1 00:00:00,120 --> 00:00:10,480 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 2 00:00:10,520 --> 00:00:13,720 Speaker 1: Daybreak Asia podcast. I'm Doug Krisner. You can join Brian 3 00:00:13,800 --> 00:00:16,640 Speaker 1: Curtis and myself for the stories, making news and moving 4 00:00:16,680 --> 00:00:19,560 Speaker 1: markets in the APAC region. You can subscribe to the 5 00:00:19,600 --> 00:00:23,080 Speaker 1: show anywhere you get your podcast and always on Bloomberg Radio, 6 00:00:23,320 --> 00:00:26,120 Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app. 7 00:00:27,480 --> 00:00:31,240 Speaker 2: So, China started its most expensive military drills in a 8 00:00:31,360 --> 00:00:36,120 Speaker 2: year around Taiwan, and Taiwan scrambled jets and put its 9 00:00:36,159 --> 00:00:40,280 Speaker 2: own missile, naval and land units on alert yesterday. It 10 00:00:40,320 --> 00:00:42,720 Speaker 2: all comes just a few days after ly Ching Doe 11 00:00:42,880 --> 00:00:45,640 Speaker 2: was sworn in as the new president for Taiwan, and 12 00:00:45,680 --> 00:00:47,920 Speaker 2: so joining us for some discussion of this is Rebecca 13 00:00:48,000 --> 00:00:52,479 Speaker 2: Chong Wilkins, Bloomberg Asia Government and Politics Correspondent. So it 14 00:00:52,520 --> 00:00:55,440 Speaker 2: sounds a little scary, but then this is a dance 15 00:00:55,480 --> 00:00:58,320 Speaker 2: that we've seen in the past. Between these two. 16 00:01:00,120 --> 00:01:01,640 Speaker 3: Dance that we've seen in the past, and it is 17 00:01:01,720 --> 00:01:05,200 Speaker 3: worth saying that actually, by and large, for the last 18 00:01:05,400 --> 00:01:08,520 Speaker 3: year or so, Beijing has been quite restrained in its 19 00:01:08,560 --> 00:01:15,000 Speaker 3: activity around Taiwan, particularly during for example, the Taiwan elections themselves, 20 00:01:15,319 --> 00:01:19,960 Speaker 3: they haven't been extremely aggressive in the way that we saw, 21 00:01:20,040 --> 00:01:24,560 Speaker 3: for example, when the then speaker US Speaker Nancy Pelosi 22 00:01:24,680 --> 00:01:28,840 Speaker 3: visited Taiwan back in August twenty twenty two. The main 23 00:01:28,880 --> 00:01:32,440 Speaker 3: difference that experts have pointed to between the Chinese response 24 00:01:32,480 --> 00:01:35,480 Speaker 3: to Pelosi's visits and this time around, for example, is 25 00:01:35,520 --> 00:01:39,560 Speaker 3: that we have seen more of these military drills and 26 00:01:39,640 --> 00:01:44,319 Speaker 3: activity around closer to the mainland Chinese shore, so in 27 00:01:44,360 --> 00:01:49,240 Speaker 3: the waters around Mutsu, Wuta, Kimmen and so on, and 28 00:01:49,280 --> 00:01:52,360 Speaker 3: so it's sort of an escalation of that gray zone 29 00:01:52,880 --> 00:01:55,680 Speaker 3: area a part of how they try and sort of 30 00:01:55,760 --> 00:01:58,880 Speaker 3: increase some of the areas in which they are carrying 31 00:01:58,880 --> 00:01:59,880 Speaker 3: out exercises. 32 00:02:00,080 --> 00:02:03,400 Speaker 1: What about the intensity around this show of force, is 33 00:02:03,440 --> 00:02:05,640 Speaker 1: it more or less than what we have seen in 34 00:02:05,680 --> 00:02:08,360 Speaker 1: the past, The number of ships involved, let's say as 35 00:02:08,400 --> 00:02:10,800 Speaker 1: an example, and. 36 00:02:11,000 --> 00:02:14,080 Speaker 3: Well, it's sort of by and large similar. I mean, 37 00:02:14,080 --> 00:02:17,800 Speaker 3: it depends specifically whether you're looking at ships or specific 38 00:02:17,840 --> 00:02:21,560 Speaker 3: types of activities and so on. But the sort of 39 00:02:21,760 --> 00:02:25,120 Speaker 3: high we've never seen. Chribes military held so many exercises 40 00:02:25,120 --> 00:02:28,079 Speaker 3: in so many locations around Taiwan for the last year, 41 00:02:28,120 --> 00:02:30,399 Speaker 3: So it's sort of the expansiveness which is I think 42 00:02:30,800 --> 00:02:35,079 Speaker 3: more of note this year, And as Brian was saying, 43 00:02:35,360 --> 00:02:37,720 Speaker 3: you know, this is really very much about sending an 44 00:02:37,760 --> 00:02:43,520 Speaker 3: explicit signal to Lei ching Tour, to the ruling power, 45 00:02:43,720 --> 00:02:48,680 Speaker 3: about you know, the punishment for what they perceived. 46 00:02:48,400 --> 00:02:49,919 Speaker 4: To be separatist acts. 47 00:02:50,560 --> 00:02:55,680 Speaker 3: They also blasted leiching Te's inaugural address, for example, accusing 48 00:02:55,720 --> 00:02:59,120 Speaker 3: him of sending the dangerious signals of independence. 49 00:03:00,600 --> 00:03:02,680 Speaker 2: Yeah, it's one of these things where you have a 50 00:03:02,720 --> 00:03:05,360 Speaker 2: feeling that I think you even mentioned it's setting the 51 00:03:05,400 --> 00:03:09,120 Speaker 2: tone a little bit. China is for Leichingda. But you know, 52 00:03:09,200 --> 00:03:13,280 Speaker 2: to be honest, he's been pretty reasonable in his approach, 53 00:03:13,560 --> 00:03:15,800 Speaker 2: at least over the past many months in the run 54 00:03:15,919 --> 00:03:20,280 Speaker 2: up to the inauguration and after the election. And I 55 00:03:20,320 --> 00:03:24,440 Speaker 2: wonder how much difference there really is between Leichingda and 56 00:03:25,200 --> 00:03:26,200 Speaker 2: President sig Wan. 57 00:03:27,760 --> 00:03:29,680 Speaker 3: Yes, I think that's a really good point. And in 58 00:03:29,680 --> 00:03:32,760 Speaker 3: some ways he has also been quite sort of careful 59 00:03:33,320 --> 00:03:37,080 Speaker 3: and muted in some of his own language as well, 60 00:03:37,360 --> 00:03:40,720 Speaker 3: something of a sort of continuity candidate, particularly of course 61 00:03:40,760 --> 00:03:43,880 Speaker 3: when it comes to this issue around China. He has also, 62 00:03:44,560 --> 00:03:47,680 Speaker 3: it's worth said, sort of emphasized several times his desire 63 00:03:47,800 --> 00:03:52,880 Speaker 3: to maintain the status Quo to maintain the peace around 64 00:03:52,920 --> 00:03:55,400 Speaker 3: the island of Taiwan. So it's not to say as 65 00:03:55,440 --> 00:03:57,280 Speaker 3: if that he lot to sort of implied that he 66 00:03:57,360 --> 00:04:00,440 Speaker 3: has been ratcheting up language per se on his side either. 67 00:04:00,840 --> 00:04:03,040 Speaker 1: All right, Rebecca, thank you so much for making time 68 00:04:03,240 --> 00:04:05,080 Speaker 1: to chat with us. I know it's a busy day 69 00:04:05,120 --> 00:04:07,720 Speaker 1: for you in Hong Kong. Rebecca Chung Wilkins of Bloomberg 70 00:04:07,840 --> 00:04:11,600 Speaker 1: Asia Government and Politics reporter, helping us understand a little 71 00:04:11,600 --> 00:04:16,479 Speaker 1: bit more about Chinese military drills around Taiwan. 72 00:04:23,640 --> 00:04:26,920 Speaker 2: China, Japan, and South Korea are set to hold their 73 00:04:26,960 --> 00:04:30,280 Speaker 2: first summit in more than four years, and joining us 74 00:04:30,279 --> 00:04:34,640 Speaker 2: now in our studios is minmn Low, Bloomberg China correspondent, 75 00:04:35,080 --> 00:04:38,240 Speaker 2: minmn Thanks very much for joining us here in the studios. 76 00:04:38,480 --> 00:04:42,560 Speaker 2: So these three countries are not easy partners, and of 77 00:04:42,560 --> 00:04:47,080 Speaker 2: course there will be a kind of quiet or invisible participant, 78 00:04:47,120 --> 00:04:49,800 Speaker 2: I suppose the United States. Let's talk a little bit 79 00:04:49,800 --> 00:04:54,200 Speaker 2: about what you see as some of the key possible deliverables. 80 00:04:54,800 --> 00:04:57,359 Speaker 5: Yeah, I think Chips is going to be top of 81 00:04:57,400 --> 00:05:02,320 Speaker 5: the table. As you mentioned, these very tough relationships to navigate. 82 00:05:02,360 --> 00:05:05,560 Speaker 5: They haven't had a summit since twenty nineteen, and that's 83 00:05:05,600 --> 00:05:09,120 Speaker 5: partly because of the pandemic, but also because of resistance 84 00:05:09,160 --> 00:05:12,599 Speaker 5: among these three countries to meet, partly due to this 85 00:05:12,760 --> 00:05:16,000 Speaker 5: warming relations that Korea and Japan has with US. But 86 00:05:16,040 --> 00:05:18,880 Speaker 5: I think what took on increased urgency for Beijing to 87 00:05:19,000 --> 00:05:22,320 Speaker 5: get these meetings going this time is that Korea, Japan, 88 00:05:22,400 --> 00:05:25,520 Speaker 5: and the US held their first trilateral summit in Camp 89 00:05:25,640 --> 00:05:28,680 Speaker 5: David in August of last year. That really set off 90 00:05:28,680 --> 00:05:31,840 Speaker 5: alarm bells ringing in Beijing because those three countries are 91 00:05:31,880 --> 00:05:35,960 Speaker 5: affirming commitments to each other's security and economy. So premierly 92 00:05:36,000 --> 00:05:38,160 Speaker 5: he's going to use this trip to really shore up 93 00:05:38,240 --> 00:05:42,960 Speaker 5: China's security, and I'm talking about both military and economic security, 94 00:05:43,360 --> 00:05:46,440 Speaker 5: because Washington has been callding Korea and Japan to increase 95 00:05:46,520 --> 00:05:50,600 Speaker 5: their limits of chip making equipment exports to China at 96 00:05:50,600 --> 00:05:53,720 Speaker 5: a time when China already faces this wall of restrictions 97 00:05:53,760 --> 00:05:57,800 Speaker 5: from the US, from the Dutch, and now Korea is 98 00:05:58,000 --> 00:06:00,920 Speaker 5: the largest source of chips for China, and Japan is 99 00:06:00,960 --> 00:06:03,680 Speaker 5: the largest source of silicon wafers for China. So a 100 00:06:03,720 --> 00:06:04,800 Speaker 5: lot is at stake here. 101 00:06:05,120 --> 00:06:07,560 Speaker 1: It's kind of interesting too the timing. We just had 102 00:06:07,560 --> 00:06:11,800 Speaker 1: the inauguration of the President of Taiwan. And now it 103 00:06:11,839 --> 00:06:17,039 Speaker 1: was only earlier yesterday that China escalated military exercises around Taiwan. 104 00:06:17,320 --> 00:06:18,800 Speaker 1: Do you think there's going to be much in the 105 00:06:18,800 --> 00:06:21,520 Speaker 1: way of conversation around activity in the South China Sea, 106 00:06:21,560 --> 00:06:26,360 Speaker 1: particularly as it relates to trade routes in and around Taiwan. 107 00:06:27,360 --> 00:06:30,520 Speaker 5: Yeah, definitely, there's going to be conversations about security issues 108 00:06:30,560 --> 00:06:34,679 Speaker 5: in both the East and South China Sea, because again Korea, Japan, 109 00:06:34,720 --> 00:06:37,240 Speaker 5: and US they have been holding these joint drills in 110 00:06:37,279 --> 00:06:41,400 Speaker 5: the East China Sea where China has disputed territorial claims 111 00:06:41,400 --> 00:06:44,680 Speaker 5: of Japan over the Senkaku or Teoyu islands, depending on 112 00:06:44,720 --> 00:06:47,040 Speaker 5: who you speak to, they have different names for these islands. 113 00:06:47,680 --> 00:06:50,599 Speaker 5: And as you said, Taiwan isn't focus as well, because 114 00:06:50,680 --> 00:06:54,720 Speaker 5: Japan had sent its largest ever delegation to the inauguration 115 00:06:55,600 --> 00:06:59,640 Speaker 5: so far to present lighting this inauguration, and obviously Beijing 116 00:06:59,680 --> 00:07:01,919 Speaker 5: is anger by it. We saw that, you know, huge 117 00:07:01,920 --> 00:07:04,880 Speaker 5: military drills yesterday, that's going to be on the table. 118 00:07:05,000 --> 00:07:08,000 Speaker 5: And in North Korea as well, the perennial issue that's 119 00:07:08,040 --> 00:07:11,160 Speaker 5: a concern for South Korea with the missile program as 120 00:07:11,160 --> 00:07:15,240 Speaker 5: well as there's allegations of that aid weapons for eight 121 00:07:15,280 --> 00:07:18,480 Speaker 5: exchange with Moscow that both Pyong Young and Moscow have denied. 122 00:07:18,920 --> 00:07:20,840 Speaker 5: But you can bet that Korea and Japan they're going 123 00:07:20,880 --> 00:07:23,320 Speaker 5: to push Beijing to really use its leaverage over Kim 124 00:07:23,360 --> 00:07:25,400 Speaker 5: Jong un to kind of rain Kyong Young in. 125 00:07:25,720 --> 00:07:25,920 Speaker 4: Yeah. 126 00:07:25,920 --> 00:07:28,160 Speaker 2: That's the interesting thing is that, you know, we often 127 00:07:28,160 --> 00:07:30,640 Speaker 2: think about countries in Asia getting caught in the middle 128 00:07:30,920 --> 00:07:34,000 Speaker 2: between the two superpowers, but in some ways, you know, 129 00:07:34,040 --> 00:07:37,360 Speaker 2: it gives them South Korea and Japan some opportunity here 130 00:07:37,400 --> 00:07:41,120 Speaker 2: to extract some benefits from both sides, in other words, 131 00:07:41,280 --> 00:07:43,720 Speaker 2: kind of playing one off the other to their own benefit. 132 00:07:44,320 --> 00:07:48,960 Speaker 5: Yeah, exactly, And we kind of see this geopolitical dynamics 133 00:07:49,000 --> 00:07:52,280 Speaker 5: really shifting fundamentally in these last four years since the 134 00:07:52,320 --> 00:07:55,480 Speaker 5: three countries last met, because if you look at trade, 135 00:07:55,560 --> 00:07:58,480 Speaker 5: China is still the largest trading partner for Korea and Japan, 136 00:07:58,920 --> 00:08:01,920 Speaker 5: but if you look at new andsments, that's already declined 137 00:08:01,920 --> 00:08:05,720 Speaker 5: from Korea and Japan in recent times, and Korea's exports 138 00:08:05,800 --> 00:08:09,040 Speaker 5: to the United States had overtaken its exports to China 139 00:08:09,400 --> 00:08:12,400 Speaker 5: for the very first times in almost twenty years. So 140 00:08:12,520 --> 00:08:15,480 Speaker 5: that's quite a big shift there, and I think Beijing 141 00:08:15,520 --> 00:08:18,200 Speaker 5: will be using this trip to really kind of, you know, 142 00:08:18,400 --> 00:08:22,920 Speaker 5: convence its neighbors to realign their foreign policy away from 143 00:08:22,920 --> 00:08:23,440 Speaker 5: the US. 144 00:08:23,920 --> 00:08:26,120 Speaker 1: Well, when you mentioned trade, one of the things that 145 00:08:27,000 --> 00:08:30,800 Speaker 1: Chinese President Chijinping mentioned when he was in the US 146 00:08:30,920 --> 00:08:32,520 Speaker 1: at the end of last year was the fact that 147 00:08:32,559 --> 00:08:35,840 Speaker 1: foreign direct investment from the United States is critical. Is 148 00:08:35,880 --> 00:08:39,040 Speaker 1: he making the same case to South Korea and Japan 149 00:08:39,240 --> 00:08:41,840 Speaker 1: that China essentially needs a lot more in the way 150 00:08:41,920 --> 00:08:43,080 Speaker 1: of investment. 151 00:08:43,600 --> 00:08:45,840 Speaker 5: For sure, as I mentioned just now, you look at 152 00:08:45,880 --> 00:08:48,520 Speaker 5: the numbers, new investments has been declining I think the 153 00:08:48,559 --> 00:08:52,720 Speaker 5: past couple of years, and China's domestic economy is not 154 00:08:52,800 --> 00:08:57,119 Speaker 5: really revving up fast enough with the property crisis. Domestic 155 00:08:57,200 --> 00:09:00,560 Speaker 5: spending is not really picking up. So China is really 156 00:09:00,880 --> 00:09:03,840 Speaker 5: relying a lot on export driven growth and also from 157 00:09:03,960 --> 00:09:07,600 Speaker 5: investment from foreign companies coming to invest and expand in China. 158 00:09:07,679 --> 00:09:09,960 Speaker 5: So that's going to be a pitch that premierly will 159 00:09:09,960 --> 00:09:13,000 Speaker 5: want to make to his counterparts in Korea and Japan. 160 00:09:13,360 --> 00:09:15,800 Speaker 5: And look, China has this saying in Chinese it's called 161 00:09:16,960 --> 00:09:21,040 Speaker 5: twin wong shihan. It translates to basically, your teeth will 162 00:09:21,080 --> 00:09:24,280 Speaker 5: be cold if your lips die. So what it means 163 00:09:24,360 --> 00:09:27,280 Speaker 5: is really that your closer neighbors are much more important 164 00:09:27,320 --> 00:09:29,320 Speaker 5: than your allies far away. And I think that's what 165 00:09:29,400 --> 00:09:32,120 Speaker 5: Premier will be there to tell his counterparts in Korean Japan. 166 00:09:32,400 --> 00:09:34,000 Speaker 2: So we talked a little bit about the US and 167 00:09:34,080 --> 00:09:37,080 Speaker 2: this discussion, and I mentioned that they were an invisible 168 00:09:37,800 --> 00:09:40,839 Speaker 2: player in all of this. To what extent is the 169 00:09:40,920 --> 00:09:45,080 Speaker 2: US putting pressure on South Korea and Japan to confront China, 170 00:09:45,559 --> 00:09:49,440 Speaker 2: and to what extent do the countries either embrace or 171 00:09:49,440 --> 00:09:49,920 Speaker 2: reject it. 172 00:09:50,800 --> 00:09:54,479 Speaker 5: Yeah, I think that's really a big factor in this relationship. 173 00:09:54,520 --> 00:09:57,240 Speaker 5: And time is of the essence here because Washington is 174 00:09:57,280 --> 00:10:00,640 Speaker 5: said to be pushing to reach a deal with Korea 175 00:10:00,720 --> 00:10:04,360 Speaker 5: on those clubs on semi conductor exports by June before 176 00:10:04,400 --> 00:10:07,320 Speaker 5: the G seven meeting, and then after that, the Korean 177 00:10:07,360 --> 00:10:10,000 Speaker 5: and Japanese leaders are said to be considering a trip 178 00:10:10,120 --> 00:10:13,680 Speaker 5: to the US to have a summit again with President 179 00:10:13,760 --> 00:10:16,960 Speaker 5: Joe Biden that's possibly taking place in July. So right 180 00:10:17,000 --> 00:10:19,120 Speaker 5: now this trip is really critical. There's a lot of 181 00:10:19,240 --> 00:10:22,560 Speaker 5: negotiations going on between Beijing, Korean and Japan to really 182 00:10:22,640 --> 00:10:25,360 Speaker 5: kind of you know shift, you know, get them to 183 00:10:25,600 --> 00:10:28,040 Speaker 5: re are in their policy away from the US at 184 00:10:28,040 --> 00:10:28,520 Speaker 5: this time. 185 00:10:28,720 --> 00:10:31,360 Speaker 1: Are we to read anything into the fact that President 186 00:10:31,480 --> 00:10:34,839 Speaker 1: she is not in attendance that instead Premier Lea Chung 187 00:10:35,280 --> 00:10:36,240 Speaker 1: is going in his place. 188 00:10:37,520 --> 00:10:41,280 Speaker 5: Yeah, that's also something that's quite interesting because he will 189 00:10:41,360 --> 00:10:44,320 Speaker 5: be meeting with a premier, will be meeting with Prime 190 00:10:44,320 --> 00:10:48,280 Speaker 5: Minister of Japan and the President of Korea, but Premier 191 00:10:48,360 --> 00:10:51,840 Speaker 5: League is kind of like one rank below presidency and 192 00:10:51,880 --> 00:10:55,760 Speaker 5: he's kind of taking this meeting in Presidency's place. I 193 00:10:55,800 --> 00:11:00,080 Speaker 5: think that also speaks to the souring relations that has 194 00:11:00,160 --> 00:11:02,600 Speaker 5: kind of taken place over the last four years because 195 00:11:03,640 --> 00:11:06,079 Speaker 5: China and Japan, their relations have not been going very well, 196 00:11:06,160 --> 00:11:09,480 Speaker 5: especially after that nuclear wastewater dump into the ocean. China 197 00:11:09,520 --> 00:11:13,960 Speaker 5: has been placing the seafood band on Japan Korea as 198 00:11:14,000 --> 00:11:17,240 Speaker 5: well with the you know, the chips threatening to kind 199 00:11:17,240 --> 00:11:19,960 Speaker 5: of hold back on these chips. We saw Korea just 200 00:11:20,000 --> 00:11:22,880 Speaker 5: recently announced I think it was nineteen billion dollars in 201 00:11:22,960 --> 00:11:26,440 Speaker 5: funds to boaster their own domestic chip supply chain. So 202 00:11:26,480 --> 00:11:31,040 Speaker 5: there's been this race intensifying chips race across the globe, 203 00:11:31,320 --> 00:11:34,240 Speaker 5: and that's something that's very sensitive takes. 204 00:11:34,040 --> 00:11:36,520 Speaker 2: Yeah, yeah, very Ie stakes Man Man, thanks so much 205 00:11:36,720 --> 00:11:39,880 Speaker 2: for coming into our studios and for providing some insights 206 00:11:39,880 --> 00:11:41,960 Speaker 2: and what to expect from these three sides here as 207 00:11:42,000 --> 00:11:45,559 Speaker 2: they get ready to meet men mean Low, Bloomberg China correspondent. 208 00:11:52,280 --> 00:11:55,760 Speaker 2: We're joined in our studios by Sean Taylor, Asia, CIO 209 00:11:55,880 --> 00:12:00,000 Speaker 2: and portfolio manager at Matthews Asia. Sean, thanks very much 210 00:12:00,120 --> 00:12:02,520 Speaker 2: for coming into our studios. Pleasure to see you again. 211 00:12:03,440 --> 00:12:07,000 Speaker 2: So I'm curious, do we want a strong growth profile 212 00:12:07,160 --> 00:12:10,559 Speaker 2: here for the United States and the global economy or 213 00:12:10,600 --> 00:12:13,760 Speaker 2: do we want it's like a weaker data so that 214 00:12:13,800 --> 00:12:15,959 Speaker 2: we can feel comfortable that inflation will. 215 00:12:15,760 --> 00:12:20,400 Speaker 6: Recede well with it, you know, if we want it, 216 00:12:20,400 --> 00:12:24,200 Speaker 6: it's it's not happening. The growth profile is really expanding. 217 00:12:24,960 --> 00:12:26,920 Speaker 6: I think, you know, you're beginning to see some real 218 00:12:26,960 --> 00:12:30,600 Speaker 6: cyclical pick up across you know, not just the US, 219 00:12:30,600 --> 00:12:33,400 Speaker 6: but across Europe and finally be seeing some pick up 220 00:12:33,440 --> 00:12:36,560 Speaker 6: in Asia and in China as well. So it's a 221 00:12:36,559 --> 00:12:40,440 Speaker 6: pretty good environment, you know, for for risky assets. But 222 00:12:40,480 --> 00:12:43,000 Speaker 6: it's obviously going to be you know, disappointing for those 223 00:12:43,000 --> 00:12:44,720 Speaker 6: who think that rates will be cut sooner. 224 00:12:45,040 --> 00:12:45,720 Speaker 4: What is it? 225 00:12:45,760 --> 00:12:47,880 Speaker 1: Does it create a bit of a nervousness on your part? 226 00:12:47,960 --> 00:12:50,920 Speaker 1: I mean, volatility may be in store here because every 227 00:12:51,040 --> 00:12:54,200 Speaker 1: day this push pull on will the Fed cut before 228 00:12:54,240 --> 00:12:57,280 Speaker 1: the end of the year, will will they remain steady 229 00:12:57,320 --> 00:13:00,600 Speaker 1: as she goes for a while longer. What concerns you 230 00:13:00,640 --> 00:13:02,720 Speaker 1: the most right now in the current environment. 231 00:13:04,160 --> 00:13:07,400 Speaker 6: Well, I suppose the three main things. You know, what's 232 00:13:07,440 --> 00:13:10,520 Speaker 6: the implications if the FED doesn't cut this year, and 233 00:13:10,760 --> 00:13:13,440 Speaker 6: that has a bit of an implication on Latin America 234 00:13:13,559 --> 00:13:16,840 Speaker 6: and parts of Asia that are relying on rates to 235 00:13:16,880 --> 00:13:19,960 Speaker 6: be cut. The second is what happens with the yen, 236 00:13:20,800 --> 00:13:23,800 Speaker 6: because that's putting pressure on other currencies, and you know, 237 00:13:23,960 --> 00:13:27,240 Speaker 6: the volatility there's not been that good. And then the 238 00:13:27,280 --> 00:13:29,720 Speaker 6: third is the cyclical pickup in China and if people 239 00:13:29,760 --> 00:13:32,800 Speaker 6: got enough money in China and a market they've ignored 240 00:13:32,840 --> 00:13:33,560 Speaker 6: for a long time. 241 00:13:34,559 --> 00:13:37,640 Speaker 2: The tricky thing is that if we do see a 242 00:13:37,640 --> 00:13:40,719 Speaker 2: little bit of a weaker environment and inflation coming down 243 00:13:40,800 --> 00:13:43,960 Speaker 2: a little and the FED were to start cutting interest rates, 244 00:13:44,960 --> 00:13:47,480 Speaker 2: although the dollar would likely weaken and that might take 245 00:13:47,520 --> 00:13:50,400 Speaker 2: some pressure off of Asian currencies, but you know, you 246 00:13:50,480 --> 00:13:54,000 Speaker 2: might get this almost like melt up in risk assets, right, 247 00:13:54,120 --> 00:13:57,079 Speaker 2: and you know that creates its own sorts of difficulties. 248 00:13:58,040 --> 00:14:01,440 Speaker 6: Absolutely spot on if you look back in history when 249 00:14:01,440 --> 00:14:04,080 Speaker 6: you've seen what we call and pick up in in 250 00:14:04,160 --> 00:14:07,560 Speaker 6: sort of global growth and leading into better earnings, and 251 00:14:07,600 --> 00:14:11,280 Speaker 6: these are more cyclical earnings as opposed to structural from AI, etc. 252 00:14:12,800 --> 00:14:15,640 Speaker 6: We've never had fed cup it's always been hiking to that. 253 00:14:16,160 --> 00:14:18,199 Speaker 2: So can can we just sort of ask for gardening 254 00:14:18,280 --> 00:14:20,280 Speaker 2: leave for the fed. Can they just take like about 255 00:14:20,320 --> 00:14:22,720 Speaker 2: six months off and and just you know, don't do 256 00:14:22,760 --> 00:14:24,320 Speaker 2: any anything stupid? 257 00:14:24,880 --> 00:14:25,320 Speaker 6: I think so. 258 00:14:25,360 --> 00:14:25,480 Speaker 1: Well. 259 00:14:25,480 --> 00:14:28,320 Speaker 6: I suppose they could restrict the balance sheet and restrict 260 00:14:28,320 --> 00:14:31,840 Speaker 6: some of the you know, they you know, they could 261 00:14:31,880 --> 00:14:34,160 Speaker 6: cut some liquidity out to slow down some of the 262 00:14:34,200 --> 00:14:37,600 Speaker 6: some of the growth. But it also doesn't it also 263 00:14:37,600 --> 00:14:40,000 Speaker 6: seems it doesn't matter who will be the president in 264 00:14:40,080 --> 00:14:42,600 Speaker 6: terms of fiscal policy will continue and the market will 265 00:14:42,640 --> 00:14:45,200 Speaker 6: be you know, flooded with with more liquidity. 266 00:14:45,720 --> 00:14:48,360 Speaker 1: So where are you finding opportunities given everything that we're 267 00:14:48,400 --> 00:14:50,960 Speaker 1: talking about right now? Are there things that you find 268 00:14:51,280 --> 00:14:53,600 Speaker 1: attractive in the current market environment? 269 00:14:55,000 --> 00:14:58,320 Speaker 6: Yeah, I mean, in terms of the APAC region, we 270 00:14:58,440 --> 00:15:02,960 Speaker 6: think that the the people investors are broadening out. You know, 271 00:15:02,960 --> 00:15:05,640 Speaker 6: obviously in the US they're broadening out from the from 272 00:15:05,680 --> 00:15:08,480 Speaker 6: the top seven to the wider market we've seen quite 273 00:15:08,480 --> 00:15:11,360 Speaker 6: a decent recovery in Europe. Japan continues to be a 274 00:15:11,440 --> 00:15:14,440 Speaker 6: very interesting story because the earnings are delivering, and actually 275 00:15:14,480 --> 00:15:18,760 Speaker 6: the weaker yen does help, even though Japanese companies aren't 276 00:15:18,760 --> 00:15:22,480 Speaker 6: as sensitive to yen, but it does help the sentiment 277 00:15:22,520 --> 00:15:26,600 Speaker 6: in the market. But investors buy earnings and earnings are 278 00:15:26,600 --> 00:15:29,640 Speaker 6: delivering in career. In Taiwan, we're getting the same. We're 279 00:15:29,760 --> 00:15:33,400 Speaker 6: really seeing the macro data improve, the export data is improving. 280 00:15:33,560 --> 00:15:37,600 Speaker 6: Maybe the weekly one is helping. You've got the Ai 281 00:15:37,720 --> 00:15:41,480 Speaker 6: structural theme happening and some cyclical themes happening so hard 282 00:15:41,520 --> 00:15:45,800 Speaker 6: where semiconductor's doing very well. You've still got India looking okay. 283 00:15:45,840 --> 00:15:49,320 Speaker 6: I mean it's sort of consolidated into an election, but 284 00:15:49,360 --> 00:15:51,560 Speaker 6: I think after that, though, you know, the Indian story 285 00:15:51,600 --> 00:15:54,240 Speaker 6: is pretty good. And then finally in Asia, we've actually 286 00:15:54,240 --> 00:15:56,760 Speaker 6: got China looking better, well better than it has been 287 00:15:56,800 --> 00:15:59,120 Speaker 6: in the last four years. And I think some of 288 00:15:59,160 --> 00:16:01,480 Speaker 6: the measures that we're in anounced on Friday in China 289 00:16:01,680 --> 00:16:04,480 Speaker 6: are quite positive and they all help global growth. 290 00:16:05,160 --> 00:16:07,200 Speaker 2: Let's talk a little bit about Japan, because we did 291 00:16:07,200 --> 00:16:09,960 Speaker 2: get some national inflation numbers today that were a little 292 00:16:10,000 --> 00:16:13,840 Speaker 2: softer good news to some, but maybe not such good 293 00:16:13,880 --> 00:16:17,000 Speaker 2: news to the Bank of Japan. Obviously, the Bank of 294 00:16:17,080 --> 00:16:19,960 Speaker 2: Japan is still kind of hoping to get a little bit, 295 00:16:20,000 --> 00:16:22,640 Speaker 2: you know, to be able to normalize policy and get 296 00:16:22,680 --> 00:16:26,400 Speaker 2: out of this, you know, ultra loose monetary policy. Do 297 00:16:26,440 --> 00:16:28,480 Speaker 2: we want a little higher inflation or do we want 298 00:16:28,480 --> 00:16:29,680 Speaker 2: to just to stay steady there. 299 00:16:30,640 --> 00:16:32,320 Speaker 6: I think we want to stay steady. I mean, I 300 00:16:32,320 --> 00:16:35,760 Speaker 6: think you know that the problem is it's getting you know, 301 00:16:36,040 --> 00:16:39,520 Speaker 6: they really the companies need to stop to put wage 302 00:16:39,520 --> 00:16:43,640 Speaker 6: growth up, and I think that's probably going to be 303 00:16:43,640 --> 00:16:47,400 Speaker 6: the main sort of driver of consumption. I think the 304 00:16:47,480 --> 00:16:50,320 Speaker 6: market at the moment's factoring in two interest rate hikes. 305 00:16:50,360 --> 00:16:53,240 Speaker 6: I expect it's only going to be one. However, we 306 00:16:53,280 --> 00:16:58,200 Speaker 6: did have an x BOJ policy member today saying that 307 00:16:58,240 --> 00:17:00,120 Speaker 6: it could be three. But I think it's going to 308 00:17:00,120 --> 00:17:02,960 Speaker 6: be going to be slow. But when we had the 309 00:17:03,000 --> 00:17:06,720 Speaker 6: first hike in Japan, they also bought and there was 310 00:17:06,760 --> 00:17:09,400 Speaker 6: also more liquidity put in, So in one way they hike, 311 00:17:09,480 --> 00:17:11,560 Speaker 6: but on the other way they kept the liquidity going. 312 00:17:11,640 --> 00:17:14,520 Speaker 6: So you know, I think, you know, I'm more focused 313 00:17:14,560 --> 00:17:17,479 Speaker 6: on the liquidity side on the Q East side in Japan, 314 00:17:18,160 --> 00:17:20,199 Speaker 6: which is probably driving growth and the actual level of 315 00:17:20,200 --> 00:17:20,920 Speaker 6: interest rates. 316 00:17:21,000 --> 00:17:23,159 Speaker 2: Okay, I give you about fifteen seconds. What do you 317 00:17:23,240 --> 00:17:25,200 Speaker 2: like about Japan from an equity standpoint? 318 00:17:25,320 --> 00:17:29,760 Speaker 6: Quick, domestic earnings and also some of the cyclical side 319 00:17:29,800 --> 00:17:31,960 Speaker 6: that's picking up a plus. 320 00:17:32,119 --> 00:17:36,240 Speaker 2: Thank you very much, Sean, nice, quick, succinct answer there, 321 00:17:36,680 --> 00:17:41,280 Speaker 2: Sean Taylor, Asia, CIO and portfolio manager at Matthew's Asia. 322 00:17:48,320 --> 00:17:51,800 Speaker 2: We look at markets now with Quincy Crosby, Chief Global 323 00:17:51,840 --> 00:17:56,000 Speaker 2: Strategist at LPL Financial. Quincy, thank you very much for 324 00:17:56,040 --> 00:17:57,560 Speaker 2: being with us. So a little bit of a sell 325 00:17:57,560 --> 00:18:01,280 Speaker 2: off here in the market today. The market will show 326 00:18:01,359 --> 00:18:04,280 Speaker 2: us in a day or two that good news is 327 00:18:04,320 --> 00:18:07,560 Speaker 2: indeed good news, not bad, true or false. 328 00:18:09,600 --> 00:18:13,040 Speaker 4: Well, you know today's that we had a video which 329 00:18:13,080 --> 00:18:16,639 Speaker 4: is certainly good news. But we also had the SMT 330 00:18:16,880 --> 00:18:22,359 Speaker 4: Global Flash Report, and that was good news except for 331 00:18:22,440 --> 00:18:25,320 Speaker 4: one thing which is bad news, really bad news, and 332 00:18:25,359 --> 00:18:27,760 Speaker 4: that was the prices are going up and they're trying 333 00:18:27,800 --> 00:18:30,480 Speaker 4: to pass it along to customers. 334 00:18:31,720 --> 00:18:32,879 Speaker 1: Where does that leave the Fed? 335 00:18:34,200 --> 00:18:37,440 Speaker 4: That leaves the Fed scratching his head and wondering when 336 00:18:37,520 --> 00:18:40,160 Speaker 4: is this going to end? They've got a report coming 337 00:18:40,160 --> 00:18:46,000 Speaker 4: out next Friday, which is their favorite supposedly favorite indication 338 00:18:46,160 --> 00:18:51,040 Speaker 4: for inflation, that's the personal consumption expenditures index. If that 339 00:18:51,119 --> 00:18:54,879 Speaker 4: comes in cooler on the super core, this will be 340 00:18:54,920 --> 00:18:57,720 Speaker 4: a catalyst for the market. But what you had now 341 00:18:58,040 --> 00:19:01,480 Speaker 4: is in market that was overbought to begin with. And 342 00:19:01,840 --> 00:19:09,160 Speaker 4: obviously Nvidia, you know, came in just fantastic top bottom guidance, 343 00:19:09,600 --> 00:19:12,480 Speaker 4: but you couldn't fight It showed that you could not 344 00:19:12,720 --> 00:19:16,600 Speaker 4: fight that price is paid data. The market just saw 345 00:19:16,640 --> 00:19:19,280 Speaker 4: that and said, are we really going to see a 346 00:19:19,359 --> 00:19:20,120 Speaker 4: rake cut this year? 347 00:19:21,920 --> 00:19:25,600 Speaker 2: Yeah, we did see UBS David Lefkowitz raise his S 348 00:19:25,640 --> 00:19:28,880 Speaker 2: and P five hundred year in target to fifty five 349 00:19:28,960 --> 00:19:31,879 Speaker 2: hundred from five thousand, and I raised this because he 350 00:19:31,960 --> 00:19:37,679 Speaker 2: cited four key positive drivers solid earnings growth, disinflation, the 351 00:19:37,720 --> 00:19:42,840 Speaker 2: FED pivot, and surging artificial intelligence investment. So it's just 352 00:19:42,880 --> 00:19:46,159 Speaker 2: another reminder that, yeah, maybe disinflation is a little in 353 00:19:46,280 --> 00:19:49,960 Speaker 2: question here, although you know, we we have had a 354 00:19:49,960 --> 00:19:54,080 Speaker 2: lot of different data points to digest, but on balance, 355 00:19:54,640 --> 00:19:57,879 Speaker 2: you do have some good news there. So is that 356 00:19:57,920 --> 00:20:00,080 Speaker 2: how you break it down, Quincy, or do you have 357 00:20:00,080 --> 00:20:02,399 Speaker 2: have a couple of metrics that mean more than anything else? 358 00:20:03,800 --> 00:20:07,679 Speaker 4: No, we do that. I mean, we're never bullish or Barish. 359 00:20:07,720 --> 00:20:12,040 Speaker 4: We're always pragmatic and we're very conservative with a small 360 00:20:12,160 --> 00:20:15,960 Speaker 4: fee in the way that we invest. What we do 361 00:20:16,040 --> 00:20:19,920 Speaker 4: see earnings holding up, and we also see for example, 362 00:20:20,800 --> 00:20:23,640 Speaker 4: you know, other sectors that we've gone We've gone long 363 00:20:23,720 --> 00:20:28,680 Speaker 4: and overweight for example industrials. So it isn't just about 364 00:20:28,880 --> 00:20:32,760 Speaker 4: the big big seven names or six names whatever, but 365 00:20:32,880 --> 00:20:36,119 Speaker 4: the industrials are doing well. Financials have also done well. 366 00:20:36,359 --> 00:20:42,400 Speaker 4: The question is can they continue to do well alongside 367 00:20:43,240 --> 00:20:46,960 Speaker 4: the mega tech when when the market believes that that's 368 00:20:47,000 --> 00:20:49,680 Speaker 4: where you need to go if things slow down. What 369 00:20:49,720 --> 00:20:53,640 Speaker 4: we know is that money flows directly into those big 370 00:20:53,680 --> 00:20:58,119 Speaker 4: tech names because as a defense mechanism with their strong 371 00:20:58,200 --> 00:21:03,040 Speaker 4: balance sheets, their ability to make money regardless of the environment, 372 00:21:03,119 --> 00:21:06,520 Speaker 4: perhaps less but at least safe. Despite the fact that 373 00:21:06,560 --> 00:21:10,000 Speaker 4: they were initially characterized with long duration that is sort 374 00:21:10,000 --> 00:21:15,159 Speaker 4: of evaporated. So again it has it's been nice. I 375 00:21:15,160 --> 00:21:18,200 Speaker 4: would have to say that we have seen breath pick 376 00:21:18,359 --> 00:21:21,239 Speaker 4: up in the market, and as I said, we went 377 00:21:21,320 --> 00:21:24,840 Speaker 4: long industrials, which we feel very comfortable with. 378 00:21:25,080 --> 00:21:27,680 Speaker 1: Hey, Quincy, when the year began, would you have bet 379 00:21:28,080 --> 00:21:30,640 Speaker 1: that the American economy would have held up as well 380 00:21:30,680 --> 00:21:32,920 Speaker 1: as it has in the face of higher interest rates. 381 00:21:32,920 --> 00:21:34,320 Speaker 1: I mean, this is pretty stunning. 382 00:21:35,800 --> 00:21:39,119 Speaker 4: It is stunning. But what we do know is that, 383 00:21:39,280 --> 00:21:42,600 Speaker 4: you know, we lived with these rates, these kinds of 384 00:21:42,720 --> 00:21:46,879 Speaker 4: rates for many years. What changed was that many of 385 00:21:46,960 --> 00:21:51,560 Speaker 4: us in private equity firms, venture capital folks with mortgages 386 00:21:51,800 --> 00:21:55,600 Speaker 4: were able to go in and buy things at very 387 00:21:55,640 --> 00:21:59,919 Speaker 4: low rates, almost sometimes negative rates. And then suddenly you 388 00:22:00,119 --> 00:22:05,000 Speaker 4: jump that quickly, and that jump really has been difficult. 389 00:22:05,040 --> 00:22:08,760 Speaker 4: But there's still, at least in the consumer side of things, 390 00:22:09,160 --> 00:22:14,200 Speaker 4: a cohort that has their houses, they have pensions, they 391 00:22:14,240 --> 00:22:18,920 Speaker 4: have money, and they bought their houses with a very 392 00:22:18,960 --> 00:22:21,639 Speaker 4: low interest rate that they don't want to leave those houses. 393 00:22:21,920 --> 00:22:25,280 Speaker 4: They're there, they want to wait. But that group still 394 00:22:25,320 --> 00:22:28,680 Speaker 4: has money. Those are the baby boomers, and that becomes 395 00:22:28,720 --> 00:22:32,280 Speaker 4: difficult to the FED because the FED is watching the 396 00:22:32,359 --> 00:22:36,879 Speaker 4: lower wage journer under tremendous pressure. You've heard Cheerman Powell 397 00:22:36,920 --> 00:22:40,480 Speaker 4: mention it so many times, not just in this period 398 00:22:40,800 --> 00:22:43,960 Speaker 4: but before COVID when he actually said, we are going 399 00:22:44,040 --> 00:22:46,600 Speaker 4: to do whatever we can do to get this group 400 00:22:46,880 --> 00:22:50,400 Speaker 4: to have jobs, jobs at pay. Well, well, they've got 401 00:22:50,440 --> 00:22:54,439 Speaker 4: the jobs, but the inflation, the higher credit rates, rates 402 00:22:54,480 --> 00:22:59,400 Speaker 4: are hurting them dramatically. So the question then becomes, would 403 00:22:59,440 --> 00:23:04,000 Speaker 4: he be boys to cut rates if this group becomes 404 00:23:04,160 --> 00:23:09,040 Speaker 4: even more battles with higher rates. 405 00:23:10,160 --> 00:23:12,240 Speaker 2: Yeah, it's a little bit of a conundrum because you 406 00:23:12,320 --> 00:23:16,359 Speaker 2: know that they would like to support jobs, but they 407 00:23:16,440 --> 00:23:19,880 Speaker 2: certainly don't want to cut rates too early and have 408 00:23:19,960 --> 00:23:23,240 Speaker 2: inflation spike back up again because that hurts the little guy, 409 00:23:24,040 --> 00:23:28,120 Speaker 2: probably just as much as as job losses. So it's 410 00:23:28,160 --> 00:23:30,280 Speaker 2: a little bit of a tricky environment. But then, you know, 411 00:23:30,359 --> 00:23:33,960 Speaker 2: I mean, we're we're trying to invest money and we're 412 00:23:34,000 --> 00:23:38,200 Speaker 2: buying companies, you know, and so let's talk a little 413 00:23:38,200 --> 00:23:41,000 Speaker 2: bit about how companies are faring, not so much the 414 00:23:42,119 --> 00:23:45,399 Speaker 2: average consumer. How are companies faring in your view and 415 00:23:45,720 --> 00:23:46,600 Speaker 2: which ones do you like? 416 00:23:47,520 --> 00:23:50,840 Speaker 4: Well, they're faring very well, you know. That is what 417 00:23:51,359 --> 00:23:56,240 Speaker 4: you know outside from the US. Global investors always point 418 00:23:56,280 --> 00:23:59,520 Speaker 4: to about the US. The companies know how to manage. 419 00:24:00,040 --> 00:24:06,959 Speaker 4: They watch their operating margins, and when those margins deteriorate, 420 00:24:07,200 --> 00:24:10,760 Speaker 4: they are very fast to cut costs. And actually that's 421 00:24:10,800 --> 00:24:15,040 Speaker 4: where they start cutting, you know, labor, They typically go 422 00:24:15,160 --> 00:24:18,080 Speaker 4: right there because that's usually what they have to start cutting. 423 00:24:18,600 --> 00:24:22,040 Speaker 4: Capital expenditures come down. But when we look at through 424 00:24:22,040 --> 00:24:27,240 Speaker 4: this earning season. The margins have been healthy, the companies 425 00:24:27,280 --> 00:24:31,440 Speaker 4: have done well. They're surprise to the upside, and again 426 00:24:31,600 --> 00:24:34,479 Speaker 4: I mean we have to be pragmatic about it. The 427 00:24:34,520 --> 00:24:39,119 Speaker 4: big mega techniques are responsible for the major portion of 428 00:24:39,200 --> 00:24:43,000 Speaker 4: earnings in the S and P five hundred, and they've 429 00:24:43,040 --> 00:24:45,160 Speaker 4: been doing well. Even when they're bad, they do well. 430 00:24:45,640 --> 00:24:49,800 Speaker 1: Quincy thirty seconds. The market that is your most favored 431 00:24:49,880 --> 00:24:52,280 Speaker 1: to in which to put capital to work offshore right 432 00:24:52,320 --> 00:24:54,479 Speaker 1: now is Japan. 433 00:24:56,560 --> 00:24:59,919 Speaker 2: That was quick, Quincy, thank you very much for joining us. 434 00:25:00,040 --> 00:25:03,560 Speaker 2: UNC Crosby, Chief Global Strategist at LPL Financial. 435 00:25:05,640 --> 00:25:08,600 Speaker 1: This has been the Bloomberg Daybreak Asia podcast, bringing you 436 00:25:08,640 --> 00:25:11,760 Speaker 1: the stories making news and moving markets in the Asia Pacific. 437 00:25:12,280 --> 00:25:15,400 Speaker 1: Visit the Bloomberg Podcast channel on YouTube to get more 438 00:25:15,400 --> 00:25:19,000 Speaker 1: episodes of this and other shows from Bloomberg. Subscribe to 439 00:25:19,040 --> 00:25:22,840 Speaker 1: the podcast on Apple, Spotify, or anywhere else you listen, 440 00:25:22,960 --> 00:25:26,040 Speaker 1: and always on Bloomberg Radio, the Bloomberg Terminal, and the 441 00:25:26,040 --> 00:25:27,120 Speaker 1: Bloomberg Business app.