WEBVTT - ByteDance Files TikTok Suit, US Pulls Huawei Export Licenses 0:00:02.480 --> 0:00:10.480 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:10.520 --> 0:00:13.720 Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian 0:00:13.800 --> 0:00:16.640 Curtis and myself for the stories, making news and moving 0:00:16.680 --> 0:00:19.560 markets in the APAC region. You can subscribe to the 0:00:19.600 --> 0:00:23.080 show anywhere you get your podcast and always on Bloomberg Radio. 0:00:23.320 --> 0:00:26.040 The Bloomberg Terminal and the Bloomberg Business. 0:00:25.800 --> 0:00:29.600 App well by Dance has filed suit against the United 0:00:29.640 --> 0:00:33.680 States in effort to repeal the TikTok divest or ban law. 0:00:34.120 --> 0:00:37.000 Who have sets up what may be a prolonged legal battle, 0:00:37.240 --> 0:00:39.720 and it suggests that by Dance is not planning to 0:00:39.800 --> 0:00:42.320 sell the app. Bloomberg's Mike Shepard has. 0:00:42.200 --> 0:00:45.880 More since President Joe Biden signed the bill into law 0:00:46.000 --> 0:00:49.440 last month, TikTok and its owners, Beijing based Byte Dance 0:00:49.640 --> 0:00:52.320 have been preparing this legal challenge, and they're doing so 0:00:52.360 --> 0:00:55.720 on First Amendment grounds. They're laying the groundwork for serious 0:00:55.760 --> 0:00:59.880 constitutional challenge to this law, saying that will infringe the 0:01:00.080 --> 0:01:03.440 free speech rights of one hundred and seventy million TikTok users. 0:01:04.200 --> 0:01:07.559 The lawsuit marks the first legal challenge since Congress passed 0:01:07.600 --> 0:01:11.520 the law. By Dance says that selling TikTok as is 0:01:11.600 --> 0:01:17.560 specified by the law is unfeasible commercially, technically and legally. 0:01:18.080 --> 0:01:20.399 Joining us now in our studios in Hong Kong is 0:01:20.440 --> 0:01:23.720 Sarah Jung, who is Bloomberg China Tech reporter for a 0:01:23.760 --> 0:01:27.280 little more discussion on this. So, Sarah, not a big 0:01:27.319 --> 0:01:30.640 surprise TikTok leadership. I've been talking about this in the 0:01:30.720 --> 0:01:33.000 run up to the law passing. They said they would 0:01:33.040 --> 0:01:37.000 fight it in court. Bloomberg News is making the statement 0:01:37.760 --> 0:01:40.880 that this is a clear sign byte Edance is not 0:01:41.520 --> 0:01:46.640 prepared to sell. I suppose that means that if it 0:01:46.680 --> 0:01:49.440 loses the case, it just closes the app. 0:01:50.160 --> 0:01:52.960 I think that would be definitely one of the worst 0:01:52.960 --> 0:01:55.480 case scenarios. Like you said, we've been hearing from the 0:01:55.520 --> 0:01:58.400 company for a while now that they will file this lawsuit. 0:01:58.480 --> 0:02:02.320 It seems like internally and externally they're quite confident that 0:02:02.360 --> 0:02:05.600 they do have a strong legal argument in the same 0:02:05.640 --> 0:02:08.080 way that they were able to overturn the Montana state 0:02:08.120 --> 0:02:11.080 ban on TikTok. They're hoping that, you know, by pushing 0:02:11.120 --> 0:02:14.240 this violation or first Amendment, you know, saying that the 0:02:14.400 --> 0:02:18.640 bill is targeting TikTok very narrowly saying that divestment like 0:02:18.680 --> 0:02:22.600 you said, is not legally, commercially or technically possible, including 0:02:22.760 --> 0:02:25.919 stating that the Chinese government would not approve of such 0:02:25.960 --> 0:02:30.240 a divesture. It's all part of this broader push that 0:02:30.280 --> 0:02:32.920 they think can make this legal argument for them. Yeah. 0:02:32.919 --> 0:02:35.400 So in the filing, TikTok is claiming that the ban 0:02:35.520 --> 0:02:38.720 will stifle free speech that may be up for debate, 0:02:39.200 --> 0:02:41.720 also that the ban would hurt small businesses that rely 0:02:41.840 --> 0:02:44.320 on the app. Can you help me understand something when 0:02:44.360 --> 0:02:47.959 I reflect back on what China did back in twenty 0:02:48.040 --> 0:02:53.240 seventeen when it passed the new cybersecurity law, whether the 0:02:53.320 --> 0:02:55.880 United States could point to that law saying I don't 0:02:55.919 --> 0:02:59.640 care what the company is saying right now. By law 0:02:59.760 --> 0:03:04.080 in China, companies that in this case by Dance is 0:03:04.120 --> 0:03:08.000 required to share data with the government. Isn't that something 0:03:08.000 --> 0:03:09.519 that's going to be a part of this case or 0:03:09.560 --> 0:03:10.120 Am I wrong? 0:03:10.880 --> 0:03:13.919 Definitely? I think that's the crux of the argument. From 0:03:13.960 --> 0:03:19.000 the legislator's side. They're saying that because Byteedance is operating 0:03:19.080 --> 0:03:22.840 in Beijing, the Chinese government, through the cybersecurity law like 0:03:22.880 --> 0:03:26.720 you mentioned, and also other types of national security data 0:03:26.760 --> 0:03:30.240 security kind of laws can require that byte Dance provide 0:03:30.480 --> 0:03:34.800 data collected by TikTok to the government. This is something 0:03:34.840 --> 0:03:37.160 that TikTok and byte Dance have both denied. They've said 0:03:37.200 --> 0:03:40.280 it's hypothetical, and actually, if you read their lawsuit, they 0:03:40.320 --> 0:03:43.160 address this head on. They say that so far all 0:03:43.200 --> 0:03:46.160 of these risks and threats are hypothetical, and that they've 0:03:46.200 --> 0:03:50.360 tried to address this with discussions with Sophia's where they 0:03:50.640 --> 0:03:53.600 would have what they've called Project Texas, which is to 0:03:53.680 --> 0:03:56.960 completely isolate and silo their US data and have that 0:03:57.040 --> 0:04:02.440 be overseen by a US company like Oracle. Of course, 0:04:02.600 --> 0:04:06.480 that argument hasn't hasn't been one that was convincing enough 0:04:06.480 --> 0:04:09.200 to Congress and to President Biden, as we've seen. 0:04:09.800 --> 0:04:12.280 Now we make the point that this lawsuit is the 0:04:12.320 --> 0:04:17.720 first legal challenge. Does that Are we expecting other suits 0:04:17.760 --> 0:04:20.840 to come forward here, perhaps from some of the users 0:04:20.880 --> 0:04:22.680 who feel wronged. 0:04:22.320 --> 0:04:25.560 By this, Yeah, definitely. There have been users talking about 0:04:25.640 --> 0:04:28.880 forming class action lawsuits on this. This is something, of course, 0:04:28.920 --> 0:04:33.640 that TikTok itself is encouraging. We saw earlier while the 0:04:33.839 --> 0:04:37.000 TikTok bill was going through Congress that they were actively 0:04:37.080 --> 0:04:41.880 lobbying their users to call their lawmakers, including with that 0:04:41.920 --> 0:04:44.280 message on the app say and call your lawmakers. But 0:04:44.360 --> 0:04:47.400 that was just used again by Congress as another sign 0:04:47.440 --> 0:04:50.680 of how how much influence TikTok does have in the US. 0:04:51.160 --> 0:04:54.480 It's interesting from what I've read, this could wind up 0:04:54.520 --> 0:04:58.400 before the US Supreme Court. I mean, it's only going 0:04:58.480 --> 0:05:00.760 to be a matter of time, I think, before it 0:05:00.800 --> 0:05:03.760 makes it there. But in terms of the litigation process, 0:05:04.000 --> 0:05:05.840 do we know what the next step is? I think 0:05:05.880 --> 0:05:09.000 the lawsuit was filed in Washington at the US Court 0:05:09.000 --> 0:05:10.880 of Appeals, Right, yep. 0:05:10.720 --> 0:05:11.200 That's right. 0:05:12.400 --> 0:05:14.960 But like you said, I think most legal experts are 0:05:14.960 --> 0:05:17.279 expecting this will be a year's long process and it 0:05:17.320 --> 0:05:19.040 will eventually make its way. 0:05:18.920 --> 0:05:19.480 To this well. 0:05:19.520 --> 0:05:23.680 Given that, would we expect perhaps an injunction filed in 0:05:24.000 --> 0:05:27.680 the short term trying to get TikTok to suspend operations 0:05:28.440 --> 0:05:30.599 while the case is being decided, or would that be 0:05:30.640 --> 0:05:32.520 difficult to get through a lower court? 0:05:32.880 --> 0:05:35.600 That could be possible, but then TikTok might appeal again. 0:05:35.640 --> 0:05:37.800 And also because the government in the bill has laid 0:05:37.800 --> 0:05:39.920 out this two hundred and seventy day timeframe, so I 0:05:39.960 --> 0:05:42.480 don't think that that's what people are expecting at this moment. 0:05:42.680 --> 0:05:44.520 Of course, you know that could happen. 0:05:45.080 --> 0:05:47.480 The timing here is very interesting because obviously in the 0:05:47.520 --> 0:05:50.360 States we're in a presidential election year, and when former 0:05:50.400 --> 0:05:55.279 President Trump was president, team moved to curtail the app. 0:05:55.360 --> 0:05:58.239 It was pretty aggressive about that. Do we know anything 0:05:58.320 --> 0:06:01.960 now about where the former president stan should he be 0:06:02.040 --> 0:06:05.240 re elected, how might that change? I don't know that 0:06:05.279 --> 0:06:07.640 it can now that we've got a law here in 0:06:07.680 --> 0:06:12.080 the United States that basically is forcing the company to 0:06:12.120 --> 0:06:14.960 be sold or to face a ban. But I'm wondering 0:06:15.040 --> 0:06:19.239 if a Trump administration comes into office, let's say after 0:06:19.279 --> 0:06:21.560 the first of the year, how does that change the situation. 0:06:22.400 --> 0:06:24.800 Yeah, I think that definitely could throw a wrene into things. 0:06:24.839 --> 0:06:28.080 We've seen that President former President Trump over the past 0:06:28.160 --> 0:06:31.120 few months has been outwardly saying that he is against 0:06:31.160 --> 0:06:34.240 a full TikTok ban because he thinks that that would 0:06:34.440 --> 0:06:38.080 elevate META and give them more influence than he believes 0:06:38.080 --> 0:06:40.880 that they should have. So it's definitely possible that he 0:06:40.920 --> 0:06:46.200 could come into the presidency early next year and potentially 0:06:46.279 --> 0:06:49.480 change the way that this whole situation plays out. 0:06:50.480 --> 0:06:53.880 I wonder what people think of Steven Mnusian's idea that 0:06:54.480 --> 0:07:00.159 perhaps the algorithm could be reverse engineered in some or 0:07:00.200 --> 0:07:03.080 a deal for the American assets. Now we know that 0:07:03.240 --> 0:07:07.680 China is not really prepared to sell, and perhaps it 0:07:07.720 --> 0:07:10.400 would sell without the algorithm, and then if you could 0:07:10.400 --> 0:07:13.320 buy it without the algorithm and somehow recreate it, I mean, 0:07:13.360 --> 0:07:15.360 it sort of boggles the mind a little bit. But 0:07:15.400 --> 0:07:16.760 what are you hearing on that front? 0:07:17.120 --> 0:07:18.960 To be honest, quite a number of people are quite 0:07:19.000 --> 0:07:22.360 skeptical that you would be able to replicate TikTok's current 0:07:22.400 --> 0:07:25.920 success without that core algorithm. It's what's known as the 0:07:26.000 --> 0:07:29.760 secret sauce of their success. So if you did buy 0:07:29.800 --> 0:07:33.040 it would essentially just be the infrastructure and the users. So, 0:07:33.320 --> 0:07:35.720 I mean, we've seen Manus come out to say he's 0:07:35.800 --> 0:07:37.800 quite confident that they would be able to replicate it, 0:07:38.000 --> 0:07:41.240 but we haven't seen TikTok's competitors like Meta and Google 0:07:41.360 --> 0:07:42.800 be able to do that so far. 0:07:43.680 --> 0:07:47.360 Sarah, do we have an understanding of how the US operations, 0:07:47.360 --> 0:07:50.200 what it's worth, I mean, how it's being valued right now? 0:07:50.280 --> 0:07:53.960 I mean, and if imagine the best case scenario where 0:07:53.960 --> 0:07:57.200 it does get sold, what's the price tag on something 0:07:57.280 --> 0:07:57.560 like this. 0:07:58.320 --> 0:08:03.320 There are actually while a huge spectrum of valuations on this, 0:08:03.480 --> 0:08:07.440 just because people are not sure exactly how valuable whatever 0:08:07.480 --> 0:08:10.880 they could buy will be. Like we said, without the algorithm, 0:08:10.880 --> 0:08:14.280 if you're just buying the TikTok brand or just purely 0:08:14.360 --> 0:08:17.360 the user base, how much would that be worth. That's 0:08:17.400 --> 0:08:19.880 something that I think, you know, we're just seeing lots 0:08:19.880 --> 0:08:23.000 of different valuations yet, so it's hard to pin down exactly. 0:08:23.280 --> 0:08:26.200 Pretty interesting because we saw some comments from Eric Schmidt, 0:08:26.480 --> 0:08:30.360 the former CEO of Google, say or Alphabet say that 0:08:30.760 --> 0:08:33.720 he had thought about it. He had actually explored a 0:08:33.720 --> 0:08:37.079 possible purchase of TikTok, but he's now moved on from 0:08:37.120 --> 0:08:41.600 the idea. In addition to Schmidt and Manution, and we 0:08:41.679 --> 0:08:45.559 know that Oracle was thinking about it before in terms 0:08:45.640 --> 0:08:48.480 of a relationship. Are there any other buyers that have 0:08:48.559 --> 0:08:49.080 come forward. 0:08:49.559 --> 0:08:53.120 Yeah, we've been just hearing potentially that like other companies, 0:08:53.160 --> 0:08:56.720 even non tech companies, gaming companies might be interested as well. 0:08:57.400 --> 0:09:00.000 Manuchin said that he's spoken to a lot of tech companies. 0:09:00.320 --> 0:09:02.000 We don't know any of the names yet that he's 0:09:02.000 --> 0:09:05.079 referring to, but it sounds like there is some interest. 0:09:05.240 --> 0:09:08.240 Yeah. Apple, I've heard Apple's name as a possibility. They 0:09:08.280 --> 0:09:12.400 don't have. They just don't have that kind of of app. 0:09:12.640 --> 0:09:15.520 Even Walmart. Walmart's name has been thrown around as. 0:09:15.400 --> 0:09:18.600 Well, exactly, although with an Apple or like a Meta, 0:09:18.600 --> 0:09:20.640 there would definitely be some FDC screwtiny. 0:09:21.440 --> 0:09:23.920 Yeah, if you don't have a social media app, I 0:09:23.960 --> 0:09:28.480 suppose you know, this might seem fair game. Anyway. That's 0:09:28.520 --> 0:09:31.559 it for that, Thanks so much for joining us, Sarah 0:09:31.600 --> 0:09:33.640 Sarah jang there Bloomberg China Tech Report. 0:09:40.720 --> 0:09:44.480 We focus next on Warren Gaza. Today, Israeli officials were 0:09:44.520 --> 0:09:48.959 saying major gaps remain with Hamas over the latest proposal 0:09:49.080 --> 0:09:52.319 for a cease fire. Joining US now, Dan Flatley, Bloomberg 0:09:52.520 --> 0:09:56.400 National Security reporter, making time for US from Washington, DC. Dan, 0:09:56.440 --> 0:09:59.480 It's always a pleasure. Maybe we can start with the 0:09:59.520 --> 0:10:03.280 operation that took place today in Gaza with the Israeli 0:10:03.320 --> 0:10:07.600 troops moving forward and taking control of the Rafa border crossing. 0:10:08.280 --> 0:10:11.280 That really wasn't much of a surprise. Now, but where 0:10:11.280 --> 0:10:14.320 does this leave the two sides as they try to 0:10:14.400 --> 0:10:17.480 work out the potential for a ceasefire? Does this kind 0:10:17.480 --> 0:10:18.680 of stymy that process? 0:10:20.400 --> 0:10:26.160 Yeah, I mean it definitely. I don't know that it 0:10:26.240 --> 0:10:30.160 means that there won't be a ceasefire agreement at some point, 0:10:30.240 --> 0:10:34.600 but it certainly is a ratcheting up of the Israeli's 0:10:34.600 --> 0:10:38.560 position here. Of course, as you mentioned, there was a 0:10:38.559 --> 0:10:43.479 ceasefire proposed by Hamas that was essentially rejected by Israel. 0:10:43.800 --> 0:10:48.679 Israel said that some of the concessions or some of 0:10:48.720 --> 0:10:52.400 the things that were in that ceasefire agreement did not 0:10:52.600 --> 0:10:57.040 meet what they had requested. The US has sort of 0:10:57.240 --> 0:11:00.440 caught a little bit betwixt and between, where you have 0:11:00.559 --> 0:11:03.480 US officials here in the last couple of days saying 0:11:03.520 --> 0:11:08.079 that they see still some room for agreement on that 0:11:08.320 --> 0:11:12.439 cease fire deal. That really just amounts to a couple 0:11:12.440 --> 0:11:14.880 of small details. That's certainly not the way the Israelis 0:11:14.880 --> 0:11:17.679 are viewing this at this point. And you know, this 0:11:17.760 --> 0:11:21.880 is really the culmination of the military operation that began 0:11:22.160 --> 0:11:26.640 in the weeks after October seventh, when the Israeli government 0:11:27.320 --> 0:11:30.760 under the leadership of Benjamin Etna, who said that they 0:11:30.800 --> 0:11:33.800 were going to eradicate Hamas. And so this is kind 0:11:33.840 --> 0:11:37.800 of the final outpost or final stronghold of Hamas. But 0:11:38.120 --> 0:11:40.320 let's not forget that there are over a million people 0:11:40.800 --> 0:11:43.200 in Rafa that led from other parts. 0:11:42.960 --> 0:11:47.080 Of Gaza exactly. I mean, Israel told residents in the 0:11:47.120 --> 0:11:51.320 eastern part of Rafa to leave immediately. But Rafa's right 0:11:51.360 --> 0:11:53.439 on the border with Egypt. I mean, where are they 0:11:53.480 --> 0:11:55.520 expecting that residents will go? 0:11:57.200 --> 0:11:58.600 Yes, And I mean this is the heart of the 0:11:58.640 --> 0:12:01.560 matter here, because Egypt to say that they don't really 0:12:01.640 --> 0:12:06.480 want any refugees coming into their territory. They cite potential 0:12:06.679 --> 0:12:12.280 unrest and other issues. The Israelis are not letting them, 0:12:12.280 --> 0:12:17.079 obviously cross into their territory. In Gaza, they're sort of stuck, 0:12:17.120 --> 0:12:20.560 and they've come basically from all other parts of Gaza 0:12:20.559 --> 0:12:24.079 as they've moved south. This city, which is usually home 0:12:24.120 --> 0:12:27.640 to about a quarter million people, is now hosting over 0:12:27.679 --> 0:12:30.320 a million in tents and other kinds of encampments. And 0:12:30.320 --> 0:12:32.559 then you sort of get into some of the remarks 0:12:32.559 --> 0:12:35.000 that President Biden made today and some of the campus 0:12:35.000 --> 0:12:38.040 protests here in the US. So really the eyes of 0:12:38.080 --> 0:12:40.360 the world in many respects are sort of focused on 0:12:40.440 --> 0:12:43.640 this city in southern Gaza for many different reasons. But 0:12:43.679 --> 0:12:46.400 that's what we're looking out for right now. 0:12:46.480 --> 0:12:50.360 So Dan, has humanitarian aid come to a halt completely? 0:12:50.480 --> 0:12:51.480 Is anything getting through? 0:12:52.800 --> 0:12:56.280 I think that there's still there's still maybe some aid 0:12:56.360 --> 0:12:59.640 getting through, but it's very difficult obviously now at this 0:12:59.720 --> 0:13:04.199 point because of the way that this conflict has evolved 0:13:04.360 --> 0:13:09.080 and the way that basically the Israeli troops have forced 0:13:09.720 --> 0:13:13.880 all of the all the Hamas fighters to this last city. 0:13:15.120 --> 0:13:17.400 So you just have a very concentrated area. So if 0:13:17.400 --> 0:13:20.120 you were talking about getting aid to you know, a 0:13:20.160 --> 0:13:24.360 few different points in Gaza, that's a different scenario than 0:13:24.400 --> 0:13:27.439 if you're just trying to get into a very tightly congested, 0:13:27.480 --> 0:13:30.760 tightly packed area. So it makes it very difficult. And 0:13:30.800 --> 0:13:34.600 of course from the Israeli troops perspective, you know, they 0:13:34.640 --> 0:13:37.800 have said that they're trying to minimize civilian casualties, and 0:13:37.880 --> 0:13:40.960 we've seen that there have been some civilian casualties throughout 0:13:40.960 --> 0:13:44.240 this conflict. But you know, that's very hard to do. 0:13:44.320 --> 0:13:47.160 When you're in a very densely packed urban environment, you 0:13:47.200 --> 0:13:49.840 don't necessarily know whose friend or who's foe right off 0:13:49.840 --> 0:13:53.160 the bat. So that adds to the complexity of this issue. 0:13:53.640 --> 0:13:56.280 Dan, if you'd have told me a year ago that 0:13:56.360 --> 0:14:01.200 the fut Up branch of Palestinians would outfall Israel in 0:14:01.280 --> 0:14:05.320 terms of global opinion. I might have bought it given 0:14:05.400 --> 0:14:08.960 the sort of newer and more modern leadership that they have, 0:14:09.240 --> 0:14:14.079 but Hamas, how has Humas out foxed Israel in terms 0:14:14.080 --> 0:14:16.920 of global opinion. Just look what's happening on campuses in 0:14:16.960 --> 0:14:19.840 the United States and what it means for President Biden 0:14:21.040 --> 0:14:21.640 in the election. 0:14:23.760 --> 0:14:25.800 Yeah, you know, it's a great question, and I'm not 0:14:25.840 --> 0:14:27.680 sure that I have a very good answer for you, 0:14:27.760 --> 0:14:30.320 but I would say a couple of things. One, you know, 0:14:30.360 --> 0:14:34.000 the world map has changed a great deal since the 0:14:34.080 --> 0:14:38.120 Russian invasion of Ukraine just two years ago. You know, 0:14:38.720 --> 0:14:42.720 there's a majority of countries around the world, especially in 0:14:42.760 --> 0:14:46.640 the global South or the more developing countries, that have 0:14:46.920 --> 0:14:49.960 abstained from weighing in on that conflict. And so you 0:14:50.040 --> 0:14:53.000 see a world that is not necessarily beholden to the 0:14:53.160 --> 0:14:56.000 US or the Israeli view of things. And you know 0:14:56.080 --> 0:14:59.880 that's true. This has been a development that's been underway 0:15:00.040 --> 0:15:02.680 for many years in college campuses, for good or for ill, 0:15:02.720 --> 0:15:05.760 where people are questioning sort of the established narratives. And 0:15:05.800 --> 0:15:08.080 then you have a very tricky issue with this with 0:15:08.200 --> 0:15:12.000 anti Semitism on one side and humanitarian concerns and other 0:15:12.040 --> 0:15:14.000 things on the other side, and that's where that's why 0:15:14.000 --> 0:15:16.520 this issue is so combustible, and that's where you see 0:15:16.520 --> 0:15:21.520 Biden today trying to tamp down some of that. But 0:15:21.640 --> 0:15:23.720 it's it's not going to go away, and it's only 0:15:23.760 --> 0:15:27.240 going to intentify if we do see continuation of operations. 0:15:27.240 --> 0:15:30.000 I mean, so, what's next if we move toward trying 0:15:30.040 --> 0:15:32.240 to get an agreement on a ceasefire, do we have 0:15:32.560 --> 0:15:33.280 the next step? 0:15:35.120 --> 0:15:38.080 Well, you know, you could look at the Israeli position now, 0:15:38.240 --> 0:15:40.960 as you know, they're trying to drive a hard bargain. 0:15:41.480 --> 0:15:44.480 Perhaps they are looking for some concessions from Hamas on 0:15:44.640 --> 0:15:48.320 a couple of key points in that ceasefire agreement. But 0:15:48.360 --> 0:15:51.920 you have to weigh that against the necessity in the 0:15:51.920 --> 0:15:54.560 part of you know that the Israeli government has identified 0:15:54.840 --> 0:15:57.600 in eradicating Hamas. So what wins out in the end, 0:15:58.160 --> 0:16:00.760 certainly not a permanent cease fire, but maybe it's temporary one. 0:16:01.040 --> 0:16:04.000 All right, we'll look forward to that, hopefully temporary cease fire. 0:16:04.080 --> 0:16:07.080 Dan Flatley joining us at Bloomberg National Security reporter. 0:16:13.360 --> 0:16:16.040 Joining us now on the program is Omar Slim, Co, 0:16:16.120 --> 0:16:20.840 Head of Asia Fixed Income at pine Bridge Investments. Omar 0:16:21.760 --> 0:16:25.880 in terms of fixed income opportunities here in Asia. One 0:16:25.920 --> 0:16:29.120 big challenge is the sort of sledgehammer of the dollar. 0:16:29.760 --> 0:16:32.560 The dollar has been strong and it seems like it's 0:16:33.160 --> 0:16:35.200 likely to stay strong as long as the FED doesn't 0:16:35.240 --> 0:16:39.440 start cutting interest rates. What is the impact for your 0:16:39.520 --> 0:16:42.400 business on the strength of the dollar? 0:16:45.120 --> 0:16:47.440 Right, So, in terms of the dollar, I would agree 0:16:47.480 --> 0:16:49.520 with the view that it's probably going to stay strong 0:16:49.640 --> 0:16:55.080 for the foreseeable future, and the impact really is can 0:16:55.120 --> 0:16:57.480 be kind of bucketed in two ways. The first one 0:16:57.600 --> 0:17:01.080 when it comes to the local currency markets here. I 0:17:01.080 --> 0:17:04.160 think it's very difficult for the local currency bond markets 0:17:04.160 --> 0:17:06.560 to perform when the dollar is that strong and when 0:17:06.600 --> 0:17:10.640 the interest rate differential is as high. So we're much 0:17:10.640 --> 0:17:12.439 more cautious when it comes to some of the local 0:17:12.480 --> 0:17:15.280 currencies when it comes to some of the US dollar 0:17:15.359 --> 0:17:19.560 denominated bond market in Asia. So when we look at 0:17:19.600 --> 0:17:21.840 the kind of the impact on the fundamentals of the 0:17:22.000 --> 0:17:26.480 corporates in the region, it tends to be pretty balanced 0:17:27.600 --> 0:17:30.400 in the sense that they can withhold a stronger dollar 0:17:30.560 --> 0:17:33.520 because part of their revenues and so on is in 0:17:33.680 --> 0:17:34.160 US dollar. 0:17:34.440 --> 0:17:38.359 So if you're a monetary authority in em and you're 0:17:38.440 --> 0:17:40.560 in the predicament that you just laid out. I mean, 0:17:41.000 --> 0:17:42.040 what are your options. 0:17:43.880 --> 0:17:45.919 Well, your options is to wait and see what the 0:17:45.920 --> 0:17:49.320 plant does. And in the meantime, the pressure is too 0:17:49.320 --> 0:17:53.000 strong on your currency, you hike defensively, like what we 0:17:53.080 --> 0:17:55.879 saw in Indonesia. So it's not a great position that 0:17:55.880 --> 0:17:59.159 they're in. You know, they don't want to burn and 0:17:59.240 --> 0:18:03.600 towards their deserves, so they are essentially price takers at 0:18:03.600 --> 0:18:04.120 this point. 0:18:05.560 --> 0:18:08.000 One interesting development I think it's the first time in 0:18:08.119 --> 0:18:10.919 forty years or so when you look at cycles that 0:18:11.000 --> 0:18:15.720 you actually have the average mortgage rate of Americans. They 0:18:15.720 --> 0:18:18.400 have this you know, fixed thirty year and people did 0:18:18.440 --> 0:18:22.320 refinance over a long period of time. The average mortgage 0:18:22.440 --> 0:18:26.000 rate is like one hundred and fifty basis points lower 0:18:26.040 --> 0:18:29.680 than the Fed funds rate, and that's really very beneficial 0:18:29.760 --> 0:18:34.200 to American families. I guess almost the reverse is true 0:18:34.200 --> 0:18:35.040 in Asia. 0:18:34.760 --> 0:18:39.320 Right, Yeah, I mean on the first point, if I 0:18:39.440 --> 0:18:42.040 just can elaborate, I think one of the most interesting 0:18:42.040 --> 0:18:45.600 things that's been that we've been looking at is how 0:18:45.720 --> 0:18:48.960 interest rate sensitive the economy is, whether it's the US 0:18:49.040 --> 0:18:51.560 economy or the global economies. And what you just stayed 0:18:51.600 --> 0:18:54.879 out is an interesting example of how it is less 0:18:54.920 --> 0:18:58.240 interest rate sensitive, which explains a certain extent at least 0:18:58.280 --> 0:19:01.880 the strength of the in the economy. In terms of Asia, 0:19:02.119 --> 0:19:04.879 I think the the the kind of the release volve 0:19:04.960 --> 0:19:08.000 has been the currency and you see it in full 0:19:08.040 --> 0:19:10.840 display when in the in the case of the end, 0:19:10.840 --> 0:19:12.200 which you can talk about it if you like. 0:19:12.560 --> 0:19:14.359 Oh, go ahead, for what are you seeing in the 0:19:14.480 --> 0:19:17.520 end right now? That's going to give the market some 0:19:17.560 --> 0:19:22.200 comfort that maybe intervention is not going to be kind 0:19:22.200 --> 0:19:26.480 of the the facto way that that the monetary authority 0:19:26.520 --> 0:19:28.919 in Japan defends, you know, the weakness that at some 0:19:29.000 --> 0:19:30.440 point is going to be up to the bo j 0:19:31.000 --> 0:19:34.439 because of inflationary pressures that are building to actually have 0:19:34.520 --> 0:19:36.679 to do its job and raise interest rates. 0:19:38.480 --> 0:19:42.080 Yeah, I think clearly market intervention is ineffective, and certainly 0:19:42.920 --> 0:19:46.640 if it's uncoordinated with the US and the ECV, it's 0:19:46.680 --> 0:19:49.720 even more ineffective. They're just kind of torching reserves. I 0:19:49.800 --> 0:19:53.200 think one of the points which the market has been 0:19:53.200 --> 0:19:59.400 missing for a while is that really the policy makers 0:19:59.440 --> 0:20:02.840 are neglecting the end in the sense that I don't 0:20:02.880 --> 0:20:05.800 know if there's a strong belief that weekend is that 0:20:05.840 --> 0:20:12.359 detrimental to the Japanese economy, and it hasn't been a 0:20:12.440 --> 0:20:16.320 very coherent policy in terms of intervening. The Bank of 0:20:16.359 --> 0:20:18.800 Japan is saying something and then the Ministry of Finance 0:20:18.840 --> 0:20:22.120 is doing something else. So I think the end weakness 0:20:22.280 --> 0:20:26.760 has not been that detrimental to the economy, and I 0:20:26.800 --> 0:20:29.440 think the role now is just to make sure that 0:20:29.560 --> 0:20:33.480 the market remains orderly as opposed to really defending the end. 0:20:33.560 --> 0:20:35.840 And the only way that they can drop up the 0:20:36.000 --> 0:20:40.320 end is to do a pretty aggressive hiking cycle at 0:20:40.359 --> 0:20:43.680 the fact which I think there is a very very 0:20:43.720 --> 0:20:45.080 low probability of that happening. 0:20:46.920 --> 0:20:48.879 It seemed like earlier when we were talking about the 0:20:48.920 --> 0:20:52.040 strong dollar, you said, yeah, I mean it definitely it 0:20:52.119 --> 0:20:55.880 hurts local currency bonds in Asia, but not not dollar bonds. 0:20:56.200 --> 0:20:59.240 So does that mean that you're actually pretty positive here 0:20:59.280 --> 0:21:01.520 on buying dollar bonds throughout the region, and if so, 0:21:01.720 --> 0:21:02.840 which areas look best? 0:21:04.800 --> 0:21:05.000 Yeah? 0:21:05.040 --> 0:21:09.600 Dollar bonds I think generally globally have been pretty resilient, 0:21:09.680 --> 0:21:12.679 pretty strong. In Asia and particular the performance has been 0:21:12.680 --> 0:21:14.639 pretty strong, and it's something that we spoke about in 0:21:14.680 --> 0:21:18.680 your so before. The problem now is that pretty much 0:21:18.680 --> 0:21:20.920 everywhere you look, particularly when you look at the high 0:21:20.920 --> 0:21:24.880 credit quality bonds, they're tight. Even when you look at 0:21:24.880 --> 0:21:29.200 some of the high yield bonds in the US, they 0:21:29.240 --> 0:21:32.080 are typed. So I think the main risk here is 0:21:32.119 --> 0:21:36.880 related to evaluation being typed as opposed to fundamentals. The fundamentals, 0:21:36.880 --> 0:21:39.840 to your point, particularly when it comes to the investment 0:21:39.840 --> 0:21:43.440 grade market, continues to be strong. In balance, we still 0:21:43.480 --> 0:21:46.440 like the investment grade markets in the region, and if 0:21:46.640 --> 0:21:49.200 some select opportunities in highyield. 0:21:49.080 --> 0:21:51.160 Are you short duration? I mean, are you at the 0:21:51.440 --> 0:21:53.200 shorter end of the curve these days? 0:21:54.920 --> 0:21:59.400 Well, we started the year where we were more aggressive 0:21:59.440 --> 0:22:02.000 in terms of then the economic data went the other way, 0:22:02.119 --> 0:22:04.920 so we uh and we thought that the market was 0:22:04.960 --> 0:22:07.640 two consensus in terms of the number of cuts, particularly 0:22:07.640 --> 0:22:09.680 in the beginning of the year and the timing of cuts. 0:22:09.720 --> 0:22:13.040 So we took a much more defensive pussure in division, 0:22:13.119 --> 0:22:16.840 which worked well, particularly in the past two months. Right now, 0:22:16.880 --> 0:22:22.520 I think, particularly after the FED messaging and the jobs number, 0:22:22.600 --> 0:22:25.479 I think the distribution outcome has been narrowed and now 0:22:25.480 --> 0:22:26.840 we're a bit more overweight division. 0:22:27.800 --> 0:22:31.040 Omar, thank you. Omar Slim, co head of Asia Fixed 0:22:31.040 --> 0:22:33.400 Income pine Bridge Investments. 0:22:36.080 --> 0:22:39.000 This has been the Bloomberg Daybreak Asia podcast, bringing you 0:22:39.080 --> 0:22:42.160