFORMATICS, DO YOU HAVE TO SHIFT YOUR STRATEGY? ALUMINA TOOK SOME BY SURPRISE. THEY ARE NAMES THAT ARE BEING CAUGHT UP, WHAT UNEXPECTEDLY -- SOMEWHAT UNEXPECTEDLY WHEN THE THEMES ARE DOING QUITE WELL. WENDY: I CAN'T COMMENT ON SINGLE STOCKS BUT I GO BACK TO YOU EARLIER POINT, IT REQUIRES A LITTLE BIT MORE FUNDAMENTAL STUDY INTO SINGLE STOCKS TO UNDERSTAND WHERE THE RISKS ARE. AND I THINK TO THE DEGREE THAT A LOT OF THE STOCKS HAVE BEEN OVERSOLD, WE DO SEE SOME INTEREST COMING BACK TO THE INVESTORS AND THEY SAY IT'S PRICED IN ALREADY.
AND WE ALSO SEE CAUTION BECAUSE, YOU KNOW 2.0 WE LEARN FROM 1.0 THAT THERE COULD BE A LOT OF SURPRISES. AND THEN CHINA IS DIFFERENT FROM MEXICO. AND CANADA. THE DEAL. WILL BE MORE COMPLEX SO, IT IS GOING TO TAKE MORE TIME. SO, WE DO THINK THIS YOU KNOW, AND EVEN PHASE WILL LAST AT LEAST INTO MARCH WHERE WE GET A LITTLE BIT MORE VISIBILITY FROM THE MPC. DAVID:
I GUESS TO YOUR POINT, THE FUNDAMENTAL QUESTION, THE INTERSECTION BETWEEN TARIFFS AND THE MEDICS IS REALLY WHAT THE EARNINGS EXPOSURE IS -- AND THEMATIC'S IS REALLY WHAT THE EARNINGS EXPOSURE IS. WHAT HAPPENS, WHAT ARE THE BENCHMARKS THAT ARE MOST EXPOSED? WENDY: WE DID SOME SENSITIVITY STUDY. SO, YOU KNOW, 1.5% OF THE GDP GOT HIT DUE TO TARIFFS. BUT WE WILL SEE A LOW SINGLE-DIGIT IMPACT ON THE CSI 300 EARNINGS IN 2025.
IT IS NOT A HIGH NUMBER. IT'S 1% TO 2%, BECAUSE THESE TWO INDICES ON THE FIRST ORDER OF IMPACT BASIS DON'T HAVE HUGE EXPOSURE TO EXPORT TOMSCI CHINA IS 4%, GENERAL ECONOMY 19. BUT SMALL, MID CAPS, THEY HAVE HIGHER EXPOSURE, 15, 16, 18% DEPENDING ON THE INDEX.
SO, THEY WOULD BE HIT A LITTLE BIT HARDER, BUT IN THESE KIND OF MARKETS, IT IS THEMATICS. SURPRISINGLY. REBECCA: YOU JUST MENTIONED MARCH MEETINGS. MPC IS GOING TO BE A VERY IMPORTANT MOMENT FOR INVESTORS. WHAT DO YOU THINK, I MEAN, ASSUMING BEIJING DELIVERS ENOUGH SUPPORT TO OFFSET WHATEVER THE COST IS OF TARIFFS WHICH SO FAR ARE RELATIVELY LOW, WHAT IS IT THAT INVESTORS NEED TO SEE IN ORDER TO SEE SUSTAINED MOMENTUM, PARTICULARLY WHEN IT COMES TO ONSHORE AND OFFSHORE CHINA STOCKS? WENDY: I THINK TO FINISH OUT DAVID'S EARLIER QUESTION, IN THESE MARKETS, IT IS THE MULTIPLES, IT IS LESS ABOUT THE EARNINGS. AND THE RE-ESCALATION PHASE,
MULTIPLES WILL COMPRESS MORE THAN THE EARLY -- COMING BACK TO YOUR QUESTION, REBECCA, I THINK PEOPLE DO WANT TO HAVE A SENSE OF WHERE THE TRADE TENSIONS WILL END UP BEING, OK, BECAUSE THAT IS THE BIGGEST OVERHANG. THE PREFERENCE IS TO SEE MORE CONSUMPTION STIMULUS, WHICH WE SEE IN SMALL PIECES, BUT NOT IN THE BIG ONE. AND THEN, WHAT WILL HELP ON THE SINGLE STOCK BASIS IS EARNINGS COMING THROUGH LIKE YOU DESCRIBED.
SO, CONSENSUS EARNINGS ON MSCI CHINA FOR 2024 WAS ORIGINALLY 14 NOW IT'S 16 AND CHANGE. SO IF YOU COULD ACTUALLY HIT THAT NUMBER, I THINK IT WILL BE MORE CONFIDENT IN TERMS OF THE SINGLE STOCK INVESTABILITY, YEAH. WE WILL KNOW BY THE END OF MARCH, EARLY APRIL. DAVID: IT IS WORTH POINTING OUT WE HAVE REALLY HIT THAT NUMBER FROM THE START OF THE YEAR THE CONSENSUS GROWTH NUMBER BY THE TIME WE GET TO THE END OF THE YEAR. TELL ME THIS, THEN. WHERE ARE WE LIKELY TO SEE THE
BIGGEST EARNINGS REVISIONS FROM THIS POINT IN TIME, IN WHICH SECTORS? WENDY: THERE ARE TWO SECTORS THAT HAVE BEEN VERY DEPRESSED. WE LOOK AT HOW MUCH THE SUBSECTORS HAVE FALLEN SINCE 2020-21, TWO SECTORS, PROPERTY AND HEALTHCARE. WE PUT THEM ON NEUTRAL AT THIS POINT IN TIME. THE BEST SECTOR HAS BEEN ENERGY. SO, I THINK WE HAD A THREE-YEAR DOWN CYCLE IN TERMS OF EARNINGS FOR CHINA FROM 2021 TO 2023.
AND 2023 EVENTUALLY TURNED AND 2024 IS PICKING UP ON THE MACRO DATA SINCE SEPTEMBER WE SEE A GROWTH MOMENTUM IMPROVING, NOT EXACTLY TO THE GROWTH STAGE BUT IN THE RECOVERY STAGE. AND GENERALLY THERE IS A SPRING SPURT. SO ARE WAITING TO SEE IF THIS IS THE SAME THIS YEAR. I WOULD THINK GROWTH -- IN CYCLICALS IS WHERE THE EARNINGS WILL BE COMING THROUGH A LITTLE BIT MORE. SO, WE STARTED OVERWEIGHT INDUSTRIAL AND MATERIALS. AND WE HAVE BEEN OVERWEIGHT I.T. AND UTILITIES AND ENERGY ARE
NEUTRAL. I THINK THE BARBELL STRATEGY IS THE WAY TO GO DURING THESE CHOPPY TIMES. YEAH? AND THEMATIC WILL HELP. DAVID: WHAT ABOUT THE OTHER SIDE THAT HAS BECOME, WELL, AT LEAST IT HAS BEEN, IT IS REWARDED -- WHICH IS THE DIVIDEND OR THE INCOME STRATEGIES? WHAT HAPPENS TO THAT TRADE? WENDY: IF WE LOOK AT THE BEST-PERFORMING SECTOR SINCE 2021 THEY HAVE BEEN VALUE INCOME SECTORS, UTILITIES, ENERGY, FINANCIAL AND THESE ARE BIG DIVIDEND PAYERS. AND THEY HAVE READY BUYERS FROM THE LIFERS AND INCOME FUNDS. AND THE LIFERS TEND TO PUT MORE MONEY INTO THE STOCKS IN Q1. SO, I THINK FROM A SEASONALITY
PERSPECTIVE, THAT IS PRETTY FAVORABLE. AND PARTICULARLY FOR THE OFFSHORE, THE -- IS ALSO HIGHER THAN ONSHORE. I THINK FOR DIFFERENT INVESTORS AND DIFFERENT BUYERS, AND THEREFORE, PART OF THE BARBELL CONTINUES TO BE THE DIVIDEND PAYING, YOU KNOW, QUALITY VALUE. DAVID: WENDY, THANK YOU SO MUCH. NICE TO SEE YOU. HAVE A GREAT REST OF THE YEAR. THE CHIEF CHINA EQUITY STRATEGIST AT J.P. MORGAN. THAT IS INDUSTRIALS, MATERIALS,
THE I.T. PLAYS THAT ARE SORT OF LEADING THAT SORT OF SECTOR. SPEAKING OF I.T. YEP, WE ARE ON TRACK TO ENTER A BULL MARKET ON THE HANG SENG TECH INDEX. COMING UP ON SHOW CHINESE RETAILERS ARE FEELING THE IMPACT OF TARIFFS ALREADY. WE GET TO THE DETAILS. JUST AHEAD. HAPPY FRIDAY.
THIS IS THE CHINA SHOW. ♪ REBECCA: TIME NOW FOR A LOOK AT WHAT IS TRENDING IN CHINA. AND A LOOK AT WHAT IS MAKING THE HEADLINES IN NATIONAL NEWSPAPERS.
AFTER USPS BOUGHT BACK ON AN -- WALKED BACK TO AN EARLIER DECISION TO HALT SOME SHIPMENTS FROM CHINA AND HONG KONG, AN EDITORIAL IN THE GLOBAL TIME SAYS THE U-TURN NOT ONLY REVEALS CONTRADICTIONS FROM WASHINGTON BUT HIGHLIGHTS THE RESILIENCE OF U.S.-CHINA TRADE RELATIONS. DAVID: THE PIECE POINTS OUT THAT SMALL PARCELS CAN CONTAIN DAILY NECESSITIES FOR AMERICAN HOUSEHOLDS AND BUSINESSES, THE ONES BEARING THE BRUNT OF THESE TARIFF POLICIES AND THAT IS SOMETHING THAT OFFICIALS ARTIFICIALLY ECHOING. >> THE UNITED STATES RECENTLY IMPOSED A 10% TARIFF ON CHINESE PRODUCTS EXPORTED TO THE UNITED STATES AND ADJUSTED THE TAX FREE POLICY ON SMALL VALUE PARCELS. THIS WILL INCREASE THE CONSUMPTION COSTS OF AMERICAN CONSUMERS AND UNDERMINE THE SHOPPING EXPERIENCE. DAVID: YEAH, AND THAT WAS THE CHINESE MINISTER OF COMMERCE JUST THERE REACTING TO TARIFFS IN CHINA. RETAILS ARE ALREADY FEELING THE
PINCH HERE. AGENTS HAVE ASKED THEM TO PAY AN ADDITIONAL 30% LEVY ON GOODS HEADING TO THE U.S. FROM CHINA AND HONG KONG. FOR MORE ON THIS, LET'S BRING
IN OUR CHINA CORRESPONDENT TO TALK US THROUGH WE ARE SEEING. THEY ARE GETTING SQUEEZED ALREADY. >> YEAH. [INAUDIBLE] BY THE LOGISTIC AGENTS TO PAY THE ADDITIONAL LEVIES, A DEPOSIT, AND THEN THEY HAVE TO TOP OFF OR HAVE THE DEPOSIT RETURNS DEPENDING ON THE ACTION. DAVID: OK, I THINK WE HAVE SOME ISSUES WITH THE MIC. SHE'S NOT BLUFFING. SHE IS IN FACT TALKING.
WE WILL GET THAT SORTED RIGHT NOW. LET'S HEAD TO A BREAK AS WE SORT OUT THESE TECH GREMLINS NOW. LEAVE YOU WITH A LOOK AT THESE MARKETS AND WE ARE ON TRACK STILL TO ENTERA. A BEAUTIFUL MORNING THIS FRIDAY. THIS IS BLOOMBERG. REBECCA: HERE ARE SOME OF THE TOP CORPORATE STORIES WE ARE FOLLOWING TODAY.
TYSON IS REPORTING THAT THE EX- CHAIRMAN OF CHINA RENAISSANCE MAY FACE PROSECUTIONS FOR SUSPECTED BRIBERY. THE OUTLET QUOTES SOURCES SAYING THE INVESTIGATION LEANS TO A FORMER EXECUTIVE AT ICBC WHO WAS PAID A SIGN ON BONUS OF $2.9 MILLION. WHEN HE WAS HIRED BY BAOI. BAO FAN WAS TAKEN AWAY BY AUTHORITIES TWO YEARS AGO AND TYSON SAYS THAT CHINA RENAISSANCE IS SEEING INTEREST FROM POTENTIAL BUYERS. REPUBLICAN ATTORNEY GENERALS FROM MORE THAN A DOZEN U.S. STATES ARE LOOKING AT THE
CHINESE INVESTMENTS OF LARGE ASSET MANAGERS. THE INSTITUTIONS INCLUDE BLACKROCK, JP MORGAN, GOLDMAN SACHS, AND MORGAN STANLEY. IN A LETTER, STATE OFFICIALS SPELL OUT THE RISKS OF TARIFF AND INVESTMENT RESOURCES ON CHINA AS WELL AS THE INVASION OF TAIWAN. PUMA SAYS IT HAS SHIPPED FEWER CHINESE MADE SNEAKERS TO THE U.S., RELYING INSTEAD ON SUPPLIES FROM VIETNAM AND
INDONESIA. AS THE TRADE WAR WITH CHINA HEATS UP. THE GERMAN COMPANY SAYS IT IS NOW SOURCING ONLY ABOUT 10% OF ITS U.S. SHOE IMPORTS FROM CHINA, DOWN FROM 30%. AND CHINESE RETAILERS ARE ALREADY FEELING THE PAIN OF TARIFFS DAVID: HERE WE GO. WHO'S ON CAMERA?
TO TELL US ABOUT THE STORY, THAT THESE RETAILERS AND THESE PLATFORMS ARE BEING ASKED HOW MUCH DEPOSIT? >> 30%. A LOGISTICS AGENT WILL PAY 30% DEPOSIT, THEY WILL HAVE TO TOP OFF OR HAVE IT RETURN TO THEM DEPENDING ON THE CHARTER FROM THE U.S. CUSTOMERS AFTER THE U.S. POSTAL SERVICE HAD FLIP-FLOPPED ON THEIR POLICY ON WHETHER TO ACCEPT PARCELS OF FROM CHINA AND HONG KONG, THE REVERSE THAT NOW SAYING THAT THEY WILL FIND A MORE EFFICIENT WAY TO COLLECT THOSE TARIFFS, BUT THEN YOU HAVE THE HONG KONG POST SAYING THEY ARE NOT ACCEPTING PARCELS THAT ARE BEING SENT TO THE U.S. BECAUSE THEY ARE IN TALKS WITH
THE U.S. POSTAL SERVICE, CLARIFYING CERTAIN ISSUES. EITHER WAY THERE IS GOING TO BE SOME DISRUPTION TO THE POST. THE QUESTION IS HOW LONG? AND THAT IS WHAT RETAILERS ARE MOST WORRIED ABOUT, ESPECIALLY SMALL BUSINESSES. THEY ARE WORKING VERY HARD TO PROTECT THEIR REPUTATION WITH CONSUMERS, AND ALSO AT THE FACTORIES, THEY COULD BE WRITTEN AT RISK OF CLOSURE IF THERE IS ANY HALT TO THESE DELIVERIES BECAUSE THEY ARE OPERATING ON VERY RAZOR THIN MARGINS, THEY DO NOT HAVE A LOT OF ROOM TO LOWER PRICES FURTHER. WHICH MEANS U.S. CONSUMERS WILL LIKELY HAVE TO BEAR THE BRUNT OF ANY PRICE INCREASES AND ESPECIALLY THIS IS GOING TO BE ACUTE FOR THOSE LOW VALUE GOODS LIKE SOCKS, FASHION ACCESSORIES THAT ARE BEING SOLD. THERE ESTIMATED THAT CHINA HAD
SENT $46 BILLION WORTH OF THESE GOODS, SMALL PARCELS, EACH VALUED AT LESS THAN $800 LAST YEAR. AND, OF COURSE, THESE PARCELS USE TO BE EXEMPTED FROM ANY CUSTOMS DUTY BECAUSE OF THAT RULE, AND NOW THAT IS BEING REVOKED BY TRUMP. AND NUMURA SAYS IT COULD COST CHINA 1.3% OF ITS EXPORTS TO GROWTH AND 0.2% OF ITS GDP. PRETTY SIGNIFICANT, GIVEN THAT CHINA SENT ABOUT, THESE SMALL PARCELS MAKE ABOUT 11% OF CHINA'S EXPORTS TO THE U.S. REBECCA: AND YOU MENTIONED THE HONG KONG POSTAL SERVICES THERE AS WELL, BUT IT IS NOT THE ONLY WAY THAT HONG KONG IS BEING CAUGHT IN THE CROSS HAIRS U.S.
AND CHINA HERE. THE ANXIETY IS THAT A LOT OF BUSINESS HAVE ALWAYS FELT IS THAT THAT HONG KONG APPEARS TO BE GETTING LUMPED IN WITH CHINA WHEN IT COMES TO POLICYMAKING. JUST TELL US HOW THAT SORT OF RISK IN HONG KONG STATUS AS A FINANCIAL HUB/ >> I'M SURE YOU KNOW VERY MUCH ABOUT THAT BECAUSE YOU COWROTE THAT STORY. REBECCA: PLEASE TELL ME ABOUT THE STORY I WROTE EARLIER TODAY.
>> PRESIDENT TEMP YOU RECALL HIS FIRST TERM IN OFFICE IN 2020, HE ENDED PREFERENTIAL TREATMENT FOR HONG KONG WHEN IT COMES TO ECONOMIC TREATMENT. WHAT THIS MEANS IS THAT THOSE 10% TARIFFS IMPOSED ON CHINESE GOODS FOR THE FIRST TIME, THEY ALSO APPLY TO HONG KONG GOODS AS WELL BUT FOR NOW, ECONOMISTS ARE SAYING DON'T PANIC BECAUSE THE TARIFFS APPLIED TO GOODS MANUFACTURED -- THAT APPLIES TO 1.3% OF HONG KONG'S EXPORTS TO THE U.S. THINGS LIKE JEWELRY, METALS, GOLD BECAUSE THE BULK OF HONG KONG'S EXPORTS CONSISTS OF THESE RE-EXPORTS FROM OTHER COUNTRIES.
SO THAT IS A GOOD THING. BUT THERE IS A PSYCHOLOGICAL IMPACT BECAUSE YOU LOOK AT COMPANIES LIKE HUTCHINSON'S WHICH OPERATES AT TWO OF FIVE PORTS IN THE PANAMA CANAL TARGETED BY THE U.S. COMPANIES LOOKING AT THAT CASE WILL HAVE TO THINK TWICE ABOUT INVESTING OVERSEAS, ESPECIALLY IN STRATEGIC SECTORS THAT COULD POTENTIALLY COME UNDER FIRE FROM THE U.S. ADMINISTRATION AS WELFARE AND
SO, ALL OF THESE ADDING TOGETHER YOU MENTIONED THE POSTAL SERVICE DISRUPTION. THEY REALLY THREATENED TO RUIN HONG KONG'S REPUTATION AS A STABLE BUSINESS HUB, THE CONNECTOR BETWEEN MAINLAND CHINA AND THE REST OF THE WORLD ESPECIALLY WHEN THESE POLICY DIFFERENCES BETWEEN MAINLAND CHINA AND HONG KONG STARTS TO ERODE OVER TIME. DAVID: THANK YOU SO MUCH. OUR CHINA CORRESPONDENT THERE. REBECCA, YOU AND I, WE COVERED
SOME OF THESE -- IT WAS A VERY BUSINESS CONFERENCE MONTH IN JANUARY. THE NOTION THAT HONG KONG MIGHT NEED TO DO BOARD TO GET OUT THE MESSAGE WHILE IT IS -- IT AN INTERNATIONAL HUB, THAT THEY WANT TO PUT FORWARD. THEY MIGHT HAVE TO DELINEATE FURTHER THERE IN TERMS OF THE POLICY MESSAGING. REBECCA: I SPOKE TO REGINA IPP AND DAVOS, AND WE TALKED PRECISELY ABOUT THIS.
SHE SAYS THAT HONG NEEDS TO DO MORE, OUGHT TO DO MORE TO DIFFERENTIATE ITSELF FROM MAINLAND CHINA. ACTUALLY THIS IS SOMETHING THAT PRESENT XI -- PRESIDENT XI HAS ADDRESSED PREVIOUSLY DURING HIS SPEECH IS VISITING HONG KONG AND MACAU, THE DIFFERENCES THAT TRACK FOR INVESTORS. I DO NOT KNOW WHETHER THERE IS AN ARGUMENT COULD BE MADE WHETHER HONG KONG DOES A GOOD ENOUGH JOB ABOUT PROMOTING THEIR DIFFERENCES. DAVID: YOU DO GET CONFUSION. IT IS ALSO DELIBERATE POLICIES AND FOR CERTAIN COMPANIES, FOR EXAMPLE, THAT JUST MAYBE LOOP HONG KONG INTO THE SAME BASKET. IT IS THAT ONGOING CONVERSATION.
YOU CAN CHECK OUT REBECCA STORY, ON THE TERMINAL RIGHT NOW AS WELL. AND CERTAINLY UNDERSCORES THE VERY POINT WITH HONG KONG IS AN INTERNATIONAL FINANCE CENTER AND THE STRESSES THERE. THE STATES OF GEOPOLITICS. PLENTY MORE AHEAD. YOU'RE WATCHING THE CHINA SHOW. DAVID: GOOD MORNING AND HAPPY FRIDAY.
WELCOME BACK TO THE SHOW. WE ARE JUST ENTERING THE SECOND HOUR OF THE CHINA SHOW. 30 MINUTES IN THE CASH MARKET SESSION AND WE ARE ON THE UP AS FAR AS PRICE AND TURNOVER AND VOLUMES GO. WHO WOULD'VE THOUGHT. ALMOST 5, 6 WEEKS INTO 2025 AND WE WOULD BE TALKING ABOUT APRIL MARKET. THAT IS WHERE WE ARE RIGHT NOW AS FAR AS HANG SENG TECH INDEX GOES. 5100 ON THE HSTECH INDEX, THAT GIVES US ABOUT 30 POINT BUFFER FOR THAT BULL MARKET LEVEL WE ARE TRACKING HERE AT ABOUT 30, 50, 77.
IT'S BEEN A GOOD FOUR WEEKS OR SO. THE GAINS TODAY ARE REALLY LEAD BY, I THINK THIS GROUP OF STOCKS COMING UP. EV STOCKS. THIS SHALL MEANS OF THE WORLD. THE LATEST NEWS HERE IS THE AUTO GETTING AN UPGRADE OUT OF THE FOLKS AT MCQUARRIE. BOTH THE H-SHARES TO OUTPERFORM IN THE ADRS ALSO GETTING AN UPGRADE.
XIAOMI COMING THROUGH WITH THIS ANNOUNCEMENT AND THE DATES FOR THE RELEASE OF THE PHONE AND CAR. ASIA X CHINA'S LOOKING AID THIS. WE ARE LOOKING AT MOSTLY DECLINES AND IT UNDERSCORES THAT THIS CHINESE MARKET HAS REALLY DIVORCE ITSELF OF LATE FROM THE BROADER GYRATIONS BROADLY SPEAKING, AND CERTAINLY THE AI ROBOTICS. TECH THING HAS GIVEN THIS MARKET NEW LIFE. THE STORY ACROSS FUTURES IS ONE
THAT IS FLAT, NOT ON YOUR SCREENS ARE EUROPEAN FUTURES. MASSIVE SESSION OVER IN EUROPE YESTERDAY. THE TWO AND 10 YEAR YIELD WE WILL TALK ABOUT SCOTT BESSENT'S COMMENTS. WE SPOKE TO HIM A COUPLE OF HOURS BACK THAT THEY WILL LET THE FED DO AS THEY DO IS FIRES MONETARY. THEY WILL FOCUS ON THE TREASURY SIDE AND THE GOVERNMENT, WHAT THEY CAN DO AS FAR AS GOVERNMENT MEASURES TO LOWER MARKET INTEREST RATES AT THE 10 YEAR YIELD. FOR EXAMPLE, JUST ON THAT VERY KNOW AS YOU LOOK AT THE TREASURY CURVE AHEAD OF THE JOBS REPORT LATER TODAY WE DID HEAR FROM SCOTT BESSENT TALKING ABOUT THE FED. HAVE A LOOK.
>> ONE OF THE THINGS I WANTED TO EMPHASIZE IS THAT WE ARE NOT FOCUSED ON WHETHER THE FED IS GOING TO CUT, NOT CUT, WHAT WE ARE FOCUSED ON IS LOWERING RATES. SO, WE ARE LESS FOCUSED ON THE SPECIFICS OF RATE CUTS AND HOW DO WE GET THE WHOLE CURVE DOWN? I MENTIONED THE 10 YEAR, I BELIEVE, IS THE IMPORTANT PRICE TO FOCUS ON, ITS MORTGAGES, ITS LONG-TERM CAPITAL FORMATION. LOOK, I THINK WITH THE PRESIDENT'S POLICIES OF ENERGY DOMINANCE, DEREGULATION AND NOT INFLATIONARY GROWTH, I THINK THAT THE 10 YEAR IS GOING TO NATURALLY COME DOWN. DAVID: MARK CRANFIELD JOINS US, OUR MLIV STRATEGIST. WE WERE TALKING ABOUT THIS YESTERDAY FOLLOWING THE SECRETARY'S INTERVIEW WITH FOX. NOW THAT WE AT LEAST KNOW
SPECIFICALLY WHAT THEY WANT TO DO AND MARKET INTEREST RATES AS IT AFFECTS CONSUMER FINANCE, HOW DO MARKETS APPROACH THIS RIGHT NOW? MARK: THE BOND INVESTORS ARE FAIRLY RELIEVED FROM WHAT THEY HEARD FROM SCOTT BESSENT. HE DOESN'T WANT TO TEMPER WITH THE QUARTERLY FUNDING, WHICH IS GOOD NEWS, IN TERMS OF ISSUING THE DEBT HE SEEMS TO BE KEEPING IT ON THE SAME LEVEL THAT HE WAS BEFORE. SO THAT'S REASSURING. HE STILL BELIEVES IN A STRONG U.S. DOLLAR, WHICH IS GREAT, INTERNATIONAL INVESTORS WOULD BE HAPPY TO HEAR THAT. WHAT HE HAS ADDRESS IS THE
TRADE DEFICIT OR THE FISCAL DEFICIT. THEY WILL BE MAJOR CONCERNS TO PEOPLE THAT WANT TO INVEST IN U.S. TREASURIES. THEY WILL NEED A BIT MORE TIME TO SEE HOW NEW POLICIES FROM THE WHITE HOUSE PLAY OUT IN THAT RESPECT BUT CERTAINLY, EVERYTHING HE'S BEEN SAYING SO FAR AS NOT HAVING A MAJOR IMPACT ON THE MARKET.
A BIT MORE CURVE FLATTENING. FROM HERE TRADERS WILL BE LOOKING MORE AT THE DATA COMING UP HERE AND ON FUN PAYROLLS IS A BIG ONE. MORE IMPORTANTLY OF THE CPI REPORT NEXT WEEK MAYBE GIVES US THE FIRST INDICATION OF IF THERE'S ANY INFLATION CHANGES SINCE DONALD TRUMP CAME IN THE WHITE HOUSE. MAY BE A BIT TOO EARLY TO TELL. BUT SO FAR MR. BESSENT IS CHOOSING HIS WORDS VERY
CAREFULLY AND THAT'S REASSURING TO INVESTORS. >> VIEWERS WERE CHATTING WITH ME ABOUT -- I WANTED TO PUT IT TO SOMEONE MUCH MORE QUALIFIED THAN I AM, THE LONG END OF U.S. TREASURY STILL SEEMS RELATIVELY HIGH. DO YOU THINK THAT IS PRICING IN RISKS FOR THE ASIA-PACIFIC, PARTICULARLY THINKING ABOUT TRADE WARS, TARIFFS? >> I THINK WHERE THE LONG END OF THE TREASURY CURVE IS, IT'S MORE OF A DOMESTIC FOCUS. INVESTORS WANT TO SEE WHETHER OR NOT U.S. INFLATION CAN GET WELL 2% OR WILL HE GET STICKY. THEY NEED TO HAVE SOME SORT OF
CUSHION TO JUSTIFY YIELDS GOING MUCH FURTHER ON INFLATION BEFORE THEY CAN DO THAT. THEN YOU HAVE TO TAKE INTO ACCOUNT THE U.S. IS STILL RUNNING VERY BIG DEFICITS. UNTIL THEY GET THEIR CURRENT ACCOUNT DEFICIT TIGHTER, IT'S GOING TO BE HARD TO JUSTIFY U.S. YIELDS COMING DOWN TO A LEVEL OF SOME EUROPEAN YIELDS. EUROPEAN YIELDS ARE WAY LOWER THAN THEY ARE.
THAT REFLECTS THE CHANGES IN THE ECONOMY, U.S. ECONOMY IS MUCH STRONGER IN GENERAL THAN WHAT'S HAPPENING IN EUROPE. IT ALSO SHOWS THAT INVESTORS FEAR THAT THE U.S. IS IN GETTING IT UNDER CONTROL, THE RATING AGENCIES AT SOME STAGE MAY SAY THAT THIS IS AN UNSUSTAINABLE SITUATION FOR THE UNITED STATES, THEY MAY NEED TO DOWNGRADE THEM, IT'S NOT SOMETHING THAT WILL HAPPEN IMMEDIATELY BUT IT'S BEEN ON THE RADAR FOR A WHILE AND THERE'S BEEN NO SIGN OF IMPROVEMENT. WHAT MR. BESSENT IS SAYING DOESN'T ADDRESS IT YET BUT GLOBAL INVESTORS WILL BE WATCHING VERY CAREFULLY TO SEE IF AMERICA RETAINS A STRONG ECONOMY AND A WIDE CURRENT ACCOUNT DEFICIT, THAN ULTIMATELY THAT WILL NOT BE GOOD FOR THE RATING OF THE U.S. BONDS. DAVID:
THAT'S A GOOD POINT. SCOTT BESSENT TOLD US IF WE WANT TO FIND OUT WHAT THE FED WANTS TO DO, AS THE FED. SO I LOOK AT THE FED AND LORI LOGAN SAYS, HEY, TO REBECCA'S QUESTION ON THE LONG AND WHY THAT REMAINS HIGH, IT'S PROBABLY BECAUSE THE ECONOMY IS DOING WELL IN THE FED MIGHT NOT NEED TO CUT INTEREST RATES. IS THAT STILL A RISK FOR MARKETS THAT THE FED DOESN'T MOVE HER SOMETHING TO CONTINUE? MARK: I THINK PEOPLE ARE SUGGESTING THAT'S A POSSIBILITY. MS. LOGAN IS HAWKISH BY NATURE. YOU CAN SLIGHTLY'S HER WORDS. SHE WOULD NORMALLY COME OUT IN THAT DIRECTION. BUT THERE ARE MORE PEOPLE FROM
THE FED SUGGESTING WE NEED A LONGER PAUSE, AND THEY WANT MORE TIME TO ASSESS HOW POTENTIAL TRADE FRICTION WILL WORK OUT AND HOW IT WOULD AFFECT THE U.S. ECONOMY ON THE OUTLOOK FOR GROWTH AND INFLATION. PUT ALL THOSE THINGS TOGETHER IN A CENTRAL BANK IN GENERAL WOULD PREFER TO DO NOTHING WHILE IT ASSESSES DATA. IT WOULD NOT RUSH TO DO ONE THING OR THE OTHER, BUT THE WAY THINGS ARE PLAYING OUT IT IS GIVEN THE FED MORE REASON TO SAY ON ITS HANDS, ABSORBED THE INCOMING DATA, SEE IF THERE'S CHANGES IN WHITE HOUSE POLICY, SEE HOW THE REACTION COMES FROM OTHER COUNTRIES OVERSEAS. IN THE MEANTIME THEY ARE PROBABLY QUITE HAPPY WITH THE SITUATION.
THEY'VE ALREADY LOWERED INTEREST RATES BY REASONABLE AMOUNT. THEY HAVE A SLIGHT CUSHION OVER THE CURRENT CPI LEVEL BUT THEY ARE UNSURE WHERE THE DATA WILL GO THE NEXT FEW MONTHS. THAT'S A VERY GOOD REASON WHEN JUST SITTING ON YOUR HANDS. DAVID: QUICK THOUGHTS ON CHINA, WHY IS THIS MARKET DOING SO WELL? MARK: TECH, TECH, TECH. THE GOOD THING IS THAT PEOPLE ARE BEGINNING TO UNDERSTAND. IF YOU LOOK AT THE PERFORMANCE
OF THE HEI TECH INDEX AND COMPARE IT TO THE CSI 300, HANG SENG TECH IS ALMOST BACK TO WHERE IT WAS IN OCTOBER AND THE CSI 300 IS NOWHERE NEAR IT. AND IF YOU LOOK AT THE UNDERLYING STORIES, IT'S ALL ABOUT SPECIFIC THINGS RELATED TO AI, RELATED TO OTHER PARTS OF THE TECH UNIVERSE, AND PEOPLE ARE BEGINNING TO BELIEVE THAT CHINA CAN ISOLATE ITSELF TO AN EXTENT AND PROMOTE ITS OWN TECH COMPANIES THAT CAN MAKE GOOD PROFITS WITH DOMESTIC ECONOMY REGARDLESS OF WHETHER THEY COULD FILTER INTO THE REST OF THE WORLD WERE NOT. THAT'S BEGINNING TO GET SOME TRACTION AND PEOPLE SEEM TO LIKE THAT STORY. REBECCA: BLOOMBERG'S MLIV STRATEGIST MARK CRANFIELD. MEANWHILE, THE U.S. TREASURY SECRETARY ALSO DEFENDED PRESIDENT TRUMP'S NEW TARIFFS ON CHINA SAYING THEY ARE ONLY DESIGNED TO ENSURE FAIR TRADE.
BESSON DISMISSED CONCERNS LEVEES WOULD BE INFLATIONARY FOR THE U.S., TELLING BLOOMBERG CHINA WOULD PAY THE HIGHER PRICE. >> CHINA IS THE MOST UNBALANCED ECONOMY IN THE HISTORY OF THE WORLD, AND THEY ARE IN A DEEP RECESSION RIGHT NOW. THEY ARE EXPERIENCING DEFLATION, AND THEY ARE TRYING TO EXPORT THEIR WAY OUT OF THAT. WE CAN'T ALLOW THAT. WE WANT FAIR TRADE AND PART OF THAT IS THE TAKING A STRONG POSITION ON THE CURRENCY AND THE TERMS OF TRADE. >> WHAT ABOUT THE INFLATION CONCERNS STEMMING FROM THE TARIFFS AND TARIFF THREATS? >> I'M NOT SURE THERE'S A NARRATIVE FOR THE COUNTRY PUTTING ON THE TERRACES INFLATIONARY, THAT WE COULD HAVE A SMALL ONE-TIME PRICE ADJUSTMENT THAT AS WE SAW IT IN TRUMP 1.0, THAT THE DEREGULATION AND THE OTHER
POLICIES WE STAY RIGHT AROUND THE FED'S TRADE LEVEL. SO I'M UNCONCERNED ABOUT THAT. I THINK ESPECIALLY THAT CHINA NOW, GIVEN ALL THEIR EXCESS CAPACITY, WILL, NO MATTER THE LEVEL OF THE TARIFFS, WILL END UP EATING QUITE A BIT. >> THERE'S A LOT OF UNCERTAINTY AROUND TARIFFS, WE'VE SEEN THEM THREATENS OR SIGNALS, THEN THEY ARE TAKEN BACK.
IT APPEARS AS IF THIS ADMINISTRATION MIGHT BE UNFRIENDLY TO BUSINESSES, IS THAT RIGHT? >> REALLY? I THINK IT'S JUST THE OPPOSITE. I THINK THIS IS THE MOST PRO BUSINESS ADMINISTRATION IN HISTORY. IN EVERYTHING WE ARE DOING IS GOING TO INCREASE THE AFTER-TAX RETURN CAPITAL, AND AS A RESULT, WORKING AMERICANS WILL HAVE VERY HIGH REAL WAGE GROWTH THAT WHAT WE HAVE SEEN OVER THE PAST FOUR YEARS, THE GOVERNMENT AND GOVERNMENT AT JASON SECTORS PROVIDING THE EMPLOYMENT GROWTH, AND WHY HAVE WE EXPERIENCED THIS SUPPORTABILITY CRISIS. THERE WAS MASSIVE SPENDING MEANT BY INCREASED REGULATION WHICH CAUSED INFLATION, THEN GOVERNMENT AND GOVERNMENT ADJACENT JOBS DO NOT CALL WILL -- REAL WAGE GROWTH BECAUSE THEY MOVE UP AT CPI. I THINK WE ARE NOT ONLY GOING TO BE BUSINESS FRIENDLY, BUT VERY FRIENDLY FOR WORKING AMERICANS. REBECCA: U.S. TREASURY SECRETARY SCOTT
BESSENT SPEAKING TO BLOOMBERG. STILL AHEAD ON THE CHINA SHOW. WE SPEAK TO THE CEO OF HONG KONG E-COMMERCE FIRM YES ASIA ABOUT HOW THEY ARE RIDING THE WAVE WHILE MANAGING THE TRADE WAR AND A SLOWDOWN IN CHINA. ♪ REBECCA: THE JAPANESE PRIME MINISTER WILL MEET PRESIDENT TRUMP ON FRIDAY IN WASHINGTON AS HE LEFT TOKYO HE TOLD REPORTERS HE WANTS TO BUILD A RELATIONSHIP OF TRUST AND CONFIRM COOPERATION OVER ECONOMIC AND SECURITY ISSUES.
BLOOMBERG -- OUR BLOOMBERG OPINION COLUMNIST SAID THE JAPANESE LEADER WILL BE PLAYING FOR A TIDE DURING THE TALKS. HE JOINS US NOW FROM TOKYO. DO YOU THINK THE EXPECTATIONS ARE TOO HIGH FOR JAPANESE-U.S. TIES, IN PART BECAUSE OF THE RELATIONSHIP THAT TRUMP HAD WITH FORMER PRESIDENT ABE? >> I'M NOT SURE IF THE EXPECTATIONS, AT LEAST ON THIS SIDE OF THE EQUATION ARE PARTICULARLY HIGH. I THINK EVERYONE HERE MOSTLY SEES THAT THIS TRIP LARGELY INVOLVES DOWNSIDE RISKS AND THE IDEA THAT SOMETHING IS GOING TO GO WRONG, THAT TRUMP IS GOING TO PULL OUT SOME TARIFFS ON JAPAN THAT NOBODY IS EXPECTING. THERE REALLY ISN'T THAT MUCH
UPSIDE. JAPAN DOESN'T REALLY WANT ANYTHING OTHER THAN THE STATUS QUO. THERE'S NOTHING THAT IS SHEBA IS GOING TO TRY TO GET OUT OF THIS ARRANGEMENT. THERE IS GOING TO BE A LOT OF TALK ACCORDING TO REPORTS IN THE JOINT STATEMENT THAT THEY ARE GOING TO ISSUE ABOUT FORGING A NEW GOLDEN AGE FOR JAPAN-U.S. TIES. BUT I THINK THAT'S LARGELY JUST TALK.
DAVID: LOTS TO UNPACK BECAUSE WE SAW WHAT HAPPENED WITH CANADA AND MEXICO AS FAR AS U.S. ALLIES ARE CONCERNED. JAPAN WILL BE THE BIGGEST ONE IN ASIA. BEFORE WE GET TO THAT, CAN I ASK YOU ABOUT WHERE OUR INTERESTS ALIGN FOR BOTH PARTIES SO WE CAN LOOK AT OUR POTENTIAL WINS HERE? >> IT DEPENDS ON ANY DAY OF THE WEEK WITH THE TRUMP ADMINISTRATION ACTUALLY WANTS. IF THE TRUMP ADMINISTRATION
DOES WANT TO CRACK DOWN ON CHINA AND EXERT INFLUENCE AND CONTROL OVER CHINA, JAPAN IS AN ABSOLUTELY CRUCIAL PARTNER THAT IS REQUIRED IN ORDER TO -- FOR EXAMPLE WE SAW HOW THE BIDEN ADMINISTRATION TIED UP AT JAPAN IN ORDER TO INCREASE ITS EXPORTS OF SEMICONDUCTOR MATERIALS AS FAR AS EXPORTS AND SEMICONDUCTOR MATERIALS. THAT WILL BE ONE FROM THE JAPANESE SIDE, JAPAN IS LOOKING AT THE SECURITY SITUATION IN ASIA THAT ARE GOING TO BE LOOKING ONE OF THE BIG THINGS THE JAPANESE SIDE WANTS TO GET OUT OF THIS IS CONFIRMATION ONCE AGAIN THAT THE U.S. OBLIGATION TO DEFEND JAPAN IN CASE OF AN ATTACK ALSO APPLIES TO THE ISLANDS, WHICH CHINA ALSO CLAIMS FOR ITS OWN. I THINK BOTH SIDES ARE NOT REALLY GOING TO BE LOOKING TO GET MUCH OUT OF IT. WHEN TRUMP WAS ASKED ABOUT THIS MEETING LAST WEEK BY REPORTERS, HE REALLY STRUGGLED TO COME UP WITH ANYTHING THAT HE WANTED TO GET OUT OF THE JAPAN SIDE. AND HE SAW IN THE ELECTION CAMPAIGN, HE SPOKE ABOUT CANADA, HE SPOKE ABOUT MEXICO, HE SPOKE ABOUT CHINA, BUT HE ALMOST NEVER MENTIONED JAPAN AT ALL. I THINK THAT GOES BACK TO THE
EARLIER POINT THAT IT GOES BACK TO TRUMP'S AFFINITY FOR A FRIENDSHIP WITH SHINZO ABE. DAVID: IF HE IS PLAYING FOR A TIED, AS FAR AS A BASKETBALL ANALOGY THIS GOES INTO OVERTIME, WHAT ARE THE DOWNSIDE RISKS THAT HE NEEDS TO? >> OBVIOUSLY WE HAVE SEEN SO MANY OCCASIONS, EVEN IN THE LAST WEEK ALONE WHERE YOU THINK THE TRUMP ADMINISTRATION IS GOING TO DO ONE THING AND SOMETHING JUST COMES COMPLETELY OUT OF LEFT FIELD. SO I DON'T THINK ANYONE WAS EXPECTING TRUMP'S COMMENTS ON GAZA THAT CAME OUT JUST EARLIER THIS WEEK. IT -- SO I THINK JAPAN WILL BE VERY CAREFUL TO TRY TO PLAY IT SAFE AND TO TRY TO MAKE SURE THAT THERE AREN'T ANY SURPRISES.
OBVIOUSLY, IN TERMS OF AN INVESTMENT PARTNER, JAPAN IS THE LARGEST INVESTOR IN THE U.S. AND HAS BEEN FOR FIVE YEARS RUNNING, BUT THE U.S. AS A SUBSTANTIAL TRADE JEFF -- TRADE DEFICIT WITH JAPAN. IT'S NOWHERE NEAR AS LARGE AS IT IS WITH CHINA OR WITH OTHER COUNTRIES, BUT IT IS SUBSTANTIAL. WE SAW ON THE FIRST TRUMP
ADMINISTRATION THAT TRUMP WAS PREPARED TO PUT PRESSURE AND TO PUT TARIFFS APPLIED TO STEAL THAT INCLUDED JAPANESE DALE -- DEAL AT ONE POINT IN THE TRUMP ADMINISTRATION. SOMETHING LIKE THAT COULD ABSOLUTELY COME OUT OF THE TRUMP ADMINISTRATION, EVEN THOUGH I THINK AT THIS POINT IN TIME WE DON'T EXPECT IT TO. DAVID: TAKE YOU SO MUCH. OUR BLOOMBERG OPINION COLUMNIST OVER IN TOKYO. COMING UP, THE BANK OF KOREAN GOVERNOR TELLS US EXCLUSIVELY WHERE HE HAS SEEN THE BIGGEST IMPACT OF THE TRUMP TARIFFS OUTSIDE OF CHINA. OUR CONVERSATION IS JUST AHEAD. REBECCA: THE BANK OF KOREA GOVERNOR THINKS WHILE THE TRUMP TARIFFS WILL AFFECT THE COUNTRY'S ECONOMY, IT'S STILL BETTER POSITIONED COMPARED WITH OTHER U.S. TRADING PARTNERS. SPEAKING EXCLUSIVELY TO BLOOMBERG, THEY TOLD US HOW HE SEES THE TRADE TENSIONS PLAYING OUT.
>> THIS IS NEGATIVE NEWS. THE U.S. TARIFF POLICY WILL HAVE A NEGATIVE IMPACT ON KOREAN ECONOMY, AS I MENTIONED. SINCE KOREAN ECONOMY HEAVILY DEPENDS ON THE EXPORT SECTOR. AND IT WILL BE DIRECT AND INDIRECT IMPACT FROM U.S. POLICY. DIRECT, WHAT I MEAN IS OUR
EXPERT EXPOSURE TO THE UNITED STATES IS AROUND 6%-9% OF OUR GDP DEPENDING ON THE YEAR. AT THE SAME TIME, OUR CONNECTION TO MEXICO, CANADA, TO GROW A SUPPLY CHAIN IS --. AT THIS MOMENT JAPAN AND KOREA IS A LITTLE BIT OFF THE RADAR AT THIS MOMENT BUT THAT COULD CHANGE AT ANY MOMENT. SO DIRECTING -- DIRECT TARIFF ON KOREA CAN HAVE A NEGATIVE IMPACT AS WELL AS A TARIFF ON OUR OTHER MANAGING TRADING -- MAJOR TRADING PARTNERS WILL HAVE A DIRECT IMPACT. I THINK WHAT I WANT TO MENTION
ON A POSITIVE NOTE, COMPARED WITH OTHER MAJOR CHANGE FED AND THE UNITED STATES, WE ARE VACCINATED. WHAT I MEAN IS THAT AFTER THE SHUTDOWN OF OUR TRADE WITH CHINA, AFTER OUR DEPLOYMENT AND A COUPLE OF YEARS AGO, AND MORE SO THE U.S. DISTINCTION OF TECH TRANSPORT TO THE SEMI CONDUCTORS IN THE LAST COUPLE YEARS, ACTUALLY MAKE US EXPEDITE THE DEPLOYMENT OF THE PRODUCTION PHASE FROM CHINA, OUTSIDE OF CHINA TO OTHER AREAS. SO CHINA PLUS ONE POLICY HAS STARTED EARLIER.
AND THEN AFTER WE PROACTIVELY DIVERSIFY OUR BASE ACROSS THE WORLD -- SHERRY: ARE WE LESS EXPLOSIVE THE SLOWDOWN IN CHINA? >> CHINA WAS THE NUMBER ONE TRADE PARTNER IF YOU LOOK AT 5, 6 YEARS AGO. BUT NOW U.S. AND CHINA IS -- IN TERMS OF OUR EXPORT EXPOSURE. ANOTHER FACTOR IS THAT, IF YOU LOOK AT THIS SECTOR OF FOR EXPORTS ON TARIFFS, CHINA DEPENDENCY IS VERY HIGH.
ON THE OTHER HAND WE HAVE MANY INDUSTRIES THAT CAN HAVE A STRATEGY CORPORATION WITH THE UNITED STATES. FOR EXAMPLE, SHIPBUILDING INDUSTRY IS ONE THING. THE OTHER THING IS TEXT SEMICONDUCTOR, ESPECIALLY AI SECTORS.
WE HAVE A LOT OF ROOM FOR THE COOPERATION OF THE UNITED STATES. IN THAT SENSE I THINK WE ARE IN A BETTER POSITION TO HAVING A GIVE AND TAKE NEGOTIATION WITH THE UNITED STATES. SHERY: SEMICONDUCTOR EXPORTS DRIVE A HUGE PART OF THE SOUTH KOREAN ECONOMY. WE SEE THE POTENTIAL OF CHEAPER, MORE COST-EFFICIENT AI MODELS FROM THE LIKES OF DEEPSEEK, FOR EXAMPLE. AS THE PRICES, DEMANDS GOING TO BE IMMEDIATE CONCERNS FOR THE BROADER ECONOMY? QUEX WE ARE CURRENTLY ANALYZING WHAT DEEPSEEK MEANS FOR SEMICONDUCTOR INDUSTRY. IT'S PREMATURE, BUT IN GENERAL
IT'S FOR THE SEMI CONDUCT INDUSTRIES. I THINK THERE IS DIFFERENT IMPACT. IF YOU FOCUS ON THE LEGACY OF THIS SEMICONDUCTOR, WHICH IS THE LOW END PRODUCT, I THINK WE HAVE LOST PRICE COMPETITIVENESS TO CHINA, EVEN FOR A COUPLE OF YEARS AGO. ON THE OTHER HAND, FOR THE HIGH-END PRODUCTS SUCH AS HPN AND AI PRODUCTS, THEY ARE THE LEADING PRODUCER.
SO DEPENDING ON THE PROSPECTIVE AI PRODUCER WE CAN HAVE -- OF DEEPSEEK AND OTHER AI DEVELOPMENT WILL REDUCE OR MAKE THE DEMAND FOR THE HIGH-END PRODUCTS NOT AS GREAT IS EXPECTED, I THINK THE OTHER IMPACT OF DEEPSEEK WITH OTHER AI TECHNOLOGY MEANS THERE WILL BE A MORE HIGH-TECH, LOW PRICE CHIP DEMAND. AA TECHNOLOGY CAN BE USED FOR THE SEMICONDUCTOR. SO FAR, MOST OF AI SEMICONDUCTOR FOCUSES ON THE SEMICONDUCTOR FOR THE SERVER. A VERY HIGH, EXPENSIVE ONE. IF YOU COULD HAVE A CHEAPER SEMICONDUCTOR FOR MORE WIDER USE, IT'S QUICKER PRODUCING. I THINK IN THAT SENSE I'M VERY
OPTIMISTIC AND I THINK THE AI INDUSTRY IS BETTER POSITIONED THAN ANY OTHER COUNTRY. DAVID: THAT WAS THE BANK OF KOREA GOVERNOR SPEAKING WITH SHERY AHN OVER IN TOKYO. LOOKING TO MY LEFT IS A LOOK AT THIS MARKET IN HONG KONG ABOUT AN HOUR INTO THE SESSION. WE ARE ON TRACK TO ENTER A BULL MARKET. HANG SENG TECH INDEXES UP 22%
FROM THAT LOW BACK IN JANUARY. PLENTY MORE AHEAD. THIS IS BLOOMBERG. DAVID: WELCOME BACK. WE ARE A MINUTE AWAY FROM THE LUNCH BREAK IN TOKYO. THE STORY HERE I WOULD SAY, IN NOR EQUITY MARKETS. -- IGNORE THE EQUITY MARKETS. FROM A MACRO PERSPECTIVE, IT IS WHERE YOU ARE WITH THE JAPANESE CURRENCY. WE ARE AT SESSION HIGHS RIGHT
NOW, 151 AND CHANGE. IF YOU ARE JUST TUNING INTO THE JAPAN STORY TODAY, THERE WAS A POINT ABOUT TWO HOURS BACK WHEN THIS ONE HAD A 150 HANDLE. IT IS 150.96 WE DID TOUCH THAT. THAT TAKES US BACK TO ONE MONTH LOWS. THE CROSS-SECTION OF THE SECTORS WE ARE TRACKING. S&P FUTURES ARE FLAT. THE DOLLAR INDEX SIDEWAYS FOR
THE SECOND DAY. ASIA IS FLAT. WE ARE GOING INTO THE WEEKEND, AND A CRUCIAL JOBS REPORT OUT OF THE U.S. ON FAIRLY DECENT FOOTING. JUST TO SET MARKETS ASIDE FOR NOW, LET'S TALK ABOUT FEELING CONFIDENT AND BEAUTIFUL. BEAUTY EXPORTS OUT OF SOUTH KOREA TOPPING $10 MILLION FOR THE FIRST TIME LAST YEAR, BEATING OUT TRADITIONAL LEADER FRANCE. WE LOOK AT HOW E-COMMERCE FIRMS
ARE MOVING TO BENEFIT FROM THIS RAPID CHANGE. >> THEY ARE NOT EXACTLY HOUSEHOLD NAMES FOR SOME, BUT FOR A YOUNGER GENERATION OF CONSUMERS, THESE UPSTART K BEAUTY BRANDS ARE BECOMING THE NUMBER ONE CHOICE. IT IS SYMBOLIC OF A BIGGER TREND THAT IS TAKING PLACE IN THE GLOBAL COSMETICS INDUSTRY, WHERE KOREA'S SMALL AND MEDIUM-SIZE COMPANIES ARE GETTING WIDER RECOGNITION AND OUTSELLING MORE ESTABLISHED AND MUCH BIGGER RIVALS. THAT SHIFT HAS COME ABOUT EVEN AS K BEAUTY GRAPPLES WITH A SLOWDOWN IN SALES TO CHINA, WITH FIRMS NOW TARGETING NEW MARKETS FURTHER AFIELD.
HONG KONG-BASED YESASIA IS RIDING THE WAVE. IT SOUTH KOREAN COSMETICS TO MORE THAN 200 TERRITORIES. WITH BUSINESS BOOMING IN RECENT YEARS. STILL, THERE ARE RISKS ON THE HORIZON, INCLUDING THE UNCERTAINTY OF TIKTOK'S FATE IN THE U.S. IT IS A FAVORITE PLATFORM FOR BEAUTY INFLUENCERS, INCLUDING A 3000 PLUS NETWORK. THE GROUP COULD FACE MARGINS AS IT -- THE OUTLOOK IS BRIGHT, SIGNALING RECORD ANNUAL PROFIT GROWTH.
ANNABELLE DROULERS, BLOOMBERG NEWS, HONG KONG. >> ANNABELLE IS WITH US NOW, ALONG WITH THE FOUNDER AND CEO OF YESASIA JOINING US EXCLUSIVELY HERE. THANKS FOR JOINING US THIS MORNING IN STUDIO.
I THINK WHAT REALLY STANDS OUT ABOUT THE BUSINESS IN PARTICULAR IS YOU HAVE BEEN OPERATING FOR 25 YEARS, AND OVER THAT TIME, THE BUSINESS GROWTH HAS EXPLODED IN THE PAST TWO YEARS. WHAT EXACTLY IS IT ABOUT K BEAUTY? WE KNOW THAT K BEAUTY HAS BEEN AROUND FOR A LONG TIME NOW, BUT WHY IS IT THE LAST TWO TO THREE YEARS SOMETHING CHANGED FOR YOU? >> WE HAVE INTRODUCED K BEAUTY, KOREAN BEAUTY, SINCE ABOUT 10 YEARS AGO, AND WE HAVE SEEN THE POPULARITY ACTUALLY RISING, INCREASING IN THE PAST TWO YEARS, STARTING WITH THE U.S. AND ALSO SPREADING TO EUROPE AND TO MANY OTHER COUNTRIES AS WELL.
>> YOU HAVE THIS WINDOW INTO WHAT IS HAPPENING AT THE FOREFRONT OF K BEAUTY. IT IS NOT NECESSARILY THE BIG NAME BRANDS THAT ARE BREAKING THROUGH HERE. EXPLAIN TO US THE MAKEUP OF THE LANDSCAPE. >>>> FOR THE PAST 10 YEARS, WE HAVE DEVELOPED A RELATIONSHIP WITH OVER 400 KOREAN BEAUTY BRANDS, OUR BUSINESS PARTNERS, AND WE ARE VERY FORTUNATE THAT WE HAVE AUTHORIZED THOSE BRANDS TO MANY PART IN THE WORLD. THIS AUTHORIZATION IS FOR ONLINE CHANNELS AS WELL AS THE OFF-LINE HANDLES. >> FRIENDS I HAVE BEEN AROUND THE LAST FIVE TO SEVEN YEARS, SO THE SMALL AND MEDIUM-SIZE NAMES.
WHAT ARE THEY DOING THAT IS DIFFERENT? >> I THINK COMPARED TO THE MARCH ESTABLISHED BRANDS, THE INDEPENDENT BRANDS FROM KOREA, THEY ARE MORE USING ONLINE MARKETING AND STRATEGY FIRST RATHER THAN OPENING UP OFF-LINE STORES GOING AFTER COUNTRY BY COUNTRY. THE ONLINE MARKETING IS ACTUALLY VERY POWERFUL AND IMPACTFUL TO HELP THE INDEPENDENT BRANDS TO REACH OUT TO MANY CONSUMERS IN MANY PARTS OF THE WORLD REALLY FAST. ALSO, YESSTYLE HAS BEEN ASSISTING MANY BRANDS. THIS IS A VERY POWERFUL STRATEGY. >> WHY DO YOU THINK IT IS THAT K BEAUTY RATHER THAN JAPANESE BEAUTY, CHINESE COSMETIC MAKERS, WHY IS IT THAT K BEAUTY HAS BEEN SUCH A WINNER FOR YOUR BUSINESS? >> I THINK THEY ARE EARLY TO INTRODUCE THE ASIAN BEAUTY PRODUCTS TO THE REST OF THE WORLD.
NOWADAYS, THE CHINESE BEAUTY AND J BEAUTY IS CATCHING UP. I THINK K BEAUTY IS MORE INNOVATIVE IN TERMS OF THEIR PRODUCT DEVELOPMENT, AND THEY ARE ABLE TO DEVELOP THE PRODUCT IN THE SHORT-TERM CYCLE. WE ARE SEEING NEW PRODUCTS COMING FROM KOREA ALMOST ON A MONTHLY BASIS. >> THAT SPEED THEY ARE GETTING THESE PRODUCTS TO MARKET AND THAT INNOVATION CYCLE IS MAKING KOREAN COSMETIC COMPANIES VERY ACTIVE. >> IT HAS BEEN FOR MANY YEARS. I THINK FOR NEW COMPANIES, AND IS VERY HELPFUL FOR THEM TO DEVELOP THE BEAUTY PRODUCTS IN KOREA, IN THIS ENVIRONMENT.
>> WHAT ABOUT M&A? THIS IS A REALLY HOT AREA WE SEE IN KOREA. >> WE HAVE SEEN CAPITAL GOING INTO THE KOREAN BEAUTY MARKET IN TERMS OF THE CONGLOMERATE ACQUIRING THE INDEPENDENT BRANDS. THE EQUITY FUND ALSO PUTTING INVESTMENT INTO GROWING THE K BEAUTY COMPANIES. I THINK MORE INVESTMENT IS HELPING TO GROW K BEAUTY IN THE COMING YEARS. >> YOU HAVE ACTUALLY ALSO MADE YOUR FIRST INVESTMENT INTO A K BEAUTY BRAND. >> RECENTLY, WE MADE A SMALL INVESTMENT INTO A NEW BRAND.
WE ARE ABOUT TO LAUNCH A BRAND, AND HOPEFULLY IT CAN ASSIST THE OTHER BRANDS AS WELL. >> I WANT TO SHIFT AND THINK ABOUT HOW HONG KONG IS BEING CAUGHT IN THE CROSS HAIRS BETWEEN U.S.-CHINA TENSIONS. THE ANXIETY FOR A LONG TIME HAS BEEN THAT HONG KONG WILL BE LUMPED IN WITH MAINLAND CHINA WHEN IT COMES TO POLICIES. WE SAW THIS FLIP-FLOP WITH THE U.S. POSTAL SERVICE SUSPENSION. IS THAT SUSPENSION OF ACCEPTING PARCELS -- OF COURSE IT HAS BEEN REVERSED -- IS THAT SOMETHING THAT WOULD HAVE AFFECTED YOUR BUSINESS AND SUPPLY CHAINS? AND HOW ARE YOU ADAPTING YOUR DELIVERY SERVICES TO TRY TO ACCOMMODATE FOR THESE TYPES OF CHALLENGES? >> THE RECENT TARIFF POLICIES, THEY HAVE IMPACTS ON OUR BUSINESS BECAUSE WE ARE ALSO SHIPPING PACKAGES FROM HONG KONG TO THE U.S.. NOW WE ARE REQUIRED TO PAY
TARIFFS. THAT MEANS THAT OUR COST IS HIGHER. EITHER WE ABSORB THE COST OURSELVES OR PASS ON THE COST TO THE U.S. CONSUMER BY RAISING THE PRICES. MOVING ON WORDS, WE HAVE THE
OPTION BECAUSE MANY OF THE PRODUCTS WE ARE SELLING, 90% ARE FROM KOREA. WE HAVE THE OPTION TO SHIP THE PRODUCTS FROM KOREA DIRECTLY TO THE U.S. SO WE ARE NOT REQUIRED TO PAY THE TARIFFS. ADDITIONALLY, WE ALSO HAVE BEEN DIVERSIFICATING OUR BUSINESS.
K BEAUTY IS ALSO GETTING VERY POPULAR IN EUROPE. FRENCH, SPANISH, GERMAN, AND ITALIAN. THOSE EUROPEAN COMPANIES, AS WELL AS LATAM IS AN OPPORTUNITY FOR US TO DIVERSIFY OUR BUSINESS FUND. >> I SEE IN YOUR REPORT THAT YOU OVERTOOK THE U.S. IN REVENUE GROWTH FOR THE FIRST TIME, THREE DIGIT GROWTH RATE. BUT THE U.S. IS STILL MAKING UP A BIG CHUNK
OF YOUR BUYERS. IT IS STILL 41%. HOW MUCH DO YOU WANT TO BRING THAT DOWN? HOW HIGH DO YOU WANT TO -- >> THE U.S. WILL CONTINUE TO GROW. I THINK K BEAUTY IS GROWING IN THE U.S.. BIG SELLERS LIKE COSCO, WALMART, T.J. MAXX CARRIE K BEAUTY. I THINK K BEAUTY WILL CONTINUE TO GROW IN THE U.S. WHILE WE CONTINUE TO DO A LOT OF MARKETING IN THE U.S., WE
NEED TO DIVERSIFY INTO OTHER MARKETS. RECENTLY, WE HAVE LAUNCHED AN ARABIC LANGUAGE WEBSITE, SO THAT IS A NEW MARKET FOR US AS WELL. >> YOU MENTIONED THE COUPLE OPTIONS YOU HAVE, AND ONE OF THEM IS STARTING TO SHIP DIRECTLY FROM KOREA, BUT YOU DON'T HAVE THE WAREHOUSE FACILITIES -- >> ACTUALLY, WE ALREADY HAVE A WAREHOUSE FACILITY IN LOS ANGELES. SO WE HAVE ALREADY BEEN SHIPPING PRODUCTS FROM KOREA TO THE U.S. SINCE 2023, ABOUT TWO YEARS
ALREADY, BECAUSE WE ARE ALSO GROWING OUR BUSINESS IN THE U.S. THERE IS AN OPTION FOR HOW WE CAN CONVERT THE WAREHOUSE. WE CAN
2025-02-09 03:25
