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Speaker 1: This is Bloomberg Daybreak Asia for this Tuesday, April eleventh

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Speaker 1: in Hong Kong, Monday April tenth in New York and

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Speaker 1: coming up today. US equities edge higher as the market

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Speaker 1: contemplates another rate hike by the Fed. The IMF says

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Speaker 1: it expects interest rates to revert to ultra low levels,

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Speaker 1: and Apple's Mac shipments suffer their worst drop since the

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Speaker 1: year two thousand days demand falls. PLA says it has

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Speaker 1: concluded drills and stands ready to fight Taiwan separatists. Pentagon

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Speaker 1: and DJ investigate the leak of highly classified intelligence. White

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Speaker 1: House elevates the effort to gain release of Wall Street

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Speaker 1: Journal reporter from Russia. I'med Baxter with Global News. That's

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Speaker 1: all straight Ahead on Bloomberg Daybreak Asia, the business news

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Speaker 1: you need to start your day in just one fifteen

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Speaker 1: minute podcast available on Apples, Spotify, the Bloomberg Business app

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Speaker 1: and everywhere you get your podcasts. Good morning, I'm de

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Speaker 1: Prisoner and I'm Brian Curtis. Here are the stories we're

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Speaker 1: following today. In the latest World Economic Outlook, the IMF

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Speaker 1: argued that rates in the United States and other industrial

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Speaker 1: countries will revert will go back to those ultra low

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Speaker 1: levels that prevailed prior to the pandemic. It sees the

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Speaker 1: so called natural or neutral rate comfortably below one percent

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Speaker 1: in the United States in the coming decades. The IMF

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Speaker 1: said that this will make it easier for some countries

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Speaker 1: to handle elevated government debt levels that came out of

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Speaker 1: the pandemic. Debt interest rates in geopolitical risks will be

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Speaker 1: in focus as both the IMF and the World Bank

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Speaker 1: kick off their Spring meetings this week now in Washington.

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Speaker 1: Managing Director Krystallina Gorgieva one that the IMS five year

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Speaker 1: outlook for global economic growth is the weakest in more

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Speaker 1: than three decades, despite the remarkable resilience of consumer spending

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Speaker 1: in the United States in Europe, despite the uplift from

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Speaker 1: China's reopening, global growth would remain below three percent as

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Speaker 1: we projected it earlier this year, and what is more concerning,

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Speaker 1: it would remain around three percent for the next five years.

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Speaker 1: Gorgieva cited Russia's invasion of Ukraine and also economic fragmentation

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Speaker 1: caused by geopolitical tensions as major factors limiting growth. The

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Speaker 1: IMF plans to release a more detailed World Economic Outlook

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Speaker 1: report tomorrow and a new sign that the banking crisis

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Speaker 1: may be easing. That story from Bloomberg's Denise Pellegrini, we're

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Speaker 1: hearing the amount of emergency debt the Federal Homelan Bank

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Speaker 1: System issued the last week of March was thirty seven

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Speaker 1: billion dollars. All that might seem like a lot, but

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Speaker 1: it is way down from the more than three hundred

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Speaker 1: billion dollars two weeks earlier. The fhlbs are essentially a

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Speaker 1: backstop for the banks. They were created during the depression

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Speaker 1: to boost mortgage lending and community investment, and at thirty

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Speaker 1: seven billion dollars in FHLB for the week, that's still elevated,

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Speaker 1: but the declines in advances and debt issuance are seen

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Speaker 1: as assigned banks need for cash has either met or dropping,

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Speaker 1: as many depositors apparently stopped pulling their money out. Denise Peloguni,

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Speaker 1: Bloomberg Day Break Asia. New Bank of Japan Governor Kazuo

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Speaker 1: Ueida said that the current yield curve control program and

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Speaker 1: also negative interest rates are appropriate policies because of the

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Speaker 1: current economy. It signals that any significant changes to the

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Speaker 1: boj's monetary policy of Framework may be unlikely for the

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Speaker 1: time being. Here's Uida speaking at his inaugural news conference

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Speaker 1: as the governor of the BOJ. If we suddenly normalize

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Speaker 1: policy when we realize that the economy will reach two

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Speaker 1: percent in a sustainable and stable manner, the market and

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Speaker 1: the economy will have to make a very large adjustment.

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Speaker 1: I think we have to make an appropriate judgment in

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Speaker 1: advance so that such a thing does not happen. Uida

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Speaker 1: also said that he's open to the idea of a

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Speaker 1: policy review from a longer term standpoint, but he said

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Speaker 1: that he'd like to discuss it with other board members

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Speaker 1: before any decision. And Doug, it's one of the reasons

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Speaker 1: we saw that broad weakness in the end again, dali

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Speaker 1: En one thirty three sixty. We go to Apple next.

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Speaker 1: The company's MAC shipments were down in the first quarter

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Speaker 1: by forty and a half percent. You know, this is

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Speaker 1: the worst decline since the fourth quarter of two thousand.

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Speaker 1: The figures, by the way, come from the International Data Corporation.

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Speaker 1: Apple was hit by sluggish demand along with an industry

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Speaker 1: wide glut. All PC makers were affected. Now, if you're

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Speaker 1: looking for a silver lining it, maybe this cooling demand

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Speaker 1: may give some of these companies the opportunity to overhaul

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Speaker 1: production and diversify their supply chains. Bloomberg's Anoragrana said that

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Speaker 1: Apple may have more time to explore options outside China.

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Speaker 1: They don't mind being exposed to China, but they don't

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Speaker 1: want to be hundred percent exposed to China. I see.

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Speaker 1: You know, let's say over the next decade, you know,

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Speaker 1: you could see perhaps half of their production coming from

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Speaker 1: China and half from somebody where else. That would be

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Speaker 1: a combination a bunch of countries. It's impossible for them

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Speaker 1: to truly diversify away from China, but they have to

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Speaker 1: do it. Bloomberg's on a rock Grana there By the way,

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Speaker 1: we are hearing that Apple is reading some new models

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Speaker 1: that could help spur demand. This would include the next

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Speaker 1: slate of laptops and desktops, including a new iMac. Those

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Speaker 1: products are expected to be launched later this year. Meantime,

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Speaker 1: Taiwan Semiconductor missed sales estimates for the second consecutive quarter.

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Speaker 1: It's a sign of continued weakness in global electronics demand.

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Speaker 1: We heard from Joan Poene at Advisors Capital Management. For

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Speaker 1: those exposed to the consumer PCs and smartphones. It's certainly

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Speaker 1: a demand decline right after the surge and purchases during

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Speaker 1: the works of the pandemic. Right we're seeing them digest

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Speaker 1: that and wait till they need to upgrade their PCs

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Speaker 1: and their smartphones. So I think demand is largely driving

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Speaker 1: what's going on both at Apple on TSMC and had

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Speaker 1: already gone on at the other PC manufacturers. Joan Poeni

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Speaker 1: Advisors Cap Management. TSMC also slashed its capital spending plans

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Speaker 1: for the year to a range of thirty two to

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Speaker 1: thirty six billion. That's down from the thirty six point

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Speaker 1: three billion that we saw last year. Separately, rival Samsung

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Speaker 1: announced last week it would cut memory chip production to

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Speaker 1: a meaningful level. It's a move that competitors had been

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Speaker 1: waiting for after a pile up of inventory hurt pricing

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Speaker 1: and profits. And we did see Samsung up more than

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Speaker 1: one percent as mentioned yesterday, and in the socks in

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Speaker 1: the session today, DOUG was up one point eight percent.

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Speaker 1: It's interesting because that runs a little counter to some

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Speaker 1: of the negativity that we've seen in the bond market,

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Speaker 1: and we can get to that in a moment, but

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Speaker 1: I wanted to mention this very interesting non consensus call

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Speaker 1: by the IMF to go back to very low interest rates.

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Speaker 1: There will be a lot of debate, and it's good

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Speaker 1: fodder for us on this show today to talk about

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Speaker 1: that because it really does mean a different outlook going

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Speaker 1: forward if the IMF is right, I would say dramatically,

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Speaker 1: so wouldn't you, Brian. I mean, in order for for

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Speaker 1: us to see rates kind of revert back to these

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Speaker 1: ultra low levels that we've known, there would have to

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Speaker 1: be a great deal of economic weakness. You know, it's

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Speaker 1: easy to argue that that's not going to be the

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Speaker 1: case because of deglobalization, so called friend shoring that raises

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Speaker 1: costs in the United States is a lot more expensive

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Speaker 1: to produce there than all around the rest of the world, geopolitics,

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Speaker 1: which we've seen a lot in the last year with US,

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Speaker 1: China and Russia Ukraine. It just seems like there's also

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Speaker 1: long wave trends that would suggest it when moving into

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Speaker 1: a higher interest rate environment. So yeah, that's up a

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Speaker 1: great debate, no doubt about it. And in terms of

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Speaker 1: the data, you're talking about interest rates directionally remaining at

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Speaker 1: elevated levels because inflation is still running hot. We've got

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Speaker 1: the CPI data later in the week here in the US,

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Speaker 1: and as you know later today in China both CPI

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Speaker 1: and PPI. But in the case of China, when it

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Speaker 1: comes to wholesale inflation, it's a story of deflation. Yeah, absolutely,

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Speaker 1: one of the things though that was interesting about on

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Speaker 1: that and also looking at why cyclicals did so well today.

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Speaker 1: I mean, we know the socks was higher because of

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Speaker 1: the Samsung call at least, and Micron moving up as much,

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Speaker 1: but Chinese provinces boosting spending on major construction projects this year.

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Speaker 1: There's a lot of money. This is one point eight

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Speaker 1: trillion dollars. It's a twenty percent gain, might be one

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Speaker 1: of the reasons, and it does kind of go against

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Speaker 1: the deflation and the low levels inflation that we've seen

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Speaker 1: so far. So sets up for a very interesting debate.

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Speaker 1: It is now time for Global news. Taiwan's foreign minister

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Speaker 1: says three days of China's military drills in the Straits

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Speaker 1: the Taiwan Straits are similar to how Beijing acted after

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Speaker 1: Nancy Pelosi's visit. Ed Baxter has Global News in the

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Speaker 1: nine sixty Newswoman San Francisco ed, Yeah, that's right. Brian

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Speaker 1: Minister Joseph Wu says the intensity is about the same.

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Speaker 1: PLA says US concluded the drill says its stands ready

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Speaker 1: to fight at any time and crush separatist activities and

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Speaker 1: foreign interference. Meanwhile, from French law makers are planning to

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Speaker 1: visit Taipei, WHO saying that they are showing support for

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Speaker 1: Taiwan and that the visit will be very soon. Ukraine

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Speaker 1: has been for USD to alter some of its counter

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Speaker 1: offensive plans. CNN reporting a leak of classified documents is

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Speaker 1: hitting too close to home. Meanwhile, in the US, A

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Speaker 1: Pentagon now says the Department of Justice and Pentagon are

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Speaker 1: looking into those leaks. We don't know who's responsible for this,

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Speaker 1: and we don't know if they have more they intend

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Speaker 1: to post, so we're watching this and monitoring it as best.

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Speaker 1: Spokesman Admiral John Kirby asked whether it was a concern,

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Speaker 1: said they darn well are. The US officials have been

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Speaker 1: in touch with the relevant allies and partners over the

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Speaker 1: last couple of days at very high levels. I'll leave

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Speaker 1: it at that. And Bloomberg's Larry Liebert says this league

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Speaker 1: has a Pentagon very very worried highly sensitive classified informations

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Speaker 1: is a very serious risk to national security made public

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Speaker 1: in this league of documents. He says. Allies may already

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Speaker 1: know much of it, but at the very least, it's

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Speaker 1: very embarrassing. The mind Administration has formally issued a statement

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Speaker 1: saying that it is determined that the Wall Street Journal

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Speaker 1: reporter Evan Gershkovitch has been wrongfully detained, and that elevates

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Speaker 1: it now to the state Department to leave the effort

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Speaker 1: to gain its release. United States leaders responding in some

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Speaker 1: force today over the Texas judges ruling to strip the

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Speaker 1: FDA of oversight of so called abortion pill Massachusetts Governor

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Speaker 1: Mora Healy it harms patience, undermines medical expertise, and takes

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Speaker 1: away freedom. It's an attempt to punish the shame, to

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Speaker 1: marginalize women. It's unnecessary, It's terrible, and Bloomberg's Rick Davis

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Speaker 1: says the implications are wide. You're going to have a

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Speaker 1: patchwork quilt of laws that nobody's really going to understand

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Speaker 1: how to abide by. We see reports that doctors are

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Speaker 1: leaving states that are banning abortion or fear that they're

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Speaker 1: going to have their practice attack by the courts. I

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Speaker 1: mean it's really a dislocation and of healthcare. And also

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Speaker 1: on sound on Bloomberg, Jeanie Schanzano says this can very

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Speaker 1: well go to the US Supreme Court. I do think

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Speaker 1: we'll see a stay of the Texas Judge's order in

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Speaker 1: the Fifth Circuit. But when you have competing rulings like this,

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Speaker 1: conflicting rulings, the Supreme Court verywell may have to step

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Speaker 1: in and politically both agree. It puts Republicans in a

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Speaker 1: very tough spot because this is a very issue that

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Speaker 1: can galvanize Democrats. Another mass shooting in the US today,

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Speaker 1: Five people, including the shooter, have lost their lives at

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Speaker 1: a bank in Louisville. Seven others are being treated at hospitals.

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Speaker 1: Kentucky Governor Andy Bascher has a personal connection to some

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Speaker 1: of the victims today. I have a very close friend

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Speaker 1: that didn't make it today, and I have another close

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Speaker 1: friend who didn't either, and one who's at the hospital

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Speaker 1: that I hope is going to make it through. So

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Speaker 1: when we talk about praying, I hope people will government. Reportedly,

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Speaker 1: as a former bank employee, Global News Power by more

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Speaker 1: than twenty seven hundred journalists and analysts and over one

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Speaker 1: hundred and twenty countries in San Francisco. I'm at Baxter

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Speaker 1: in This is Bloomberg. This is Bloomberg day Break Asia.

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Speaker 1: I'm Brian Curtis along with David Inglis. Our guest is

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Speaker 1: belie to own chairman of Dalton Investments. So blie to

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Speaker 1: where a daily news show. We have to rope in

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Speaker 1: some of the big stories so the day. What do

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Speaker 1: you make of this IMF call for going back to

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Speaker 1: very low interest rates? I find it quite surprising because

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Speaker 1: the fact is that inflation has increased and is still

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Speaker 1: with us despite the fence raising interest rates by five

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Speaker 1: percent or almost five percent in short order. And I

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Speaker 1: don't see how the federal lower interest rates very quickly

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Speaker 1: unless there's some sort of a dramatic economic accident. So

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Speaker 1: it's puzzling and it's something I have to think about more.

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Speaker 1: But it's it's not something that makes a lot of

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Speaker 1: sense to me at this point. To David here, that's

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Speaker 1: a very diplomatic way of putting that doesn't make sense. Okay, well, okay,

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Speaker 1: let's look ahead then to this main meeting of the

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Speaker 1: FED coming up. This changes daily. Obviously, the probability is

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Speaker 1: like they probably will move um. I don't like those odds,

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Speaker 1: but perhaps the broader question to you is the market

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Speaker 1: correct as who may likely is the last hike of

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Speaker 1: the cycle. Yeah, obviously I don't know, but twenty five

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Speaker 1: basins points and may seems like a reasonable outcome if

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Speaker 1: there are no huge surprises in the CPI and PPI

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Speaker 1: numbers this week. And the reason I say that is

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Speaker 1: because of credibility. The Fed governors have already said that

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Speaker 1: they want to increase rates further and pause, so that

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Speaker 1: seems to be a reasonable outcome given what they've already said,

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Speaker 1: and they've basically done what they've said, so I would

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Speaker 1: believe they're comments. The bulls would would hope for a

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Speaker 1: pause in interest rates, but not necessarily cut. Often hear

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Speaker 1: analysts come on and say, well, you know, I don't

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Speaker 1: see a cut later this year, and the Feds certainly

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Speaker 1: not saying it. That's not what the what the real

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Speaker 1: bulls really want. What they probably want is the pause,

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Speaker 1: because when you get signs of a cut, it means

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Speaker 1: there's a reason for it. I agree, I'm not seeing

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Speaker 1: a cut, but I have heard many other people forecast

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Speaker 1: a cut by the end of this year. It's that's

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Speaker 1: surprising to me too, but it seems to be a

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Speaker 1: common view that we will answer a recession in the

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Speaker 1: second half of the federal cut interest rates. It's not

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Speaker 1: what I believe, but it's what I hear. Okay, Belieita,

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Speaker 1: let's talk strategy. How are your friends doing? Our friends

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Speaker 1: are doing fine. This year. It's been an exciting time

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Speaker 1: for us in Asia, especially in Japan because the government

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Speaker 1: is really ramping up its corporate government's reforms, and especially

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Speaker 1: because they just provide details of the listing requirements and

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Speaker 1: a headline for meeting those requirements or the companies will

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Speaker 1: be booted down from the prime to the standard section

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Speaker 1: or even delisted all together. So finally something's happening there

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Speaker 1: that we think it's very positive for stocks. You know,

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Speaker 1: we mentioned at the top that Chinese provinces will boost

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Speaker 1: spending this year. It's one of the stories that we're

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Speaker 1: featuring on the terminal, and that might mean a lot

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Speaker 1: of business for foreign companies. And we did see a

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Speaker 1: spike in cyclicals today. Industrials, materials, and energy all seem

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Speaker 1: to do well, and it runs counter to what the

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Speaker 1: bond market seems to be saying. Can you figure out

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Speaker 1: a way to play China correctly this year. We don't

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Speaker 1: really invest in China currently. We have a specific way

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Speaker 1: of investing, which is that we're a value investor. We

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Speaker 1: look for good companies, good cash flows, and also importantly,

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Speaker 1: we look for companies that are run by managements whose

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Speaker 1: interests are a line with shareholders. And there's less and

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Speaker 1: less of that in China, one because there are a

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Speaker 1: lot of SOEs and two because truly successful entrepreneurs have

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Speaker 1: been punished, so the environment for entrepreneurs is becoming less welcoming.

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Speaker 1: On top of which, um, you know, we think there

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Speaker 1: a lot of headwinds facing China this year and even

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Speaker 1: going forward. So we're not that positive on China to

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Speaker 1: begin with, and the sort of anti capitalistic atmosphere there

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Speaker 1: hinders are enthusiasm. Okay, Well, talk to us in about

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Speaker 1: other opportunities you've you've talked about Japan, if you if

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Speaker 1: you would like to lay out some names there and why,

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Speaker 1: or perhaps other markets that career or time one. I believe,

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Speaker 1: of course you're looking at some companies there too, sure,

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Speaker 1: just to finish up one in Japan, you know, I

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Speaker 1: just want to mention that Warren Buffett is apparently talking

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Speaker 1: about raising another bond offering in Japan. Yes, and with

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Speaker 1: that he'll probably buy more stocks again. So clearly Warren

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Speaker 1: Buffett's thinking that this might be a good time to

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Speaker 1: add to his existing positions, because if we recall a

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Speaker 1: while back, he had bought a bunch of trading companies,

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Speaker 1: and he might do that again, you know. And we're

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Speaker 1: seeing from our visits with companies and other investors that

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Speaker 1: there are, actually, there's actually now for the first time

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Speaker 1: in over a decade, large investment management firms setting up

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Speaker 1: offices in Japan, and we're getting more visits from other

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Speaker 1: investors as well, from clients and other investors to Japan.

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Speaker 1: So clearly the interest in Japan is rising, and I

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Speaker 1: believe it's because it seemed to be a safe place

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Speaker 1: to be because there are good companies that are cheap,

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Speaker 1: and corporate governance is making an impact on the stock market.

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Speaker 1: But the problem with Japan always has been that for

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Speaker 1: the last thirty years, if you just overweighted Japan, you

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Speaker 1: lost money relative to the index. So it's a difficult

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Speaker 1: psychological hurdle to overcome. And there is one major trend

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Speaker 1: that may happen. It seems that Kazua is talking about

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Speaker 1: maintaining Corona's policies for a while, but a lot of

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Speaker 1: people in the market think that will change, and if so,

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Speaker 1: will that attract repatriation of yen back to Japan and

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Speaker 1: would that really benefit domestic companies. I think that's clearly

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Speaker 1: a upside possibility. That's very little downside because how much

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Speaker 1: further can you go than zero? And they've tried, and

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Speaker 1: they actually have gone below zero. But I don't think

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Speaker 1: that's sustainable because it costs a lot of money to

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Speaker 1: maintain the Yeo curve control that they have for so long.

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Speaker 1: And we are seeing some increase in wage in wages,

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Speaker 1: so there is the possibility that you might get an

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Speaker 1: appreciation in yen as well, on top of the stock

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Speaker 1: market doing better. Yeah, believe I was going to ask you,

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Speaker 1: how did dollar investors approach the hedging situation on the

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Speaker 1: end or is that something you're not worried about. We

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Speaker 1: hedge when we're given the opportunity to hedge. Often our

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Speaker 1: clients do the hedging themselves. But where we have the opportunity,

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Speaker 1: we hedge when we think that there might be weakness

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Speaker 1: in the yen. But at this point we're not hedged,

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Speaker 1: because we think that's upside. This is Bloomberg Daybreak Asia,

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