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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian

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Speaker 1: Curtis and myself for the stories, making news and moving

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Speaker 1: markets in the APAC region. You can subscribe to the

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Speaker 1: show anywhere you get your podcast and always on Bloomberg Radio.

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Speaker 1: The Bloomberg Terminal and the Bloomberg Business.

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Speaker 2: App well by Dance has filed suit against the United

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Speaker 2: States in effort to repeal the TikTok divest or ban law.

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Speaker 2: Who have sets up what may be a prolonged legal battle,

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Speaker 2: and it suggests that by Dance is not planning to

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Speaker 2: sell the app. Bloomberg's Mike Shepard has.

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Speaker 3: More since President Joe Biden signed the bill into law

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Speaker 3: last month, TikTok and its owners, Beijing based Byte Dance

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Speaker 3: have been preparing this legal challenge, and they're doing so

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Speaker 3: on First Amendment grounds. They're laying the groundwork for serious

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Speaker 3: constitutional challenge to this law, saying that will infringe the

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Speaker 3: free speech rights of one hundred and seventy million TikTok users.

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Speaker 2: The lawsuit marks the first legal challenge since Congress passed

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Speaker 2: the law. By Dance says that selling TikTok as is

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Speaker 2: specified by the law is unfeasible commercially, technically and legally.

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Speaker 2: Joining us now in our studios in Hong Kong is

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Speaker 2: Sarah Jung, who is Bloomberg China Tech reporter for a

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Speaker 2: little more discussion on this. So, Sarah, not a big

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Speaker 2: surprise TikTok leadership. I've been talking about this in the

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Speaker 2: run up to the law passing. They said they would

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Speaker 2: fight it in court. Bloomberg News is making the statement

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Speaker 2: that this is a clear sign byte Edance is not

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Speaker 2: prepared to sell. I suppose that means that if it

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Speaker 2: loses the case, it just closes the app.

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Speaker 4: I think that would be definitely one of the worst

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Speaker 4: case scenarios. Like you said, we've been hearing from the

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Speaker 4: company for a while now that they will file this lawsuit.

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Speaker 4: It seems like internally and externally they're quite confident that

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Speaker 4: they do have a strong legal argument in the same

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Speaker 4: way that they were able to overturn the Montana state

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Speaker 4: ban on TikTok. They're hoping that, you know, by pushing

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Speaker 4: this violation or first Amendment, you know, saying that the

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Speaker 4: bill is targeting TikTok very narrowly saying that divestment like

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Speaker 4: you said, is not legally, commercially or technically possible, including

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Speaker 4: stating that the Chinese government would not approve of such

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Speaker 4: a divesture. It's all part of this broader push that

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Speaker 4: they think can make this legal argument for them. Yeah.

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Speaker 1: So in the filing, TikTok is claiming that the ban

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Speaker 1: will stifle free speech that may be up for debate,

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Speaker 1: also that the ban would hurt small businesses that rely

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Speaker 1: on the app. Can you help me understand something when

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Speaker 1: I reflect back on what China did back in twenty

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Speaker 1: seventeen when it passed the new cybersecurity law, whether the

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Speaker 1: United States could point to that law saying I don't

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Speaker 1: care what the company is saying right now. By law

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Speaker 1: in China, companies that in this case by Dance is

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Speaker 1: required to share data with the government. Isn't that something

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Speaker 1: that's going to be a part of this case or

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Speaker 1: Am I wrong?

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Speaker 4: Definitely? I think that's the crux of the argument. From

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Speaker 4: the legislator's side. They're saying that because Byteedance is operating

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Speaker 4: in Beijing, the Chinese government, through the cybersecurity law like

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Speaker 4: you mentioned, and also other types of national security data

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Speaker 4: security kind of laws can require that byte Dance provide

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Speaker 4: data collected by TikTok to the government. This is something

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Speaker 4: that TikTok and byte Dance have both denied. They've said

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Speaker 4: it's hypothetical, and actually, if you read their lawsuit, they

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Speaker 4: address this head on. They say that so far all

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Speaker 4: of these risks and threats are hypothetical, and that they've

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Speaker 4: tried to address this with discussions with Sophia's where they

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Speaker 4: would have what they've called Project Texas, which is to

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Speaker 4: completely isolate and silo their US data and have that

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Speaker 4: be overseen by a US company like Oracle. Of course,

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Speaker 4: that argument hasn't hasn't been one that was convincing enough

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Speaker 4: to Congress and to President Biden, as we've seen.

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Speaker 2: Now we make the point that this lawsuit is the

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Speaker 2: first legal challenge. Does that Are we expecting other suits

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Speaker 2: to come forward here, perhaps from some of the users

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Speaker 2: who feel wronged.

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Speaker 4: By this, Yeah, definitely. There have been users talking about

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Speaker 4: forming class action lawsuits on this. This is something, of course,

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Speaker 4: that TikTok itself is encouraging. We saw earlier while the

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Speaker 4: TikTok bill was going through Congress that they were actively

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Speaker 4: lobbying their users to call their lawmakers, including with that

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Speaker 4: message on the app say and call your lawmakers. But

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Speaker 4: that was just used again by Congress as another sign

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Speaker 4: of how how much influence TikTok does have in the US.

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Speaker 1: It's interesting from what I've read, this could wind up

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Speaker 1: before the US Supreme Court. I mean, it's only going

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Speaker 1: to be a matter of time, I think, before it

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Speaker 1: makes it there. But in terms of the litigation process,

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Speaker 1: do we know what the next step is? I think

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Speaker 1: the lawsuit was filed in Washington at the US Court

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Speaker 1: of Appeals, Right, yep.

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Speaker 5: That's right.

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Speaker 4: But like you said, I think most legal experts are

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Speaker 4: expecting this will be a year's long process and it

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Speaker 4: will eventually make its way.

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Speaker 5: To this well.

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Speaker 2: Given that, would we expect perhaps an injunction filed in

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Speaker 2: the short term trying to get TikTok to suspend operations

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Speaker 2: while the case is being decided, or would that be

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Speaker 2: difficult to get through a lower court?

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Speaker 4: That could be possible, but then TikTok might appeal again.

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Speaker 4: And also because the government in the bill has laid

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Speaker 4: out this two hundred and seventy day timeframe, so I

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Speaker 4: don't think that that's what people are expecting at this moment.

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Speaker 4: Of course, you know that could happen.

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Speaker 1: The timing here is very interesting because obviously in the

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Speaker 1: States we're in a presidential election year, and when former

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Speaker 1: President Trump was president, team moved to curtail the app.

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Speaker 1: It was pretty aggressive about that. Do we know anything

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Speaker 1: now about where the former president stan should he be

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Speaker 1: re elected, how might that change? I don't know that

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Speaker 1: it can now that we've got a law here in

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Speaker 1: the United States that basically is forcing the company to

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Speaker 1: be sold or to face a ban. But I'm wondering

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Speaker 1: if a Trump administration comes into office, let's say after

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Speaker 1: the first of the year, how does that change the situation.

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Speaker 4: Yeah, I think that definitely could throw a wrene into things.

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Speaker 4: We've seen that President former President Trump over the past

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Speaker 4: few months has been outwardly saying that he is against

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Speaker 4: a full TikTok ban because he thinks that that would

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Speaker 4: elevate META and give them more influence than he believes

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Speaker 4: that they should have. So it's definitely possible that he

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Speaker 4: could come into the presidency early next year and potentially

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Speaker 4: change the way that this whole situation plays out.

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Speaker 2: I wonder what people think of Steven Mnusian's idea that

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Speaker 2: perhaps the algorithm could be reverse engineered in some or

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Speaker 2: a deal for the American assets. Now we know that

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Speaker 2: China is not really prepared to sell, and perhaps it

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Speaker 2: would sell without the algorithm, and then if you could

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Speaker 2: buy it without the algorithm and somehow recreate it, I mean,

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Speaker 2: it sort of boggles the mind a little bit. But

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Speaker 2: what are you hearing on that front?

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Speaker 4: To be honest, quite a number of people are quite

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Speaker 4: skeptical that you would be able to replicate TikTok's current

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Speaker 4: success without that core algorithm. It's what's known as the

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Speaker 4: secret sauce of their success. So if you did buy

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Speaker 4: it would essentially just be the infrastructure and the users. So,

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Speaker 4: I mean, we've seen Manus come out to say he's

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Speaker 4: quite confident that they would be able to replicate it,

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Speaker 4: but we haven't seen TikTok's competitors like Meta and Google

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Speaker 4: be able to do that so far.

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Speaker 1: Sarah, do we have an understanding of how the US operations,

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Speaker 1: what it's worth, I mean, how it's being valued right now?

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Speaker 1: I mean, and if imagine the best case scenario where

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Speaker 1: it does get sold, what's the price tag on something

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Speaker 1: like this.

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Speaker 4: There are actually while a huge spectrum of valuations on this,

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Speaker 4: just because people are not sure exactly how valuable whatever

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Speaker 4: they could buy will be. Like we said, without the algorithm,

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Speaker 4: if you're just buying the TikTok brand or just purely

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Speaker 4: the user base, how much would that be worth. That's

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Speaker 4: something that I think, you know, we're just seeing lots

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Speaker 4: of different valuations yet, so it's hard to pin down exactly.

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Speaker 2: Pretty interesting because we saw some comments from Eric Schmidt,

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Speaker 2: the former CEO of Google, say or Alphabet say that

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Speaker 2: he had thought about it. He had actually explored a

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Speaker 2: possible purchase of TikTok, but he's now moved on from

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Speaker 2: the idea. In addition to Schmidt and Manution, and we

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Speaker 2: know that Oracle was thinking about it before in terms

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Speaker 2: of a relationship. Are there any other buyers that have

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Speaker 2: come forward.

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Speaker 4: Yeah, we've been just hearing potentially that like other companies,

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Speaker 4: even non tech companies, gaming companies might be interested as well.

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Speaker 4: Manuchin said that he's spoken to a lot of tech companies.

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Speaker 4: We don't know any of the names yet that he's

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Speaker 4: referring to, but it sounds like there is some interest.

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Speaker 2: Yeah. Apple, I've heard Apple's name as a possibility. They

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Speaker 2: don't have. They just don't have that kind of of app.

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Speaker 1: Even Walmart. Walmart's name has been thrown around as.

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Speaker 4: Well, exactly, although with an Apple or like a Meta,

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Speaker 4: there would definitely be some FDC screwtiny.

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Speaker 2: Yeah, if you don't have a social media app, I

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Speaker 2: suppose you know, this might seem fair game. Anyway. That's

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Speaker 2: it for that, Thanks so much for joining us, Sarah

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Speaker 2: Sarah jang there Bloomberg China Tech Report.

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Speaker 1: We focus next on Warren Gaza. Today, Israeli officials were

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Speaker 1: saying major gaps remain with Hamas over the latest proposal

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Speaker 1: for a cease fire. Joining US now, Dan Flatley, Bloomberg

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Speaker 1: National Security reporter, making time for US from Washington, DC. Dan,

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Speaker 1: It's always a pleasure. Maybe we can start with the

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Speaker 1: operation that took place today in Gaza with the Israeli

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Speaker 1: troops moving forward and taking control of the Rafa border crossing.

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Speaker 1: That really wasn't much of a surprise. Now, but where

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Speaker 1: does this leave the two sides as they try to

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Speaker 1: work out the potential for a ceasefire? Does this kind

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Speaker 1: of stymy that process?

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Speaker 5: Yeah, I mean it definitely. I don't know that it

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Speaker 5: means that there won't be a ceasefire agreement at some point,

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Speaker 5: but it certainly is a ratcheting up of the Israeli's

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Speaker 5: position here. Of course, as you mentioned, there was a

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Speaker 5: ceasefire proposed by Hamas that was essentially rejected by Israel.

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Speaker 5: Israel said that some of the concessions or some of

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Speaker 5: the things that were in that ceasefire agreement did not

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Speaker 5: meet what they had requested. The US has sort of

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Speaker 5: caught a little bit betwixt and between, where you have

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Speaker 5: US officials here in the last couple of days saying

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Speaker 5: that they see still some room for agreement on that

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Speaker 5: cease fire deal. That really just amounts to a couple

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Speaker 5: of small details. That's certainly not the way the Israelis

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Speaker 5: are viewing this at this point. And you know, this

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Speaker 5: is really the culmination of the military operation that began

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Speaker 5: in the weeks after October seventh, when the Israeli government

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Speaker 5: under the leadership of Benjamin Etna, who said that they

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Speaker 5: were going to eradicate Hamas. And so this is kind

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Speaker 5: of the final outpost or final stronghold of Hamas. But

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Speaker 5: let's not forget that there are over a million people

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Speaker 5: in Rafa that led from other parts.

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Speaker 2: Of Gaza exactly. I mean, Israel told residents in the

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Speaker 2: eastern part of Rafa to leave immediately. But Rafa's right

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Speaker 2: on the border with Egypt. I mean, where are they

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Speaker 2: expecting that residents will go?

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Speaker 5: Yes, And I mean this is the heart of the

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Speaker 5: matter here, because Egypt to say that they don't really

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Speaker 5: want any refugees coming into their territory. They cite potential

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Speaker 5: unrest and other issues. The Israelis are not letting them,

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Speaker 5: obviously cross into their territory. In Gaza, they're sort of stuck,

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Speaker 5: and they've come basically from all other parts of Gaza

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Speaker 5: as they've moved south. This city, which is usually home

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Speaker 5: to about a quarter million people, is now hosting over

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Speaker 5: a million in tents and other kinds of encampments. And

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Speaker 5: then you sort of get into some of the remarks

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Speaker 5: that President Biden made today and some of the campus

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Speaker 5: protests here in the US. So really the eyes of

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Speaker 5: the world in many respects are sort of focused on

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Speaker 5: this city in southern Gaza for many different reasons. But

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Speaker 5: that's what we're looking out for right now.

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Speaker 1: So Dan, has humanitarian aid come to a halt completely?

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Speaker 1: Is anything getting through?

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Speaker 5: I think that there's still there's still maybe some aid

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Speaker 5: getting through, but it's very difficult obviously now at this

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Speaker 5: point because of the way that this conflict has evolved

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Speaker 5: and the way that basically the Israeli troops have forced

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Speaker 5: all of the all the Hamas fighters to this last city.

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Speaker 5: So you just have a very concentrated area. So if

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Speaker 5: you were talking about getting aid to you know, a

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Speaker 5: few different points in Gaza, that's a different scenario than

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Speaker 5: if you're just trying to get into a very tightly congested,

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Speaker 5: tightly packed area. So it makes it very difficult. And

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Speaker 5: of course from the Israeli troops perspective, you know, they

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Speaker 5: have said that they're trying to minimize civilian casualties, and

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Speaker 5: we've seen that there have been some civilian casualties throughout

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Speaker 5: this conflict. But you know, that's very hard to do.

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Speaker 5: When you're in a very densely packed urban environment, you

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Speaker 5: don't necessarily know whose friend or who's foe right off

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Speaker 5: the bat. So that adds to the complexity of this issue.

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Speaker 2: Dan, if you'd have told me a year ago that

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Speaker 2: the fut Up branch of Palestinians would outfall Israel in

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Speaker 2: terms of global opinion. I might have bought it given

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Speaker 2: the sort of newer and more modern leadership that they have,

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Speaker 2: but Hamas, how has Humas out foxed Israel in terms

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Speaker 2: of global opinion. Just look what's happening on campuses in

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Speaker 2: the United States and what it means for President Biden

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Speaker 2: in the election.

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Speaker 5: Yeah, you know, it's a great question, and I'm not

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Speaker 5: sure that I have a very good answer for you,

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Speaker 5: but I would say a couple of things. One, you know,

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Speaker 5: the world map has changed a great deal since the

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Speaker 5: Russian invasion of Ukraine just two years ago. You know,

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Speaker 5: there's a majority of countries around the world, especially in

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Speaker 5: the global South or the more developing countries, that have

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Speaker 5: abstained from weighing in on that conflict. And so you

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Speaker 5: see a world that is not necessarily beholden to the

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Speaker 5: US or the Israeli view of things. And you know

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Speaker 5: that's true. This has been a development that's been underway

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Speaker 5: for many years in college campuses, for good or for ill,

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Speaker 5: where people are questioning sort of the established narratives. And

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Speaker 5: then you have a very tricky issue with this with

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Speaker 5: anti Semitism on one side and humanitarian concerns and other

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Speaker 5: things on the other side, and that's where that's why

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Speaker 5: this issue is so combustible, and that's where you see

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Speaker 5: Biden today trying to tamp down some of that. But

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Speaker 5: it's it's not going to go away, and it's only

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Speaker 5: going to intentify if we do see continuation of operations.

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Speaker 1: I mean, so, what's next if we move toward trying

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Speaker 1: to get an agreement on a ceasefire, do we have

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Speaker 1: the next step?

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Speaker 5: Well, you know, you could look at the Israeli position now,

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Speaker 5: as you know, they're trying to drive a hard bargain.

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Speaker 5: Perhaps they are looking for some concessions from Hamas on

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Speaker 5: a couple of key points in that ceasefire agreement. But

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Speaker 5: you have to weigh that against the necessity in the

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Speaker 5: part of you know that the Israeli government has identified

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Speaker 5: in eradicating Hamas. So what wins out in the end,

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Speaker 5: certainly not a permanent cease fire, but maybe it's temporary one.

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Speaker 1: All right, we'll look forward to that, hopefully temporary cease fire.

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Speaker 1: Dan Flatley joining us at Bloomberg National Security reporter.

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Speaker 2: Joining us now on the program is Omar Slim, Co,

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Speaker 2: Head of Asia Fixed Income at pine Bridge Investments. Omar

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Speaker 2: in terms of fixed income opportunities here in Asia. One

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Speaker 2: big challenge is the sort of sledgehammer of the dollar.

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Speaker 2: The dollar has been strong and it seems like it's

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Speaker 2: likely to stay strong as long as the FED doesn't

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Speaker 2: start cutting interest rates. What is the impact for your

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Speaker 2: business on the strength of the dollar?

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Speaker 6: Right, So, in terms of the dollar, I would agree

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Speaker 6: with the view that it's probably going to stay strong

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Speaker 6: for the foreseeable future, and the impact really is can

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Speaker 6: be kind of bucketed in two ways. The first one

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Speaker 6: when it comes to the local currency markets here. I

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Speaker 6: think it's very difficult for the local currency bond markets

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Speaker 6: to perform when the dollar is that strong and when

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Speaker 6: the interest rate differential is as high. So we're much

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Speaker 6: more cautious when it comes to some of the local

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Speaker 6: currencies when it comes to some of the US dollar

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Speaker 6: denominated bond market in Asia. So when we look at

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Speaker 6: the kind of the impact on the fundamentals of the

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Speaker 6: corporates in the region, it tends to be pretty balanced

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Speaker 6: in the sense that they can withhold a stronger dollar

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Speaker 6: because part of their revenues and so on is in

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Speaker 6: US dollar.

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Speaker 1: So if you're a monetary authority in em and you're

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Speaker 1: in the predicament that you just laid out. I mean,

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Speaker 1: what are your options.

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Speaker 6: Well, your options is to wait and see what the

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Speaker 6: plant does. And in the meantime, the pressure is too

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Speaker 6: strong on your currency, you hike defensively, like what we

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Speaker 6: saw in Indonesia. So it's not a great position that

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Speaker 6: they're in. You know, they don't want to burn and

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Speaker 6: towards their deserves, so they are essentially price takers at

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Speaker 6: this point.

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Speaker 2: One interesting development I think it's the first time in

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Speaker 2: forty years or so when you look at cycles that

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Speaker 2: you actually have the average mortgage rate of Americans. They

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Speaker 2: have this you know, fixed thirty year and people did

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Speaker 2: refinance over a long period of time. The average mortgage

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Speaker 2: rate is like one hundred and fifty basis points lower

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Speaker 2: than the Fed funds rate, and that's really very beneficial

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Speaker 2: to American families. I guess almost the reverse is true

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Speaker 2: in Asia.

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Speaker 6: Right, Yeah, I mean on the first point, if I

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Speaker 6: just can elaborate, I think one of the most interesting

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Speaker 6: things that's been that we've been looking at is how

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Speaker 6: interest rate sensitive the economy is, whether it's the US

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Speaker 6: economy or the global economies. And what you just stayed

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Speaker 6: out is an interesting example of how it is less

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Speaker 6: interest rate sensitive, which explains a certain extent at least

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Speaker 6: the strength of the in the economy. In terms of Asia,

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Speaker 6: I think the the the kind of the release volve

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Speaker 6: has been the currency and you see it in full

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Speaker 6: display when in the in the case of the end,

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Speaker 6: which you can talk about it if you like.

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Speaker 1: Oh, go ahead, for what are you seeing in the

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Speaker 1: end right now? That's going to give the market some

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Speaker 1: comfort that maybe intervention is not going to be kind

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Speaker 1: of the the facto way that that the monetary authority

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Speaker 1: in Japan defends, you know, the weakness that at some

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Speaker 1: point is going to be up to the bo j

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Speaker 1: because of inflationary pressures that are building to actually have

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Speaker 1: to do its job and raise interest rates.

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Speaker 6: Yeah, I think clearly market intervention is ineffective, and certainly

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Speaker 6: if it's uncoordinated with the US and the ECV, it's

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Speaker 6: even more ineffective. They're just kind of torching reserves. I

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Speaker 6: think one of the points which the market has been

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Speaker 6: missing for a while is that really the policy makers

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Speaker 6: are neglecting the end in the sense that I don't

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Speaker 6: know if there's a strong belief that weekend is that

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Speaker 6: detrimental to the Japanese economy, and it hasn't been a

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Speaker 6: very coherent policy in terms of intervening. The Bank of

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Speaker 6: Japan is saying something and then the Ministry of Finance

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Speaker 6: is doing something else. So I think the end weakness

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Speaker 6: has not been that detrimental to the economy, and I

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Speaker 6: think the role now is just to make sure that

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Speaker 6: the market remains orderly as opposed to really defending the end.

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Speaker 6: And the only way that they can drop up the

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Speaker 6: end is to do a pretty aggressive hiking cycle at

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Speaker 6: the fact which I think there is a very very

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Speaker 6: low probability of that happening.

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Speaker 2: It seemed like earlier when we were talking about the

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Speaker 2: strong dollar, you said, yeah, I mean it definitely it

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Speaker 2: hurts local currency bonds in Asia, but not not dollar bonds.

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Speaker 2: So does that mean that you're actually pretty positive here

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Speaker 2: on buying dollar bonds throughout the region, and if so,

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Speaker 2: which areas look best?

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Speaker 4: Yeah?

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Speaker 6: Dollar bonds I think generally globally have been pretty resilient,

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Speaker 6: pretty strong. In Asia and particular the performance has been

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Speaker 6: pretty strong, and it's something that we spoke about in

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Speaker 6: your so before. The problem now is that pretty much

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Speaker 6: everywhere you look, particularly when you look at the high

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Speaker 6: credit quality bonds, they're tight. Even when you look at

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Speaker 6: some of the high yield bonds in the US, they

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Speaker 6: are typed. So I think the main risk here is

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Speaker 6: related to evaluation being typed as opposed to fundamentals. The fundamentals,

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Speaker 6: to your point, particularly when it comes to the investment

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Speaker 6: grade market, continues to be strong. In balance, we still

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Speaker 6: like the investment grade markets in the region, and if

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Speaker 6: some select opportunities in highyield.

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Speaker 1: Are you short duration? I mean, are you at the

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Speaker 1: shorter end of the curve these days?

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Speaker 6: Well, we started the year where we were more aggressive

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Speaker 6: in terms of then the economic data went the other way,

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Speaker 6: so we uh and we thought that the market was

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Speaker 6: two consensus in terms of the number of cuts, particularly

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Speaker 6: in the beginning of the year and the timing of cuts.

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Speaker 6: So we took a much more defensive pussure in division,

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Speaker 6: which worked well, particularly in the past two months. Right now,

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Speaker 6: I think, particularly after the FED messaging and the jobs number,

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Speaker 6: I think the distribution outcome has been narrowed and now

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Speaker 6: we're a bit more overweight division.

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Speaker 2: Omar, thank you. Omar Slim, co head of Asia Fixed

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Speaker 2: Income pine Bridge Investments.

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Speaker 1: This has been the Bloomberg Daybreak Asia podcast, bringing you

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Speaker 1: the stories making news and moving markets in the Asia Pacific.

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